File No. 0-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
FIRST ECOM.COM, INC.
(Exact Name of Registrant as Specified in its Charter)
NEVADA 98-0206967
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
902, Henley Building 5,
Queen's Road Central
Hong Kong SAR
(Address of principal offices)
Registrant's Telephone Number, Including Area Code: 852 2801 5181
Securities to be Registered under Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.001 Per Share
(Title of class)
================================================================================
<PAGE>
ITEM 1. BUSINESS
The Company was formed on September 16, 1998 and is in its development
stage. It has had no operating revenues to date. The Company's auditors have
expressed substantial doubt as to its ability to continue as a going concern.
See Independent Auditors' Report to the Board of Directors and Stockholders of
the Company on page F-2. The Company incurred operating losses of $3.9 million
in the nine-month period ended September 30, 1999 and on September 30, 1999 the
Company's accumulated deficit was $3.9 million. The Company expects its
accumulated deficit to grow for the foreseeable future.
The Internet
The Internet consists of an inter-connected web of computers around the
world. Having started as a source of information and communication for a limited
number of government departments, the Internet has been transformed through
improvements in both computer hardware and software. It has grown from a web of
1.3 million computers at the end of 1992 to approximately 60 million computers
today. It is now a key economic resource, serving commerce worldwide. New
commercial services and products brought about as a result of this
transformation demand that payments be processed in electronic form quickly,
securely and cheaply. Merchants are recognizing the Internet as a viable
alternative to mail and telephone order business. From a base of $2.7 billion in
1996, on-line purchases of goods and services by consumers and businesses are
expected to grow 150% through 1999 and 138% through 2000 and to reach $1.3
trillion by 2003.
Selling Goods Through the Internet
Many goods and services may now be purchased over the Internet, an
inter-connected web of computers around the world. To do this, a customer
accesses the Internet and visits a merchant's web site, where he is able to
view, select and purchase an item of merchandise (or a service), paying by way
of credit card. Before shipping the goods or providing the service, the merchant
would request the relevant credit card company to authorize the consumer's
credit card to be charged with the cost. Although largely invisible to the
customer, the authorization and payment mechanisms are complex and involve the
merchant and his bank, and the consumer and his bank.
The authorization to charge any particular credit card may only be granted
by the bank that actually issued it, which is known as the "issuing bank." In
order to obtain authorization to charge merchandize to a customer's credit card,
a merchant designs its web site to prompt the customer to enter his credit card
number and other necessary information and to transmit the same via the Internet
to a "gateway." A gateway is one or more servers that convert the information
into a format that can be read by banks and other participants in the processing
chain. After converting the information, the gateway transmits it to the
merchant's bank, which uses a "switch" to transmit it to the appropriate credit
card network, such as Visa, MasterCard or American Express. A switch is one or
more servers that determine which credit card network the data should be sent
to. A switch must be certified by the credit card networks to which it sends
data and is audited by them periodically. Switches are almost exclusively
operated by or on behalf of financial institutions. Using a portion of the
credit card number, the card network determines the identity of the issuing bank
and sends the information to it for authorization. If granted, the authorization
is communicated back up the chain to the merchant and the issuing bank "blocks,"
or reserves, the amount of the purchase to the credit card. This process usually
takes from five to ten seconds. If authorization for a credit card charge is
granted, the merchant may complete the transaction and ship the merchandize to
the customer.
The payment for the goods may be collected by the merchant only after they
have been shipped. Each day (or at some other interval), the merchant sorts
through its authorized transactions to determine which ones have been filled.
That information is transmitted to the issuing bank in the same way as an
authorization request and, upon receiving it, the issuing bank pays the merchant
(through the credit card network and the merchant's bank).
Because each credit card network deals with many banks, most of whom are
both issuing and merchant's banks, the networks offset each bank's receivables
(on behalf of the bank's merchants) with its payables (due on cards it has
issued) and computes a net amount that the bank owes to or is owed by the
network.
<PAGE>
The Company's Operations to Date
The Company presently owns and operates a payment gateway. On May 6, 1999
the Company agreed with the Bank of Bermuda to connect its payment gateway to
that bank's switch which provides access to VISA, MasterCard and American
Express. The Bank of Bermuda is regarded by the Company as a leading bank in the
field of e-commerce since 1995. It is capable of processing credit card
transactions in multiple currencies. The Bank agreed to engage the Company as a
"Master Merchant" with authority to act on behalf of one or more merchants, each
of whom have separate agreements with the Company. The Company is a principal in
transactions with the Bank of Bermuda and is liable for any payment made by the
bank to a merchant that uses the Company's gateway if the bank is unable to
collect the payment from a cardholder because of a dispute. While the merchant
would have a corresponding liability to the Company, the Company may ultimately
be unable to collect the payment from the merchant. The Company plans to adopt
procedures that are in its opinion adequate to prevent liability for disputed
transactions. These will include evaluating the creditworthiness of merchants
initially and on an on-going basis and monitoring the number of disputed
transactions by any merchant.
The gateway began operation in late October 1999. At present, only two
merchants are connected to the Company's gateway. Through November 30, 1999, 342
transactions representing an aggregate value of over $7000 had been processed
through the Company's gateway.
The Company's gateway consists of two servers (which are powerful personal
computers) located on the premises of the Bank of Bermuda. If one server fails,
the other will process all the gateway's transactions until the failed server
has been restored to service. The Company maintains engineers at all times to
monitor the gateway and repair any server failure. The servers are connected to
the Internet through separate Internet service providers, one in London and one
in New York, to protect against Internet outages.
All the transactions that are processed through the gateway are collected
and stored on a database. Merchants may access this information by web browser
to review their transactions and submit for payment those for which the
merchandise has been shipped.
The gateway, together with the Bank of Bermuda, allows transactions to be
processed in multiple currencies. Thus, for example, a merchant whose web site
is connected to the Company's gateway can offer to sell its products around the
world over the internet priced in Yen, Pounds Sterling and U.S. Dollars.
The Company has provided software to the merchants that use its gateway to
assist them in connecting their web sites to it. This software encrypts the
information sent over the Internet to the gateway, which in turn encrypts the
information that it sends to the Bank of Bermuda's switch. This encryption is
128-bit key length.
The software used by the gateway was created for the Company by Asia
Internet Limited, an independent contractor that is 30% owned by one of the
Company's directors (see "Item 7 - Certain Relationships and Related
Transactions"). The Company may request that this contractor create additional
software meeting specifications and for fees to be negotiated at that time. The
Company may also elect to retain other persons to create software for it.
The Company's Strategy for the Future
The Company plans to add merchants to its gateway to better utilize its
capacity. To facilitate this plan, the Company aims to simplify the software
needed to connect a merchant with its gateway and make it easier to install and
use. Towards this end, the Company has engaged Microsoft to develop software
that can be used in web sites to connect them to the Company's gateway.
Recently, People's Telephone, a cellular telephone operator in Hong Kong, agreed
to connect its web site to the Company's gateway so that customers could pay
their phone bills with a credit card over the Internet. The Company has
completed the software necessary to make this connection.
The Company will seek to add other merchant banks besides the Bank of
Bermuda that need gateway services to its gateway. If the numbers warrant, the
Company plans to add gateways in countries where there are sufficient banks or
2
<PAGE>
merchants to use it. Recently, Hana Bank of Korea agreed to use the Company's
gateway. The Company expects to complete the software necessary for this bank to
provide e-commerce services to its merchants in the first quarter of 2000.
The Company also plans to develop a switch and have it certified by the
appropriate credit card networks so it can be used by many banks, enabling each
to avoid having to maintain a switch of its own to connect to credit card
networks. The switch would also be able to process traditional (non-Internet)
point-of-sale and ATM transactions. As with gateways, switches will be installed
in multiple locations if the demand warrants. The Company has not commenced the
development of a switch.
The gateways and switches planned by the Company are expected to be
suitable for transactions in multiple currencies using credit cards, debit cards
and "smart cards," which are cards that contain a microprocessor that can be
programmed for multiple functions.
Finally, the Company intends to create software that a shipper can use to
inform the gateway's database of which merchandise it has delivered. By so
doing, the merchant will automatically be made aware of the accounts for which
payment may be collected. The Company has not commenced the development of this
software.
Whether the Company can achieve any of the goals set forth in this section
depends on whether it can raise the capital necessary to purchase the hardware
and software required and to hire the personnel to pursue each of them. The
Company estimates that approximately $30,000,000 will be needed to accomplish
all of the goals described above. Because the Company has not had any earnings
to date and does not expect to have any in the foreseeable future, the full
amount needed to pursue its plans will have to be raised by issuing and selling
equity in the Company. This will result in dilution to all the then-existing
shareholders.
Sources of Revenue
Through September 30, 1999, the Company had received no revenues from
operations. If the Company can realize its goals as set forth above, revenue
could potentially come from fees that merchants and merchant banks would pay to
connect to the Company's gateway. Fees would also potentially be charged for
each transaction processed through the gateway. These fees could be fixed for
each transaction or variable based upon the size of the transactions. See Item
2. Financial Information - Management's Discussion and Analysis of Financial
Position and Results of Operations - General.
Employees
The Company has established its core base of developers and project
managers in Hong Kong and intends to hire additional project managers in-house.
So far the Company has outsourced the development of software to connect its
gateway to merchants' web-sites but is evaluating the benefits and cost savings
of hiring an internal development group. The Company's network operations and
e-commerce payment gateway and processing center located on the premises of Bank
of Bermuda is staffed seven days a week, 24 hours a day by qualified network and
transaction processing personnel employed by the Company.
The Company currently employs 34 full-time personnel and employee
relationships are good. None of the Company's employees is a member of a labor
union. The Company is in the process of building its management team by adding
senior executives with a track record in the information technology industry,
e-commerce, or transaction processing. These will include an experienced chief
financial officer, legal officer, regional sales managers and sales executives,
administrative managers and support personnel. Each major new project will be
headed by a project manager, technical support staff and administrative support
staff. Over the next twelve months, the Company expects to hire 60 new
employees.
Market
The immediate market for the Company's services is facilitating electronic
payment processing of e-commerce transactions for merchants and their banks. To
date, two industry sectors have dominated e-commerce: computer hardware and
software sales, and supporting functions within the travel business. The
majority of remaining online commerce
3
<PAGE>
consists of the sale of miscellaneous consumables, including books, music,
videocassettes, apparel, gifts, flowers, food and beverages. Several service
sectors are now emerging to further fuel the demand for e-commerce. These
include on-line stockbroking, banking, insurance, telecommunications, education,
and technical and professional publications and information.
The number and nature of commercial websites changes daily, with portals
becoming increasingly sophisticated and easier to use. There were 411,000 such
sites at the beginning of 1998 and 720,000 in 1999. These websites offer an
increasing array of goods and services, including computer hardware and
software, travel arrangements, entertainment, financial services, and education.
In order to sell these goods and services, banks and their e-merchant customers
must be able to accept and process transactions on widely-held credit cards such
as MasterCard, Visa and American Express, and in as many currencies as possible.
Nearly 50% of households in the United States today have access to
e-commerce via the Internet. Although the penetration is lower in Asia, it is
growing rapidly. In Hong Kong, for example, only 20% of households have Internet
access, but this figure is increasing at an annual rate of 20%. Against this
background, however, fully 92% of total e-commerce is currently generated
through websites hosted in the United States, in the opinion of the Company
principally because only merchants in the United States currently have access to
satisfactory e-commerce solutions.
Sales and Marketing
The Company plans to be the third party processor of electronic
transactions for many of the world's financial institutions and their merchants.
The Company will initially focus its efforts in Hong Kong and other Asian target
markets. The Company plans to establish marketing offices in Taiwan, Korea and
the Philippines by the first quarter of 2000; in Europe and Japan by the second
quarter of 2000; and in Brazil, Canada and the United States by 2001.
The Company may selectively invest in key strategic customers but has no
firm plans to do so at this time and is not involved in any negotiations about
any such investment at this time. In Hong Kong, the Company has already secured
an agreement with People's Telephone whereby it uses the Company's gateway
together with the Bank of Bermuda to offer its customers the option of paying
their telephone bills online. The Company will pursue similar relationships with
airlines, telecom service providers, utilities, established e-commerce
retailers, and major traditional retailers looking to build an e-commerce
presence, particularly on a global basis.
The Company has begun the process of marketing to banks, many of whom are
unable to process credit card transactions and serve e-merchants. The Company
plans to extend this effort throughout Asia.
Websites, portals and Internet service providers are also potentially
important sources of merchants. Internet Service Providers have begun offering
e-commerce services and hosting storefronts and e-malls. The Company plans to
target a select number of websites, portals and Internet Service Providers with
particular regional or global profiles.
E-commerce website designers are also in a key position to refer business
to the Company since they are responsible for designing and integrating payment
links. The Company has retained US Web/CKS Corporation, a large web-site design
company to assist the Company in marketing to merchants. Mr. Cody Cain, a
director of the Company, is an employee of US Web/CKS Corporation.
Integral to all of these strategies is the hiring of experienced business
development and sales employees, which the Company intends to do. The Company
retained two sales consultants in July 1999 located in Korea and the
Philippines.
Competition
The most dominant participant in credit card processing is First Data
Corporation, Atlanta, Georgia, which enjoys a near monopoly of the industry in
North America. Outside of North America, however, First Data is not dominant. In
Asia, the Company's principal market, competition will come from three sources:
o Large merchants having their own gateways;
4
<PAGE>
o Merchant banks maintaining their own gateways;
o Internet service providers and similar businesses that host merchant
web sites maintaining their own gateways.
Many of these competitors will be substantially larger than the Company and have
much greater resources at their disposal.
The Company believes that competition will be on the basis of price and
quality of service. Because the Company's gateway and planned switch are to be
shared by many merchants and banks, the Company believes that its prices will be
competitive because of economies of scale. It should be cheaper for each bank
and merchant to share the cost of the Company's gateway and (if developed)
switch rather than maintain its own. Since operating gateways and switches will
be the core business of the Company, it believes that it will have an advantage
over merchants and banks in maintaining the highest quality of service possible.
The Company's gateway presently has a database that collects information a
merchant can use to determine which transactions are ready for collection. The
Company will endeavor to develop services that enhance the value of its product,
such as software that connects a shipper to the Company's gateway in order to
allow the shipper to inform merchants when goods have been sent in response to a
customer's order so that the merchant can collect the amount owing. To the best
knowledge of Company, no other vendor presently offers access to a gateway
combined with a bank and switch as well as the software to assist a merchant in
connecting to it. Competitors of the Company, however, will have greater
resources to allocate to the development and maintenance of a gateway and switch
should they choose to do so.
