<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------------
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________to ______________
COMMISSION FILE NUMBER 33-19435
eVENTURES GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2233445
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation)
ONE EVERTRUST PLAZA, 8th FLOOR
JERSEY CITY, NEW JERSEY 07302
(201) 200-5515
(Address and telephone number of principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
(1) Yes No X
----- -----
(2) Yes X No
----- -----
On February 18, 2000, 45,799,832 shares of the registrant's Common Stock were
outstanding.
The accompanying notes are an integral part of these consolidated financial
statements
Page 1 of 18
<PAGE> 2
eVENTURES GROUP, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
PART I: FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1999 and December 31, 1999 (unaudited) 3
Consolidated Statements of Operations - Three and six months ended December 31,
1998 and 1999 (unaudited) 4
Consolidated Statement of Shareholders' Equity (Deficit) - Six months
ended December 31, 1999 (unaudited) 5
Consolidated Statements of Cash Flows - Six months ended December 31,
1998 and 1999 (unaudited) 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk 14
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Securities Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K
Exhibits 16
Reports on Form 8-K 16
</TABLE>
WHEN USED IN THIS REPORT, THE WORDS "INTEND," "EXPECTS," "PLANS,"
"ESTIMATES,""ANTICIPATES," "PROJECTS," "BELIEVES," AND SIMILAR EXPRESSIONS ARE
INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SPECIFICALLY, STATEMENTS
INCLUDED IN THIS REPORT THAT ARE NOT HISTORICAL FACTS, INCLUDING STATEMENTS
ABOUT THE COMPANY'S BELIEFS AND EXPECTATIONS ABOUT ITS BUSINESS AND ITS INDUSTRY
ARE FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS OR OUTCOMES TO DIFFER MATERIALLY.
SUCH RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO, OUR LIMITED
OPERATING HISTORY, THE RAPID EVOLUTION OF THE MARKET FOR OUR PRODUCTS AND
SERVICES, AND OUR UNCERTAIN ABILITY TO RAISE SUFFICIENT CAPITAL TO MEET OUR
CAPITAL EXPENDITURE REQUIREMENTS THAT MAY ADVERSELY AFFECT THE COMPANY'S ABILITY
TO FINANCE ITS FUTURE OPERATIONS, TO COMPETE EFFECTIVELY AGAINST BETTER
CAPITALIZED COMPETITORS AND TO WITHSTAND DOWNTURNS IN ITS BUSINESS OR THE
ECONOMY GENERALLY; AND OTHER FACTORS DISCUSSED IN THE COMPANY'S FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION. FORWARD-LOOKING STATEMENTS INCLUDED IN THIS
REPORT SPEAK ONLY AS OF THE DATE HEREOF AND THE COMPANY UNDERTAKES NO OBLIGATION
TO REVISE OR UPDATE SUCH STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE
DATE HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
Page 2 of 18
<PAGE> 3
eVENTURES GROUP, INC.
CONSOLIDATED BALANCE SHEETS
ITEM 1: FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1999 1999
------------ -------------
(unaudited)
<S> <C> <C>
Current Assets:
Cash $ 39,379 $ 7,042,377
Accounts receivable 6,129 1,574,165
Other receivables 11,164 63,124
Prepaid expenses and other 13,250 136,814
Deposits 242,310 603,752
VAT receivable 2,757,368 1,781,354
----------- -----------
3,069,600 11,201,586
----------- -----------
Long-term Assets
Restricted cash 1,107,437 750,000
Property and equipment, net 6,219,874 12,880,498
Investments 2,191,498 2,758,531
Goodwill, net 3,072,908 30,394,986
Other -- 521,800
----------- -----------
12,591,717 47,305,815
----------- -----------
Total Assets $15,661,317 $58,507,401
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable $ 4,609,806 $ 4,223,758
Accrued other 1,477,757 1,423,101
Accrued interest payable 383,163 569,042
Customer deposits and deferred revenues 1,272,682 634,532
Notes payable -- 26,875
Capital leases, current portion 1,916,761 2,937,621
----------- -----------
9,660,169 9,814,929
----------- -----------
Long-term Liabilities
Debentures 6,828,948 --
Capital leases, net of current portion 2,031,513 5,250,370
----------- -----------
8,860,461 5,250,370
----------- -----------
Stockholders' Equity (Deficit)
Common stock 36 953
Preferred stock -- --
Additional paid-in capital 4,310,144 62,051,448
Accumulated deficit (7,169,493) (18,195,049)
Deferred compensation -- (415,250)
----------- -----------
(2,859,313) 43,442,102
----------- -----------
Total Liabilities & Stockholders' Equity (Deficit) $15,661,317 $58,507,401
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
Page 3 of 18
<PAGE> 4
eVENTURES GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended December 31, Six Months Ended December 31,
------------------------------ -----------------------------
1998 1999 1998 1999
------------ ------------ ----------- ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues $8,808,038 $ 13,986,119 $13,013,700 $22,661,838
Direct costs 6,250,017 13,030,262 9,745,604 21,759,782
---------- ------------ ----------- ------------
Gross profit (loss) 2,558,021 955,857 3,268,096 902,056
Selling, general and administrative
expense 1,853,821 7,449,099 3,442,347 9,265,131
---------- ------------ ----------- ------------
Loss from operations 704,200 (6,493,242) (174,251) (8,363,075)
Other (income) expenses
Interest expense, net 376,443 78,831 735,878 598,062
Write off of unamortized debt discount -- -- -- 917,615
Equity in loss of affiliate -- 13,089 -- 31,819
Foreign currency (gain) loss 393 4,470 8,631 (2,032)
Other (25,797) 7,662 (17,851) 1,074
---------- ------------ ----------- ------------
351,039 104,052 726,658 1,546,538
---------- ------------ ----------- ------------
Net income (loss) 353,161 (6,597,294) (900,909) (9,909,613)
Series B Preferred dividends -- (1,115,943) -- (1,115,943)
---------- ------------ ----------- ------------
Net income (loss) available to
Common Shareholders $ 353,161 $ (7,713,237) $ (900,909) $(11,025,556)
========== ============ =========== ============
Net income (loss) per share (basic and
diluted) $ 0.03 $ (0.17) $ (0.08) $ (0.36)
Weighted average number of shares
outstanding (basic and diluted) 11,365,614 46,215,687 11,365,614 30,623,956
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
Page 4 of 18
<PAGE> 5
eVENTURES GROUP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
---------------------------- ------------------------- Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
---------- ----------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance, June 30, 1999 -- -- 3,600 $ 36 $ 4,310,144 $ (7,169,493)
Net effect of acquisitions -- -- 39,623,010 792 32,170,568 --
Intrinsic value of stock options -- -- -- -- 453,000 --
Net effect of the purchase of
remaining 1/3 of e.Volve -- -- 5,831,253 117 11,662,389 --
Issuance of Preferred Stock 7,000 -- -- -- 8,115,943 (1,115,943)
Issuance of Common Stock -- -- 376,799 8 5,339,404 --
Net Loss -- -- -- -- -- (9,909,613)
------ -------- ---------- ----------- ----------- ------------
Balance, December 31, 1999 7,000 $ -- 45,834,662 $ 953 $62,051,448 $(18,195,049)
====== ======== ========== =========== =========== ============
<CAPTION>
Deferred
Compensation Total
------------ -----------
<S> <C> <C>
Balance, June 30, 1999 $ -- $(2,859,313)
Net effect of acquisitions -- 32,171,360
Intrinsic value of stock options (415,250) 37,750
Net effect of the purchase of
remaining 1/3 of e.Volve -- 11,662,506
Issuance of Preferred Stock -- 7,000,000
Issuance of Common Stock -- 5,339,412
Net Loss -- (9,909,613)
--------- -----------
Balance, December 31, 1999 $(415,250) $43,442,102
========= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
Page 5 of 18
<PAGE> 6
eVENTURES GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended December 31,
------------------------------
1998 1999
-------------- --------------
(unaudited)
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $ (900,909) $ (9,909,613)
Adjustments to reconcile net income to net cash (used in)
provided by net operating activities:
Depreciation and amortization 882,882 3,187,038
Other expenses 370,689 (285,816)
Bad Debt -- 23,895
Foreign currency (gain) loss 11,162 (2,032)
Equity in unconsolidated affiliate -- 31,819
Change in operating assets and liabilities:
Accounts receivable (488,189) (582,920)
Other receivables (89,318) (51,960)
Prepaid expenses and other (26,315) (30,257)
VAT receivable (1,347,608) 976,014
Restricted cash (1,080,806) 1,107,437
Accounts payable 1,124,102 3,755,860
Accrued other (450) 220,647
Accrued interest payable 33,063 185,879
Customer deposits (200,000) (1,214,650)
----------- -------------
Net cash used in operating activities (1,711,697) (2,588,659)
----------- -------------
Cash Flow From Investing Activities
Deposits 4,728 (361,442)
Proceeds from sale of available-for-sale securities 246,580 --
Purchase of property and equipment (993,394) (1,667,894)
Net cash acquired in acquisitions -- 299,687
Long term investments -- (475,000)
Investments in affiliates (25,000) (598,852)
----------- -------------
Net cash used in investing activities (767,086) (2,803,501)
----------- -------------
Cash Flow From Financing Activities
Advances - shareholders (60,920) (246,560)
Issuance of common stock and preferred stock -- 13,227,350
Proceeds from the issuance of debentures 850,000 --
Payments on capital leases (240,993) (585,632)
----------- -------------
Net cash provided by financing activities 548,087 12,395,158
----------- -------------
Net change in cash (1,930,696) 7,002,998
Cash and cash equivalents, beginning of period 2,417,216 39,379
----------- -------------
Cash and cash equivalents, end of period $ 486,520 $ 7,042,377
=========== =============
Supplemental schedule of non-cash investing and
financing activities
Purchases of equipment under capital leases $ 1,808,683 $ 5,206,790
=========== =============
Fair value of original issue discount on revaluation
of Company at July 1, 1998, arising from change
in ownership $ 2,000,000 $ --
=========== =============
Goodwill arising from change in ownership
and acquisitions settled through the issuance of stock $ 3,414,343 $ 28,302,477
=========== =============
Net assets of subsidiary acquired through an
issue of stock $ -- $ 1,241,162
=========== =============
Stock issued for settlement of accounts payable $ -- $ 5,399,480
=========== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
Page 6 of 18
<PAGE> 7
eVENTURES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND BUSINESS:
eVentures Group, Inc. ("eVentures" or the "Company") was incorporated in
the state of Delaware on June 24, 1987 and was a public shell with no
operations prior to the transactions consummated on September 22, 1999,
which are described below. The Company was formerly known as Adina, Inc.
On September 22, 1999, the Company acquired all of the outstanding shares
of AxisTel Communications, Inc. ("AxisTel"), approximately 66.67% of the
outstanding shares of e.Volve Technology Group, Inc. ("e.Volve"),
approximately 17% of the outstanding shares of i2v2.com, Inc.
("i2v2.com") (collectively the "Acquired Entities"), and $8,540,159 notes
receivable from e.Volve including accrued interest ("Notes") held by
Major Shareholders (as defined below). All the acquisitions and the
purchase of the Notes were settled through issuance of stock of eVentures
(the "Transaction"). As a result of the Transaction, approximately 77% of
the common stock of the Company outstanding after the Transaction was
owned by three shareholders that are affiliated with each other (the
"Major Shareholders") on September 22, 1999. In October 1999, the
remaining 33.33% of e.Volve was acquired by the Company.
