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 (IRS Employer Identification)
incorporation or organization)
902, Henley Building 5, not applicable
Queen's Road Central (zip code)
Hong Kong SAR
(Address of principal offices)
852.2801.5181
(Registrant's telephone number, including area code)
Securities to be registered under Section 12(b) of the Act:
NONE
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $0.001 per share
(Title of class)
<PAGE>
TABLE OF CONTENTS
ITEM 1. BUSINESS
ITEM 2. FINANCIAL INFORMATION
ITEM 3. PROPERTIES
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
ITEM 6. EXECUTIVE COMPENSATION
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 8. LEGAL PROCEEDINGS
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
<PAGE>
ITEM 1. BUSINESS
General
First Ecom.com, Inc. (the "Company") plans to provide a range of secure
electronic payment processing solutions and services. These e-payment services
will be intended to address many existing and future needs of commerce. Designed
to meet the requirements of the world's financial institutions and national
banking networks, the benefits of the Company's e-payment services will be
enjoyed by merchants and individual purchasers. E-payment services will enable
financial transactions to be completed in a secure, low-cost and fast manner
through the medium of the electronic computer network known as the Internet, as
well as existing and future card switch telecommunications infrastructures.
These transactions include
o Merchant-consumer transactions
o Merchant-merchant transactions
o Merchant application & verification services
o Internet commerce solutions
o Electronic switching of credit card, debit card and stored value card
and smart card transactions
o Point-Of-Sale transactions
o AutoTeller Machines
o Interbank funds transfers
The Company's E-payment services will feature a comprehensive range of network
protocols and cryptography to provide system security. They will be common to
both UNIX and Windows NT platforms and employ relational databases to provide
multicurrency financial transactions processing solutions. A key design feature
will be the employment of redundant internet connectivity so as to eliminate
single points of contact, thus substantially reducing the chances of transaction
failure.
It is important to note that the Company has only recently commenced pilot
operations. It has not yet begun commercial operations and may not do so for
some time. The business described herein is a description of the goals that the
Company has set for itself and the solutions it plans to deliver in order to
meet those goals. There can of course be no assurance that these goals will be
achieved, or that the solutions will be commercially viable.
The Internet
The Internet (or the "Net") 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 Net 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 around 60 million computers
today. It is now a key economic resource, serving commerce worldwide. Not only
do the 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 Net as the preferred
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 to reach $1.3 trillion
by 2003. Much more dramatically, however, the Net is now being acknowledged by
financial institutions as a viable alternative to private computer networks.
This is where the Company's E-payment services will be most critically needed in
the short-term, and so the Company's immediate goal is to be the third party
processor of electronic transactions for financial institutions. The Company
intends to achieve this goal through the design and implementation of a
proprietary card switch system which provides banks with both processing and
approval capabilities with minimal interface costs.
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2
The First Ecom Card Switch System
The Company has already undertaken feasibility studies with national
Asia-Pacific debit-card switch providers and is presently negotiating with
switch providers in Hong Kong, the Philippines, Korea and Thailand.
Each of the national switch providers makes available the connection hub into
which between 25 and 45 local banks connect and seek authorization and
settlement of debit card transactions undertaken through point-of -sale and ATM
machines. However, credit card transactions are not supported by existing
national switches and so member banks must maintain separate connections with
the Visa and MasterCard networks to source credit card approval and payment
processing.
The First Ecom card switch system is being designed to handle not only the full
range of traditional debit card transactions, but credit and smart card
transactions in addition. The system will accommodate transactions undertaken
through a wide range of existing point-of-sale, ATMs and Internet-enabled
devices such as personal computers, Internet kiosks and Wireless Application
Protocol-enabled devices. WAP is the new technology that Nokia and Ericsson are
using in their range of mobile phones designed to undertake transactions through
the Internet.
Changes to switch systems of this magnitude invariably require the support of
the member banks concerned. First Ecom has received the support of a number of
member banks, which have identified immediate advantages.
In addition to providing traditional local debit card settlement, the First Ecom
card switch system will be designed to handle connections to VISA and MasterCard
networks in North America. Banks in Asia estimate that 90% of credit card
transactions in any particular country are made with locally issued cards. Some
7% of transactions are made with cards issued to Asian tourists on regional
visits and the balance of 3% of transactions are made with cards used by Western
visitors. The First Ecom card switch system will obviate each bank's need to
maintain expensive, separate connections with VISA and Master Card networks and
to incur expensive per-transaction approval costs for what are in most cases
entirely domestic transactions. The system will also eliminate the need to
install a separate payment gateway on a bank-by-bank basis to handle
internet-based commerce and to spend heavily on research and development to keep
up with new technologies that are constantly hitting the market, something which
few banks are able to do in any event.
The First Ecom card switch system will enable credit card authorizations at a
fraction of the cost that Asian banks currently pay and will accept new
technology applications such as smart cards. This strategy is intended to
provide the Company with a significant income stream at an early stage from
traditional credit card processing services, while e-commerce revenues are
expected to take longer to develop. This strategy will also enable the Company's
relationships with major banks to evolve from providing a more competitive
system for traditional debit and credit card processing to forming partner
programs designed to meet the e-commerce needs of banks and their merchant
customers as they take shape.