The Company's ability to offer, together with the Bank of Bermuda, the
processing of transactions in multiple currencies should prove attractive to
merchants including U.S. merchants by allowing, for example, purchasers in Japan
to transact in Yen rather than United States dollars. At the moment, a US
merchant looking to offer e-commerce to foreign purchasers must establish a
banking relationship (and in many cases a local presence) in each foreign
country, which in turn forces the merchant to integrate its systems with many
banks, and may require payment of taxes in some jurisdictions where it has
established a presence. However, the Company's system will enable e-merchants to
meet the requirement to transact in the currency of the customer's choice.
Further, as the processing of the transaction will take place in Bermuda, this
will not require the payment of taxes.
The Company
The Company was incorporated on February 12, 1999 in the state of Nevada in
the United States. On February 12, 1999, before issuing any shares of capital
stock, the Company consummated an agreement and plan of merger with JRL
Resources Corp., a Florida corporation, whereby each of JRL's 12,040,000
outstanding shares of common stock was converted into a share of the Company's
common stock. JRL was incorporated in Florida on November 13, 1996 and was
inactive from the time of its formation until its merger with the Company.
Before August 18, 1998, JRL was named Vantage Sales Corp. Shortly before this
merger, JRL had acquired all the outstanding capital stock of First Ecommerce
Asia Limited, now the Company's only direct subsidiary, which is located in Hong
Kong. First Ecommerce Asia Limited was incorporated in Hong Kong on September
16, 1998. Before December 10, 1998, it was named Gold Pacific Management
Limited. On January 28, 1999 all of First Ecommerce Asia Limited's outstanding
shares of common stock were exchanged for 985,000 of JRL's 1,025,000
then-outstanding shares plus 3,015,000 newly issued shares, and it became a
wholly owned subsidiary of JRL. For accounting purposes, this transaction was
treated as an acquisition of JRL by First Ecommerce Asia Limited, and therefore
the financial information contained herein is only presented from September 16,
1998, the date on which First Ecommerce Asia Limited was formed. JRL had no
operations before this date. When JRL was merged into the Company, First
Ecommerce Asia Limited became the subsidiary of the Company.
The Company's headquarters are presently located at 8th Floor, Henley
Building, 5, Queen's Road Central, Hong Kong SAR.
Risk Factors
An investment in the Company's common stock involves a high degree of risk.
Investors should consider the following risk factors and the other information
in this registration statement carefully before investing in the Company's
5
<PAGE>
common stock. The Company's business and results of operations could be
seriously harmed and the trading price of the Company's common stock could
decline should any of these risks come to fruition.
The Company's Limited Operating History May Prevent it From Achieving
Success
The Company's date of inception was September 16, 1998. It has a limited
operating history, which may prevent it from achieving success. The Company's
revenue and income potential are unproven. It will encounter challenges and
difficulties frequently encountered by early-stage companies in new and rapidly
evolving markets.
Chief among these challenges and difficulties are:
o persuading banks to outsource their internet credit card processing;
o finding and hiring personnel with an expertise in:
- computer software and hardware technology;
- banking;
- internet strategy for merchants; and
- credit card processing.
It may fail to address any of these challenges and the failure to do so
would seriously harm the Company's business and operating results. In addition,
because of the Company's limited operating history, it has limited insight into
trends that may emerge and affect the Company's business.
The Company has Incurred Losses and Expects Future Losses
The Company has experienced operating losses in each period since inception
and expects to incur significant losses in the future. On September 30, 1999,
the Company had an accumulated deficit of $3.9 million. The Company expects to
increase its operating expenses significantly. As a result, the Company will
need to increase its revenues significantly to achieve profitability. The
Company's failure to increase its revenues significantly would seriously harm
the Company's business and operating results. In fact, the Company may not have
any revenue growth.
Future Operating Results Will Likely Fluctuate
The Company's quarterly operating results will likely vary significantly in
the future. As a result, period-to-period comparisons of the Company's operating
results will not be meaningful and should not be relied upon as indicators of
the Company's future performance. In the future, the Company's operating results
may be below the expectations of securities analysts and investors. The
Company's failure to meet these expectations would likely depress the market
price of the Company's common stock. To date, the Company has not had sufficient
operating results to gauge any period-to-period fluctuations.
The Company Expects Significant Increases in Operating Expenses
The Company intends to increase operating expenses as it:
o Increases sales and marketing activities, including expanding the
Company's sales force;
o Increases technical support and development; and
o Expands customer support.
6
<PAGE>
The amount of this increase will depend entirely upon the extent to which
the Company undertakes the above activities given its resources at the time.
With these additional expenses, the Company must significantly increase its
revenues in order to continue as a going concern and ultimately to become
profitable. These expenses will be incurred before the Company generates any
significant revenues by this increased spending. If the Company does not
significantly increase revenues from these efforts, the Company's business and
operating results would be seriously harmed.
The Company Depends on the Growth of Its Customer Base
The Company's success is substantially dependent on the growth of its customer
base of merchants and banks that use its gateway (and, if it develops one, its
switch). If it fails to increase its customer base, its business and operating
prospects would be seriously harmed. The Company's ability to attract customers
will depend on a variety of factors, including the price and quality of the
Company's services as well as the Company's ability to market its products and
services effectively.
The Company's Markets Are Highly Competitive
The Company's markets are new, rapidly evolving and highly competitive, and
it expects this competition to persist and intensify in the future. The
Company's failure to maintain and enhance its competitive position could
seriously harm its business and operating prospects. It will encounter
competition from a number of sources.
The Company's competitors have longer operating histories and significantly
greater financial, technical, marketing and other resources than the Company.
Many of these competitors have extensive customer bases and strong customer
relationships that they could leverage, including relationships with the
Company's current and potential customers. These competitors also have
significantly more established customer service organizations than the Company
does. In addition, these competitors may adopt aggressive pricing policies.
Having processed over $4 billion credit card transactions in 1998, First Data
Corporation of Atlanta, Georgia is regarded by the Company as dominating credit
card processing in North America.
The Company Needs to Develop and Expand Its Sales and Marketing
Capabilities
The Company needs to expand its marketing and sales operations in order to
increase market awareness of the Company's services and generate increased
revenues. Competition for qualified sales personnel is intense, however, and the
Company may not be able to hire enough qualified individuals in the future. The
Company plans to establish marketing offices in Europe and Asia by 2000, and in
North and South America by 2001. The Company's services require sophisticated
sales effort targeted at senior management of the Company's prospective
customers. The Company has only been marketing its services since early 1999.
The Company Must Manage Its Growth and Expansion
The Company's historical growth has placed, and any future growth is likely
to continue to place, a significant strain on the Company's resources. Any
failure to manage growth effectively could seriously harm the Company's business
and operating results. To be successful, the Company will need to implement
management information systems, improve operating, administrative, financial and
accounting systems and controls, train new employees and maintain close
coordination among executive, technical, accounting, finance, marketing, sales
and operations organizations. In addition, the Company's growth has resulted,
and any future growth will result, in increased responsibilities for management
personnel.
The Company Must Retain and Attract Key Personnel
The Company's success depends largely on the skills, experiences and
performance of the members of its senior management and other key personnel. The
Company needs employees with knowledge of Internet and computer technology,
banking, Internet marketing strategy and credit card processing. The Company may
not be successful in attracting, assimilating or retaining qualified personnel.
In addition, the Company's future success will depend on the
7
<PAGE>
Company's ability to continue attracting and retaining highly skilled personnel.
Like other companies in Hong Kong the Company faces intense competition for
qualified personnel.
Reliance On Key Personnel
The Company considers Gregory M. Pek and Ravi K. Daswani to be key
employees. The loss of either of them could seriously harm the Company's
business. The Company does not maintain key man life insurance for either of
these employees.
The Company Will Be Liable For Certain Accounts Receivable That Banks Are
Unable to Collect From Credit Cardholders
If a merchant that uses the Company's gateway receives payment from a bank
for a transaction that a purchaser is not obligated to pay because of fraud,
failure of the merchant to ship the purchased goods, sales return or other
dispute, the Company will be obligated to reimburse the bank for the amount of
the payment and the Company may be unable to collect the amount of the
reimbursement from the merchant.
Year 2000 Issues Could Affect The Company's Business
If the Company's systems do not operate properly with respect to date
calculations involving the Year 2000 and subsequent dates, it could incur
unanticipated expenses to remedy any problems, which could seriously harm the
Company's business. The Company has identified all third parties with which it
deals that present a material risk to the Company if they experience Year 2000
problems.
The reasonable worst case Year 2000 scenario for the Company would include
the substantial or complete shutdown of the Internet or the Bank of Bermuda or
the major credit card companies. This eventuality would cause the Company to
cease operations until the Year 2000 problems were corrected. The Company has no
contingency plan for dealing with this scenario and is not planning to develop
one.
The Company Needs Future Capital
The Company needs to raise funds, and funds may not be available on
favorable terms or at all. Failure to obtain funds on favorable terms could
seriously harm the Company's business and operating results. Futhermore, if the
Company issues additional equity securities, stockholders will experience
dilution, and the new equity securities could have rights senior to those of the
holders of the Company's common stock. If the Company cannot raise funds on
acceptable terms it will not be able to continue.
The Company Depends on Continued Use of the Internet and Growth of
E-commerce
Rapid growth in the use of the Internet has occurred only recently. As a
result, its acceptance and use may not continue to develop at historical rates,
and a sufficiently broad base of consumers may not adopt, and 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 there exist few proven
services and products.
The Internet may not be accepted as a long-term commercial marketplace for
a number of reasons, including potentially inadequate development of the
necessary network infrastructure or delayed development of enabling technologies
and performance improvements. The Company's success will depend, in large part,
upon third parties maintaining the Internet infrastructure to provide a reliable
network backbone with the necessary speed, data capacity, security and hardware
for reliable Internet access and services.
8
<PAGE>
Thin Public Market for The Company's Common Stock; Stock Price May
Fluctuate
The Company's common stock is very thinly traded. Its trading price may not
be an accurate reflection of the Company's value. The market price of the
Company's common stock may fluctuate significantly in response to a number of
factors, some of which (such as interest rates, general economic conditions and
trading multiples of comparable companies) are beyond the Company's control, and
some of which (such as operating results and announcements of new products) are
within the Company's control.
Future Sales of Shares Could Affect The Company's Stock Price
If the Company's stockholders sell substantial amounts of the Company's
common stock in the public market, the market price of the Company's common
stock could fall. Of the Company's outstanding common stock, 59% is eligible for
sale in the public market immediately.
Shareholders Will Receive No Dividends
The Company has never paid dividends and has no current plans to do so.
Given the Company's financial position, it is unlikely that it will pay any
dividends in the foreseeable future. The Company plans instead to retain
earnings, if any, to fund internal growth.
Special Note Regarding Forward-Looking Statements
This document contains forward-looking statements. These statements relate
to future events or the Company's future financial performance. In some cases,
one can identify forward-looking statements by terminology. For example, "may",
"will", "should", "expect.., "plan", "anticipate", "believe", "estimate",
"predict", "potential" or "continue", or the negative of these terms or other
comparable terminology, indicate forward-looking statements. These statements
are only predictions. Actual events or results may differ materially. In
evaluating these statements, one should specifically consider various factors,
including the risks outlined in the Risk Factors section. These factors may
cause the Company's actual results to differ materially from any forward-looking
statement.
Although it believes that the expectations reflected in the forward-looking
statements are reasonable, the Company cannot guarantee future results, levels
of activity, performance or achievements. Accordingly, neither the Company nor
any other person assumes responsibility for whether the forward-looking
statements ultimately prove accurate. The Company will not update any of the
forward-looking statements after the date of this registration statement to
conform them to actual results or to changes in the Company's expectations that
occur after the date of this registration statement.
9
<PAGE>
ITEM 2. FINANCIAL INFORMATION
Selected Financial Data.
<TABLE>
<CAPTION>
From September 16, 1998 Nine Months ended
(date of inception) to September 30, 1999 and
Statement of Operations Data December 31, 1998 cumulative since inception
- - - - - - - - - - - - - - - - - ----------------------------------------------------------------- -------------------------- ---------------------------
<S> <C> <C>
Revenues $-- $--
General and administration expenses -- $3,691,067
Other income (expense)
Interest income -- 14,073
Interest expense -- (216,474)
Loss on disposal of equipment -- (3,804)
---------------------------
(206,205)
Net loss for the period -- (3,897,272)
-------------------------- ---------------------------
Basic and diluted loss per share applicable to common
stockholders $-- $(0.34)
-------------------------- ---------------------------
Weighted average shares used in computing per share amounts -- 11,352,924
-------------------------- ---------------------------
<CAPTION>
Balance Sheet Data December 31, 1998 September 30, 1999
- - - - - - - - - - - - - - - - - ----------------------------------------------------------------- -------------------------- ---------------------------
<S> <C> <C>
Current Assets $-- $1,302,166
Property and Equipment -- $1,102,762
Total Assets -- 2,404,928
Deferred Rent -- 77,466
Obligations under capital lease (including current instalments) -- 4,194
</TABLE>
Management's Discussion and Analysis of Financial Position and Results Of
Operations
General.
The only material financial transactions have been capital raising and
paying costs of forming the Company and commencing limited operations. The
Company is a corporation with a limited operating history. Its date of inception
was September 16, 1998. It is a development stage company with no operating
revenues to date. The Company expects to derive revenues from one-time
initiation fees when merchants or banks connect to the Company's system and from
ongoing transaction fees that will be both fixed and variable with the size of
the transaction being processed. The Company has insufficient operating history
on which to base an evaluation of its business and prospects. Any such
evaluation must be made in light of the risks frequently encountered by
companies in their early states of development, particularly for companies in
the rapidly evolving sector related to the Internet. See "Item 1. Business -
Risk Factors". There is no assurance that the Company will be successful in
addressing these risks and if it fails to do so its financial condition and
results of operations would be materially adversely affected.
In instances where a bank is unable to collect from a cardholder because of
fraud, failure of the merchant to ship goods, sales returns or other disputes,
the merchant is liable for the uncollected amount. If the amount cannot be
collected from the merchant, however, then the Company will have to reimburse
the bank for the uncollected amount. The Company will adopt procedures aimed at
evaluating the credit of merchants initially and on an ongoing basis and at
monitoring each merchant's transactions for excessive disputes.
Its agreement with the Company gives the Bank of Bermuda the right to
retain a percentage (determined solely by the bank) of any day's remittances as
security for disputed items. It can hold this amount for up to 180 days, at
which time it must release it to the Company unless a dispute over it has
developed. Amounts so retained by the bank will not have to be paid to the
merchant until they are received by the Company. Alternatively, the bank at its
sole option may require the company to deposit with it an amount, determined
solely by the bank, that the bank will hold as security for disputed items. The
amount of the deposit must be evaluated by the bank at least every 180 days and,
if necessary, increased or reduced to reflect more or less risk from disputed
items as a result of greater or lesser volume of transactions or otherwise.
Results of Operations.