Prior to the Transaction, the Major Shareholders had directly and
indirectly held interests in the Acquired Entities, as follows: 66.67% of
e.Volve, 21% of i2v2.com, and 0.7% of AxisTel plus options to purchase a
further 49.3% of Axistel. Immediately after exercising the options in
AxisTel, these interests, along with the Major Shareholders' Notes
receivable from e.Volve, were directly and indirectly transferred to
eVentures in exchange for the Company's stock. The remaining 50% of
AxisTel was then purchased from AxisTel's founding shareholders.
The Company operates in one business segment, the provision of
Internet-based communications services and operation of Internet-based
communications networks based on Internet protocol ("IP") and
asynchronous transfer mote ("ATM") technologies. The Company currently
has network facilities and points of presence in the United States and
five foreign countries: Mexico, India, Syria, Sri Lanka and the United
Kingdom.
The Acquired Entities provide communications services and operate
communications networks based on IP and ATM technologies. The Acquired
Entities provide high quality communications services, offering
international voice, data, Internet access and other value-added
applications over private fiber optic networks and the Internet. The
customers of the Company include corporate and governmental
communications service providers and individual business customers in the
United States and the Company's foreign markets.
Both the e.Volve and Axistel networks are scalable networks built around
digital packet switching equipment. This switching equipment, together
with other components of the networks, incorporate ATM and IP
technologies. The networks meet voice over internet protocol ("VOIP")
standards. Internationally, the Company's networks offer communications
services through leased or owned fiber optic cable under direct operating
agreements with telecommunications authorities and Internet service
providers ("ISP").
Page 7 of 18
<PAGE> 8
eVENTURES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Strategic Investments
As of February 17, 2000, the Company has made strategic investments in
the following companies:
<TABLE>
<CAPTION>
Company Name Accounting Method % Ownership
------------ ----------------- -----------
<S> <C> <C>
Innovative Calling Technologies LLC equity basis 50.0%
i2v2.com (d/b/a PhoneFree.com) cost basis 16.0%
FonBox, Inc. cost basis 31.0%
Launch Center39 cost basis 5.0%
Televant cost basis 30.0%
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INTERIM FINANCIAL DATA
The consolidated balance sheet as of December 31, 1999, the consolidated
statements of operations for the three and six month periods ended
December 31, 1998 and 1999, consolidated statements of shareholders'
equity flows for the six month period ended December 31, 1999, and the
consolidated statements of cash flows for the six month periods ended
December 31, 1998 and 1999 have been prepared by the Company without
audit. In the opinion of management, all adjustments, consisting of only
normal recurring adjustments, necessary to present fairly the
consolidated financial position, results of operations and cash flows
have been made. The results of operations for the interim periods are not
necessarily indicative of the results for the full year. The accompanying
financial statements should be read with the Company's consolidated
financial statements included in the Company's 8K-A and Form 10 filed
with the Securities and Exchange Commission on December 9, 1999 and
December 20, 1999, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with Generally
Accepted Accounting Principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following at December 31, 1999:
<TABLE>
<S> <C>
Property and Equipment:
Leasehold improvements $ 334,559
Network equipment under capital leases 11,146,106
Other equipment 3,047,440
Furniture and fixtures 27,862
-----------
14,555,967
Accumulated depreciation and amortization (1,675,469)
-----------
$12,880,498
===========
</TABLE>
Depreciation and amortization expense was $374,619 and $775,016 for the
six months ended December 31, 1998 and 1999, respectively.
4. NET INCOME (LOSS) PER SHARE:
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 128 ("SFAS#128"), Earnings Per Share
("EPS"). SFAS#128 requires dual presentation of basic EPS and diluted EPS
on the face of all income statements issued after December 15, 1997 for
all entities with complex capital structures. Basic EPS is computed as
net income divided by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution
that could occur from common shares issuable through stock options,
warrants and convertible debentures. Diluted EPS has not been presented
for the effects of stock options, warrants, convertible debentures and
preferred stock as the effect would be antidilutive. Accordingly, basic
and diluted EPS did not differ for any period presented. For purposes of
computation of EPS, the shares issued for the acquisition of e.Volve
(11,365,614 shares) are deemed to have been in existence for the entire
period.
5. SIGNIFICANT TRANSACTIONS.
On October 14, 1999, eVentures paid $1,107,967 cash and issued 239,299
shares of eVentures' common stock to Avantel S.A. in satisfaction of
accounts payable to Avantel of $4,307,437.
To consummate the September 22, 1999 Transaction (see Note 1), eVentures
acquired the remaining 33.3% of e.Volve on October 19, 1999 through an
extension of eVentures original offer. This purchase was settled through
an issuance of 5,831,253 shares of eVentures' common stock.
On November 18, 1999, eVentures issued 2,500 shares of Series B
Convertible Preferred Stock and on November 24, 1999 eVentures issued
3,725 shares of Series B Convertible Preferred Stock, both at a price of
$1,000 per share. The par value of shares of Series B Convertible
Preferred Stock is $0.00002. The shares of Series B Convertible Preferred
Stock are convertible into shares of the Company's common stock at a
price of $13.80 per share, subject to certain anti-dilution adjustments.
The conversion price was determined using the average of the closing bid
price per share of eVentures common stock for the 10 trading days ended
October 29, 1999. Due to the beneficial conversion feature of these
securities, a preferred dividend of $1,115,943 has been recorded during
the three months ended December 31, 1999.
On November 30, 1999 the Company terminated its marketing agreement with
Corpovision, S.A. The Company settled its liability to Corpovision with
respect to the termination of this agreement through the issuance of
137,500 shares of eVentures common stock. As a result, the Company
recorded a charge in the statement of operations of approximately
$1,100,000 in November, 1999 related to the difference between the value
of the shares issued and the book value of the note payable to
Corpovision.
Page 8 of 18
<PAGE> 9
eVENTURES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. SUBSEQUENT EVENTS
In a series of transactions closed between January 6 and February 4,
2000, the Company issued 15,570 shares of our Series C Convertible
Preferred Stock, par value $0.00002 per share, to 8 accredited investors,
at a price of $1,000 per share. The shares are convertible into Common
Stock at a price of $17.90 per share, subject to certain anti-dilution
adjustments. The conversion price was determined using the average of the
closing bid prices per share of the Company's common stock for the 20
trading days ended December 10, 1999.
On January 31, 2000, the Company exercised its option to purchase
approximately 23% of Fonbox, Inc., in addition to the approximately 8%
already owned by the Company, for $1.0 million cash and the issuance of
27,860 shares of eVentures common stock. As of February 11, 2000, the
Company owns approximately 31% of Fonbox.
On January 28, 2000, the Company purchased membership interests in LC39
Group, LLC for $1.0 million. These interests represent less than 5%
ownership in LC39. LC39 is the legal name of Launch Center 39, a New York
City based incubator for Internet start-ups.
On February 11, 2000, the Company executed definitive documentation
regarding its investment in Televant, Inc., which owns and operates the
Callrewards.com(TM) website. As part of this transaction, the Company
also completed an initial funding of $750,000 for a 30% interest in
Callrewards. The Company's investment anticipates an additional $3.5
million of funding during 2000. The further funding is conditioned on
Callrewards achieving certain operational targets.
7. PRO FORMA FINANCIAL DATA
On September 22, 1999, the Company acquired all of the outstanding shares
of AxisTel, approximately 66.67% of the outstanding shares of e.Volve,
and approximately 17% of the outstanding shares of i2v2.com. On October
19, 1999, the Company acquired the remaining 33.33% of the outstanding
shares of e.Volve. All of the acquisitions were settled through the
issuance of stock of eVentures.
Set forth below is the Company's unaudited pro forma condensed statement
of operations for the three and six months ended December 31, 1998 and
the six months ended December 31, 1999 as though the acquisition of
AxisTel had occurred on July 1, 1998, after adjustments related to
goodwill, amortization of intangible assets and debt discount and
interest expense relating to the e.Volve debentures. The unaudited pro
forma results are not necessarily indicative of either actual results of
operations that would have occurred had the acquisitions been made on
July 1, 1998 or of future results.
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, 1998 DECEMBER 31, 1999 DECEMBER 31, 1998
<S> <C> <C> <C>
Total revenues $ 14,829,347 $ 28,403,640 $ 9,979,203
Net loss $ (3,839,602) $ (10,367,384) $ (239,498)
Net loss per share $ (0.09) $ (0.23) $ (0.01)
</TABLE>
Page 9 of 18
<PAGE> 10
eVENTURES GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
eVentures Group, Inc. ("eVentures" or the "Company") was incorporated in the
state of Delaware on June 24, 1987 and was a public shell with no operations
prior to the transactions consummated on September 22, 1999, which are described
below. The Company was formerly known as Adina, Inc.
On September 22, 1999, the Company acquired all of the outstanding shares of
AxisTel Communications, Inc. ("AxisTel"), approximately 66.67% of the
outstanding shares of e.Volve Technology Group, Inc. ("e.Volve"), approximately
17% of the outstanding shares of i2v2.com, Inc. ("i2v2.com") (collectively the
"Acquired Entities"), and $8,540,159 notes receivable from e.Volve including
accrued interest ("Notes") held by Major Shareholders (as defined below). All
the acquisitions and the purchase of the Notes were settled through issuance of
stock of eVentures (the "Transaction"). As a result of the Transaction,
approximately 77% of the common stock of the Company outstanding after the
Transaction was owned by three shareholders that are affiliated with each other
(the "Major Shareholders") on September 22, 1999. In October 1999, the remaining
33.33% of e.Volve was acquired by the Company.
Prior to the Transaction, the Major Shareholders had directly and indirectly
held interests in the Acquired Entities, as follows: 66.67% of e.Volve, 21% of
i2v2.com, and 0.7% of AxisTel plus options to purchase a further 49.3% of
Axistel. Immediately after exercising the options in AxisTel, these interests,
along with the Major Shareholders' Notes receivable from e.Volve, were directly
and indirectly transferred to eVentures in exchange for the Company's stock. The
remaining 50% of AxisTel was then purchased from AxisTel's founding
shareholders.
NET REVENUES. Net revenues are generated through the sale of international and
domestic Internet telephony minutes on a wholesale basis to other U.S.
long-distance providers and to distributors of prepaid calling cards. In
addition, we sell data bandwidth to other carriers and corporate customers. Our
agreements with our wholesale customers are short term in duration and the rates
charged to customers are subject to change from time to time. Due to increasing
competition, management expects these rates to decline, which could result in
lower revenues and increased losses. Our three largest customers accounted for
79.3% of its net revenues during the six months ended December 31, 1999.
DIRECT COSTS. Direct costs include per minute termination charges and lease
payments and fees for fiber optic cable. Prior to September 1999, we provided
international telecommunication services only from the United States to Mexico.
The majority of our termination fees and certain fiber optic lease payments were
payable in Mexican pesos. As a result we were exposed to exchange rate risk due
to the fluctuation of the Mexican peso compared to the U.S. dollar. Continued
fluctuation in the exchange rate may make it cheaper or more expensive for us to
purchase pesos to meet our peso denominated expenses. Two vendors in Mexico
provide substantially all of our terminating capabilities in Mexico. If either
of these vendor relationships were terminated, our ability to conduct operations
in Mexico would be limited.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. These expenses include corporate
expenses and management salaries, depreciation and amortization expenses, sales
and marketing expenses, travel and development expenses, benefits, occupancy
costs, and administrative expenses. We maintain a corporate office and several
switch facilities. Due to the international nature of our business, travel and
development costs have been significant and could continue to increase as we
seek to expand our network.