Future E-Commerce Solutions
Looking further ahead to the point where the `Internet Revolution' reaches
maturity, the Company aims to play a part in processing electronic commerce
transactions, whether they originate from a point-of-sale device, an ATM, a
mobile phone or an Internet application. Not only is the range of e-commerce
transactions expanding rapidly, but the rate of transaction growth is strong and
is expected to remain so for some years to come.
Since February 1999, the Company has announced the following:
o strategic relationship with the Bank of Bermuda to provide to larger
merchants Asia's first Internet credit card multicurrency payment
gateway in a tax-neutral jurisdiction
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3
o agreement to provide electronic bill presentment and payment for
People's Phone, a cellular telephone operator in Hong Kong
o engagement of Microsoft to develop software that can be used to
integrate the Company's E-commerce solutions with Microsoft products
o memorandum of understanding with Joint Electronic Teller Services
Ltd., which has 51 member banks, operates over 1500 ATMs in Hong Kong
and processes over 300,000 intra-bank transactions per day
o agreement to enable Sterling Commerce to integrate the Company's
E-commerce solutions in its business-to-business commerce software
o memorandum of understanding with Hana Bank of Korea to provide it with
electronic payment processing
The Company believes the long-term financial rewards from e-commerce to be very
high, and the increasing growth in Internet-based commerce will play an
important part. Key to the Company's technology infrastructure are the following
elements, which are in various stages of installation:
o The use of a fault-tolerant, highly scalable architecture, running on
Sun Microsystems hardware and supporting a complete network
architecture
o Use of a proven transaction switch running on UNIX-based hardware; the
switch identifies the bank to which a transaction belongs and requests
authorization from that bank's system
o Multicurrency capability in order to enable non-US$ transaction
processing
o Security requirements, including digital signature, Secure Socket
Layer encryption with 128-bit security, so as to create and maintain
consumer confidence that the Company's systems operate at the highest
industry standards
Employees
The Company has established its core base of developers and project managers in
Hong Kong and intends to hire project managers in-house. The Company will
initially outsource web development but is evaluating the benefits and cost
savings of hiring an internal development group. The Company is in the process
of establishing a network operations and e-commerce payment gateway and
processing center located within the premises of Bank of Bermuda in Hamilton,
Bermuda. This center will be staffed seven days a week, 24 hours a day by
qualified network and transaction processing personnel.
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, in-house lawyer, 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.
Market
The immediate market for the Company's services is the electronic payment
processing for financial institutions for e-commerce transactions entered into
by their merchant customers. To-date, two industry sectors have dominated
e-commerce: computer hardware & software sales, and supporting functions within
the travel business. The majority of remaining online commerce 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
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4
the demand for e-commerce. These include on-line stockbroking, banking,
insurance, telecommunications, education, and technical & professional
publications & information.
The number and nature of commercial websites changes daily, with portals
becoming ever easier to use and increasingly sophisticated. There were 414,000
such sites at the beginning of 1998 and this figure has been projected to rise
to 1.6 million by end 2002. 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, principally because only merchants in the United
States currently have access to satisfactory e-commerce solutions.
The First Ecom e-commerce solution will meet not just the e-commerce demands of
non-US merchants, but the multicurrency dimension should prove attractive to US
banks and their merchants, so that, for example, purchasers in Japan may
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 pay
taxes in each jurisdiction 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 and will not require the payment of taxes
in any country in which the e-merchant would not otherwise be taxed.
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 Japan, Taiwan, Korea, the
Philippines, Germany, the United Kingdom, Brazil, Canada and the United States.
The Company plans to offer payment gateway services to banks and their
e-merchants. 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 important relationship with People's Telephone whereby the Company
has begun to implement a comprehensive bill presentment and payment system that
will offer all 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 effectively. The
Company plans to extend this effort throughout Asia.
Websites, portals and ISP's are also potentially important channels. ISP's have
begun offering e-commerce services and hosting storefronts and e-malls. The
Company aims to select as channel partners a select number of websites, portals
and ISP's 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 established a strong relationship with US Web/CKS, a large and
influential web design company.
Integral to all of these strategies is the hiring of experienced business
development and sales professionals. The Company commenced hiring sales
professionals in July 1999 and located one each in Korea and the Philippines.
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5
Competition
As the Company enters the e-commerce market, it expects competition to come from
three sectors. First, many of the largest e-commerce merchants have installed
customized systems, enabling them to process payments in-house. Second, a small
number of major banks process e-commerce transactions themselves. Finally,
several Commerce Service Providers ("CSP"), provide Internet processing services
on behalf of the e-commerce merchants they host. Many of these competitors are
substantially larger than the Company and have much greater resources at their
disposal.
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.
("JRL"), 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.