Because the Company's date of inception was September 16, 1998, no period
to period comparison of operations is possible. Operating expenses incurred
through September 30, 1999 were $3,691,067, and represent the cost of forming
the Company, building its infrastructure, hiring and paying employees, and
advertising and marketing. As of September 30, 1999, the Company had an
accumulated deficit of $ 3.9 million. For a description of the contribution of
each item of expense to the accumulated deficit, see the Company's Consolidated
Statement of Operations for the Nine Months Ended September 30, 1999 on page
F-5.
10
<PAGE>
Liquidity and Capital Resources.
On March 3, 1999, the Company issued 500,000 shares of Common Stock at
$4.00 per share to raise $2,000,000 in working capital. On August 10, 1999, the
Company issued a promissory note in principal amount of $1,000,000 at par to
Private Investment Company Ltd. to raise working capital. This note bears
interest at the rate of 12% per annum, had an original maturity date of November
10, 1999 and is convertible into Common Stock at the option of the holder at
$8.00 per share. This Note was accompanied by separable five-year warrants to
purchase 100,000 shares of Common Stock at $8.50 per share, the last trade price
on August 6, 1999. The maturity of the note was subsequently extended to January
10, 2000. On September 8, 1999, the Company issued 166,667 shares of Common
Stock at $9 per share to raise $1,500,000 of working capital. On October 27,
1999 the Company borrowed $250,000 and on November 12, 1999 it borrowed $500,000
from Pacific Capital Markets, which is owned by Richard N. Jeffs, James R. King,
Jr. and Robert Smith, all shareholders of the Company. These loans are evidenced
by demand promissory notes. On November 26, 1999, the Company issued 1,000,000
units, each of which consisted of one share of common stock and a warrant to
purchase one share of common stock for $7.80 at any time for five years, to the
Bank of Bermuda Limited to raise $6,500,000 of working capital. These financings
represent the sole source of the Company's working capital to date. In September
1999, the Company paid $1,500,000 to a consultant in full satisfaction of an
obligation under a Consulting Agreement dated for reference March 5, 1999
pursuant to which the consultant will render services to the Company through
August 31, 2000.
These services are:
o introducing the Company to investment banks, institutional investors,
and high net worth individual investors and assisting in negotiating
the terms of debt, equity or convertible debt financing as required by
the Company;
o designing and implementing a public relations program for the Company
to broaden exposure to the Company's services, and introducing the
Company to potential customers and partners and helping to negotiate
the terms of any arrangement with them;
o designing and implementing a program to broaden the Company's exposure
to financial industry analysts, financial institutions, brokerage
firms, individual brokers and the investing public;
o developing an advertising strategy for the Company that may involve
electronic, print or broadcast advertising to promote the development
and marketing of the Company's products and services.
The consultant is required to bear all costs (including out-of-pocket expenses)
incurred in connection with providing the above-described services.
On November 30, 1999, the Company had $6,317,680 of cash, cash equivalents
and marketable securities available to fund operations. At the rate the Company
is currently using cash (approximately $500,000 per month), this amount would be
sufficient to enable the Company to maintain its current operations for
approximately eleven months and repay the $1 million note referred to above. The
Company's auditors have expressed substantial doubt as to its ability to
continue as a going concern. See Independent Auditors' Report to the Board of
Directors and Stockholders of the Company on page F-2.
In order to implement its growth plans through June 30, 2000, the Company
estimates that it will require a further $30,000,000. Failure to raise this
amount will have a material adverse effect on the financial position and results
of operation of the Company. There can be no assurance that the Company will be
able to raise any more working capital, and any such financing will be dilutive
to the existing shareholders.
Year 2000 Issues.
Many currently installed computer systems are not capable of distinguishing
21st century dates from 20th century dates. As a result, beginning on January 1,
2000, computer systems and software may produce erroneous results or fail unless
they have been modified or upgraded to process date information correctly.
Significant uncertainty exists in the
11
<PAGE>
software industry and other industries concerning the scope and magnitude of
problems associated with the century change. The Company recognizes the need to
ensure that its operations will not be adversely affected by Year 2000 software
problems.
The Company has completed its assessment of the Year 2000 issues in the
software and hardware contained in its internal systems. Based on its current
assessment, the Company has determined that its internal systems are Year 2000
compliant. The cost of this assessment to the Company was not material. All
software and hardware installed hereafter will be tested and verified for Year
2000 readiness at the time of installation at no additional cost.
The Company has identified all third parties with which it deals that
present a material risk to the Company if they experience Year 2000 problems. Of
these parties, nearly all have web sites that discuss their Year 2000 readiness.
All of these have stated on their web site that they are Year 2000 compliant.
The Company has contacted all material third parties that did not have a web
site discussing their Year 2000 readiness. All of these responded in writing
that they are Year 2000 compliant.
The reasonable worst case Year 2000 scenario for the Company would include
the substantial or complete shutdown of the Internet or the Bank of Bermuda or
the major credit card companies. This eventuality would cause the Company to
cease operations until the Year 2000 problems were corrected. The Company has no
contingency plan for dealing with this scenario and is not planning to develop
one.
ITEM 3. PROPERTIES.
The Company does not own any real property. It leases 8,740 square feet of
office space at the address of its headquarters in Hong Kong for $41,890 per
month. This lease expires on March 21, 2001. The Company also occupies office
space for network operations and processing centre rent-free on the premises of
the Bank of Bermuda in Bermuda. The Company believes that its present facilities
are adequate to meet its current business requirements and that suitable
facilities for expansion will be available when necessary.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth the current beneficial ownership of the
Company's common stock by (i) each person known by the Company to beneficially
own five percent or more of the Company's outstanding common stock, (ii) the
Company's Chief Executive Officer and Directors and (iii) all of the Company's
Executive officers and Directors as a group. Except as otherwise indicated, all
shares of Common Stock are beneficially owned, and investment and voting power
is held, by the person named as owner.
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner Number of Shares Beneficially Owned Percentage Ownership
<S> <C> <C>
Bank of Bermuda Limited 2,000,000(1) 14.0%
Gregory M. Pek 1,750,000(2) 13.0%
Ravi K. Daswani 1,750,000(2) 13.0%
Ermanno Pascutto 450,000(2) 3.2%
Cody Cain 100,000(2) 0.7%
Douglas Moore 100,000(2) 0.7%
Executive Officers and Directors as a group 4,620,000(3) 33.1%
</TABLE>
- - - - - - - - - - - - - - - - - ----------
(1) Includes options to purchase 1,000,000 shares of common stock.
(2) Includes options to purchase 100,000 shares of common stock.
(3) Includes options to purchase 970,000 shares of common stock.
12
<PAGE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The names, ages, and terms of office of directors and executive officers of
the Company are set forth below:
Name Position With Company
Gregory M. Pek(1) Director, President, and Chief Executive Officer
Ravi K. Daswani(1) Director, Senior Vice President, Chief Operating Officer
Ermanno Pascutto(1) Director
Cody Cain(1) Director
Douglas Moore (1) Director
Raymond Chan Director of Payment Processing Systems
Christopher M. Fox Chief Technology Officer
Paul W. Fok Project Director
Anders Green Country Manager-Philippines
Lee Choong Wan Country Manager-Korea
John R. Brewer Corporate Secretary
- - - - - - - - - - - - - - - - - ----------
(1) Member of the Company's Board of Directors
Gregory M. Pek, 44, has been a Director of the Company and the President
and Chief Executive Officer of the Company since March 3, 1999 and has been a
Director of First Ecommerce Asia Limited since its inception. He was from March
1994 to February 1999 an executive officer of David Resources Company Limited,
Kong Tai International Holdings Company Limited and from 1998 to February 1999 a
director of Singapore Hong Kong Properties Investment Limited. Before 1994, Mr.
Pek was a director and officer of a number of public companies in Canada.
Ravi K. Daswani, 32, has been a Director of the Company and Senior vice
President and Chief Operating Officer of the Company since March 3, 1999 and has
been a Director of First Ecommerce Asia Limited since its inception. He was from
December 1997 to February 1999 the managing director and co-owner of Asia
Internet Limited, a Hong Kong Internet service provider. For more than three
years before December 1997, he resided in Panama where he was managing director
of a wholesale and retail apparel business.
Ermanno Pascutto, 46, has been a Director of the Company since March 3,
1999. He is a Canadian and Hong Kong lawyer with extensive experience in
securities regulation and corporate governance. Mr. Pascutto has been for more
than five years a partner with Goodman Phillips & Vineberg working in the in
Toronto and Hong Kong offices of the firm. Before that Mr. Pascutto was deputy
chairman and executive director of the Hong Kong Securities and Futures
Commission where, among other things, he was involved in the regulation of
listed companies. Prior to his joining the HRSFC, he was executive director and
chief operating officer of the Ontario Securities Commission
Cody Cain, 31, has been a Director of the Company since May 31, 1999. He is
the Partner for the Asia Pacific Region of USWeb/CKS Corporation, an Internet
consulting company. Mr. Cain joined Gray Peak Technologies, a computer network
infrastructure consulting company where he was the managing Director and founder
of the Hong Kong office in January 1998. Grey Peak was acquired by USWeb/CKS in
July 1998. Prior to joining Gray Peak, Mr. Cain was a National Sales manager of
China for Nike from January 1997 to December 1997, and prior to that he was the
Business Development Director for Icon CMT Corp., an Internet service provider
based in New York, from February 1996 to January 1997. In 1995, prior to joining
Icon CMT Corp., Mr. Cain was a founder and Director of Find Publishing, an
online marketing database company based in the United Kingdom and was the sole
proprietor of Peak Performance International, a health and fitness consultant
based in the United Kingdom, from January 1995 to December 1995.
13
<PAGE>
Douglas Moore, 41, has been a Director of the Company since October 27,
1999. Since 1994, Mr. Moore has worked for Credit Suisse in Hong Kong and is
currently the director of Credit Suisse Investment Advisory (Hong Kong) Limited,
a wholly owned subsidiary of Credit Suisse. Before joining Credit Suisse, Mr.
Moore practiced international tax law with the Hong Kong office of McMillan
Binch, a Canadian law firm. He is a Canadian and a Hong Kong lawyer.
Raymond Chan, 59, has been director of Payment Processing Systems since
June 1, 1999. Before joining the Company on that date, he spent 17 years at visa
international where he was ultimately promoted to Executive Vice President and
General Manager of Greater China Region.
Christopher M. Fox, 34, joined the Company in April 1999. Before that from
January to March 1999, he was a Practice Director of China.com and consulted
with its large clients regarding their Internet business strategies. During
November 1998 and December 1998 he was employed by Interim Technology, an
information technology company, in its Hong Kong office to set up a professional
services division. From June 1998 to November 1998, he was a technical architect
for Hong Kong Telecom. Mr. Fox was a technical director in charge of ecommerce
projects for Computerland in New Zealand from October 1996 to June 1998, and
before that was a strategy consultant for ecommerce projects for the National
Bank, Wellington, New Zealand from January 1996 to September 1996. From October
1994 to January 1996 he was a technical architect for the New Zealand Police
Force's Integrated National Crime Information System.
Paul W. Fok, 46, joined the Company in May 1999. Before that, he was head
of technical development at the Stock Market Channel, a subsidiary of Reuters
located in Hong Kong that distributes stock market information, from October
1997 to April 1999. From October 1989 to September 1997, he was the senior
manager of the cost center of Cable and Wireless Hong Kong Telecom.
Anders Green, 43, joined the Company in August 1999. Before that for more
than ten years he was the proprietor and chief executive officer of Sky
International Consultancy, a Hong Kong company that represented European
businesses seeking to do business in Asia.
Lee Choong Wan, 46, joined the Company in September 1999. From 1990 to
August 1998, he worked for Visa International where he was promoted to president
of Visa Korea, a wholly owned subsidiary of Visa International. From August 1998
until he joined the Company, he attended to personal matters.
John R. Brewer, 43, joined the company in September 1999. Before that, he
was the corporate secretary of Astec (BSR)(PLC) in Hong Kong from June 1996 to
August 1999. He was the proprietor of East Asia Trust, a registered investment
advisor in Hong Kong, from May 1993 until May 1996.
ITEM 6. EXECUTIVE COMPENSATION.
Directors are not paid any fees in connection with their so acting. They
are reimbursed for out-of-pocket expenses incurred in connection with attending
board meetings. Directors have been granted options to purchase the Company's
common stock for $7.65 per share (85% of the fair market value on the date of
grant for all but Mr. Moore; 100% of fair market value on date of grant for Mr.
Moore) as set forth below:
Name Number of Options
--------------------------------------- ------------------------
Gregory M. Pek 100,000
Ravi K. Daswani 100,000
Ermanno Pascutto 100,000
Cody Cain 100,000
Douglas Moore 100,000
14
<PAGE>
In addition to the options set forth above, senior management as a group
has been granted options to purchase 775,000 shares for $7.65 per share (85% of
the fair market value on the date of grant.) Half of these vest in June 2000 and
half vest in June 2001.
The Company paid no Executive officer more than $10,000 in 1998. The law
firm of which Mr. Pascutto is a partner renders legal services to the Company
from time to time and charges the Company its usual rates plus out of pocket
disbursements for doing so. During the nine months ended September 30, 1999, the
Company paid that firm $131,169.
Mr. Pek's employment agreement, which became effective January 1, 1999,
provides for a monthly salary of 100,000 Hong Kong dollars (one Hong Kong dollar
equaled approximately 12.9 U.S. cents on December 2, 1999) and a year-end bonus
equal to one month's salary. The agreement is for an indefinite term. Mr. Pek is
required to devote his full time efforts to being the Company's President and
Chief Executive Officer. The Company may terminate Mr. Pek without any payment
for cause or disability or for having reached mandatory retirement age or, by
paying him one month's salary, at its complete discretion. Mr. Pek may resign at
any time upon one month's notice. Following his employment, Mr. Pek has agreed
not to compete with the Company for periods ranging from six to 12 months
depending upon the geographic region at issue.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Messrs. Pek and Daswani formed First Ecommerce Asia Limited in 1998. Mr.
Pek contributed $1,507 to that company and Mr. Daswani contributed $1,507. In
return, each received one-half of the outstanding common stock of that company
(one share each). On January 28, 1999, JRL Resources Corp. acquired that company
for 3, 015,000 newly issued shares of the common stock of JRL and 985,000
already-outstanding shares of common stock of JRL (from JRL shareholders), of
which Messrs. Pek and Daswani each received half. These 4,000,000 shares
represent all but 40,000 of JRL's issued and outstanding shares after this
issuance. On February 12, 1999, JRL merged with and into the Company and in
connection with the merger the JRL common stock of each of Messrs. Pek and
Daswani was converted into 2,000,000 shares of the Company's common stock.
Asia Internet Limited, of which Mr. Daswani is a director and shareholder,
received $154,543 from the Company for providing technical support, system
maintenance and other professional services for the Company during the nine
months ended September 30, 1999.