SUMMARY OF OPERATING RESULTS
The table below summarizes our operating results
Page 10 of 18
<PAGE> 11
eVENTURES GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended December 31, Six Months Ended December 31,
------------------------------------------ ----------------------------------------
1998 % 1999 % 1998 % 1999 %
---------- ----- ----------- ----- ----------- ----- ----------- -----
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $8,808,038 100.0% $13,986,119 100.0% $13,013,700 100.0% $22,661,838 100.0%
Direct costs 6,250,017 71.0% 13,030,262 93.2% 9,745,604 74.9% 21,759,782 96.0%
---------- ----- ----------- ----- ----------- ----- ----------- -----
Gross profit (loss) 2,558,021 29.0% 955,857 6.8% 3,268,096 25.1% 902,056 4.0%
Selling, general and administrative
expenses 1,853,821 21.0% 7,449,099 53.3% 3,442,347 26.5% 9,265,131 40.9%
---------- ----- ----------- ----- ----------- ----- ----------- -----
Loss from operations 704,200 8.0% (6,493,242) (46.4%) (174,251) (1.3%) (8,363,075) (36.9%)
Other (income) expenses
Interest expense, net 376,443 4.3% 78,831 0.6% 735,878 5.7% 598,062 2.6%
Write off of unamortized debt - 0.0% - 0.0% - 0.0% 917,615 4.0%
Equity in loss of affiliate - 0.0% 13,089 0.1% - 0.0% 31,819 0.1%
Foreign currency (gain) loss 393 0.0% 4,470 0.0% 8,631 0.1% (2,032) (0.0%)
Other (25,797) (0.3%) 7,662 0.1% (17,851) (0.1%) 1,074 0.0%
---------- ----- ----------- ----- ----------- ----- ----------- -----
351,039 4.0% 104,052 0.7% 726,658 5.6% 1,546,538 6.8%
---------- ----- ----------- ----- ----------- ----- ----------- -----
Net income (loss) $ 353,161 4.0% $(6,597,294) (47.2%) $ (900,909) (6.9%) $(9,909,613) (43.7%)
========== ===== =========== ===== =========== ===== =========== =====
</TABLE>
THREE AND SIX MONTHS ENDED DECEMBER 31, 1999 COMPARED TO THREE AND SIX MONTHS
ENDED DECEMBER 31, 1998
REVENUES. Revenues increased to $14.0 million and $22.7 million during the three
and six months ended December 31, 1999 from $8.8 million and $13.0 million
during the three and six months ended December 31, 1998, respectively, an
increase of 58.8% and 74.1%, respectively. The increase in revenues in our
second quarter and during the six months ended December 31, 1999 primarily
resulted from the acquisition of AxisTel in September 1999 which increased
revenues by $5.6 million during the second quarter. In addition, an increase in
traffic to Mexico and India contributed to the increase, offset by a decrease in
the average price per minute that we charged.
DIRECT COSTS. Direct costs increased to $13.0 million and $21.8 million during
the three and six months ended December 31, 1999 from $6.3 million and $9.7
million during the three and six months ended December 31, 1998, respectively,
an increase of 108.5% and 123.3%, respectively. The increase in direct costs in
our second quarter and during the six months ended December 31, 1999 primarily
resulted from a $5.2 million increase in direct costs attributable to the
operations of AxisTel during the second quarter and an increase in termination
fees associated with the increase in traffic transmitted to Mexico. In addition,
direct costs increased due to additional costs related to the termination of
traffic in India and an increase in costs for fiber optic connections between
our points of presence. As a percentage of revenues, direct costs during the
three months ended December 31, 1999 increased to 93.2% from 71.0% during the
three months ended December 31, 1998. As a percentage of revenues, direct costs
during the six months ended December 31, 1999 increased to 96.0% from 74.9%
during the six months ended December 31, 1998. The increase in direct costs as a
percentage of revenues results primarily because our wholesale prices per minute
decreased faster than our cost per minute for termination, offset by higher
volumes of traffic over fixed cost circuits.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased to $7.4 million and $9.3 million during the three and six
months ended December 31, 1999 from $1.9 million and $3.4 million during the
three and six months ended December 31, 1998, respectively, an increase of
301.8% and 169.2%, respectively. These increases resulted primarily from the
aggregate expenses related to our termination of a marketing agreement, the
incurrence of severence costs, and charges related to consulting and
professional fees in Mexico totaling $2.3 million in our second quarter and
$325,000 in our first quarter, and expenses of $1.4 million in our second
quarter related to the acquisition of AxisTel. In addition, an increase in
operating staff and general operating activities, and an increase in
depreciation and amortization expense contributed to the increase in selling,
general and administrative expense.
INTEREST EXPENSE, NET. Interest expense, net decreased to $78,831 and $598,062
during the three and six months ended December 31, 1999 from $376,443 and
$735,878 during the three and six months ended December 31, 1998. This decrease
was a result of the
Page 11 of 18
<PAGE> 12
eVENTURES GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
elimination of $8.0 million of debentures as a result of our acquisition of
e.Volve's outstanding debentures on September 22, 1999 and the resulting
consolidation of accounts, and due to interest income on higher cash balances
maintained out of proceeds of private placements completed during our second
quarter, offset by higher charges related to capital leases for equipment
leased after December 31, 1998.
WRITE OFF OF UNAMORTIZED DEBT DISCOUNT. The write off of unamortized debt
discount during the six months ended December 31, 1999 resulted from our
purchase of e.Volve's outstanding debentures and the subsequent elimination of
these debentures in our consolidated balance sheet.
EQUITY IN LOSS OF UNCONSOLIDATED AFFILIATE. Equity in loss of unconsolidated
affiliate was $13,089 and $31,819 during the three and six months ended December
31, 1999. These losses occurred at a joint venture formed e.Volve in April 1999.
FOREIGN CURRENCY (GAIN) LOSS. Foreign currency (gain) loss during the three and
six months ended December 31, 1999 was a loss of $4,470 and a gain of $2,032
compared with a loss of $393 and a loss of $8,631 during the three months ended
September 30, 1998.
OTHER. Other expenses of $7,662 and $1,074 during the three and six months ended
December 31, 1999 compares with other income of $25,797 and $17,851 during the
three and six months ended December 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Since July 1, 1999, we have funded our operations primarily through cash from
operations and from the private placement of common stock, preferred stock,
warrants to purchase common stock and debt. During the six months ended December
31, 1999, we have raised a total $12.9 million through private placements of
common stock and preferred stock, $287,350 from the exercise of options and
$5.2 million through capital leases to finance operations and to fund capital
expenditures.
On September 28, 1999, we completed a private placement of common and preferred
stock of approximately $5.9 million. Proceeds from these issuances were used
for general corporate purposes and for use as capital for new investments and
projects.
On November 19 and 26, 1999, we completed two private placements of preferred
stock with aggregate proceeds of approximately $6.2 million. Proceeds from these
issuances are for general corporate purposes and for use as capital for new
investments and projects.
On December 15, 1999, we completed a private placement of preferred stock with
aggregate proceeds of approximately $775,000. Proceeds from this issuance are
for general corporate purposes and for use as capital for new investments and
projects.
Our principal uses of cash are to fund working capital requirements, capital
expenditures and operating losses.
As of December 31, 1999, we had current assets of $11.2 million, including cash,
cash equivalents and short-term investments of $7.0 million, and a working
capital surplus of $1.4 million. Current assets included a tax refund receivable
of $1.8 million.
Since December 31, 1999, we have raised additional funds through subsequent
private placements of preferred stock. In a series of transactions between
January 6 and February 4, 2000, we completed a private placement of preferred
stock with aggregate proceeds of approximately $15.6 million. Proceeds from this
issuance are for general corporate purposes and for use as capital for new
investments and projects.
CASH FLOWS FROM OPERATING ACTIVITIES:
Our operating activities used cash of $2.6 million during the six months ended
December 31, 1999. During the six months ended December 31, 1999 cash flow used
by operating activities primarily resulted from net losses, the reduction of
customer deposits, and an increase in accounts receivable, off-set by
depreciation and amortization charges, a decrease in restricted cash, and a
decrease in accounts payable (funded through the issuance of our common stock to
vendors) and an increase in other accrued liabilities.
CASH FLOWS FROM INVESTING ACTIVITIES:
We used cash for investing activities of $2.8 million during the six months
ended December 31, 1999. During the six months ended December 31, 1999 cash used
by investing activities primarily consisted of cash used to purchase equipment,
fund affiliates, and make other long term investments, off-set by net cash
acquired in the acquisitions.
CASH FLOWS FROM FINANCING ACTIVITIES:
Our cash flow from financing activities was $12.4 million during the six months
ended December 31, 1999. During the six months ended December 31, 1999 cash
provided by financing activities was attributable to the issuance of common
stock and preferred stock, offset by capital lease payments.
Page 12 of 18
<PAGE> 13
GENERAL
Our business plans will continue to require a substantial amount of capital to
fund our expansion in existing and recently acquired markets, to continue our
development of our network and to fund our operating losses and debt and capital
lease service requirements. We also continue to make strategic investments and
to evaluate acquisitions in light of our long range plans. Such strategic
investments and acquisitions, if realized, could require expenditure of a
material portion of our financial resources and would accelerate the need for
raising additional capital. Sources of funding for our financing requirements
may include vendor financing, bank loans and public offerings or private
placements of equity and/or debt securities. There can be no assurance that
additional financing will be available or, if available, that financing can be
obtained on a timely basis and on acceptable terms. The failure to obtain such
financing on acceptable terms could significantly reduce our ability to fund our
expenses, development, investments and operations.
Our cash and short-term investments are expected to provide sufficient liquidity
to meet our capital requirements for approximately the next twelve months.
EQUIPMENT LEASING AND FINANCING. We have leased equipment manufactured by
various equipment manufacturers including Siemens A.G., Network Equipment
Technologies, Inc. and Harris Corporation. We have entered into an aggregate of
approximately $10.3 million of capital leases with (i) Telecommunications
Finance Group, a subsidiary of Siemens A.G., (ii) BA Capital Corp., (iii) Ascend
Credit Corporation, and (iv) Arrendadora BankAmerica, S.A.
SUBSEQUENT EVENTS:
In a series of transactions closed between January 6 and February 4, 2000, we
issued 15,570 shares of our Series C Convertible Preferred Stock, par value
$0.00002 per share, to eight accredited investors, at a price of $1,000 per
share. The shares are convertible into shares of our common stock at a price of
$17.90 per share, subject to certain anti-dilution adjustments. The conversion
price was determined using the average of the closing bid prices per share of
our common stock for the 20 trading days ended December 10, 1999.
On January 31, 2000, our Company exercised its option to purchase an additional
23% of Fonbox, Inc. for $1.0 million cash and the issuance of 27,860 shares of
eVentures common stock. As of February 11, 2000, we own approximately 31% of
Fonbox.
On January 28, 2000, we purchased membership interests in LC39 Group, LLC for
$1.0 million. These interests represent less than 5% ownership in LC39. LC39
is the legal name of Launch Center 39, a New York City based incubator for
Internet start-ups.