Shortly before this merger, JRL had acquired all the outstanding capital stock
of First Ecommerce Asia Limited, the Company's Hong Kong subsidiary. 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
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. 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 June 30, 1999, the Company
had an accumulated deficit of $1.3 million. The Company expects to increase its
operating expenses significantly. As a result, the Company will need to increase
its revenues significantly to achieve and maintain 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 Remain Uncertain
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. Operating results will vary depending on a
number of factors, many of which will be outside the Company's control.
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6
The Company Expects Significant Increases in Operating Expenses
o 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.
With these additional expenses, the Company must significantly increase its
revenues in order to become profitable. These expenses will be incurred before
the Company generates any 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. If it fails to increase its customer base, its business and operating
results would be seriously harmed. The Company's ability to attract customers
will depend on a variety of factors, including the reliability, security, and
cost-effectiveness of the Company's products and 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 results. It will encounter competition from a number
of sources.
Competitors may bundle their products in a manner that discourages users from
purchasing the Company's services. Furthermore, new competitors, or alliances
among competitors may emerge and acquire significant market share. The Company's
competitors may be able to respond more quickly to new or emerging technologies
and changes in customer requirements than the Company can.
The Company's competitors have longer operating histories and significantly
greater financial, technical, marketing and other resources than the Company
does. Many of these competitors have extensive customer bases and strong
customer relationships that they could leverage, including relationships with
many of 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.
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's services require sophisticated sales effort targeted at senior
management of the Company's prospective customers. New hires require extensive
training to achieve full productivity. In addition, the Company has limited
experience in marketing the Company's services broadly to a large number of
potential customers.
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
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7
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 may
not be successful in attracting, assimilating or retaining qualified personnel
in the future. If it loses one or more of these key employees, the Company's
business and operating results could be seriously harmed. In addition, the
Company's future success will depend on the 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.
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's Future Capital Needs Are Uncertain
The Company needs to raise funds, and funds may not be available on favorable
terms or if 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 may 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.
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 are beyond the Company's control, including:
o Quarterly variations in operating results;
o Changes in financial estimates by securities analysts;
o Announcements by the Company or its competitors of new products,
significant contracts, acquisitions or strategic relationships;
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8
o Additions or departures of key personnel;
o Future sales of the Company's common stock or other securities; and
o General stock market price and volume fluctuations, which are particularly
common among securities of Internet-related companies.
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. Substantially all of the Company's outstanding common stock 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. Moreover, neither the Company nor any
other person assumes responsibility for the accuracy and completeness of the
forward-looking statements. The Company is under no duty to 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.
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9
ITEM 2. FINANCIAL INFORMATION
Selected Financial Data.
<TABLE>
<CAPTION>
From September 16, 1998 Six Months ended
(date of inception) to June 30, 1999 and
Statement of Operations Data December 31, 1998 cumulative since inception
- ---------------------------- ----------------- --------------------------
<S> <C> <C>
Revenues $ -- $ --
General and administration expenses -- $ 1,298,569
Other income (expense)
Interest income -- 12,827
Interest expense -- (57)
----------
12,770
Net loss for the period -- (1,285,799)
==== ==========
Basic and diluted loss per share
applicable to common stockholders $ -- $ (0.12)
==== ==========
Weighted average shares used in
computing per share amounts -- 10,575,470
==== ==========
<CAPTION>
Balance sheet data December 31, 1998 June 30, 1999
- ------------------ ----------------- -------------
<S> <C> <C>
Current Assets $ -- $ 793,421
Property and Equipment -- 523,443
Total Assets -- 1,316,864
Deferred Rent -- 37,223
Obligations under capital lease (excluding
current installment) -- 2,976
</TABLE>
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10
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 e-merchants establish accounts with it and from ongoing 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. Among the risks faced by the company are the absence of an established
customer base, lack of a significant presence in the marketplace, untested
operating capacity, unproven business model and the need for additional capital.
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.
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
June 30, 1999 were $1,298,569, and represent the cost of forming the Company,
building its infrastructure, hiring and paying employees, and advertising and
marketing. As of June 30, 1999, the Company had an accumulated deficit of
$1,285,799 and as of September 30, 1999, an accumulated deficit of $3,514,963.
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 raise
working capital. This note bears interest at the rate of 12% per annum, matures
on 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 five-year warrants to
purchase 100,000 shares of Common Stock at $8.50 per share, the last trade price
on August 6, 1999. 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. 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.
On September 27, 1999, the Company had $266,000 of cash, cash equivalents and
marketable securities available to fund operations. At the rate the Company is
currently using cash, this amount will be used up within 25 days. In order to
remain a going concern, the Company must raise more capital within that time.
In order to implement its plans through June 30, 2000, the Company estimates
that it will require $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 may be on terms that are
extremely 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 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.
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The Company has completed its assessment of the Year 2000 issues in the software
contained in its internal systems. Based on its current assessment, the Company
has determined that the consequences of the Year 2000 issues with respect to its
internal systems will not have a material effect on its business, results of
operation or financial condition. The cost of this assessment to the Company was
not material. All software and systems installed hereafter will be tested and
verified for Year 2000 readiness at the time of installation at no additional
cost.