The Directors and management of the Company have been granted options to
purchase the Company's common stock. A law firm of which a director is a partner
has received legal fees. See Item 6 Executive Compensation.
On July 21, 1999, the Company entered into an agreement with US Web/CKS
Corporation pursuant to which the Company will pay $231,000 for technology
development services for one year. Mr. Cain is an employee of US Web/CKS
Corporation.
The Company believes that the above transactions are on terms at least as
favorable to it as could have been obtained in an arm's length transaction.
ITEM 8. LEGAL PROCEEDINGS.
At the date of this registration statement, the Company is not involved in
any litigation and does not have any pending claims. The Company's management is
not aware of any threatened claims or the basis therefor.
15
<PAGE>
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The Company's common stock has traded on the OTC Bulletin Board under the
symbol "FECC" since March 8, 1999. The following table sets forth the high and
low closing prices for the common stock for the periods indicated.
1999 High Low
- - - - - - - - - - - - - - - - - ------------------------------------------ ------------ ----------
Fourth Quarter(through November 30) $ 8.69 $ 6.69
Third Quarter 11.38 6.69
Second Quarter 12.13 5.88
First Quarter 7.25 2.25
As of November 30, 1999, there were approximately 35 holders of record of
the common stock. On December 7, 1999, the closing sales price of the Company's
common stock was $7.50 per share.
The Company has not paid any cash dividends on its Common Stock and does
not presently intend to do so. Future dividend policy will be determined by its
Board of Directors on the basis of its earnings, capital requirements, financial
condition and other factors deemed relevant.
The transfer agent and registrar of the Company's Common stock is Nevada
Agency and Trust Company, 50 West Liberty, Suite 880, Reno, Nevada 89SO1.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
JRL Resources Corp. (then known as Vantage Sales Corp.) issued 1,025,000
shares of its common stock to 26 persons on November 14, 1996 for an aggregate
of $5,025. These persons, and the number of shares issued to each, were:
Shares
------
Eric P. Littman 1,000,000
Lane Abraham 1,000
Mark Bryn 1,000
Isabel Cantera 1,000
Stephanie Fisch 1,000
Michael Fridovich 1,000
Lori Halpern 1,000
Bernard Halpern 1,000
Ronnie Halpern 1,000
Susan Hershkowitz 1,000
16
<PAGE>
Wendy Heckleman 1,000
Rob Hedeman 1,000
Marc Kuperman 1,000
Alan Leibowitz 1,000
James Littman 1,000
Leona Littman 1,000
Daryl Merl 1,000
Robert Oosterwyk 1,000
S. Ronald Pallot 1,000
Sophie Romano 1,000
Lawrence Schwartz 1,000
Nancy Schwartz 1,000
Cindy Singer 1,000
Bernice Steiner 1,000
Samuel Steiner 1,000
Gertrude Weiner 1,000
This issuance was exempt from the registration requirements of the
Securities Act of 1933 pursuant to Rule 504.
JRL Resources Corp. issued 3,015,000 shares of its common stock to the
shareholders of First Ecommerce Asia Limited (Messrs. Pek and Daswani) on
January 28, 1999 in return for all the outstanding equity of that company. This
issuance was exempt from registration pursuant to Regulation S. On the same
date, JRL Resources Corp. issued 8,000,000 shares of its common stock in a
transaction exempt from registration under Regulation S to financial advisors
for services rendered in connection with organizational activities at a deemed
value of $308,000, which includes $8,000 of cash received. These advisors, and
the number of shares issued to each, were:
Shares
------
Beaconsfield Corporation
Nassau, Bahamas 450,000
Claritas Trading Ltd.
Turks & Caicos Islands, BWI 480,000
Crescent Group SA
Nassau, Bahamas 480,000
17
<PAGE>
Ermine Overseas Ltd.
British Virgin Islands 500,000
Gastinough Incorporated
Nassau, Bahamas 500,000
Georgina Industries limited
British Virgin Islands 450,000
Hawk Management Ltd
Turks & Caicos Islands 450,000
Hildesheim Kapital GmbH
Alofi, Niue 450,000
Inversiones Arturo S. A.
Republic of Panama 450,000
Richard N. Jeffs
Vancouver, British Columbia 300,000
Kaleyard Corp.
Nassau, Bahamas 480,000
James R. King, Jr.
Vancouver, British Columbia 300,000
Marble Hall Investments Ltd
Douglas, Isle of Man 480,000
Minglow Management S.A.
Republic of Panama 500,000
Octavia Kapital GmbH
Alofi, Niue 500,000
Rockridge Estates Ltd.
Nassau, Bahamas 450,000
Robert Smith
North Vancouver, British Columbia 300,000
Wherry Trading S. A.
Republic of Panama 480,000
18
<PAGE>
The services they rendered were in the nature of financial and business
advice related to finding, evaluating, financing and negotiating the acquisition
of First Ecommerce Asia Limited. In connection with rendering these services,
they paid for their own out-of-pocket expenses, including attorneys' fees.
On February 12, 1999 the Company (which had not previously issued any
capital stock) issued 12,040,000 shares of its common stock to the shareholders
of JRL Resources Corp. in connection with merging JRL into the Company. These
issuances were exempt from registration under Regulation S and Rule 504.
The Company issued 500,000 shares of its common stock to Gera Unternehmen
GmbH, Alofi, Nive outside the United States on March 3, 1999 at a price of $4.00
per share. This issuance was exempt from registration pursuant to Regulation S.
The Company issued its 12% promissory note due November 10, 1999 in
principal amount of $1,000,000 at par to Private Investment Company Ltd.,
Nassau, Bahamas on August 10, 1999. This note is convertible into shares of the
Company's common stock at the rate of $8 per share. The note was accompanied by
five-year warrants to purchase 100,000 shares of the Company's common stock for
$8.50 per share. These issuances were exempt from registration pursuant to
Regulation S.
On September 8, 1999, the Company issued 166,667 shares of its Common Stock
to Tradewinds Investments Ltd., Nassau, Bahamas outside the United States at a
price of $9 per share. The issuance was exempt from registration pursuant to
Regulation S.
On November 26, 1999 the Company issued 1,000,000 units, each of which
consisted of one share of common stock and a five-year warrant to purchase one
share of common stock for $7.80, to The Bank of Bermuda Limited, Hamilton,
Bermuda outside the United States for $6.50 per unit. This issuance was exempt
from registration pursuant to Regulation S.
ITEM 11. DESCRIPTION OF SECURITIES
The authorized common stock of the Company consists of 200,000,000 shares
at a par value of one mill ($0.001) per share. A total of 13,706,667 shares of
common stock are presently issued and outstanding. Also outstanding are options
held by the Company's Directors and management and warrants held by a two third
parties to purchase an aggregate of 2,612,500 shares of common stock.
Holders of common stock are each entitled to vote for each share standing
in his or her name in the books of the Company. Holders of the common stock do
not have subscription, redemption, conversion or pre-emptive rights. The
outstanding shares of common stock are fully paid and non-assessable. Each share
of common stock is entitled to participate pro rata in distribution upon
liquidation and to one vote on all matters submitted to a vote of stockholders.
The holders of common stock may receive cash dividends as declared by the Board
of Directors out of funds legally available therefor. Holders of the common
stock are entitled to elect all Directors. The holders of the common stock do
not have cumulative voting rights, which means that the holders of more than
half of the shares voting can elect all of the Directors and the remaining
holders will not be able to elect any Directors.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company will indemnify and hold harmless its directors and officers
from any action, suit or proceeding whether civil, criminal, or administrative,
or investigative, to the fullest extent legally permissible under the General
Corporate Law of the State of Nevada. No director or officer shall have any
personal liability to the Company or its stockholders from damages for breach of
fiduciary duty as a Director or officer, except that Directors and Officers may
be held liable to the Company or its stockholders for acts or omissions which
involve intentional misconduct, fraud or knowing violation of law, or the
payment of dividends in violation of the Nevada Revised Statutes. The Directors
may
19
<PAGE>
cause the Company to purchase and maintain insurance on behalf of any person who
is or was a Director or Officer of the Company.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to Directors, officers or third parties controlling the
Company pursuant to Nevada law, the Company has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See attached financial statements beginning on page F-1
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) See Index to Financial Statements on page F-1
(b) Exhibits
3.1 Articles of Incorporation
3.2 By-laws
4.1 Specimen Stock Certificate
11.1 Computation of Earnings per Share
21.1 List of Subsidiaries
27.1 Financial Data Schedule
20
<PAGE>
SIGNATURES
Pursuant to the requirements of section 12 of the securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
FIRST ECOM.COM, INC.
By: /s/ Gregory M. Pek
---------------------------------------
Dated: December 20, 1999 Gregory M. Pek, Chief Executive Officer
21
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' report to the Board of Directors and
Stockholders of First Ecom.com, Inc.................................F-2
Consolidated balance sheet at September 30, 1999 (unaudited) and
at December 31, 1998 (audited)......................................F-3
Consolidated Statement of operations for the nine months
ended September 30, 1999 (unaudited) and for the period
from September 16, 1998 (date of inception) to December
31, 1998 (audited)......................................................F-5
Consolidated Statement of Stockholders Equity for the nine months
ended September 30, 1999 (unaudited) and for the period
from September 16, 1998 (date of inception) to December
31, 1998 (audited)......................................................F-6
Consolidated Statement of Cash Flows for the nine months
ended September 30, 1999 (unaudited) and for the period
from September 16, 1998 (date of inception) to December
31, 1998 (audited)......................................................F-7
Notes to Consolidated Financial Statements for the nine months ended
September 30, 1999 (unaudited) and for period from
September 16, 1998 (date of inception) to December 31,
1998 (audited)..........................................................F-9
F-1
<PAGE>
Independent Auditors' Report
To the Board of Directors and Stockholders
First Ecom.com, Inc.
We have audited the accompanying consolidated balance sheet of First
Ecom.com, Inc. and subsidiaries (a group of companies in development stage)
(together "the Group") as of December 31, 1998 and the related consolidated
statements of operations, stockholders' equity, and cash flows for the period
from September 16, 1998 (date of inception) to December 31, 1998. These
financial statements are the responsibility of the Group's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards in Hong Kong and the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of First
Ecom.com, Inc. and subsidiaries (a group of companies in development stage) as
of December 31, 1998, and the results of their operations and their cash flows
for the period from September 16, 1998 (date of inception) to December 31, 1998
in conformity with generally accepted accounting principles in the United States
of America.
The accompanying consolidated financial statements have been prepared
assuming that the Group will continue as a going concern. As discussed in Note 2
to the consolidated financial statements, the Group is not generating cash flows
from operations and does not have adequate working capital sufficient to fund
expected capital and operating requirements through its development stage. This
condition raises substantial doubt about the Group's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 2. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
KPMG
Hong Kong, August 12, 1999
F-2
<PAGE>
<TABLE>
<S> <C>
First Ecom.com, Inc. and subsidiaries (a group of companies in development stage)
Consolidated financial statements for the nine months ended September 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
</TABLE>
Consolidated balance sheet at September 30, 1999 and
December 31, 1998
(Expressed in United States Dollars)
September 30,
1999 December 31,
Note (unaudited) 1998
US$ US$
Assets
Current assets
Cash and cash equivalents 20,009 --
Advances to employees 76,762 --
Amounts due from stockholders 3,478 --
Prepaid financial advisory fees 5 922,504
Other receivables and prepaid expenses 279,413 --
---------- ----------
Total current assets 1,302,166 --
Property and equipment 6 1,102,762 --
---------- ----------
Total assets 2,404,928 --
========== ==========
F-3
<PAGE>
<TABLE>
<S> <C>
First Ecom.com, Inc. and subsidiaries (a group of companies in development stage)
Consolidated financial statements for the nine months ended September 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
</TABLE>
Consolidated balance sheet at September 30, 1999
and December 31, 1998 (continued)
(Expressed in United States Dollars)
September 30,
1999 December 31,
Note (unaudited) 1998
US$ US$
Liabilities and stockholders' equity
Current liabilities
Short term loan 9 817,282 --
Current instalments of obligations under
capital lease 7 1,624 --
Accounts payable 790,280 --
Accrued expenses 167,468 --
---------- ----------
Total current liabilities 1,776,654 --
Deferred rent 77,466 --
Obligations under capital lease, excluding
current instalments 7 2,570 --
---------- ----------
Total liabilities 1,856,690 --
Stockholders' equity
Common stock, $0.001 par value
Authorised
2 and 200,000,000 shares at December 31,
1998 and September 30, 1999 respectively;
Issued and outstanding shares
As of December 31, 1998 - 2 shares
As of September 30, 1999 - 12,706,667
shares 12,707 --
Additional paid-in capital 4,534,509 --
Deficit accumulated during the development
stage
(3,998,978) --
---------- ----------
Total stockholders' equity 548,238 --
---------- ----------
Total liabilities and stockholders' equity 2,404,928 --
========== ==========
See accompanying notes to financial statements.
F-4
<PAGE>
<TABLE>
<S> <C>
First Ecom.com, Inc. and subsidiaries (a group of companies in development stage)
Consolidated financial statements for the nine months ended September 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
</TABLE>
Consolidated statement of operations
for the nine months ended September 30, 1999 and
for the period from September 16, 1998 (date of inception)
to December 31, 1998
(Expressed in United States Dollars)
For the nine
months ended
September 30,1999 From September
and cumulative 16, 1998 (date of
Note since inception inception) to
(unaudited) December 31, 1998
US$ US$
Operating expenses
General and administration expenses
Staff costs 901,754 --
Stock compensation costs 330,116
Organisational costs 300,000 --
Advertising and promotion 186,670 --
Legal and professional fees 1,167,678 --
Travelling 273,246 --
Depreciation 134,307
Others 471,285 --
----------- ----------
(3,765,056)
----------
Other income/(expenses)
Interest income 14,073 --
Interest expense (244,191) --
Loss on disposal of equipment (3,804)
----------- ----------
(233,922) --
----------- ----------
Net loss for the period (3,998,978) --
=========== ==========
Basic and diluted loss per share
applicable to common stockholders (0.34) --
=========== ==========
Weighted average shares used in
computing per share amounts 11,647,155 --
=========== ==========
See accompanying notes to financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
First Ecom.com, Inc. and subsidiaries (a group of companies in development stage)
Consolidated financial statements for the nine months ended September 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
</TABLE>
Consolidated statement of stockholders' equity
for the nine months ended September 30, 1999 and
for the period from September 16, 1998 (date of inception)
to December 31, 1998
(Expressed in United States Dollars)
<TABLE>
<CAPTION>
Deficit
accumulated Total stock-
Additional during the holders'
Common paid-in development equity
Note stock capital stage
US$ US$ US$ US$
Consolidated statement of stockholders'
equity for the period from September
16, 1998 (date of inception) to
December 31, 1998
<S> <C> <C> <C> <C>
Balance at September 16, 1998 1 -- -- -- --
---------- ---------- ---------- ----------
Balance at December 31, 1998 -- -- -- --
========== ========== ========== ==========
Consolidated statement of stockholders'
equity for the nine months ended
September 30, 1999 (unaudited)
Balance at December 31, 1998 -- -- -- --
Impact of merger with JRL Resources Corp.