On February 11, 2000, we executed definitive documentation regarding our
investment in Televant, Inc., which owns and operates the Callrewards.com(TM)
website. As part of this transaction, we also completed an initial funding of
$750,000 for a 30% interest in Callrewards. Our investment anticipates an
additional $3.5 million of funding during 2000. The further funding is
conditioned on Callrewards achieving certain operational targets.
EFFECTS OF INFLATION
Management does not believe that its business is impacted by inflation to a
significantly different extent than is the general economy. However, there can
be no assurances that inflation will not have a material effect on the Company's
operations in the future.
Page 13 of 18
<PAGE> 14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to the impact of political instability, foreign currency, and
other risks.
Political Instability Risks. We have relationships with foreign suppliers in
Syria, Mexico, India, Sri Lanka and other countries. We have not experienced any
negative economic consequences as a result of relationships with foreign
suppliers in these countries, but may be negatively affected should political
instability in any of these countries develop.
Foreign Currency Risks. Since the agreements we have has entered into with
foreign suppliers in Syria, India, Sri Lanka and other countries are denominated
in U.S. dollars, we are not exposed to risks associated with fluctuations in
these foreign currencies. However, because our agreements with Mexican suppliers
are denominated in Mexican pesos, we may be exposed to fluctuations in Mexican
pesos, as well as to downturns in the Mexican economy, all of which may affect
profitability. During the six months ended December 31, 1999, $13.7 million of
our direct costs were denominated in Mexican pesos.
Other Market Risks. We are also exposed to potential risks in dealing with
foreign suppliers in foreign countries associated with potentially weaker
protection of intellectual property rights, unexpected changes in regulations
and tariffs, and varying tax consequences.
Page 14 of 18
<PAGE> 15
PART II
Item 1. Legal Proceedings
In September 1999, Yurie Systems Inc. filed a lawsuit in the United
States District Court of Maryland against e.Volve, claiming e.Volve owed Yurie
Systems approximately $283,497 arising from a previous sale of
telecommunications equipment from Yurie Systems to e.Volve in June and July of
1997. e.Volve denies the claim because it never agreed to accept the equipment.
The equipment has failed field testing and did not meet either e.Volve's or
Yurie Systems' standards. e.Volve filed a counterclaim for lost business
opportunities and lost profits in an amount to be determined at trial. On
February 3, 2000, we reached an agreement with Yurie Systems to settle this
litigation in exchange for a payment by us of $140,000.
We are involved in legal proceedings from time to time, none of which
management believes, if decided adversely to us, would have a material adverse
effect on the business, financial condition or results of operations of the
Company.
Item 2. Changes in Securities
In the past four months, we have issued and sold unregistered securities
in the transactions described below.
On October 14, 1999, we issued 239,229 shares of our common stock to
Avantel S.A. to settle accounts payable due to Avantel in the amount of $3.2
million in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) of the Securities Act.
On October 19, 1999, in connection with our reorganization, we issued and
sold an aggregate of 5,831,253 shares to 27 shareholders of e.Volve in exchange
for the outstanding shares of capital stock of e.Volve not owned by eVentures in
a transaction exempt from the registration requirements of the Securities Act
pursuant to Rule 506 of Regulation D under the Securities Act. No general
solicitations were made in connection with this transaction, and 22 accredited
and 5 non-accredited investors participated in this transaction. All
non-accredited investors were represented in connection with this transaction by
purchaser representatives.
On November 19, 1999, we issued and sold 2,500 shares of our Series B
preferred stock to an accredited investor for $2,500,000 in a transaction exempt
from the registration requirements of the Securities Act pursuant to Rule 506 of
Regulation D under the Securities Act. No general solicitations were made in
connection with this transaction.
On November 26, 1999, we issued and sold 3,725 shares of our Series B
preferred stock to an accredited investor for $3,725,000 in a transaction exempt
from the registration requirements of the Securities Act pursuant to Rule 506 of
Regulation D under the Securities Act. No general solicitations were made in
connection with this transaction.
On November 30, 1999, we issued 137,500 shares of our common stock to
Corpovision, S.A. to settle a note payable due to Corpavision in the amount of
$1.1 million in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) of the Securities Act.
On December 15, 1999, we issued and sold an aggregate of 775 shares of
our Series B preferred stock to 14 accredited investors for $775,000 in a
transaction exempt from the registration requirements of the Securities Act
pursuant to Rule 506 of Regulation D under the Securities Act. No general
solicitations were made in connection with this transaction.
On December 21, 1999, we issued 200,000 shares of our common stock upon
conversion of 1,000 shares of our Series A preferred stock in a transaction
exempt from the registration requirements of the Securities Act pursuant to
Section 3(a)(9) of the Securities Act.
In a series of transactions closed between January 6 and February 4,
2000, we issued 15,570 shares of our Series C Convertible Preferred Stock, par
value $0.00002 per share, to eight accredited investors, at a price of $1,000
per share in a transaction exempt from the registration requirements of the
Securities Act pursuant to Rule 506 of Regulation D under the Securities Act. No
general solicitations were made in connection with this transaction. The shares
are convertible into shares of our common Stock at a price of $17.90 per share,
subject to certain anti-dilution adjustments. The conversion price was
determined using the average of the closing bid prices per share of our common
stock for the 20 trading days ended December 10, 1999.
On January 31, 2000, we issued and sold an aggregate of 27,860 shares to
two shareholders of Fonbox in exchange for 700,000 shares of Fonbox common stock
in a transaction exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) of the Securities Act.
Page 15 of 18
<PAGE> 16
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Agreement and Plan of Exchange, dated as of October
19, 1999, among eVentures Group, Inc., and the
persons set forth on Schedule 1 thereto (incorporated
by reference to Exhibit 2.1 to the report filed on
Form 8-K on November 3, 1999).
3.1 Amended and Restated Certificate of Designation of
Rights, Preferences and Privileges of Series A
Convertible Preferred Stock, dated October 14, 1999
(incorporated by reference to Exhibit 3.6 to the
registration statement filed on Form 10 on December
20, 1999).
3.2 Certificate of Designation of Rights, Preferences and
Privileges of Series B Convertible Preferred Stock,
dated as of November 10, 1999 (incorporated by
reference to Exhibit 3.7 to the registration
statement filed on Form 10 on December 20, 1999).
3.3 Certificate of Amendment, dated as of December 15,
1999, to the Certificate of Designation of Rights,
Preferences and Privileges of Series B Convertible
Preferred Stock (incorporated by reference to Exhibit
3.8 to the registration statement filed on Form 10 on
December 20, 1999).
3.4 Certificate of Designation, Preferences, Rights, and
of Series C Convertible Preferred Stock.
4.1 Registration Rights Agreement, dated as of September
22, 1999, among the Registrant and the persons and
entities set forth on Schedule 1 thereto (the "First
Registration Rights Agreement") (incorporated by
reference to Exhibit 4.1 to the report filed on Form
8-K on October 7, 1999).
4.2 Addendum to the First Registration Rights Agreement,
dated as of October 19, 1999, among eVentures Group,
Inc., the persons set forth on Schedule 1 thereto and
the other parties to the First Registration Rights
Agreement (incorporated by reference to Exhibit 4.2
to the registration statement filed on Form 10 on
December 20, 1999).
4.3 Registration Rights Agreement, dated as of November
19, 1999, between eVentures Group, Inc. and Geronimo
Partners, L.P. (incorporated by reference to Exhibit
4.3 to the registration statement filed on Form 10 on
December 20, 1999).
4.4 Schedule identifying other agreements, the dates
thereof and the parties thereto, substantially
identical to the Registration Rights Agreement, dated
as of November 19, 1999, between eVentures Group,
Inc. and Geronimo Partners, L.P. (incorporated by
reference to Exhibit 4.4 to the registration
statement filed on Form 10 on December 20, 1999).
4.5 Registration Rights Agreement, dated as of December
31, 1999, between eVentures Group, Inc. and the
persons and entities signatories thereto.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
Reports on 8-K
1) On October 7, 1999, the Company filed a report on Form 8-K announcing that it
had acquired (i) all of the outstanding shares of AxisTel, (ii) approximately
two-thirds of the outstanding shares of e.Volve and (iii) approximately 17% of
the outstanding shares of i2v2.com Inc. pursuant to the Reorganization.
2) On November 3, 1999, the Company filed a report on Form 8-K announcing that
on October 19, 1999 it had acquired the remaining one-third interest of e.Volve,
making eVolve a wholly owned subsidiary of the Company.
3) On December 7, 1999, the Company filed a report on Form 8-K/A which amends
the Form 8-K previously filed on October 7, 1999. The Form 8-K/A reported that
the Company was unable to provide historical financial information statements
and pro forma financial information statements as of December 6, 1999 as was
previously planned, but anticipated filing the historical financial information
statements and pro forma financial information statements on or prior to
December 9, 1999.
4) On December 9, 1999, the Company filed a report on Form 8-K/A which amends
the Form 8-K previously filed on October 7, 1999, as later amended on December
7, 1999. The Form 8-K/A filed on December 9, 1999 included the historical
financial information statements and pro forma financial information statements,
as well as unaudited financial statements of the Company as of September 30,
1999 and for the three months ended September 30, 1999 and September 30, 1998.
5) On December 14, 1999, the Company filed a report on Form 8-K announcing that
(i) it had engaged BDO Seidman LLP at its auditors and dismissed Larry
O'Donnell, C.P.A. as of December 9, 1999 and (ii) it had changed its fiscal year
end date from April 30, 1999 to June 30, 1999. Page 17 of 20
6) On December 20, 1999, the Company filed a report on Form 8-K/A which amends
the financial statements reported in the December 9, 1999 Form 8-K/A.
7) On December 28, 1999, the Company filed a report on Form 8-K/A which amends
the Form 8-K filed on December 14, 1999 in order to provide the letter addressed
to the Securities and Exchange Commission by the Company's former accountant
required pursuant to Item 304 of Regulation S-K.
Page 16 of 18
<PAGE> 17
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
eVENTURES GROUP, INC.
Date: February 18, 2000 By: /s/ Fred A. Vierra
------------------------ ------------------------------------
Fred A. Vierra
Chairman of the Board
Date: February 18, 2000 By: /s/ Barrett N. Wissman
------------------------ ------------------------------------
Barrett N. Wissman
President and Chief Executive Officer
Date: February 18, 2000 By: /s/ John Stevens Robling Jr.
------------------------ ------------------------------------
John Stevens Robling Jr.
Chief Financial Officer
Page 17 of 18
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
2.1 Agreement and Plan of Exchange, dated as of October 19, 1999, among
eVentures Group, Inc., and the persons set forth on Schedule 1 thereto
(incorporated by reference to Exhibit 2.1 to the report filed on Form
8-K on November 3, 1999).
3.1 Amended and Restated Certificate of Designation of Rights, Preferences
and Privileges of Series A Convertible Preferred Stock, dated October
14, 1999 (incorporated by reference to Exhibit 3.6 to the registration
statement filed on Form 10 on December 20, 1999).
3.2 Certificate of Designation of Rights, Preferences and Privileges of
Series B Convertible Preferred Stock, dated as of November 10, 1999
(incorporated by reference to Exhibit 3.7 to the registration
statement filed on Form 10 on December 20, 1999).
3.3 Certificate of Amendment, dated as of December 15, 1999, to the
Certificate of Designation of Rights, Preferences and Privileges of
Series B Convertible Preferred Stock (incorporated by reference to
Exhibit 3.8 to the registration statement filed on Form 10 on December
20, 1999).