The Company has made inquiries of third parties it has identified as presenting
a material risk to the Company if they experience Year 2000 problems. The
Company has been unable to determine the Year 2000 readiness of these third
parties. In addition, there are many third parties that have not been identified
by the Company whose Year 2000 problems would have a material adverse affect on
the Company. The Company's proposed business depends on the smooth operation of
the Internet. Should Year 2000 problems experienced by any third party
materially impede the operation of the Internet, the Company will be materially
adversely affected. As a result of the foregoing, the Company cannot determine
whether it will be materially adversely affected by the Year 2000 problems of
third parties.
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 center 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.
Name and Address of Number of Shares Percentage Ownership
Beneficial Owner Beneficially Owned
Gregory M. Pek 1,750,000(1) 13.0%
Ravi K. Daswani 1,750,000(1) 13.0%
Ermanno Pascutto 450,000(1) 3.2%
Cody Cain 100,000(1) 0.7%
Executive Officers and Directors 4,520,000(2) 33.0%
as a group
(1) Includes options to purchase 100,000 shares of common stock.
(2) Includes options to purchase 870,000 shares of common stock.
<PAGE>
12
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
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 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. Mr. Pek has
broad business experience in the United States, Canada and Hong Kong in
manufacturing, marketing, finance, regulatory issues and acquisitions.
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 December 1999 the managing director and co-owner of Asia
Internet Limited, a Hong Kong Internet service provider. During his tenure with
Asia Internet, Daswani helped establish Sing web Pte Ltd., a Singapore-based
Internet service provider. Mr. Daswani has established international operations
trading in dry goods, consumer electronics, apparel and Internet services.
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 is a former 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 five years with the SFC, he was executive director and chief operating
officer of the Ontario Securities Commission. Mr. Pascutto is currently a
partner with Goodman Phillips & Vineberg working in the in Toronto and Hong Kong
offices of the firm.
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 USWeb when it acquired Gray Peak
Technologies, a computer network infrastructure consulting company where he was
the Managing Director and founder of the Hong Kong office. Prior to joining Gray
Peak, Mr. Cain was a National Sales Manager of China for Nike, and prior to that
he was the Business Development Director for Icon CMT Corp., an Internet service
provider based in New York. 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. From 1992-1994, Mr. Cain worked for the
Asian Sources Media Group, first in Taiwan as an Account Manager and then later
as the Marketing Manager for the UK office, which he founded in 1993.
<PAGE>
13
Raymond Chan, 59, has been director of Payment Processing Systems since June 1,
1999. Before joining the Company, he spent 17 years at Visa International where
he was instrumental in creating and establishing Visa's Greater China business
which now has a market share exceeding 70 percent in China, Hong Kong, Macau and
Taiwan. Mr. Chan also made significant contributions to the design and
architecture of the Visanet system worldwide.
Christopher M. Fox, 34, Chief Technology Officer, joined the Company on April
15, 1999 from The Web Connection, a Hong Kong web design and online advertising
agency. Before joining the Company he worked on broadband services for Hongkong
Telecom. Mr. Fox began his career at Microsoft Corporation and has established
Internet related businesses in New Zealand and the United States, including a
commercial Internet service provider and an e-commerce solutions company.
Paul W. Fok, 46, has been Project director since 12 July 1999. From October 1989
to October 1997 he was a senior manager and manager of Cable and Wireless HKT
and from October 1997 to December 1998 he was the Head of Technical Development
in The Stock Market Channel Limited, a subsidiary of Reuters. From February 1979
to October 1989, he was the project manager of Telstra Australia and Hutchison
Whampoa Limited. Mr. Fok has extensive project management experience covering
telecommunications, financial services, regulatory accounting and the retail
sectors.
Anders Green, 43, has been Country Manager, Philippines, since August 1, 1999
and brings to the Company 19 years of marketing experience, 15 of which have
been gained in Asia. Mr. Green was marketing manager for Richurst Limited of
Hong Kong, providing real estate and financial services, before spending 12
years as proprietor and CEO of Sky International Consultancy where he
represented European businesses seeking to do business in Asia. In 1997 Mr.
Green formed Verve Media Technology, which provides Internet web page design and
e-commerce consultancy services.
Lee Choong Wan, 46, has been Country Manager, Korea, since September 15, 1999.
Mr. Lee holds an MBA from Wharton and is a banker by training. Mr. Lee was
previously executive director, business development, with GE International's
Korea office, responsible for developing new business in the financial sector,
before joining President & CEO of VISA International (Asia Pacific) Korea
Limited where over an eight year period he built VISA Korea from a one-man
operation into VISA's second largest Asia Pacific operation.
John R. Brewer, 43, joined as Corporate Secretary in September, 1999. Mr. Brewer
has over 20 years' experience as corporate secretary and in-house counsel of
major public companies in Hong Kong, Australia and the U.K. His 17 years of
experience in Hong Kong include over ten years as a representative on various
governmental and regulatory committees dealing with law reform and securities
regulation.
Item 6. EXECUTIVE COMPENSATION.