1 4,040 (4,940) -- (900)
Issuance of 8,000,000 shares of common
stock for organisational costs 1 8,000 300,000 -- 308,000
Secondary common stock offering of
500,000 shares 1 500 1,999,500 -- 2,000,000
Third common stock offering of 166,667
shares 1 167 1,499,833 -- 1,500,000
Stock-based compensation -- 330,116 -- 330,116
Issuance of debt securities with
detachable warrants 9 -- 410,000 -- 410,000
Net loss for the period -- -- (3,998,978) (3,998,978)
---------- ---------- ---------- ----------
Balance at September 30, 1999 12,707 4,534,509 (3,998,978) 548,238
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
First Ecom.com, Inc. and subsidiaries (a group of companies in development stage)
Consolidated financial statements for the nine months ended September 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
</TABLE>
Consolidated statement of cash flows
for the nine months ended September 30, 1999 and
for the period from September 16, 1998 (date of inception)
to December 31, 1998
(Expressed in United States Dollars)
<TABLE>
<CAPTION>
For the nine
months ended
September 30,1999 From September
and cumulative 16, 1998 (date of
Note since inception inception) to
(unaudited) December 31, 1998
US$ US$
<S> <C>
Net loss for the period (3,998,978) --
Organisational costs in excess of cash paid 300,000 --
Stock compensation costs 330,116 --
Depreciation of property and equipment 134,307 --
Loss on disposal of equipment 3,804 --
Payment of financial advisory fee (1,500,000)
Amortisation of financial advisory fee 577,496
Increase in other receivables and prepaid expenses (279,413) --
Increase in amounts due from employees and
stockholders (80,240) --
Accretion of discount on loan 227,282
Increase in accounts payable 459,739 --
Increase in accrued expenses 139,247 --
Increase in deferred rent 77,466 --
---------- ----------
Net cash used in operating activities (3,609,174) --
----------
Cash flows from investing activities
Payments for property and equipment (883,946) --
---------- ----------
Net cash used in investing activities (883,946) --
---------- ----------
Cash flows from financing activities
Proceeds from issuance of common stock 3,508,000 --
Proceeds from short term loan with detachable warrants 1,000,000 --
Proceeds from disposal of equipment 5,806 --
Principal payments under capital lease obligations (677) --
---------- ----------
Net cash provided by financing activities 4,513,129 --
---------- ----------
Net increase in cash and cash equivalents 20,009 --
Cash and cash equivalents at beginning of period -- --
---------- ----------
Cash and cash equivalents at end of period 20,009 --
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
First Ecom.com, Inc. and subsidiaries (a group of companies in development stage)
Consolidated financial statements for the nine months ended September 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
</TABLE>
Consolidated statement of cash flows
for the nine months ended September 30, 1999 and
for the period from September 16, 1998 (date of inception)
to December 31, 1998 (continued)
(Expressed in United States Dollars)
The Group paid $142 and $Nil for interest for the nine months ended September
30, 1999 (unaudited) and for the period from September 16, 1998 (date of
inception) to December 31, 1998 (audited) respectively.
Major non-cash transactions
Period from January 1, 1999 to September 30, 1999 (unaudited):
(a) Property and equipment amounting to $4,871 were acquired under a capital
lease during the nine months ended September 30, 1999.
(b) Issuance of 8,000,000 shares to financial advisors for services rendered in
connection with organisational activities of the Group at a deemed value of
$300,000, in excess of $8,000 cash received
(c) During the nine months ended September 30, 1999 $330,116 in compensation
expense was recorded for options granted.
See accompanying notes to financial statements.
F-8
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
First Ecom.com, Inc. and subsidiaries (a group of companies in development stage)
Consolidated financial statements for the nine months ended September 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
</TABLE>
Notes to consolidated financial statements
for the nine months ended September 30, 1999 (unaudited)
and for the period from September 16, 1998 (date of inception)
to December 31, 1998
(Expressed in United States Dollars)
1 Background and principal activities
Formation
First Ecommerce Asia Limited ("FEAL") (prior to December 10, 1998 named Gold
Pacific Management Limited ) was incorporated in Hong Kong on September 16, 1998
with two shares of HK$1 per share issued and outstanding. On January 28, 1999
FEAL entered into an agreement and plan of merger with JRL Resources Corp.
(prior to August 18, 1998 named Vantage Sales Corp.), a company incorporated in
the State of Florida on November 13, 1996 with 1,025,000 common shares issued
and outstanding ("JRL Resources"), which had been inactive since its formation.
Pursuant to the terms of the agreement and plan of merger and related
agreements, 3,015,000 newly issued shares of JRL Resources and 985,000 shares
held by existing shareholders of JRL Resources were exchanged for the two shares
of FEAL, and FEAL became a wholly-owned subsidiary of JRL Resources.
Issuance of common shares for organisational costs
Also on January 28, 1999, JRL Resources issued 8,000,000 shares to financial
advisors for services rendered in connection with organisational activities at a
deemed value of $308,000, including $8,000 cash received.
Accounting for the formation and organisational costs
The merger between JRL Resources and FEAL was a merger of a private operating
company into a non-operating public shell corporation with nominal net assets
that resulted in the owners and management of the private company having
operating control of the combined company after the transaction. For accounting
purposes, the transaction has been treated as a reverse acquisition of JRL
Resources by FEAL with FEAL deemed to be the accounting acquirer. The
consolidated financial statements for periods prior to the merger reflect the
financial position and results of operations of FEAL since its formation. Since
JRL Resources had no significant operations prior to the reverse acquisition,
pro forma information giving effect to the acquisition is not presented.
The issuance of common shares to financial advisors for organisational costs
were recorded at the deemed fair value of the services provided of $300,000,
plus the nominal amount of cash received of $8,000, or $0.0385 per share.
F-9
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
First Ecom.com, Inc. and subsidiaries (a group of companies in development stage)
Consolidated financial statements for the nine months ended September 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
</TABLE>
1 Background and principal activities (continued)
JRL Resources merger with First Ecom.com, Inc.
Pursuant to an agreement and plan of merger dated February 12, 1999, JRL
Resources was merged with and into First Ecom.com, Inc. ("FECI"), a company
incorporated in the State of Nevada on February 12, 1999, with no shares
issued and outstanding. Pursuant to the agreement and plan of merger, all
of the 12,040,000 outstanding common shares of JRL Resources were exchanged
on a one-for-one basis for newly issued shares of FECI, with FECI being the
surviving corporation.
For accounting purposes, this merger is treated as a re-incorporation of
JRL Resources as FECI.
Secondary common share offering
On March 3, 1999, FECI completed a secondary stock offering of 500,000 new
common shares at $4 per share pursuant to a Subscription Agreement dated
March 3, 1999, and raised net proceeds totalling $2,000,000.
Third common share offering
On September 8, 1999, FECI completed a stock offering of 166,667 new common
shares at $9 per share pursuant to a Subscription Agreement dated September
8, 1999, and raised net proceeds totalling $1,500,000.
Formation of FEC Ltd.
On March 31, 1999, FEC Ltd. ("FECL") was incorporated in Bermuda as a
wholly-owned subsidiary of FEAL (together with FECI and FEAL "the Group").
Nature of Business
The Group was established to facilitate electronic payment processing of
e-commerce transactions for merchants and banks across the Internet. The
Group has developed an electronic gateway to convert consumers' credit card
information collected by merchants on the Internet into a format that can
be processed by banks. The Group will act as an intermediary payment system
service provider between on-line merchants, consumers and banks. The
principal geographic area in which the Group initially intends to provide
its services is throughout Asia. The Group initially intends to charge its
merchants and banks service fees to process transactions through this
gateway.
Where reimbursement for any transaction cannot be obtained in connection
with merchant transactions processed through the Group's gateway with The
Bank of Bermuda Limited, the Group expects to retain the risk of loss
related to sales returns, fraud losses, and chargebacks. The Group expects
to perform evaluations of its merchants and monitor the level and nature of
transactions of the merchants.
Since its inception the Group has been in the development stage. The Group
is in the process of acquiring and developing its software and hardware,
training its personnel, performing research and development activities, and
developing its markets. Through September 30, 1999, the Group had no
revenues from operations.
F-10
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
First Ecom.com, Inc. and subsidiaries (a group of companies in development stage)
Consolidated financial statements for the nine months ended September 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
</TABLE>
2 Basis of preparation
The accompanying financial statements have been prepared on a going concern
basis. While the Group had cash of $20,009 as of September 30, 1999,
currently it is not operating or generating cash flows. The ability of the
Group to continue as a going concern is ultimately dependent upon the
successful start-up of operations, including placing in service the Group's
operating software and hardware as well as developing sufficient markets.
Management believes that the Group will be able to attract additional
working capital to fund its requirements throughout the development stage.
However, there can be no assurance that the Group's business once started
will be successful or that such funds will be available to the Group on
commercially reasonable terms or at all.
3 Summary of significant accounting policies
(a) Principles of consolidation
The consolidated financial statements include the financial statements of
FECI and its subsidiaries. All companies in which the parent has a
controlling financial interest through direct or indirect ownership of a
majority voting interest are consolidated. All significant intercompany
balances and transactions have been eliminated on consolidation.
The financial statements prepared as of and for the period ended December
31, 1998 reflect the financial position and results of operations of FEAL
since its formation. The financial statements as of and for the period
ended September 30, 1999 and for the period prior to the merger with JRL
Resources reflect the consolidated financial position and results of
operations of FEAL. Subsequent to the merger, the financial statements
reflect the consolidated financial position and results of operations of
FECI (as successor to JRL Resources subsequent to FECI's formation and JRL
Resources prior to FECI's formation) and its subsidiary FEAL.
(b) Business combinations
Business combinations have been accounted for under the purchase method of
accounting. The results of operations of the acquired business from the
date of acquisition are included in the results of the Group. Net assets of
the companies acquired are recorded at their fair value to the Group at the
date of acquisition.
(c) Revenue and cost recognition
With respect to fees generated by transactions processed on behalf of
merchants, revenues are recognized when the transaction is processed. Other
payments received for service revenues are recognized on a straight-line
basis, unless evidence suggests that the revenue is earned or obligation is
fulfilled in a different pattern, over the contractual term of the
arrangement, or the expected period during which those specified services
are performed, whichever is longer.
F-11
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
First Ecom.com, Inc. and subsidiaries (a group of companies in development stage)
Consolidated financial statements for the nine months ended September 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
</TABLE>
3 Summary of significant accounting policies (continued)
(c) Revenue and cost recognition (continued)
Costs directly related to a contract that would not have been incurred but
for that contract (incremental direct acquisition costs) are deferred and
charged to expense in proportion to the revenue recognised. All other
costs, such as costs of services performed under the contract, general and
administrative expenses, advertising expenses and costs associated with the
negotiation of a contract prior to it being consummated, are charged to
expense as incurred. The Group expects to accrue for expected uncollectible
sales returns, fraud losses, credit card chargebacks and classify the
resulting expense as an addition to the allowance for doubtful debts.
(d) Cash and cash equivalents
Cash and cash equivalents consist of money market instruments with original
maturities of three months or less.
(e) Property and equipment
Property and equipment are stated at cost, net of accumulated depreciation.
Depreciation is calculated using the straight line basis over the
anticipated useful lives of the assets as follows:
Leasehold improvements Over the term of the leases
Computer equipment and processing system 3 years
Furniture, fixtures and office equipment 5 years
(f) Software development costs
In accordance with Statement of Position 98-1, internal and external costs
incurred to develop internal-use computer software are expensed during the
preliminary project stage and capitalised during the application
development stage and amortised over three years. During the period ended
December 31, 1998 and the nine-month period ended September 30, 1999, $Nil
and $27,600 (unaudited) of internal-use computer software was expensed,
respectively. As of December 31, 1998 and September 30, 1999, capitalised
software net of accumulated amortisation was $Nil and $544,482 (unaudited),
respectively.
(g) Income taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognised for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carry forwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is
F-12
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
First Ecom.com, Inc. and subsidiaries (a group of companies in development stage)
Consolidated financial statements for the nine months ended September 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
</TABLE>
3 Summary of significant accounting policies (continued)
(g) Income taxes (continued)
recognised in income in the period that includes the enactment date. A
valuation allowance is recognised to reduce the deferred tax assets if it
is more likely than not that all or some portion of the deferred tax assets
will not be realised.
(h) Commitments and contingencies
Liabilities for loss contingencies arising from claims, assessments,
litigation, fines and penalties, and other sources are recorded when it is
probable that a liability has been incurred and the amount of the
assessment and/or remediation can be reasonably estimated.
(i) Use of estimates
Management of the Group has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results
could differ from those estimates.
(j) Translation of foreign currencies
The functional currency of the Group is Hong Kong dollars. The reporting
currency of the Group is United States dollars. Balance sheet accounts of
the Group are translated into United States dollars at current exchange
rates. Income statement items are translated at the average rates during
the year. Net translation gains and losses are recorded directly to a
separate component of stockholders' equity. Foreign currency transaction
gains and losses are included in the determination of net loss.
(k) Research and development and advertising
Research and development, and advertising costs are expensed as incurred.
Research and development costs amounted to $Nil in the nine-month period
ended September 30, 1999 (unaudited) and the period from September 16, 1998
(date of inception) to December 31, 1998. Advertising costs amounted to
$186,670 (unaudited) and $Nil respectively in the nine-month period ended
September 30, 1999 and the period from September 16, 1998 (date of
inception) to December 31, 1998.
(l) Start-up and pre-operating costs
Start-up and pre-operating costs are expensed as incurred.
(m) Long-lived assets
The Group accounts for long-lived assets in accordance with the provisions
of Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting
for the Impairment of Long-lived Assets and for Long-lived Assets to Be
Disposed Of. This statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying
F-13
<PAGE>
3 Summary of significant accounting policies (continued)
(m) Long-lived assets (continued)
amount of an asset may not be recoverable. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount of an
asset to future net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized
is measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets. Assets to be disposed of are reported
at the lower of carrying amount or fair value less costs to sell.
(n) Stock-based compensation
The Group accounts for stock-based compensation arrangements in accordance
with the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB No. 25") and complies with
the disclosure provisions of SFAS No. 123 "Accounting for Stock-Based
Compensation". Under APB No. 25 compensation expense is based on the
difference, if any, between the deemed fair value of the Group's stock and
the exercise price of the option. The unearned compensation is being
amortized in accordance with Financial Accounting Standards Board
Interpretation No. 28 on a straight-line basis over the vesting period of
the individual options.