3.4 Certificate of Designation, Preferences, Rights, and of Series C
Convertible Preferred Stock.
4.1 Registration Rights Agreement, dated as of September 22, 1999, among
the Registrant and the persons and entities set forth on Schedule 1
thereto (the "First Registration Rights Agreement") (incorporated by
reference to Exhibit 4.1 to the report filed on Form 8-K on October 7,
1999).
4.2 Addendum to the First Registration Rights Agreement, dated as of
October 19, 1999, among eVentures Group, Inc., the persons set forth
on Schedule 1 thereto and the other parties to the First Registration
Rights Agreement (incorporated by reference to Exhibit 4.2 to the
registration statement filed on Form 10 on December 20, 1999).
4.3 Registration Rights Agreement, dated as of November 19, 1999, between
eVentures Group, Inc. and Geronimo Partners, L.P. (incorporated by
reference to Exhibit 4.3 to the registration statement filed on Form
10 on December 20, 1999).
4.4 Schedule identifying other agreements, the dates thereof and the
parties thereto, substantially identical to the Registration Rights
Agreement, dated as of November 19, 1999, between eVentures Group,
Inc. and Geronimo Partners, L.P. (incorporated by reference to Exhibit
4.4 to the registration statement filed on Form 10 on December 20,
1999).
4.5 Registration Rights Agreement, dated as of December 31, 1999, between
eVentures Group, Inc. and the persons and entities signatories
thereto.
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 3.4
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF SERIES C CONVERTIBLE
PREFERRED STOCK OF eVENTURES GROUP, INC.
I, STUART J. CHASANOFF, being the Vice President and Secretary of
eVENTURES GROUP, INC., a corporation organized and existing under the laws of
Delaware (the "Corporation"), DO HEREBY CERTIFY that, pursuant to authority
conferred upon the Board of Directors by the Amended Certificate of
Incorporation and Section 141(f) of the Delaware General Corporation Law, the
Board of Directors, by a unanimous written consent dated the 31st day of
December, 1999, adopted the following resolution:
RESOLVED, that pursuant to authority vested in the Board of Directors
by Article Fourth of the Amended Certificate of Incorporation of this
Corporation, there is hereby established a series of Preferred Stock
designated as "Series C Convertible Preferred Stock"; that the series
shall consist of 30,000 shares, par value $.00002 per share, which
series shall have the preferences and rights set forth in a Certificate
of Designation, Preference and Rights of Series C Convertible Preferred
Stock of eVentures Group, Inc. to be filed with the Delaware Secretary
of State, as the same may be amended and restated from time to time, as
set forth below:
SERIES C CONVERTIBLE PREFERRED STOCK
1. Dividends. The holders of the Series C Convertible Preferred Stock
(the "Series C Stock") shall have no rights to the payment of dividends on the
Series C Stock (regardless of whether the Corporation declares or pays dividends
on any other class of preferred stock or common stock of the Corporation).
2. Redemption.
2.1. Optional Redemption. The Corporation may, at any time and
from time to time, pursuant to a resolution of its Board of Directors, redeem
all or any of the outstanding shares of Series C Stock in the manner prescribed
in this Section 2; provided that the Corporation shall not redeem less than 750
shares of Series C Stock pursuant to any single Redemption Notice.
2.2. Redemption Notice. At any time that the Corporation
elects to redeem shares of Series C Stock pursuant to Section 2.1, the
Corporation shall mail by certified or registered mail, return receipt
requested, to each holder of any shares of Series C Stock as shown on the books
and records of the Corporation (each, a "Registered Holder") at the address
shown on the Corporation's records, a written notice (a "Redemption Notice"),
stating: (i) the number of shares of Series C Stock held of record by such
Registered Holder which the Corporation proposes to redeem; (ii) the date on
which the Corporation proposes to redeem such shares (the
-1-
<PAGE> 2
"Redemption Date"); (iii) that in consideration for such shares, the Corporation
will pay to such holder the Liquidation Value (as defined below) of each such
share (the "Redemption Price"); and (iv) the place at which the shares to be
redeemed may be surrendered in exchange for the Redemption Price for such
shares. Upon the mailing of a Redemption Notice, the Corporation shall become
obligated to redeem the shares of Series C Stock specified in such notice on the
Redemption Date. Each Redemption Notice shall be mailed at least 10 days prior
to the Redemption Date stated therein.
2.3. Determination of Number of Each Holder's Shares to be
Redeemed. At any time that the Corporation elects to redeem shares of Series C
Stock pursuant to Section 2.1, the number of shares of Series C Stock that the
Corporation shall redeem from each holder of Series C Stock shall be equal to
the product of (i) the total number of shares of Series C Stock to be redeemed
(the "Redeemed Shares"), and (ii) a fraction, the numerator of which shall be
the total number of shares of Series C Stock held by such holder on the
Redemption Date, and the denominator of which shall be the total number of
shares of Series C Stock outstanding on the Redemption Date.
2.4. Status of Redemption Obligation; Payment of Redemption
Price.
(a) Payment of the Redemption Price with respect to each share
of Series C Stock subject to a Redemption Notice shall be deemed to
become "due" on the Redemption Date regardless of whether the
Corporation shall be able or legally permitted to make such payments on
the Redemption Date.
(b) Each holder of Series C Stock shall receive on or at any
time after any Redemption Date the aggregate Redemption Price for the
Redeemed Shares held by such holder upon surrender by such holder at
the place specified in the Redemption Notice of the certificate
representing such Redeemed Shares duly endorsed in blank or accompanied
by an appropriate form of assignment duly endorsed in blank. Payment of
the Redemption Price shall be made promptly following any holder's
surrender of certificates for Redeemed Shares in the manner set forth
in Section 4.2. Upon payment of the Redemption Price with respect to
any Redeemed Shares, all rights of the holder of such Redeemed Shares
shall cease and terminate with respect to such Redeemed Shares. Unless
all of the shares of Series C Stock evidenced by any certificate
delivered shall have been redeemed, the Corporation shall within a 15
day period prepare a new certificate, substantially identical to that
surrendered, representing the balance of the shares of Series C Stock
formerly represented by the certificate which shall not have been
redeemed and shall within such 15 day period deliver such certificate
to the Registered Holder thereof.
2.5. Redeemed Shares to be Canceled. The Corporation shall
cancel each share of Series C Stock which it shall redeem or for any other
reason acquire, and no share of Series C Stock which shall be redeemed or
otherwise acquired by the Corporation shall thereafter be reissued, sold, or
transferred by the Corporation to any person. The number of shares of Series C
Stock which the Corporation shall be authorized to issue shall be deemed to be
reduced by the number of shares of Series C Stock which the Corporation shall
redeem or otherwise acquire.
-2-
<PAGE> 3
2.6. Allocation of Partial Redemption Payments Among Holders
of Series C Stock. If any time the Corporation shall not be able to pay the full
Redemption Price for all Series C Stock which the Corporation shall have become
obligated to redeem at or prior to such time pursuant to this Section 2, of the
Corporation shall redeem shares of Series C Stock from each holder Stock equal
to the product of (i) the total number of shares of Series C Stock which the
Corporation shall be able to redeem at such time, and (ii) a fraction, the
numerator of which shall be the total number of shares of Series C Stock which
the Corporation intends to redeem from such holder at or prior to such time (but
which the Corporation shall not have redeemed at or prior to such time), and the
denominator of which shall be the total number of shares of Series C Stock which
the Corporation intends to redeem at or prior to such time (but which the
Corporation shall not have redeemed at or prior to such time).
3. Liquidation.
3.1. Rights of Holders of Series C Stock. In the event of any
voluntary or involuntary liquidation (whether complete or partial), dissolution
or winding up of the Corporation (a "Dissolution"), the holders of shares of
Series C Stock shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders, whether from capital, surplus or
earnings and pari passu with the holders of any outstanding shares of Series B
Convertible Preferred Stock, par value $0.00002 per share, of the Corporation
(the "Series B Stock"), an amount in cash equal to the sum of one thousand
dollars ($1,000) per share (the "Liquidation Value").
3.2. Allocation of Liquidation Payments Among Holders of
Stock. If upon any Dissolution, the assets of the Corporation available for
distribution to holders of shares of Series B Stock and Series C Stock (the
"Total Amount Available") shall be insufficient to pay the holders of
outstanding shares of Series B Stock and Series C Stock the full amounts to
which they shall be entitled under Section 3.1 and the Certificate of
Designation with respect to the Series A Stock, each holder of shares of Series
C Stock shall be entitled to receive an amount equal to the product derived by
multiplying the Total Amount Available times a fraction the numerator of which
shall be the number of shares of Series C Stock held by such holder and the
denominator of which shall be the total number of shares of Series B Stock and
Series C Stock then outstanding.
4. Additional Provisions Governing Preferred Stock.
4.1. Voting Rights. (a) Except as otherwise provided herein,
by the Certificate of Incorporation or by applicable law, the shares of Series C
Stock shall have no voting rights.
(b) Not withstanding the foregoing, the vote of at least a
majority of the outstanding shares of Series C Stock shall be required
to effect any of the following:
(i) any amendment or change to the rights, preferences,
privileges or power of the Series C Stock;
(ii) any action that authorizes, creates or issues shares
of any class of stock having
-3-
<PAGE> 4
rights, preferences or privileges superior to the
Series C Stock;
(iii) any increase or decrease in the authorized number of
shares of the Series C Stock; and
(iv) any amendment or waiver of any provisions of the
Company's Certificate of Incorporation (the
"Certificate of Incorporation") or Bylaws that
adversely affects the rights of the Series C Stock..
4.2. Method of Payment.
(a) Payments. Any payment at any time due with respect to any
share of Series C Stock (including but not limited to the payment of
the Redemption Price for such share, and any payment due with respect
to such share under Section 3) shall be made by means of a check (drawn
upon funds which are immediately available not later than the due date
of the payment being made by such check) to the order of the Registered
Holder of such share which check shall be mailed by United States
certified or registered mail, return receipt requested, to the address
for such Registered Holder shown on the Corporation's records.
(b) When Payment Deemed to Have Been Made. Any payment at any
time due with respect to any share of Series C Stock (including but not
limited to payment of the Redemption Price for such share and any
payment due on such share under Section 3) shall be deemed to have been
paid by the Corporation at the time the Corporation shall have received
a receipt therefor from the U.S. postal service.
4.3. Registration and Transfer
(a) The Corporation will keep at its principal office a
register for the registration of the shares of Series C Stock.
(b) The Corporation will record a transfer in such register of
any share or shares of Series C Stock and all rights evidenced thereby
upon the request of the Registered Holder thereof in person or by duly
authorized attorney upon the surrender of the certificate(s)
representing such share of Series C Stock with the form of assignment
set forth on the reverse of such certificate properly completed and
executed, properly endorsed at the Corporation's principal office. For
so long as such certificate bears any legend to such effect, prior to
any registration of transfer of any shares of Series C Stock, the
Corporation shall have received an appropriate investment
representation for purposes of confirming the availability of an
exemption from applicability of the registration provisions of the
Securities Act of 1933, as amended, signed by the Registered Holder of
such shares of Series C Stock, and an opinion of counsel reasonably
acceptable to the Corporation to the same effect.