Directors may be paid a fixed sum for attendance at each meeting or a stated
salary as a director over and above their executive salaries. Directors also
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) as set forth below:
Number of
Name Options
---- -------
Gregory M. Pek 100,000
Ravi K. Daswani 100,000
Ermanno Pascutto 100,000
Cody Cain 100,000
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.
<PAGE>
14
The Company paid no Executive Officer more than $10,000 in 1998. Mr. Pek and
other Executive Officers have employment agreements with the Company that
entitle them to an aggregate of $1,010,000 per year. 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 six months ended June 30, 1999, the Company paid that firm
$61,629.
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.
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. 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.
A company of which Mr. Daswani is a director and shareholder received $154,543
from the Company for services rendered 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 Corporation
pursuant to which the Company will pay $231,000 for technology development
services for one year. Mr. Cain is an affiliate of US Web 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.
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
- ---- ---- ---
Third Quarter $11.38 $6.69
Second Quarter 12.13 5.88
First Quarter 7.25 2.25
As of September 30, 1999, there were approximately 24 holders of record of the
common stock. On October 18, 1999, the closing sales price of the Company's
common stock was $6.75 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.
<PAGE>
15
The transfer agent and registrar of the Company's Common Stock is Nevada Agency
and Trust Company, 50 West Liberty, Suite 880, Reno, Nevada 89501.
Item 10. RECENT SALES OF UNREGISTERED SECURITIES.
The Company (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. This
issuance was exempt from the registration requirements of the Securities Act of
1933 pursuant to Rule 504.
The Company (then known as JRL Resources Corp.) issued 3,015,000 shares of its
common stock to the shareholders of First Ecommerce Asia Limited 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, the Company
(then known as JRL Resources Corp.) issued 8,000,000 shares of its common stock
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. This issuance was exempt from registration pursuant to Regulations D
and S.
The Company issued 500,000 shares of its common stock to a single investor
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 a single investor 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 a
single investor outside the United States at a price of $9 per share. The
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 12,706,667 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 third party to
purchase an aggregate of 1,275,000 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 preemptive 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 cause the Company to purchase and maintain insurance on behalf of any person
who is or was a Director or Officer of the Company.
<PAGE>
16
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
21.1 List of subsidiaries
27.1 Financial Data Schedule
<PAGE>
17
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
---------------------------------------
Gregory M. Pek, Chief Executive Officer
Dated: October 20, 1999
<PAGE>
First Ecom.com, Inc. and subsidiaries
(a group of companies in development stage)
Consolidated financial statements for the six months ended
June 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
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 June 30, 1999 (unaudited) and
at December 31, 1998 (audited).....................................F-3
Consolidated Statement of Operations for the six months ended
June 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 six months ended
June 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 six months ended June 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 six months ended
June 30, 1999 (unaudited) and for period from September 16, 1998
(date of inception) to December 31, 1998 (audited)..................F-9
F-1
<PAGE>
First Ecom.com, Inc. and subsidiaries
(a group of companies in development stage)
Consolidated financial statements for the six months ended
June 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
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>
First Ecom.com, Inc. and subsidiaries
(a group of companies in development stage)
Consolidated financial statements for the six months ended
June 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
Consolidated balance sheet at June 30, 1999 and
December 31, 1998
(Expressed in United States Dollars)
<TABLE>
<CAPTION>
June 30,
1999 December 31, 1998
Note (unaudited)
US$ US$
<S> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents 344,181 --
Advances to employees 65,980 --
Amounts due from stockholders 2,329 --
Other receivables and prepaid expenses 380,931 --
--------- ---------
Total current assets 793,421 --
Property and equipment 5 523,443 --
--------- ---------
Total assets 1,316,864 --
========= =========
</TABLE>
F-3
<PAGE>
First Ecom.com, Inc. and subsidiaries
(a group of companies in development stage)
Consolidated financial statements for the six months ended
June 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
Consolidated balance sheet at June 30, 1999
and December 31, 1998 (continued)
(Expressed in United States Dollars)
<TABLE>
<CAPTION>
June 30,
1999 December 31,
Note (unaudited) 1998
US$ US$
<S> <C> <C> <C>
Liabilities and stockholders' equity
Current liabilities
Current instalments of obligations under capital lease 6 1,624 --
Accounts payable 165,003 --
Accrued expenses 58,065 --
--------- ---------
Total current liabilities 224,692 --
Deferred rent 37,223 --
Obligations under capital lease, excluding current
instalments 6 2,976 --
--------- ---------
Total liabilities 264,891 --
Stockholders' equity
Common stock, $0.001 par value
Authorised
2 and 200,000,000 shares at December 31, 1998 and
June 30, 1999 respectively;
Issued and outstanding shares
As of December 31, 1998 - 2 shares
As of June 30, 1999 - 12,540,000 shares 12,540 --
Additional paid-in capital 2,325,232 --
Deficit accumulated during the development stage (1,285,799) --
--------- ---------
Total stockholders' equity 1,051,973 --
--------- ---------
Total liabilities and stockholders' equity 1,316,864 --
========= =========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