The Group accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS No. 123 and Emerging Issues Task
Force 96-18. All transactions in which goods or services are the
consideration received for the issuance of equity instruments are accounted
for based on the fair value of the consideration received or the fair value
of the equity instrument, whichever is more reliably measurable.
(o) Basic and diluted loss per share
SFAS No. 128, "Earnings Per Share" requires the presentation of basic net
income per share, and for companies with complex capital structures,
diluted net income per share.
As of September 30, 1999 and December 31, 1998 potentially diluting shares
totalling 1,177,500 (unaudited) and Nil, respectively, for employee share
options and 100,000 (unaudited) and Nil, respectively for warrants with
exercise prices less than the average market price that could dilute basic
earnings per share in the future, were not included in earnings per share
as their effect was anti-dilutive for those periods.
(p) Debt issued with stock purchase warrants
Debt issued with detachable stock purchase warrants is accounted for in
accordance with the provisions of Accounting Principles Board Opinion No.
14, "Accounting for Convertible Debt and Debt Issued with Stock Purchase
Warrants" ("APB No. 14"). Under APB No. 14 the portion of the proceeds of
debt securities issued with detachable stock purchase warrants which is
allocable to the warrants is accounted for as additional paid-in capital.
The allocation is based on the relative fair values of the two securities
at the time of issue. Any resulting discount or premium on the debt
securities is accounted for as such and amortised over the term of the debt
securities.
F-14
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
First Ecom.com, Inc. and subsidiaries (a group of companies in development stage)
Consolidated financial statements for the nine months ended September 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
</TABLE>
3 Summary of significant accounting policies (continued)
(q) Recent accounting pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133 "Accounting for Derivative Financial Instruments and Hedging
Activities" which requires companies to record derivative financial
instruments on their balance sheets as assets or liabilities, measured at
fair value. Gains and losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. The key criterion for hedge
accounting is that the hedging relationship must be highly effective in
achieving offsetting changes in fair value or cash flows. In June 1999 the
FASB issued SFAS No. 137 "Accounting for Derivative Instruments and Hedging
Activities - Deferral of Effective Date of FASB Statement No. 133" which
amends SFAS 133 to be effective for all fiscal years beginning after June
15, 2000. The Group has not determined the potential impact of this
statement on its financial condition or results of its operations.
4 Income taxes
As the Group is in its development stage and incurred losses since its
inception, no income tax expenses were recognised for the nine months ended
September 30, 1999 (unaudited) and for the period from September 16, 1998
(date of inception) to December 31, 1998. There were no taxes payable at
September 30, 1999 (unaudited) or December 31, 1998.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
September 30, 1999 are presented below (at the Hong Kong statutory rate of
16%):
September
30, 1999
(unaudited)
US$
Deferred tax liabilities:
Property and equipment, principally due to
differences in depreciation 131,078
--------
Deferred tax assets:
Net operating loss carry forward 529,291
Less valuation allowance (398,213)
--------
Net deferred tax assets 131,078
--------
Net deferred tax assets/liabilities --
========
F-15
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
First Ecom.com, Inc. and subsidiaries (a group of companies in development stage)
Consolidated financial statements for the nine months ended September 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
</TABLE>
4 Income taxes (continued)
The tax effects of temporary differences and carry forwards that give rise
to deferred tax assets and liabilities were $Nil as at December 31, 1998.
Currently, net operating loss carryforwards at September 30, 1999 of
$3,308,067 (unaudited), substantially all of which relate to the Group's
Hong Kong operations, can be carried forward indefinitely.
5 Prepaid financial advisory fees
Pursuant to an agreement dated March 5, 1999, the Group paid a fee of
$1,500,000 to a consultant for the following services:
- introducing the Group to investment banks, institutional investors,
finding institutions and high net worth individual investors and
assisting in negotiation of the terms of debt, equity or convertible
debt financing as required by the Group;
- designing and implementing a public relations program for the Group to
broaden exposure to the Group's services and introducing the Group to
potential customers and partners;
- designing and implementing an investor relations program to broaden
the Group's exposure to the financial industry analysts, financial
institutions, brokerage firms, individual brokers and the investing
public;
- developing an advertising strategy for the Group that may involve
electronic, print or broadcast advertising to promote the development
and marketing of the Group's products and services.
These services are to be rendered to the Group over the period from March
5, 1999 to August 31, 2000 and the amount paid was deferred and is being
amortised over the life of the service agreement on a straight-line basis.
For the nine months ended September 30, 1999 (unaudited) the Group
recognised approximately $577,000 in operating expenses in respect of the
consultant's fee and has approximately $923,000 in prepaid expenses as of
September 30, 1999 (unaudited) in respect of the consultant's fee.
F-16
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
First Ecom.com, Inc. and subsidiaries (a group of companies in development stage)
Consolidated financial statements for the nine months ended September 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
</TABLE>
6 Property and equipment
Details of the Group's property and equipment are as follows:
September 30,
1999 December 31,
(unaudited) 1998
US$ US$
Leasehold improvements 318,227 --
Computer equipment and processing system 778,624 --
Furniture, fixtures and office equipment 140,218 --
---------- ----------
1,237,069 --
Less accumulated depreciation (134,307)
---------- ----------
1,102,762 --
========== ==========
Depreciation expense charged to results of operations was $134,307 for the
nine months ended September 30, 1999 (unaudited).
7 Leases
The Group leases office equipment under a capital lease. The lease includes
a bargain purchase option at the end of the lease term. At September 30,
1999 (unaudited) and December 31, 1998, the gross amount of property and
equipment and related accumulated depreciation held under the capital lease
were as follows:
September 30,
1999 December 31,
(unaudited) 1998
US$ US$
Office equipment 4,871 --
Less accumulated depreciation (406) --
---------- ----------
4,465 --
========== ==========
Depreciation of office equipment held under capital lease is included in
depreciation expense for the nine months ended September 30, 1999.
F-17
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
First Ecom.com, Inc. and subsidiaries (a group of companies in development stage)
Consolidated financial statements for the nine months ended September 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
</TABLE>
7 Leases (continued)
Future minimum lease payments under non cancellable operating leases and
future minimum capital lease payments as of September 30, 1999 (unaudited)
are:
<TABLE>
<CAPTION>
<S> <C> <C>
Capital lease Operating lease
US$ US$
Three months ending December 31, 1999 491 117,629
Years ending December 31,
2000 1,965 502,690
2001 1,965 101,262
2002 655 --
---------- ----------
5,076 721,581
==========
Less amount representing interest (882)
----------
Present value of net minimum lease payments
4,194
Less current instalments of obligations under
capital lease (1,624)
----------
Obligations under capital lease, excluding
current instalments 2,570
==========
</TABLE>
There were no capital or operating leases as at December 31, 1998.
Rental expense for operating leases for the nine months ended September 30,
1999 (unaudited) and for the period from September 16, 1998 (date of
inception) to December 31, 1998 were $160,343 and $Nil respectively.
8 Stock options
Pursuant to a written consent of the directors on March 30, 1999, 3,000,000
shares of FECI's common stock have been reserved for issuance to employees
of the Group under an employee stock option plan.
On June 22, 1999, the board of directors approved the granting of share
options to certain employees of the Group. Under this stock option plan,
the grantees are allowed to purchase up to 1,137,500 shares of FECI's
common stock at a price of $7.65 per share. The fair value of the shares at
the date of grant was $9.06 and related compensation expense will be
recorded over the two-year vesting period. 50% of these options are
exercisable on and after June 22, 2000 and the remaining 50% are
exercisable on and after June 22, 2001. All of these options, if remaining
unexercised, will expire on June 22, 2004.
F-18
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
First Ecom.com, Inc. and subsidiaries (a group of companies in development stage)
Consolidated financial statements for the nine months ended September 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
</TABLE>
8 Stock options (continued)
On September 15, 1999 the board of directors approved the granting of share
options to a further employee of the Group. Under this stock option plan,
the grantee is allowed to purchase up to 100,000 shares of FECI's common
stock at a price of $7.65 per share. The fair value of the shares at the
date of grant was $6.88. 50% of these options are exercisable on and after
September 15, 2000 and the remaining 50% are exercisable on and after
September 15, 2001. All of these options, if remaining unexercised, will
expire on September 15, 2004.
Had compensation costs been determined consistent with the fair value
approach enumerated in SFAS No. 123, the Group's net loss for the nine
months ended September 30, 1999 (unaudited) and the period from September
16, 1998 (date of inception) to December 31, 1998 would have been increased
as indicated below:
From September
For the nine 16, 1999 (date of
months ended inception) to
September 30, 1999 December 31, 1998
(unaudited) US$
US$
Net loss As reported 3,998,978 --
Proforma 4,576,165 --
Net loss per share As reported 0.34 --
Proforma 0.39 --
The fair value of options granted on June 22, 1999 was estimated on the date of
grant using the Black-Scholes option-pricing model with the following
assumptions used: risk-free interest rate of 5.5%; expected life of 3 years;
51.45% expected volatility; and no dividends.
The fair value of options granted on September 15, 1999 was estimated on the
date of grant using the Black-Scholes option-pricing model with the following
assumptions used: risk-free interest rate of 5.5%; expected life of 3 years;
87.9% expected volatility; and no dividends.
F-19
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
First Ecom.com, Inc. and subsidiaries (a group of companies in development stage)
Consolidated financial statements for the nine months ended September 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
</TABLE>
8 Stock options (continued)
A summary of the Group's stock option plan is presented below:
<TABLE>
<CAPTION>
From September 16,
For the nine months 1999 (date of
ended September 30, inception) to December
1999 (unaudited) 31, 1998
US$ US$
Weighted Weighted
Number average Number average
of exercise of exercise
options price options price
------- -------- ------- --------
<S> <C> <C> <C> <C>
Outstanding at beginning
of period -- -- -- --
Granted 1,237,500 $ 7.65 -- --
Exercised -- -- -- --
Forfeited (60,000) $ 7.65 -- --
---------- ---------- ---------- ----------
Outstanding at end of period 1,177,500 $ 7.65 -- --
========== ========== ========== ==========
Options exercisable at period end -- -- -- --
========== ========== ========== ==========
Weighted-average fair value of
options granted during the
period $ 3.80 --
========== ==========
</TABLE>
9 Short term loan and warrants
On August 10, 1999 the Group entered into a loan agreement with a company
(the "Lender") for the advance of a $1,000,000 three month term loan to the
Group. Pursuant to the terms of the loan agreement the loan bears interest
at 12% per annum and is convertible into the common shares of the Group at
$8 per share at the Lender's option. The repayment date of the loan was
subsequently extended to January 10, 2000. The Lender was also granted at
origination warrants to subscribe to 100,000 common shares of the Group at
$8.50 per share, exercisable for 5 years commencing on August 10, 1999. The
intrinsic value of the conversion feature at the date of issuance of the
loan of $50,000 has been accounted for as additional paid-in share.
The portion of the loan proceeds issued with detachable warrants which is
allocable to the warrants of $360,000 has been accounted for as additional
paid-in share capital. The allocation is based on the fair value of the
loan of $1,000,000 and the fair value of the warrants at the date of issue
of $566,000.
F-20
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
First Ecom.com, Inc. and subsidiaries (a group of companies in development stage)
Consolidated financial statements for the nine months ended September 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
</TABLE>
9 Short term loan and warrants (continued)
The effective interest rate of the loan was calculated to be 280% per annum
as a result of the allocation of a portion of the proceeds to the separable
warrants and the conversion feature, the resultant discount of $410,000
created therefrom, and the amortisation of the discount to the initial
maturity date.
The fair value of warrants issued was estimated on the date of issue using
the Black-Scholes option-pricing model with the following assumptions used:
risk-free interest rate of 5.5%; expected life of 5 years; 76.7% expected
volatility; and no dividends. 10 Related party transactions
Period from January 1, 1999 to September 30, 1999 (unaudited)
(a) Asia Internet Limited ("AIL") is considered a related party to the
Group by virtue of a 40% shareholder of AIL being a director and
stockholder of the Group. AIL provided technical support, system
maintenance and other professional services to the Group and purchased
computer and office equipment on behalf of the Group. During the
nine-month period ended September 30, 1999, the Group paid $154,543 to
AIL for the above services. The amounts charged by AIL to the Group
for technical support, system maintenance and other professional
services and purchase of computer and office equipment on the Group's
behalf were $183,276 and $114,580 respectively. As at September 30,
1999, the Group owed AIL $143,313 (unaudited) (as at December 31,
1998: $Nil).
(b) Issuance of 8,000,000 shares to financial advisors for services
rendered in connection with organisational activities of the Group at
a deemed value of $300,000, in excess of $8,000 cash received.
(c) A director and shareholder of the Group is a partner in a firm of
solicitors to which the Group has paid legal fees in the ordinary
course of its business. The amount advanced by the Group to the firm
during the nine-month period ended September 30, 1999 was $131,170 and
the amount charged by the firm was $130,192. As at September 30, 1999,
the firm owed the Group $978.
(d) A director of the Group is a partner in a professional firm to which
the Group has paid consultancy fees in the ordinary course of its
business. The amount charged by the firm to the Group during the
nine-month period ended September 30, 1999 was $174,319. As at
September 30, 1999, the Group owed the firm $49,227.
F-21
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
First Ecom.com, Inc. and subsidiaries (a group of companies in development stage)
Consolidated financial statements for the nine months ended September 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
</TABLE>
11 Commitments and contingencies
Capital commitments outstanding at September 30, 1999 (unaudited) not
provided for were as follows:
September 30,
1999 December 31,
(unaudited) 1998
US$ US$
Contracted for -- --
Authorised but not contracted for 3,383,524 --
========== ==========
12 Subsequent events (unaudited)
On October 27, 1999 the Group entered into a loan agreement with a company
wholly owned by three shareholders of the Group for the advance of a
$250,000 short term loan repayable by January 21, 2000. Pursuant to the
terms of the loan agreement the loan bears interest at 12% per annum.
On November 12, 1999 the Group entered into a loan agreement with the same
company wholly owned by three shareholders of the Group for the advance of
a $500,000 short term loan repayable on or before January 10, 2000.
Pursuant to the terms of the loan agreement the loan bears interest at 12%
per annum.
On November 26, 1999 the Group issued 1,000,000 units to The Bank of
Bermuda Limited for $6,500,000, each unit consisting of one share and a
five year warrant to purchase one share for $7.80. The warrants are
exercisable at any time up to November 25, 2004.
On November 11, 1999 the board of directors approved the granting of share
options to certain employees of the Group. Under this stock option plan,
the grantees are allowed to purchase up to 335,000 shares of FECI's common
stock at a price of $7.65 per share. 50% of these options are exercisable
on and after November 3, 2000 and the remaining 50% are exercisable on and
after November 3, 2001.