(c) Upon the surrender of any certificate representing shares
of Series C Stock at the Corporation's principal office, the
Corporation will, at the request of the registered
-4-
<PAGE> 5
holder of such certificate, execute and deliver, at the Corporation's
expense, a new certificate or certificates in exchange representing the
number of shares of Series C Stock represented by the surrendered
certificate. Each such new certificate shall be registered in the name
of such Registered Holder or, if any such shares are to be transferred
to another person in compliance with this Section 4.3, such other
person and shall represent such number of shares of Series C Stock as
shall be requested by the holder of the surrendered certificate and
shall be substantially identical in form to the surrendered
certificate, provided that that if the certificate is to be issued in a
name other than that of a Registered Holder, the Corporation shall not
be required to issue or deliver any such certificate unless and until
the person requesting the issuance thereof shall have paid to the
Corporation the amount of any tax that may be payable with respect to
any transfer involved in the issuance and delivery of such certificate
or has established to the satisfaction of the Corporation that such tax
has been paid.
4.4. Replacement Certificates. Upon receipt by the Corporation
of evidence reasonably satisfactory to it of the ownership of and the loss,
theft, destruction or mutilation of any certificate evidencing one or more
shares of Series C Stock (an affidavit of the Registered Holder, shall be
satisfactory) the Corporation at its expense will execute and deliver in lieu of
such certificate, a new certificate of like kind, representing the number of
shares of Series C Stock which shall have been represented by such lost, stolen,
destroyed, or mutilated certificate. If required by the Corporation, an
indemnity bond sufficient in the judgment of the Corporation to protect itself
from any loss which it may suffer if a certificate is replaced must be
delivered. The Corporation may charge such Registered Holder for reasonable
expenses directly related to replacing the certificate.
5. Interpretation of this Instrument.
5.1. Definitions. As used in this Certificate of Designation,
each term defined in this Section 5.1 has the meaning set forth below:
(a) Business Day. The term "Business Day" means any day except
Saturday, Sunday and any day which shall be in New York or Texas a
legal holiday or a day on which banking institutions are authorized or
required by law or other government action to close.
(b) Common Stock. The term "Common Stock" designates and
includes the Corporation's common stock, par value $0.00002 per share.
(c) Conversion Price. The term "Conversion Price" means the
Initial Conversion Price of $17.90, as such price may be adjusted from
time to time pursuant to the provisions of Section 7 hereof.
(d) Conversion Share. The term "Conversion Share" means one
share of the Corporation's authorized Common Stock, provided that if
under the provisions hereof, there shall be a change in the class of
securities purchasable hereunder or such that the securities
purchasable hereunder shall be issued by an entity other than the
Corporation.
-5-
<PAGE> 6
The term "Conversion Share" shall mean one share of the security
purchasable upon the exercise of the rights granted hereunder if such
security shall be issuable in shares or shall mean the smallest unit in
which such security shall be issuable if such security shall not be
issuable in shares.
(e) Market Value. The term "Market Value" means the average
closing sale price of the Common Stock for the 10 preceding days.
(f) Trading Day. The term "Trading Day" means any Business Day
in which the Common Stock may be traded in a securities market or
exchange in the United States.
6. Conversion Rights. Each share of Series C Stock shall initially be
convertible into 55.865922 shares (subject to adjustment in Section 7) of Common
Stock as set forth in this Section 6.
(a) Conversion Rights.
(i) Optional Conversion by the Holder. At any time or
from time to time prior to the earlier to occur of (x) the
Corporation Conversion Date (as defined below), (y) the
Mandatory Conversion Date (as defined below), or (z) the
Redemption Date with respect to all outstanding shares of
Series C Stock, each Registered Holder shall have the right to
convert any or all of such Registered Holder's shares of
Series C Stock into the number of shares of fully paid and
nonassessable Common Stock derived by dividing the Liquidation
Value of each such share by the Conversion Price by delivering
the certificate representing such shares to the Corporation,
duly endorsed in blank or accompanied by an appropriate form
of assignment duly endorsed in blank, together with a written
notice stating that the Registered Holder is converting such
shares;
(ii) Mandatory Conversion. On the date following (i)
the completion by the Corporation of an underwritten offering
with proceeds of no less than $50 million at a price per share
of no less than $35.80 and (ii) the date upon which the
trading volume for shares of common stock of the Corporation
for the preceding three consecutive calendar months has
equaled or exceeded 700,000 shares per month (the "Mandatory
Conversion Date"), each share of Series C Stock shall,
automatically and without further action on the part of any
Registered Holder of Series C Stock, be converted into the
number of shares of fully paid and nonassessable Common Stock
derived by dividing the Liquidation Value of each such share
by the Conversion Price. Upon such conversion, each share of
Series C Stock shall be canceled and not subject to
reissuance. On or prior to the twentieth (20th) Business Day
prior to the Mandatory Conversion Date, the Corporation may
mail by certified or registered mail, return receipt
requested, to each Registered Holder of any shares of Series C
Stock at the address shown on the Corporation's records, a
written notice (the "Mandatory Conversion Notice"), stating
that the Corporation (x) does not intend to exercise the
redemption option provided for in Section 3 hereof, and (y)
does intend to allow the shares of Series C
-6-
<PAGE> 7
Stock to automatically convert pursuant to this Section
6.1(a)(ii). Notwithstanding the delivery of any Mandatory
Conversion Notice, the Corporation shall not be deemed to have
waived its right to redeem the Series C Stock pursuant to
Section 2 hereof by virtue of the issuance of the Mandatory
Conversion Notice;
(iii) Optional Conversion by the Corporation. At any
time that (i) any shares of the Series C Stock are outstanding
and (ii) the trading volume for shares of common stock of the
Corporation has equaled or exceeded 700,000 shares per month
for three consecutive calendar months, at any time during the
thirty (30) trading days following the last of any ten
consecutive Trading Days (the "Trigger Date") on which the
Market Price of the Common Stock equals or exceeds an amount
equal to 2.5 multiplied by the Conversion Price per share (the
"Target Price"), the Corporation may (but has no obligation
to) elect to convert each outstanding share of Series C Stock
(automatically and without further action on the part of any
holder of outstanding shares of Series C Stock) into the
number of shares of fully paid and nonassessable Common Stock
derived by dividing the Liquidation Value of each such share
by the Conversion Price. Upon such conversion, each share of
Series C Stock shall be canceled and not subject to
reissuance. An optional conversion by the Corporation pursuant
to this paragraph 6.1(a)(iii) shall be deemed to have taken
place on the fifth (5th) Business Day following the delivery
by the Corporation of written notice (the "Corporation
Conversion Notice") to the holders of shares of Series C Stock
that the Corporation has elected to convert the outstanding
shares of Series C Stock pursuant to this Section 6.1(a)(iii).
The immediately preceding sentence notwithstanding, the
Corporation shall not be deemed to have waived its right to
redeem the Series C stock pursuant to Section 2 hereof by
virtue of the issuance of the Corporation Conversion Notice.
The failure of the Corporation to elect to convert the shares
of Series C Stock following any particular Trigger Date shall
not prejudice in any manner the Corporation's rights under
this paragraph 6.1(a)(iii) with respect to any other Trigger
Date or under Section 2 hereof.
(b) Delivery of Series C Certificates. Following a conversion
pursuant to Section 6(a)(ii) or (iii), each holder of Series C Stock
shall be entitled to receive a certificate or certificates representing
the shares of Common Stock into which such holder's Series C Stock was
converted upon surrender by such holder at the place specified in the
Mandatory Conversion Notice or Corporate Conversion Notice of the
certificate representing such shares of Series C Stock, duly endorsed
in blank or accompanied by an appropriate form of assignment duly
endorsed in blank. Each share of Series C Stock surrendered pursuant to
Section 6(a)(i) or this Section 6(b) shall constitute payment of the
Conversion Price equal to the Liquidation Value of such share
surrendered.
(c) Delivery of Certificates for Conversion Shares.
Certificates for Conversion Shares shall be issued and delivered to the
Registered Holder of the converted shares of
-7-
<PAGE> 8
Series C Stock within 15 days after the delivery of the certificates
representing the shares of Series C Stock to be converted. Unless all
of the shares of Series C Stock evidenced by any certificate delivered
shall have been converted, the Corporation shall within a 15 day period
prepare a new certificate, substantially identical to that surrendered,
representing the balance of the shares of Series C Stock formerly
represented by the certificate which shall not have been converted and
shall within such 15 day period deliver such certificate to the
Registered Holder thereof.
(d) Fractional Shares. The Corporation may, if it so elects,
issue fractional shares of Common Stock or scrip representing
fractional shares upon the conversion of shares of Series C Stock. If
the Corporation does not elect to issue fractional shares, the
Corporation shall pay to the holder of the shares of Series C Stock
which were converted a cash adjustment in respect of such fractional
shares in an amount equal to the same fraction of the market price per
share of the Common Stock (as determined in a reasonable manner
prescribed by the Board of Directors) at the close of business on the
day of such conversion. The determination as to whether or not any
fractional shares are issuable shall be based upon the total number of
shares of Series C Stock being converted at any one time by any holder
thereof, not upon each share of Series C Stock being converted.
(e) Authorization and Issuance. The Corporation covenants and
agrees that:
(i) the Conversion Shares issuable upon any
conversion of any shares of Series C Stock shall be deemed to
have been issued to the Registered Holder of such shares of
Series C Stock at the time of such conversion, such Registered
Holder shall be deemed for all purposes to have become the
Registered Holder of such Conversion Shares at such time, and
all rights of such Registered Holder with respect to such
Redeemed Shares (other than the right to surrender the
certificates therefor and receive in exchange certificates for
Conversion Shares) shall cease and terminate;
(ii) all Conversion Shares which may be issued upon
any conversion of any shares of Series C Stock will, upon
issuance, be fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof;
(iii) The Corporation will take all such action as
may be necessary to assure that all Conversion Shares issuable
upon conversion of Series C Stock may be issued without
violation of any applicable law or regulation or of any
requirements of any domestic securities exchange upon which
securities of the same class may be listed. The Corporation
will not take any action which would result in any adjustment
of the Conversion Price if the total number of shares of
Common Stock issuable after such action upon conversion of all
Series C Stock together with all shares of Common Stock then
outstanding and all shares of Common Stock then issuable upon
the exercise of all outstanding options, warrants, conversion
and other rights, would exceed the total number of shares of
Common Stock then authorized by the Corporation's Certificate
of Incorporation;
-8-
<PAGE> 9
(iv) the issuance of certificates for shares of
Common Stock issuable upon conversion shall be made without
charge to the Registered Holder; provided, however, that if
any certificate is to be issued in a name other than that of
the Registered Holder of the shares being converted, the
Corporation shall not be required to issue or deliver any such
certificate unless and until the person requesting the
issuance thereof shall have paid to the Corporation the amount
of any tax that may be payable with respect to any transfer
involved in the issuance and delivery of such certificate or
has established to the satisfaction of the Corporation that
such tax has been paid;
(v) The Corporation will at no time close its
transfer books against the transfer of the Series C Stock or
of any Conversion Share issued or issuable upon the conversion
of the Series C Stock in any manner which interferes with the
timely conversion of the Series C Stock; and
(vi) The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of issuance upon
conversion of the outstanding shares of Series C Stock, such
number of shares of Common Stock as shall be issuable upon the
conversion of all such shares of Series C Stock then
outstanding.