First Ecom.com, Inc. and subsidiaries
(a group of companies in development stage)
Consolidated financial statements for the six months ended
June 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
Consolidated statement of operations
for the six months ended June 30, 1999 and
for the period from September 16, 1998 (date of inception)
to December 31, 1998
(Expressed in United States Dollars)
<TABLE>
<CAPTION>
For the six
months ended
June 30,1999 From September 16,
and cumulative 1998 (date of
since inception inception) to
(unaudited) December 31, 1998
US$ US$
<S> <C> <C>
Operating expenses
General and administration expenses
Salaries 343,083 --
Stock compensation costs 30,672
Organisational costs 300,000 --
Advertising and promotion 151,940 --
Legal and professional fees 216,770 --
Travelling 108,317 --
Others 147,787 --
---------- ----------
(1,298,569) --
Other income/(expenses)
Interest income 12,827 --
Interest expense (57) --
---------- ----------
12,770 --
---------- ----------
Net loss for the period (1,285,799) --
========== ==========
Basic and diluted loss per share applicable to
common stockholders (0.12) --
========== ==========
Weighted average shares used in computing per
share amounts 10,575,470 --
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
First Ecom.com, Inc. and subsidiaries
(a group of companies in development stage)
Consolidated financial statements for the six months ended
June 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
Consolidated statement of stockholders' equity
for the six months ended June 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$
<S> <C> <C> <C> <C> <C>
Consolidated statement of stockholders'
equity for the period from September
16, 1998 (date of inception) to
December 31, 1998
Balance at September 16, 1998 1 -- -- -- --
------ --------- --------- ---------
Balance at December 31, 1998 -- -- -- --
====== ========= ========= =========
Consolidated statement of stockholders'
equity for the six months ended June
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
Stock-based compensation 30,672 30,672
Net loss for the period -- -- (1,285,799) (1,285,799)
------ --------- --------- ---------
Balance at June 30, 1999 12,540 2,325,232 (1,285,799) 1,051,973
====== ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
First Ecom.com, Inc. and subsidiaries
(a group of companies in development stage)
Consolidated financial statements for the six months ended
June 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
Consolidated statement of cash flows
for the six months ended June 30, 1999 and
for the period from September 16, 1998 (date of inception)
to December 31, 1998
(Expressed in United States Dollars)
<TABLE>
<CAPTION>
From September 16,
1998
For the six (date of
months ended inception) to
June 30, 1999 December 31, 1998
Note (unaudited)
US$ US$
<S> <C> <C> <C>
Net cash used in operating activities 8 (1,116,699) --
---------- ----------
Cash flows from investing activities
Payments for property and equipment (546,849) --
---------- ----------
Net cash used in investing activities (546,849) --
---------- ----------
Cash flows from financing activities
Proceeds from issuance of common stock 2,008,000 --
Principal payments under capital lease
obligations (271) --
---------- ----------
Net cash provided by financing activities
2,007,729 --
---------- ----------
Net increase in cash and cash equivalents
344,181 --
Cash and cash equivalents at beginning of period
-- --
---------- ----------
Cash and cash equivalents at end of period 344,181 --
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE>
First Ecom.com, Inc. and subsidiaries
(a group of companies in development stage)
Consolidated financial statements for the six months ended
June 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
Consolidated statement of cash flows
for the six months ended June 30, 1999 and
for the period from September 16, 1998 (date of inception)
to December 31, 1998
(Expressed in United States Dollars)
Major non-cash transactions
Period from January 1, 1999 to June 30, 1999 (unaudited):
(a) Property and equipment amounting to $4,871 were acquired under a capital
lease during the six months ended June 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.
See accompanying notes to financial statements.
F-8
<PAGE>
First Ecom.com, Inc. and subsidiaries
(a group of companies in development stage)
Consolidated financial statements for the six months ended
June 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
Notes to consolidated financial statements
for the six months ended June 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.
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.
F-9
<PAGE>
First Ecom.com, Inc. and subsidiaries
(a group of companies in development stage)
Consolidated financial statements for the six months ended
June 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
1 Background and principal activities (continued)
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.
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 carry on the business of online credit card
transaction processing across the Internet. 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 intends to
charge its services is throughout Asia. The Group initially intends to charge
its merchant customers a service fee to process their customers' purchase
transactions over the Internet.
The Group intends to provide credit in its capacity as an intermediary in the
processing of its individual merchant customers' transactions while
simultaneously collecting amounts from their customers' credit card providers.
The Group retains the risk of loss related to sales returns, fraud losses, and
chargebacks which are uncollectible from its merchant customers. The Group
expects to perform selective ongoing credit evaluations of its merchant
customers' financial condition, and generally anticipate requiring collateral
from its customers.
F-10
<PAGE>
First Ecom.com, Inc. and subsidiaries
(a group of companies in development stage)
Consolidated financial statements for the six months ended
June 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
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 June 30, 1999, the Group has no revenues from operations.
2 Basis of preparation
The accompanying financial statements have been prepared on a going concern
basis. While the Group had cash of $344,181 as of June 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 significant intercompany balances and transactions
have been eliminated on consolidation.