On November 11, 1999 the board of directors approved the granting of share
options to a potential future employee of the Group, subject to this
employee joining the Group. Under this stock option plan, the grantee is
allowed to purchase up to 30,000 shares of FECI's common stock at a price
of $7.65 per share. 50% of these options are exercisable on the date the
grantee joins the Group and the remaining 50% are exercisable on and after
the second anniversary of the date the grantee joins the Group.
F-22
Exhibit 3.1
<PAGE>
ARTICLES OF INCORPORATION
OF
FIRST ECOM.COM, INC.
* * * *
The undersigned, acting as incorporator, pursuant to the provisions of the
laws of the State of Nevada relating to private corporations, hereby adopts the
following Articles of Incorporation:
ARTICLE ONE. [NAME]. The name of the corporation is:
FIRST ECOM.COM, INC.
ARTICLE TWO. [RESIDENT AGENT]. The initial agent for service of process is
Nevada Agency and Trust Company, 50 West Liberty Street, Suite 880, City of
Reno, County of Washoe, State of Nevada 89501.
ARTICLE THREE. [PURPOSES]. The purposes for which the corporation is
organized are to engage in any activity or business not in conflict with the
laws of the State of Nevada or of the United States of America, and without
limiting the generality of the foregoing, specifically:
I. [OMNIBUS]. To have to exercise all the powers now or hereafter
conferred by the laws of the State of Nevada upon corporations
organized pursuant to the laws under which the corporation is
organized and any and all acts amendatory thereof and supplemental
thereto.
II. [CARRYING ON BUSINESS OUTSIDE STATE]. To conduct and carry on its
business or any branch thereof in any state or territory of the United
States or in any foreign country in conformity with the laws of such
state, territory, or foreign country, and to have and maintain in any
state, territory, or foreign country a business office, plant, store
or other facility.
III. [PURPOSES TO BE CONSTRUED AS POWERS]. The purpose specified herein
shall be construed both as purposes and powers and shall be in no wise
limited or restricted by reference to, or inference from, the terms of
any other clause in this or any other article, but the
2
<PAGE>
purposes and powers specified in each of the clauses herein shall be
regarded as independent purposes and powers, and the enumeration of
specific purposes and powers shall not be construed to limit or
restrict in any manner the meaning of general terms or the general
powers of the corporation; nor shall the expression of one thing be
deemed to exclude another, although it be of like nature not
expressed.
ARTICLE FOUR. [CAPITAL STOCK]. The corporation shall have authority to
issue an aggregate of TWO HUNDRED MILLION (200,000,000) Common Capital Shares,
PAR VALUE ONE MILL ($0.001) per share for a total capitalization of TWO HUNDRED
THOUSAND DOLLARS ($200,000).
The holders of shares of capital stock of the corporation shall not be
entitled to pre-emptive or preferential rights to subscribe to any unissued
stock or any other securities which the corporation may now or hereafter be
authorized to issue.
The corporation's capital stock may be issued and sold from time to time
for such consideration as may be fixed by the Board of Directors, provided that
the consideration so fixed is not less than par value.
The stockholders shall not possess cumulative voting rights at all
shareholders meetings called for the purpose of electing a Board of Directors.
ARTICLE FIVE. [DIRECTORS]. The affairs of the corporation shall be governed
by a Board of Directors of no more than eight (8) nor less than one (1) person.
The name and address of the first Board of Director is:
NAME ADDRESS
---- -------
Feliberto Gurat 3545 East 43rd Avenue, Apt. C7
Vancouver, British Columbia
Canada V5R 5X5
ARTICLE SIX. [ASSESSMENT OF STOCK]. The capital stock of the corporation,
after the amount of the subscription price or par value has been paid in, shall
not be subject to pay debts of the corporation, and no paid up stock and no
stock issued as fully paid up shall ever be assessable or assessed.
ARTICLE SEVEN. [INCORPORATOR]. The name and address of the incorporator of
the corporation is as follows:
NAME ADDRESS
---- -------
Amanda Cardinalli 50 West Liberty Street, Suite 880
Reno, Nevada 89501
3
<PAGE>
ARTICLE EIGHT. [PERIOD OF EXISTENCE.] The period of existence of the
corporation shall be perpetual.
ARTICLE NINE. [BY-LAWS]. The initial By-laws of the corporation shall be
adopted by its Board of Directors. The power to alter, amend, or repeal the
By-laws, or to adopt new By-laws, shall be vested in the Board of Directors,
except as otherwise may be specifically provided in the By-laws.
ARTICLE TEN. [STOCKHOLDERS' MEETINGS]. Meetings of stockholders shall be
held at such place within or without the State of Nevada as may be provided by
the By-laws of the corporation. Special meetings of the stockholders may be
called by the President or any other executive officer of the corporation, the
Board of Directors, or any member thereof, or by the record holder or holders of
at least ten percent (10%) of all shares entitled to vote at the meeting. Any
action otherwise required to be taken at a meeting of the stockholders, except
election of directors, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by stockholders having at
least a majority of the voting power.
ARTICLE ELEVEN. [CONTRACTS OF CORPORATION]. No contract or other
transaction between the corporation and any other corporation, whether or not a
majority of the shares of the capital stock of such other corporation is owned
by this corporation, and no act of this corporation shall in any way be affected
or invalidated by the fact that any of the directors of this corporation are
pecuniarily or otherwise interested in, or are directors or officers of such
other corporation. Any director of this corporation, individually, or any firm
of which such director may be a member, may be a party to, or may be pecuniarily
or otherwise interested in any contract or transaction of the corporation;
provided, however, that the fact that he or such firm is so interested shall be
disclosed or shall have been known to the Board of Directors of this
corporation, or a majority thereof; and any director of this corporation who is
also a director or officer of such other corporation, or who is so interested,
may be counted in determining the existence of a quorum at any meeting of the
Board of Directors of this corporation that shall authorize such contract or
transaction, and may vote thereat to authorize such contract or transaction,
with like force and effect as if he were not such director or officer of such
other corporation or not so interested.
ARTICLE TWELVE. [LIABILITY OF DIRECTORS AND OFFICERS]. No director or
officer shall have any personal liability to the corporation or its stockholders
for damages for breach of fiduciary duty as a director or officer, except that
this Article Twelve shall not eliminate or limit the liability of a director or
officer for (i) acts or omissions which involve intentional misconduct, fraud or
a knowing violation of law, or (ii) the payment of dividends in violation of the
Nevada Revised Statutes.
IN WITHNESS WHEREOF, the undersigned incorporator has hereunto affixed her
signature at Reno, Nevada this 11th day of February, 1999.
------------------------
AMANDA CARDINALLI
Exhibit 3.2
<PAGE>
BY LAWS
of
FIRST ECOM.COM, INC.
a Nevada corporation
ARTICLE I
Offices
Section 1. The registered office of this corporation is in the City of Reno,
Nevada.
Section 2. The corporation may also have offices at other places both within and
without the State of Nevada as the directors may determine or the business of
the corporation may require.
ARTICLE 2
Meetings of Stockholders
Section 1. Annual meetings of the stockholders must be held at the registered
office of the corporation or at any other place within or without the State of
Nevada as the directors may decide. Special meetings of the stockholders may be
held at the time and place within or without the State of Nevada as is stated in
the notice of the meeting, or in a duly executed waiver of notice.
Section 2. Annual meetings of the stockholders must be held on the anniversary
date of incorporation each year if it is not a legal holiday and, and if it is a
legal holiday, then on the next secular day following, or at another time as the
directors may decide, at which the stockholders will elect the directors and
transact any other business that is properly before the meeting.
Section 3. The president or the secretary may, by resolution of the directors or
on the written request of the stockholders owning a majority of the issued and
outstanding shares and entitled to vote, call special meetings of the
stockholders for any purpose unless otherwise prescribed by statute or by the
articles of incorporation. A request must state the purpose of the proposed
meeting.
Section 4. Notices of meetings must be written and signed by the president or
vice-president or the secretary or an assistant secretary or by any other person
designated by the directors. The notice must state the purpose for which the
meeting is called and the time and the place, which may be within or without the
State, where it is to be held. A copy of the notice must be either delivered
personally or mailed, postage prepaid, to each stockholder of record entitled to
vote at the meeting not less than ten nor more than sixty days before the
meeting. If it is mailed, it must
2
<PAGE>
be directed to a stockholder at the address that appears upon the records of the
corporation and is deemed to be delivered to the stockholder when it is
deposited into the mail. If a stockholder is a corporation, association or
partnership, the notice is deemed to have been delivered to the stockholder it
is delivered personally to an officer of the corporation or association, or to
any member of a partnership. A transferee is not entitled to notice of a meeting
if the stock is transferred after the notice is delivered and before the meeting
is held.
Section 5. Business transactions at any special meeting of stockholders are
limited to the purpose stated in the notice.
Section 6. The holders of a majority of the stock issued and outstanding and
entitled to vote and present in person or represented by proxy, constitutes a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the articles of incorporation. If
a quorum is not present or represented at any meeting of the stockholders, the
stockholders who are entitled to vote and present in person or represented by
proxy may adjourn the meeting from time to time, without notice other than
announcements at the meeting, until a quorum is present or represented. Any
business may be conducted at the adjourned meetings that could have been
transacted at the meeting as originally notified if a quorum is present or
represented at the adjourned meeting.
Section 7. When a quorum is present or represented at any meeting, the vote of
the holders of 10% of the stock having voting power present in person or
represented by proxy is sufficient to elect directors or to decide any question
brought before the meeting unless the statute or the articles of incorporation
specify that the question requires that a different percentage is required to
decide the question.
Section 8. Each stockholder of record of the corporation is entitled at each
meeting of the stockholders to one vote for each share standing in his name on
the books of the corporation. Any stockholder may demand that the vote for
directors and any question before the meeting be by ballot.
Section 9. At any meeting of the stockholders any stockholder may be represented
and vote by a proxy or proxies appointed in writing. If the written proxy
designates two or more persons to act as proxies, a majority of the designated
persons present at the meeting, or one if only one is present, has the powers
conferred by the written instruction. No proxy or power of attorney to vote may
be voted at a meeting of the stockholders unless it has been filed with the
secretary of the meeting when required by the inspectors of election. All
questions regarding the qualifications of voters, the validity of proxies, and
the acceptance or rejection of votes must be decided by the inspectors of
election who are appointed by the directors, or if not appointed, then by the
officer presiding at the meeting.
Section 10. Any action that may be taken by the vote of the stockholders at a
meeting may be taken without meeting if it is authorized by the written consent
of stockholders holding at least a majority of the voting power, unless the
provisions of the statute or the articles of incorporation require a greater
proportion of voting power to authorize the action, in which case the greater
proportion of written consents is required.
3
<PAGE>
ARTICLE 3
Directors
Section 1. The directors must manage business of the corporation and they may
exercise all the powers of the corporation and do any lawful thing unless the
statute or the articles of incorporation or these bylaws specify that the
stockholders have the power to do the thing.
Section 2. The number of directors that constitutes the whole board may not be
less than one or more than eight. The directors at any time may increase or
decrease the number of directors to not less than one nor more than eight. The
stockholders will elect the directors at the annual meeting of the stockholders
and except as provided in section 2 of this article, each director elected holds
office until his successor is elected and qualified. Directors need not be
stockholders.
Section 3. A majority of the remaining directors, even if they are less than a
quorum, or a sole remaining director may fill any vacancies in the board of
directors, including those caused by an increase in the number of directors, and
each director so elected holds office until his successor is elected at the
annual or a special meeting of the stockholders. The holders of a two-thirds of
the outstanding shares of stock entitled to vote may at any time peremptorily
terminate the term of office of all or any of the directors by voting at a
meeting called for the purpose or by a written statement filed with the
secretary or, of the secretary is absent, with any other officer. The removal is
effective immediately even if successors are not elected simultaneously, and the
resulting vacancies on the board of directors may be filled only from the
stockholders.
A vacancy on the board of directors is deemed to exist if a director dies,
resigns or is removed, or if the authorized number of directors is increased, or
if the stockholders fail to elect the number of directors to be elected at any
annual or special meeting of stockholders at which any director is to be
elected.
The stockholders may elect a director at any time to fill any vacancy not
filled by the directors. If the directors accept the resignation of a director
tendered to take effect at a future time, the board or the stockholders may
elect a successor to take office when the resignation becomes effective.
Neither the directors nor the stockholders can reduce the authorized number
of directors to cause the removal of any director before the expiration of his
term of office.
ARTICLE 4
Meeting of the Board of Directors
Section I. Regular meetings of the board of directors must be held at any place
within or without the State that is designated by a resolution of the board or
the written consent of all members of the board. In the absence of a
designation, regular meetings must be held at the registered office.
4
<PAGE>
Section 2. The first meeting of each newly elected directors should be held
immediately following the adjournment of the meeting of stockholders and at the
place of the meeting. A notice of the meeting is not necessary in order legally
to constitute the meeting if a quorum is present. If the meeting is not held
then, it may be held at the time and place that is specified in a notice given
as these bylaws provide for special meetings of the directors.
Section 3. Regular meetings of the board of directors may be held without call
or notice at the time and at the place that is fixed by the directors.
Section 4. Special meetings of the directors may be called by the chairman or
the president or by the vice-president or by any two directors.
Written notice of the time and place of special meetings must be delivered
personally to each director, or sent to each director by mail or by other form
of written communication, charges prepaid, addressed to the director at the
address as it is shown upon the records or, if not readily ascertainable, at the
place in which the meetings of the directors are regularly held. If the notice
is mailed or telegraphed, it will be deposited in the postal service or
delivered to the telegraph company at least forty-eight hours before the meeting
is scheduled to start. If the notice is delivered or faxed, it must be delivered
or faxed at least twenty-four hours before the meeting is scheduled to start.
Delivery as described in this article is legal and sufficient notice to the
director.
Section 5. Notice of the time and place for convening an adjourned meeting need
not be given to the absent directors if the time and place has been fixed at the
meeting adjourned.
Section 6. The transaction of business at any meeting of the directors, however
called and noticed or wherever held, is as valid as though transacted at a
meeting duly held after regular call and notice if a quorum is present and if,
either before or after the meeting, each of the directors not present signs a
written waiver of notice or a consent to meetings being held, or written
approvals are filed with the corporate records or made a part of the minutes of
the meeting.
Section 7. A majority of the authorized number of directors constitutes a quorum
for the transaction of business, except to adjourn as described in these bylaws.
Every decision made by a majority of the directors present at a meeting duly
held at which a quorum is present is deemed to be the decision of the board of
directors unless a greater number is required by law or by the articles of
incorporation. Any action of a majority, although not at a regularly called
meeting, and the record of it if the other directors have consented in writing,
is as valid and effective in all respects as if it were passed by the board in
regular meeting.
Section 8. A quorum of the directors may adjourn any directors' meeting to meet
again at a stated day and hour; but, in the absence of a quorum, a majority of
the directors present at any directors' meeting, either regular or special, may
adjourn the meeting to the next regular meeting of the board.