7. Anti-dilution Provisions.
7.1. Adjustment of Number of Shares. In order to prevent
dilution of the rights granted hereunder, the Conversion Price shall be subject
to adjustment from time to time in accordance with this Section 7. At any given
time the Conversion Price, whether as the Initial Price or as last adjusted,
shall be that dollar (or part of a dollar) amount the payment of which shall be
sufficient at the given time to acquire one Conversion Share. Upon each
adjustment of the Conversion Price pursuant to this Section 7, the Registered
Holder of the shares of Series C Stock shall thereafter be entitled to acquire
upon exercise, at the Conversion Price resulting from such adjustment, the
number of Conversion Shares obtainable by multiplying the Conversion Price in
effect immediately prior to such adjustment by the number of Conversion Shares
acquirable immediately prior to such adjustment and dividing the product thereof
by the Conversion Price resulting from such adjustment.
7.2. Liquidating Dividends. In the event the Corporation shall
declare a dividend upon the Common Stock (other than a dividend payable in
Common Stock) payable otherwise than out of earnings or earned surplus,
determined in accordance with generally accepted accounting principles,
including the making of appropriate deductions for minority interests, if any,
in subsidiaries (herein referred to as "Liquidating Dividends"), then as soon as
possible after the conversion of any shares of Series C Stock the Corporation
shall pay to the person converting such shares of Series C Stock an amount equal
to the aggregate value at the time of such exercise of all Liquidating Dividends
(including but not limited to the Common Stock which would have been issued at
the time of such earlier exercise and all other securities which would have been
issued with respect to such Common Stock by reason of stock splits, stock
dividends, mergers or reorganizations, or for any other reason). For the
purposes of this Section
-9-
<PAGE> 10
7.2, a dividend other than in cash shall be considered payable out of earnings
or earned surplus only to the extent that such earnings or earned surplus is
charged an amount equal to the fair value of such dividend.
7.3. Subdivision or Combination of Stock. In case the
Corporation shall at any time subdivide (other than by means of a dividend
payable in Common Stock) its outstanding shares of Common Stock into a greater
number of shares, the Conversion Price in effect immediately prior to such
subdivision shall be appropriately reduced, and, conversely, in case the
outstanding shares of Common Stock of the Corporation shall be combined into a
smaller number of shares, the Conversion Price in effect immediately prior to
such combination shall be proportionately increased.
7.4. Reorganization, Reclassification, Consolidation, Merger
or Sale. If any capital reorganization or reclassification of the capital stock
of the Corporation, or consolidation or merger of the Corporation with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the Registered Holders of the shares of Series C Stock
shall thereafter have the right to acquire and receive upon conversion of the
shares of Series C Stock such shares of stock, securities or assets as would
have been issuable or payable (as part of the reorganization, reclassification,
consolidation, merger or sale) with respect to or in exchange for such number of
outstanding shares of the Corporation's Common Stock as would have been received
upon conversion of the Series C Stock immediately before such reorganization,
reclassification, consolidation, merger or sale and the number of shares of
Common Stock that would have been so received), and in any such case appropriate
provisions shall be made with respect to the rights and interests of the holders
of the Series C Stock to the end that the provisions hereof (including without
limitation provisions for adjustments of the Conversion Price and of the number
of Conversion Shares acquirable and receivable upon the conversion of the Series
C Stock) shall thereafter be applicable, in relation to any shares of stock,
securities or assets thereafter deliverable upon the conversion of the Series C
Stock. In the event of a merger or consolidation of the Corporation with or into
another corporation or the sale of all or substantially all of its assets as a
result of which a number of shares of Common Stock of the surviving or
purchasing corporation, greater or lesser than the number of shares of Common
Stock of the Corporation outstanding immediately prior to such merger,
consolidation or purchase are issuable to holders of Common Stock of the
Corporation, then the Conversion Price in effect immediately prior to such
merger, consolidation or purchase shall be adjusted in the same manner as though
there were a subdivision or combination of the outstanding shares of Common
Stock of the Corporation.
7.5. Notices. In the event that:
(a) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or
consolidation or merger of the Corporation with, or sale of all or
substantially all of its assets to, another corporation; or
-10-
<PAGE> 11
(b) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in connection with such event, the Corporation shall give to the
Registered Holders of the shares of Series C Stock at least twenty (20) days
prior written notice of the date when the same shall take place.
Such notice shall also specify the date on which the holders
of Common Stock shall be entitled to exchange their Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger or sale, dissolution, liquidation or winding up, as the
case may be. Each such written notice shall be given by first class mail,
postage prepaid, address to the Registered Holders of the Series C Stock.
7.6. Certain Events. If any event occurs as to which, in the
opinion of the Board of Directors of the Corporation, the provisions of this
Section 7 are not strictly applicable or if strictly applicable would not fairly
protect the rights of the holders of the Series C Stock in accordance with the
essential intent and principles of such provisions, then the Board of Directors
shall make an adjustment in the application of such provision, in accordance
with such essential intent and principles, so as to protect such rights as
aforesaid, but in no event shall any adjustment have the effect of increasing
the Conversion Price as otherwise determined pursuant to any of the provisions
of this Section 7 except in the case of a combination of shares of a type
contemplated in Section 7.3.
and be it RESOLVED FURTHER, that the Secretary of this corporation be, and is
hereby authorized, empowered and directed, for and on behalf of this
corporation, to file the Certificate of Designations with the Secretary of State
of the State of Delaware, with any amendments or modifications thereto as he
shall deem necessary and proper, the filing of the Certificate of Designations
by such officer shall conclusively evidence his authority therefor.
-11-
<PAGE> 12
IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of
January, 2000, and we hereby affirm that the foregoing Certificate is my act and
deed and the act and deed of the Corporation and that the facts stated therein
are true.
---------------------------------------
Stuart J. Chasanoff,
Vice President and Secretary
-12-
<PAGE> 1
EXHIBIT 4.5
eVENTURES GROUP, INC.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into on the ___ day of January, 2000, by and among eVENTURES GROUP,
INC., a Delaware corporation (the "Company"), and the persons and entities
signatories hereto (collectively, the "Stockholders"), as holders of shares of
Series C Convertible Preferred Stock, par value $0.00002 per share, of the
Company ("Series C Stock").
W I T N E S S E T H:
WHEREAS, the Company and the Stockholders have entered into that
certain Preferred Stock Subscription Agreement dated as of January __, 2000
(the "Subscription Agreement"), pursuant to which certain of the Stockholders
acquired shares of the Company's Series C Stock; and
WHEREAS, in connection with the Subscription Agreement, the parties
have agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in this Agreement and in the Subscription Agreement, the
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. REGISTRABLE SHARES. For purposes of this Agreement "Registrable Shares"
shall mean, at any time, and with respect to any Stockholder or Qualified
Transferee (as defined in Section 8(g) below), any Restricted Securities (as
defined below) held by such Stockholder or Qualified Transferee, and "Holder"
shall mean any Stockholder or Qualified Transferee holding Registrable Shares.
As to any particular Registrable Shares, once issued, such Registrable Shares
shall cease to be Registrable Shares (1) when such Registrable Shares have been
registered under the Securities Act of 1933, as amended or any successor
Federal statute (the "Act"), the Registration Statement in connection therewith
has been declared effective and they have been disposed of pursuant to and in
the manner described in such effective Registration Statement, (2) when such
Registrable Shares are sold or distributed pursuant to Rule 144, (3) when such
Registrable Shares have ceased to be outstanding, or (4) when such Registrable
Shares have been transferred to a person or entity other than a Qualified
Transferee. For purposes of this Agreement, the term "Restricted Securities"
shall mean, at any time and with respect to any Stockholder or Qualified
Transferee, the shares of Series C Stock and any other securities which by
their terms are directly or indirectly exercisable or exchangeable for or
convertible into Common Stock (other than stock options granted to employees or
directors of the Company in their capacity as such, or Common Stock issuable
upon the exercise thereof), and any securities received on or with respect to
any of the foregoing securities, which are held by such Stockholder or
Qualified Transferee and which theretofor have not been sold to the public
pursuant to a Registration Statement or pursuant to Rule 144 under the Act. For
purposes of this Agreement, the term "Registration Statement" shall
1
<PAGE> 2
mean any registration statement of the Company which covers any of the
Registrable Shares, and all amendments and supplements to any such Registration
Statement, including post-effective amendments, in each case including the
Prospectus (defined herein) contained therein, all exhibits thereto and all
material incorporated by reference therein. For purposes of this Agreement, the
term "Prospectus" shall mean the prospectus included in a Registration
Statement, including any prospectus subject to completion, and any such
Prospectus as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Shares and, in
each case, by all other amendments and supplements to such prospectus,
including post-effective amendments, and in each case including all material
incorporated by reference therein. For purposes of this Agreement, the term
"Rule 144" shall mean Rule 144 promulgated under the Act or any successor or
similar rule thereto, as may be enacted by the Securities and Exchange
Commission (the "Commission") from time to time.
2. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. If the Company proposes to register any of its
securities under the Act (other than pursuant to (i) a registration solely in
connection with an employee benefit or stock ownership plan on Form S-8 or
any comparable or successor form, (ii) a registration solely in connection
with an acquisition consummated in a manner which would permit registration
of such securities to the public on Form S-4 or any comparable or successor
form or (iii) a "shelf" or similar registration for use solely in connection
with future acquisitions), and the registration form to be used may be used
for the registration of Registrable Shares (a "Piggyback Registration"), the
Company will give prompt written notice to all Holders of Registrable Shares
of its intention to effect such a registration (each a "Piggyback Notice").
Subject to Section 2(b) below, the Company will include in such registration
all shares of Registrable Shares which Holders of Registrable Shares request
the Company to include in such registration by written notice given to the
Company within twenty (20) days after the date of sending of the Piggyback
Notice.
(b) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback Registration relates
to an underwritten public offering of equity securities by the Company and
the managing underwriters for such offering advise the Company in writing
that in their opinion the number of securities requested to be included in
such registration exceeds the number which can be sold in an orderly manner
in such offering within a price range acceptable to the Company, the Company
will include in such registration (i) first, the securities proposed to be
sold by the Company, (ii) second, the securities proposed to be sold by any
other persons with registration rights prior to those of the Holder, (iii)
third, the Registrable Shares requested to be included in such registration,
pro rata among the Holders of such Registrable Shares on the basis of the
number of shares owned by each such Holder, and (iv) fourth, other securities
requested to be included in such registration.
(c) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration
relates to an underwritten public offering of equity securities held solely
by Holders of the Company's securities and the managing underwriters advise
the Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the
2
<PAGE> 3
number which can be sold in an orderly manner in such offering within a price
range acceptable to the Holders initially requesting such registration, the
Company will include in such registration (i) first, the securities requested
to be included therein by the Holders requesting such registration, (ii)
second, the securities proposed to be sold by any other persons with
registration rights prior to those of the Holder, (iii) third, the
Registrable Shares requested to be included in such registration, pro rata
among the Holders of such Registrable Shares on the basis of the number of
shares owned by each such Holder, and (iv) fourth, other securities requested
to be included in such registration.