(b) Revenue recognition
Service revenues are to be recognized in the period the service is rendered.
Provisions for uncollectible amounts are to be made when the related revenue is
recognized.
(c) Cash and cash equivalents
Cash and cash equivalents consist of money market instruments with original
maturities of three months or less.
(d) 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 to 5 years
Furniture, fixtures and office equipment 5 years
F-11
<PAGE>
First Ecom.com, Inc. and subsidiaries
(a group of companies in development stage)
Consolidated financial statements for the six months ended
June 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
(e) 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 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.
(f) 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.
3 Summary of significant accounting policies (continued)
(g) 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.
(h) Translation of foreign currencies
The functional currency of the Group is the Hong Kong dollar. Transactions in
currencies other than the functional currency are translated at exchange rates
ruling at the transaction dates. Balances in currencies other than the
functional currency are translated at the exchange rates ruling at the balance
sheet date. Exchange gains and losses are dealt with in the statement of
operations.
The functional currency balance sheets of the Group are translated into United
States dollars at the rate of exchange prevailing at the balance sheet date and
the functional currency statements of operations are translated at average
rates. Adjustments resulting from the translation of the financial statements
into United States dollars are recorded as other accumulated comprehensive
income.
(i) Research and development and advertising
Research and development, and advertising costs are expensed as incurred.
Research and development costs amounted to $Nil (unaudited) and $Nil (audited)
respectively in the six-month period ended June 30, 1999 and the period from
September 16, 1998 (date of inception) to December 31, 1998. Advertising costs
amounted to $151,940 (unaudited) and $Nil (audited) respectively in the
six-month period ended June 30, 1999 and the period from September 16, 1998
(date of inception) to December 31, 1998.
F-12
<PAGE>
First Ecom.com, Inc. and subsidiaries
(a group of companies in development stage)
Consolidated financial statements for the six months ended
June 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
(j) Start-up and pre-operating costs
Start-up and pre-operating costs are expensed as incurred.
(k) Long-lived assets
The Group accounts for long-lived assets in accordance with the provisions of
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 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.
3 Summary of significant accounting policies (continued)
(l) Stock-based compensation
The Group has a stock-based compensation plan, as discussed in Note 7. The Group
has accounted for the effect of its stock-based compensation plan under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." The Group has elected to adopt only the disclosure based
requirements of SFAS No. 123 "Accounting for Stock-Based Compensation" and as
such has disclosed the proforma effects on net income (loss) and net income
(loss) per share data as if it had elected to use the fair value approach to
account for the stock-based compensation plan.
(m) 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 June 30, 1999 and December 31, 1998 potentially diluting shares totalling
1,112,500 (unaudited) and Nil (audited), respectively, for employee share
options 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.
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 six months period
ended June 30, 1999 (unaudited) and for the period from September 16, 1998 (date
of inception) to December 31, 1998 (audited).
F-13
<PAGE>
First Ecom.com, Inc. and subsidiaries
(a group of companies in development stage)
Consolidated financial statements for the six months ended
June 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
4 Income taxes (continued)
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at June 30, 1999 are
presented below:
June 30, 1999
(unaudited)
US$
Deferred tax liabilities:
Property and equipment, principally due to
Differences in depreciation 81
--------
Deferred tax assets:
Net operating loss carry forward 242
Less valuation allowance (161)
--------
Net deferred tax assets 81
--------
Net deferred tax assets/liabilities --
========
The tax effects of temporary differences and carry forwards that give rise to
deferred tax assets and liabilities were $Nil as at December 31, 1998 (audited).
F-14
<PAGE>
First Ecom.com, Inc. and subsidiaries
(a group of companies in development stage)
Consolidated financial statements for the six months ended
June 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
5 Property and equipment
Details of the Group's property and equipment are as follows:
June 30,
1999 December 31,
(unaudited) 1998
US$ US$
Leasehold improvements 6,395 --
Computer equipment and processing system 505,532 --
Furniture, fixture and office equipment 39,793 --
551,720 --
Less accumulated depreciation (28,277) --
-------- ---------
523,443 --
========= =========
Depreciation expense charged to results of operations was $28,277 for the six
months ended June 30, 1999.
6 Leases
The Group has an obligation under a capital lease for office equipment. At June
30, 1999 (unaudited) and December 31, 1998 (audited), the gross amount of
property and equipment and related accumulated depreciation held under the
capital lease were as follows:
June 30, 1999
(unaudited) December 31,
1998
US$ US$
Office equipment 4,871 --
Less accumulated depreciation (162) --
------ ------
4,709 --
====== ======
Depreciation of office equipment held under capital lease is included in
depreciation expense for the six months ended June 30, 1999.