5
<PAGE>
ARTICLE 5
Committees of Directors
Section 1. The directors may, by resolution adopted by a majority of them,
designate one or more committees of the directors, each to consist of two or
more of the directors. A committee may exercise the power of the whole board in
the management of the business of the corporation and may authorize the fixing
of the seal of the corporation to any document that requires it. The directors
may name the committee. The members of the committee present at any meeting and
not disqualified from voting may, whether or not they constitute a quorum,
unanimously appoint another member of the board to act at the meeting in the
place of any absent or disqualified member. The consent of a majority of the
members or alternate members at any meeting of a committee that has a quorum is
required to approve any act of the committee.
Section 2. The committee must keep regular minutes of their proceedings and
report them to the whole board.
Section 3. Any action that must or may be taken at meetings of the directors or
any committee of them may be taken without a meeting if the directors on the
board or committee consent unanimously in writing and the written consent is
filed with the minutes of the proceedings of the board or committee.
ARTICLE 6
Compensation of Directors
Section 1. The directors may be paid their expenses for attending each meeting
of the directors and may be paid a fixed sum for attendance at each meeting of
the directors or a stated salary as director. No payment precludes any director
from serving the corporation in any other capacity and being compensated for the
service. Members of special or standing committees may be allowed like
reimbursement and compensation for attending committee meetings.
ARTICLE 7
Notices
Section 1. Notices to directors and stockholders must be written and delivered
personally or mailed to the directors or stockholders at their addresses as they
appear on the books of the corporation. Notices to directors may also be given
by fax and by telegram. Notice by mail, fax or telegram is deemed to be given
when the notice is mailed, faxed or telegraphed.
Section 2. Whenever all parties entitled to vote at any meeting, whether of
directors or stockholders, consent, either by writing on the records of the
meeting or filed with the secretary, or by their presence at the meeting or oral
consent entered on the minutes, or by taking part in the deliberations at the
meeting without objection, the doings of the meeting are as valid as if they
were done at a meeting regularly called and noticed, and at the meeting any
business may be transacted that is not excepted from the written consent if no
objection for want of notice is made at the time and, if any meeting is
irregular for want of notice or consent and a quorum was
6
<PAGE>
present at the meeting, the proceedings of the meeting may be ratified and
approved and rendered valid and the irregularity or defect is waived if all
parties having the right to vote at the meeting consent in writing. The consent
or approval of stockholders may be by proxy or attorney, but all the proxies and
powers of attorney must be in writing.
Section 3. Whenever any notice is required to be given under the provisions of
the statute, the articles of incorporation or these bylaws, a written waiver
signed by the persons entitled to the notice, whether before or after the time
stated, is deemed to equivalent.
ARTICLE 8.
Officers
Section 1. The directors will choose the officers of the corporation. The
offices to be filled are president, secretary and treasurer. A person may hold
two or more offices.
Section 2. The directors at their first meeting after each annual meeting of
stockholders will choose a chairman of the board of directors from among
themselves, and will choose a president, a secretary and a treasurer, none of
whom must be directors.
Section 3. The directors may appoint a vice-chairman of the board,
vice-presidents and one or more assistant secretaries and assistant treasurers
and the other officers and agents as it deems necessary to hold their offices
for the terms and exercise the powers and perform the duties determined by the
directors.
Section 4. The directors will fix the salaries and compensation of all officers
of the corporation.
Section 5. The officers of the corporation hold their offices at the pleasure of
the directors. Any officer elected or appointed by the directors may be removed
any time by the directors. The directors will fill any vacancy occurring in any
office of the corporation by the death, resignation, removal or otherwise.
Section 6. The chairman of the board will preside at meetings of the
stockholders and the directors and will see that the orders and resolutions of
the directors are carried into effect.
Section 7. The vice-chairman will, if the chairman is absent or disabled,
perform the duties and exercise the powers of the chairman of the board and will
perform other duties as the directors may prescribe.
Section 8. The president is the chief executive officer of the corporation and
will manage the business of the corporation. He will execute on behalf of the
corporation all instruments requiring execution unless the signing and execution
of them is expressly designated by directors to some other officer or agent of
the corporation.
Section 9. The vice-presidents will act under the direction of the president
and, if the president is absent or disabled, will perform the duties and
exercise the powers of the president. They will perform the other duties and
have the other powers prescribed by the president or
7
<PAGE>
directors. The directors may designate one or more executive vice-presidents and
may specify the order of seniority of the vice-presidents. The duties and powers
of the president descend to the vice-presidents in the specified order of
seniority.
Section 10. The secretary will act under the direction of the president, will
attend and record the proceedings at all meetings of the directors and the
stockholders and at the standing committees when requested; will give or cause
to be given notice of all meetings of the stockholders and special meetings of
the directors and will perform other duties that are prescribed by the president
or the directors.
Section 11. The assistant secretaries will act under the direction of the
president in the order of their seniority unless the president or the directors
decide otherwise, and they will perform the duties and exercise the powers of
the secretary if the secretary is absent or disabled. They will perform other
duties and have the other powers that are prescribed by the president and the
directors.
Section 12. The treasurer will act under the direction of the president with
custody of the corporate funds and securities; will keep full and accurate
accounts of receipts and disbursements in books belonging to the corporation;
and will deposit all money and other valuable effects in the name and to the
credit of the corporation in the depositories that are designated by the
directors; will disburse the funds of the corporation as ordered by the
president or the directors, taking proper vouchers for the disbursements; and
will render to the president and the directors, at their regular meetings or
when the directors require, an account of all the transactions undertaken by the
treasurer and of the financial condition of the corporation.
If the directors require, the treasurer will give the corporation a bond in
the sum and with the surety that is satisfactory to the directors for the
faithful performance of the duties of his office and for the restoration to the
corporation, if he dies, resigns, retires or is removed from office, of all
books, papers, vouchers, money and other property of whatever kind in his
possession or under his control belonging to the corporation.
Section 13. The assistant treasurers in order of their seniority, or as
determined by the president or the directors, will perform the duties and
exercise the powers of the treasurer if the treasurer is absent or disabled.
They will perform the other duties and have the other powers that are prescribed
by the president or the directors.
ARTICLE 9
Certificates of Stock
Section 1. Every stockholder is entitled to have a certificate signed by the
president or a vice-president and the treasurer or an assistant treasurer, or
the secretary or an assistant secretary of the corporation, that certifies the
number of shares owned by him in the corporation. If the corporation is
authorized to issue more than one class of stock or more than one series of any
class, the designations, preferences and relative, participating, optional or
other special rights of the various classes of stock or series and the
qualifications, limitation or restrictions of the rights, must be described in
full or summarized on the face or back of the certificate that the corporation
issues to represent the stock.
8
<PAGE>
Section 2. If a certificate is signed (a) by a transfer agent other than the
corporation or its employees or (b) by a registrar other than the corporation or
its employees, the signatures of the officers of the corporation may be
facsimiles. If any officer who has signed or whose facsimile signatures has been
placed upon a certificate ceases to be the officer before the certificate is
issued, the certificate may be issued with the same effect as though the person
had not ceased to be the officer. The seal of the corporation or a facsimile of
it may, but need not be, affixed to certificates of stock.
Section 3. The directors may direct that a new certificate be issued in place of
any certificate issued by the corporation that is alleged to have been lost or
destroyed if the person claiming the loss or destruction of the certificate
makes an affidavit of that fact. When they authorize the issuance of a new
certificate, the directors may, in their discretion and as a condition precedent
to the issuance of the new certificate, require that the owner of the lost or
destroyed certificate or his legal representative advertise the loss as it
requires or give the corporation a bond in the sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost or destroyed.
Section 4. When a certificate for shares, duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, is surrendered to
the corporation or the transfer agent of the corporation shares, the corporation
must, if it is satisfied that it complies with the laws and regulations
applicable to the corporation regarding the transfer and ownership of shares,
issue a new certificate to the person entitled to it and will cancel the old
certificates and record the transaction upon its books.
Section 5. The directors may fix in advance a date not more than sixty days nor
less than ten days before the date of any meeting of stockholders, or the date
of the payment of any dividend, or the date of the allotment of rights, or the
date when any change or conversion or exchange of capital stock is effective, or
a date in connection with obtaining the consent of stockholders for any purpose,
as a record date for the determination of the stockholders entitled to notice of
and to vote at any meeting or adjournment, or entitled to be paid any dividend,
or to consent to any matter for which stockholders' consent is required, and in
either case, only the stockholders who are stockholders of record on the date so
fixed are entitled to notice of and to vote as the meeting or any adjournment,
or to be paid a dividend, or to be allotted rights, or to exercise the rights,
or to consent, as the case may be, notwithstanding any transfer of any stock on
the books of the corporation after the record date is fixed.
Section 6. The corporation is entitled to recognize the person registered on its
books as the owner of the share as the exclusive owner for all purposes
including voting and dividends, and the corporation is not bound to recognize
any other person's equitable or other claims to or interest in the shares,
whether it has express of other notice of a claim, except as otherwise provided
by the laws of Nevada.
9
<PAGE>
ARTICLE 10
General Provisions
Section 1. The directors may declare dividends upon the capital stock of the
corporation, subject to the provisions of the articles of incorporation, if any,
at any regular or special meeting, pursuant to law. Dividends may be paid in
cash, in property or in shares of the capital stock, subject to the provisions
of the articles of incorporation.
Section 2. Before it pays any dividend, the corporation may set aside out of any
funds of the corporation available for dividends the sum that the directors, in
their absolute discretion, think proper as a reserve to meet contingencies, or
for equalizing dividends, or for repairing and maintaining any property of the
corporation, or for the another purpose that the directors determine are in the
interests of the corporation, and the directors may modify or abolish any the
reserve in the manner that it was created.
Section 3. All checks or demands for money and notes of the corporation must be
signed by the officers or other persons that are designated by the directors.
Section 4. The directors will fix the fiscal year of the corporation.
Section 5. The directors may resolve to adopt a corporate seal for the
corporation. The name of the corporation must be inscribed on the seal with the
words "Corporate Seal" and "Nevada". The seal may be used by causing it or a
facsimile of it to be impressed or affixed or in any manner reproduced.
ARTICLE 11
Indemnification
Section 1. Every person who was or is a party or is a threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, because he or a person whom he
legally represents is or was a director or officer of the corporation or is or
was serving at the request of the corporation of for its benefit as a director
or officer of another corporation, or as its representative in a partnership,
joint venture, trust or other enterprise, is indemnified and held harmless to
the fullest legally permissible under the General Corporation Law of the State
of Nevada from time to time against all expenses, liability and loss (including
attorney's fees, judgments, fines and amounts paid or to be paid in settlements)
reasonably incurred or suffered by him in connection with his acting. The
expenses of officers and directors incurred in defending a civil or criminal
action, suit or proceeding must be paid by the corporation as they are incurred
and in advance of the final disposition of the action, suit or proceeding upon
receipt of an undertaking by or on behalf of the director or officer to repay
the amount if it is ultimately determined by a court of competent jurisdiction
that he is not entitled to be indemnified by the corporation. The right of
indemnification is a contract right that may be enforced in any matter desired
by the person. The right of indemnification does not any other right that the
directors, officers or representatives may have or later acquire and, without
limiting the generality of the statement, they are entitled to their respective
rights of
10
<PAGE>
indemnification under any bylaw, agreement, vote of stockholders, provision of
law or otherwise, as well as their rights under this article.
Section 2. The directors may cause the corporation to purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise against any liability
asserted against the person and incurred in any capacity or arising out of the
status, whether or not the corporation would have the power to indemnify the
person.
Section 3. The directors may adopt other bylaws regarding indemnification and
may amend the bylaws to provide at all times the fullest indemnification
permitted by the General Corporation Law of the State of Nevada.
ARTICLE 12
Amendments
Section 1. The bylaws may be amended by the majority vote of all the record
holders of stock issued and outstanding and entitled to vote at any annual or
special meeting of the stockholders, if the notice of the meeting contains a
notice of the intention to amend.
Section 2. The directors by a majority vote of the whole board at any meeting
may amend these bylaws, including bylaws adopted by the stockholders, but the
stockholders may specify particulars of the bylaws that cannot be amended by the
board of directors.
Approved and adopted on February 12, 1999
CERTIFICATE OF THE SECRETARY
I, Feliberto Gurat, certify that I am the secretary of First eCom.com Inc., and
that the foregoing bylaws consisting of 8 pages constitute the code of bylaws of
this corporation as duly adopted at a regular meeting of the directors of the
corporation held on February 12, 1999.
February 12, 1999
[Signature of Feliberto Gurat]
- - - - - - - - - - - - - - - - - -----------------------------
Secretary
Exhibit 4.1
<PAGE>
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
CUSIP NO. 32008N 10 4
NUMBER SHARES
First Ecom.com, Inc.
AUTHORIZED COMMON STOCK: 200,000,000 SHARES
PAR VALUE $.001
THIS CERTIFIES THAT ____________________________________________________________
IS THE RECORD HOLDER OF ________________________________________________________
__________________________Shares of FIRST ECOM.COM, INC. Common Stock
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid until countersigned by the Transfer Agent and registered by the
Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers Dated: _______________
SEAL
- - - - - - - - - - - - - - - - - --------------------------
President
Countersigned Registered
_________________________ NEVADA AGENCY AND TRUST COMPANY
Secretary 50 WEST LIBERTY STREET, SUITE 880
RENO, NEVADA 89501
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
By: ___________________________
Authorized Signature
Exhibit 11
(Expressed in United States Dollars)
Statement of computation of earnings per share
for the nine months ended September 30, 1999
(Expressed in United States dollars)
For the nine months ended
September 30, 1999
Income Shares Per share
amount
US$ US$
Basic and diluted earnings per share
Income available to common stock holders 3,998,978 11,647,155 0.34
========== ========== ==========
Options to purchase 1,177,500 shares and warrants to subscribe to 100,000 shares
are not reflected in the above calculation as they are anti-dilutive.
Exhibit 21.1
<PAGE>
First Ecommerce Asia Limited, a Hong Kong corporation wholly owned by the
registrant ("FEAL")
FEC Ltd., a Bermuda corporation wholly owned by FEAL
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 344181
<SECURITIES> 0
<RECEIVABLES> 449240
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 793421
<PP&E> 523443
<DEPRECIATION> 0
<TOTAL-ASSETS> 1316864
<CURRENT-LIABILITIES> 224692
<BONDS> 40199
0
0
<COMMON> 12540
<OTHER-SE> 1039433
<TOTAL-LIABILITY-AND-EQUITY> 1316864
<SALES> 0
<TOTAL-REVENUES> 12827
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1298569
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57
<INCOME-PRETAX> (1285799)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1285799)
<EPS-BASIC> (.12)
<EPS-DILUTED> (.12)
</TABLE>