F-15
<PAGE>
First Ecom.com, Inc. and subsidiaries
(a group of companies in development stage)
Consolidated financial statements for the six months ended
June 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
6 Leases (continued)
Future minimum lease payments under non cancellable operating leases and future
minimum capital lease payments as of June 30, 1999 (unaudited) are:
<TABLE>
<CAPTION>
Capital lease Operating lease
US$ US$
<S> <C> <C>
Six months ending December 31, 1999 982 190,279
Years ending December 31,
2000 1,965 502,690
2001 1,965 101,262
2002 655 -
---------- ----------
5,567 794,231
========
Less amount representing interest (967)
----------
Present value of net minimum lease payments 4,600
Less current instalments of obligations under capital
lease (1,624)
----------
Obligations under capital lease, excluding current
instalments 2,976
========
</TABLE>
There were no capital or operating leases as at December 31, 1998 (audited).
Rental expense for operating leases for the six months ended June 30, 1999
(unaudited) and for the period from September 16, 1998 (date of inception) to
December 31, 1998 (audited) were $47,187 and $Nil respectively.
7 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 1,112,500 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 $9.06
and related compensation expense will be recorded over the two-year vesting
period. 50% of these options are exercisable on and after June 22, 2000 and the
remaining 50% are exercisable on and after June 22, 2001. All of these options,
if remain unexercised, will expire on June 22, 2004.
F-16
<PAGE>
First Ecom.com, Inc. and subsidiaries
(a group of companies in development stage)
Consolidated financial statements for the six months ended
June 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
7 Stock options (continued)
Had compensation costs been determined consistent with the fair value approach
enumerated in SFAS No. 123, the Group's net loss for the six months ended June
30, 1999 (unaudited) and the period from September 16, 1998 (date of inception)
to December 31, 1998 (audited) would have been increased as indicated below:
<TABLE>
<CAPTION>
From September
For the six months 16, 1999 (date of
ended June 30, inception) to
1999 (unaudited) December 31, 1998
US$ (audited)
US$
<S> <C> <C>
Net loss As reported 1,285,799 --
Proforma 1,334,728 --
Net loss per share As reported 0.12 --
Proforma 0.13 --
</TABLE>
The fair value of options granted 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.
F-17
<PAGE>
First Ecom.com, Inc. and subsidiaries
(a group of companies in development stage)
Consolidated financial statements for the six months ended
June 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
7 Stock options (continued)
A summary of the Group's stock option plan is presented below:
<TABLE>
<CAPTION>
From September 16,
For the six months 1999 (date of
ended June 30, 1999 inception) to December
(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 1,112,500 $7.65 -- --
Exercised -- -- -- --
Forfeited -- -- -- --
--------- --------- --------- ---------
Outstanding at end of period 1,112,500 $7.65 -- --
========= ========= ========= =========
Options exercisable at period end -- -- -- --
========= ========= ========= =========
Fair value of options granted
during the period $3.82 --
========= =========
</TABLE>
F-18
<PAGE>
First Ecom.com, Inc. and subsidiaries
(a group of companies in development stage)
Consolidated financial statements for the six months ended
June 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
8 Reconciliation of net loss to net cash used in operating activities
The reconciliation of net loss to net cash used in operating activities for the
six months ended June 30, 1999 (unaudited) and the period from September 16,
1998 (date of inception) to December 31, 1998 (audited) is as follows:
<TABLE>
<CAPTION>
From September 16,
For the six 1998 (date of
months ended inception) to
June 30, 1999 December 31, 1998
(unaudited)
US$ US$
<S> <C> <C>
Net loss for the period (1,285,799) --
Organisational costs in excess of cash paid 300,000 --
Stock compensation costs 30,672
Depreciation of property and equipment 28,277 --
Increase in other receivables and prepaid expenses (380,931) --
Increase in amounts due from employees
and stockholders (68,309) --
Increase in accounts payable 164,103 --
Increase in accrued expenses 58,065
Increase in deferred rent 37,223 --
--------- ---------
Net cash used in operating activities (1,116,699) --
========== =========
</TABLE>
The Group paid $57 and $Nil for interest for the six months ended June 30, 1999
(unaudited) and for the period from September 16, 1998 (date of inception) to
December 31, 1998 (audited) respectively.
9 Related party transactions
Period from January 1, 1999 to June 30, 1999 (unaudited)
(a) Asia Internet Limited ("AIL") is considered a related party to the Group by
virtue of its owner 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 six-month period ended June 30, 1999, the Group
advanced $88,438 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 $23,989 and $33,565 respectively. As at June 30, 1999,
AIL owed the Group $30,884 (unaudited) (As at December 31, 1998: $Nil
(audited)).
F-19
<PAGE>
First Ecom.com, Inc. and subsidiaries
(a group of companies in development stage)
Consolidated financial statements for the six months ended
June 30, 1999 (unaudited)
Consolidated financial statements for the period from September 16, 1998
(date of inception) to December 31, 1998
(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 paid during the six-month period ended June 30,
1999 was $61,629.
10 Post balance sheet events
On August 10, 1999, the Group entered into a loan agreement ("the Agreement")
with a company owned by three shareholders of the Group ("the Lender") for the
advance of a $1,000,000 three-month term loan to the Group. Pursuant to the
terms of the 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 Lender was also granted 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.
F-20
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 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
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