3. REGISTRATION PROCEDURES. Whenever the Holders of Registrable Shares have
requested that any Registrable Shares be registered pursuant to this Agreement,
the Company will use its best efforts to effect the registration and the sale
of such Registrable Shares in accordance with the intended method of
distribution thereof and will as expeditiously as possible:
(i) prepare and file with the Commission a Registration
Statement with respect to such Registrable Shares on any appropriate
form under the Act, which form shall be selected by the Company and
shall be available for the sale of Registrable Shares in accordance
with the intended method or methods of distribution thereof and use
its best efforts to cause such Registration Statement to become
effective, provided that before filing a Registration Statement or
Prospectus or any amendments or supplements thereto, the Company will
furnish to the counsel selected by the Holders of a majority of the
Registrable Shares included in such Registration Statement copies of
all such documents proposed to be filed, which documents will be
subject to the review of such counsel;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to such Registration Statement and
supplements to the Prospectus used in connection therewith (and to
file the Prospectus, as so supplemented, under Rule 424 under the Act,
if required) as may be necessary to keep such Registration Statement
effective for a period of up to one (1) year, and comply with the
provisions of the Act with respect to the disposition of all
securities included in such Registration Statement during such period
in accordance with the intended methods of distribution by the selling
Holders thereof set forth in such Registration Statement or supplement
to such Prospectus;
(iii) furnish to each selling Holder of Registrable Shares
such number of copies of such Registration Statement, each amendment
and supplement thereto (in each case including all exhibits), the
Prospectus included in such Registration Statement (including each
preliminary Prospectus) and such other documents as such selling
Holder may reasonably request in order to facilitate the disposition
of the Registrable Shares owned by such selling Holder;
(iv) notify the selling Holders of Registrable Shares and the
managing underwriters, if any, promptly and (if requested by any such
Stockholder) confirm such advice in writing, (A) when a Prospectus,
including any Prospectus supplement or post-
3
<PAGE> 4
effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same
has become effective, (B) of any request by the Commission for
amendments or supplements to a Registration Statement or related
Prospectus or for additional information, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that
purpose, (D) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any of the
Registrable Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, and (E) of the
existence of any fact which results in a Registration Statement, a
Prospectus or any document incorporated therein by reference
containing an untrue statement of a material fact or omitting to state
a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading;
(v) use its best efforts to register or qualify such
Registrable Shares under such other securities or blue sky laws of
such jurisdictions as any selling Holder reasonably requests and do
any and all other acts and things which may be reasonably necessary or
advisable to enable such selling Holder to consummate the disposition
in such jurisdictions of the Registrable Shares owned by such selling
Holder, provided that the Company will not be required (A) to qualify
generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (B) to
subject itself to taxation in any such jurisdiction, or (C) to consent
to general service of process in any such jurisdiction;
(vi) notify each selling Holder of such Registrable Shares,
at any time when a Prospectus relating thereto is required to be
delivered under the Act, of the happening of any event referred to in
clause (iv)(E) of this Section 3, and, at the request of any such
seller, prepare a supplement to such Prospectus or a post-effective
amendment to such Registration Statement so that, as thereafter
delivered to the purchasers of such Registrable Shares, such
Prospectus will not contain an untrue statement of a material fact or
omit to state any fact necessary to make the statements therein not
misleading;
(vii) cause all such Registrable Shares to be listed on each
securities exchange on which similar securities issued by the Company
are then listed and to be qualified for trading on each system on
which similar securities issued by the Company are from time to time
qualified;
(viii) provide a transfer agent and registrar for all such
Registrable Shares not later than the effective date of such
Registration Statement and thereafter maintain such transfer agent and
registrar;
(ix) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other
actions as the Holders of a majority of the Registrable Shares being
sold or the underwriters, if any, reasonably request in
4
<PAGE> 5
order to expedite or facilitate the disposition of such Registrable
Shares;
(x) in connection with an underwritten offering, use its best
efforts to (A) obtain opinions of counsel to the Company and updates
thereof, which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriters,
addressed to the underwriters, covering the matters customarily
covered in opinions requested in underwritten offerings and such other
matters as may be reasonably requested by such underwriters; and (B)
obtain "cold comfort" letters and updates thereof from the Company's
independent certified public accountants, addressed to the
underwriters, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters to
underwriters in connection with underwritten offerings; make available
for inspection during normal business hours by any underwriter
participating in any disposition pursuant to a registration statement,
and any attorney or accountant retained by such underwriter, all
financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors
and employees to supply all information reasonably requested by such
underwriter, attorney or accountant in connection with such
registration statement; provided that such underwriters execute prior
thereto an agreement with the Company that all such records,
information or documents shall be kept confidential by such persons
unless (1) disclosure of such records, information or documents is
required by law or by a court or administrative order or (2) such
records, information or documents are or become (but only when they
become) generally available to the public other than as a result of
disclosure in violation of this paragraph; and make available for
inspection by any underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant
or other agent retained by any such underwriter, all financial and
other records, pertinent corporate documents and properties of the
Company, and cause the Company's officers, directors, employees and
independent accountants to supply all information reasonably requested
by any such underwriter, attorney, accountant or agent in connection
with such registration statement;
(xi) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission;
(xii) permit any Holder of Registrable Shares which might be
deemed, in the sole and exclusive judgment of such Holder, to be an
underwriter or a controlling person of the Company, to participate in
the preparation of such registration or comparable statement and to
require the insertion therein of material, furnished to the Company in
writing, which in the reasonable judgment of such Holder and its
counsel should be included;
(xiii) in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or of any
order suspending or preventing the use of any related prospectus or
suspending the qualification of any Registrable Shares
5
<PAGE> 6
included in such registration statement for sale in any jurisdiction,
the Company will use its reasonable efforts promptly to obtain the
withdrawal of such order; and
(xiv) provide a CUSIP number for all Registrable Shares, not
later than the effective date of the applicable registration
statement.
If any such registration or comparable statement refers to any Holder by name
or otherwise as the Holder of any securities of the Company and if, in the sole
and exclusive judgment of such Holder, such Holder is or might be deemed to be
a controlling person of the Company, such Holder shall have the right to
require (a) the inclusion in such registration statement of language, in form
and substance reasonably satisfactory to such Holder, to the effect that the
holding of such securities by such Holder is not to be construed as a
recommendation by such Holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such
Holder will assist in meeting any future financial requirements of the Company,
or (b) in the event that such reference to such Holder by name or otherwise is
not required by the Act or any similar federal statute then in force, the
deletion of the reference to such Holder; provided, that with respect to this
clause (b) such Holder shall furnish to the Company an opinion of counsel to
such effect, which opinion and counsel shall be reasonably satisfactory to the
Company.
4. REGISTRATION EXPENSES.
(a) DEFINITION. The term "Registration Expenses" means any
expenses incident to the Company's performance of or compliance with
this Agreement, including, without limitation, all registration and
filing fees, listing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery
expenses, internal expenses, the fees and expenses of counsel for the
Company (but not the fees and expenses of counsel to the Holders of
the Registrable Shares included in such registration) and all
independent certified public accountants, underwriting fees and
expenses (excluding discounts and commissions attributable to the
Registrable Shares, which shall be paid by the selling Holders out of
the proceeds of the offering) and the fees and expenses of any other
Persons (defined below) retained by the Company. For purposes of this
Agreement, the term "Person" shall be construed as broadly as possible
and shall include an individual or natural person, a partnership
(including a limited liability partnership), a company, an
association, a joint stock company, a limited liability company, a
trust, a joint venture, an unincorporated entity and a governmental
authority.
(b) PAYMENT. The Company shall pay the Registration Expenses
in connection with any and all Piggyback Registrations.
5. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify, to the extent permitted by law, each Holder of Registrable
Shares, such holder's general and limited partners, officers and
directors and each Person who controls such Holder (within the
6
<PAGE> 7
meaning of the Act) against all losses, claims, damages, liabilities
and expenses caused by any untrue or alleged untrue statement of
material fact contained in any Registration Statement, Prospectus or
preliminary Prospectus or any amendment thereof or supplement thereto
or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in
any information furnished in writing to the Company by such Holder
expressly for use therein. In connection with an underwritten
offering, the Company will indemnify such underwriters, their officers
and directors and each Person who controls such underwriters (within
the meaning of the Act) to the same extent as provided above with
respect to the indemnification of the Holders of Registrable Shares.
(b) INDEMNIFICATION BY HOLDERS. In connection with any
registration statement in which a Holder of Registrable Shares is
participating, each such Holder will furnish to the Company in writing
such information and affidavits as the Company reasonably requests for
use in connection with any such Registration Statement or Prospectus
and, to the extent permitted by law, will indemnify the Company, its
directors and officers and each Person who controls the Company
(within the meaning of the Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue
statement of material fact contained in the registration statement,
prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements
therein not misleading, but only to the extent that such untrue
statement or omission is contained in any written information or
affidavit so furnished in writing by such Holder; provided, that the
obligation to indemnify will be individual to each Holder and will be
limited to the net amount of proceeds received by such Holder from the
sale of Registrable Shares pursuant to such registration statement.
(c) NOTICE; DEFENSE OF CLAIMS. Any Person entitled to
indemnification hereunder will (i) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks
indemnification and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is
assumed, the indemnifying party will not be subject to any liability
for any settlement made by the indemnified party without its consent
(but such consent will not be unreasonably withheld or delayed). An
indemnifying party who is not entitled to, or elects not to, assume
the defense of a claim will not be obligated to pay the fees and
expenses of more than one special and one local counsel for all
parties indemnified by such indemnifying party with respect to such
claim.
(d) CONTRIBUTION. If the indemnification provided for in this
Section 5 is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss,
liability, claim, damage or expense referred to herein, then the
indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage,
or
7
<PAGE> 8
expense in such proportion as is appropriate to reflect (i) the
relative benefits received by the indemnifying party or parties on the
one hand and the indemnified party on the other from the offering of
the Registrable Shares or (ii) if the allocation provided for by the
foregoing clause (i) is not permitted by applicable law, not only such
relative benefits but also the relative fault of the indemnifying
party or parties on the one hand and the indemnified party on the
other hand in connection with the statements or omissions or alleged
statements or omissions that resulted in such losses, claims, damages
or liabilities (or actions in respect thereof). The relative fault of
the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying
party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or
prevent such statement or omission. The obligation to contribute will
be individual to each Holder of Registrable Shares and will be limited
to the amount by which the net amount of proceeds received by such
Holder from the sale of Registrable Shares exceeds the amount of
losses, liabilities, damages, and expenses which such Holder has
otherwise been required to pay by reason of such statements or
omissions.
(e) SURVIVAL. The indemnification provided for under this
Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any
officer, director or controlling Person of such indemnified party and
will survive the transfer of securities.
(f) UNDERWRITING AGREEMENT. To the extent that the provisions
on indemnification and contribution contained in the underwriting
agreement entered into in connection with an underwritten public
offering are in conflict with the provisions of this Section 5, the
provisions contained in the underwriting agreement shall control.
6. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may participate in
any registration hereunder which is underwritten unless such Person (i) agrees
to sell such Person's securities on the basis provided in any underwriting
arrangements approved by the Person or Persons entitled hereunder to approve
such arrangements, (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements; provided that no Holder of
Registrable Shares included in any underwritten registration shall be required
to make any representations or warranties to the Company or the underwriters
other than representations and warranties regarding such Holder and such
Holder's intended method of distribution, and (iii) if requested by the
managing underwriter or underwriters or the Demanding Persons (as defined in
the Registration Rights Agreement, dated as of September 22, 1999, among the
Company and the persons and entities set forth on Schedule 1 thereto), agrees
not to sell Registrable Shares or other securities held by such Person in any
transaction other than pursuant to such underwriting for such period following
the effective date of the registration statement relating to such underwriting
as determined by either the Board of Directors or the Demanding Persons;
provided that no Holder of Registrable Shares shall be required to enter into
such an agreement unless each other Holder of Registrable Shares, each director
and executive officer of the Company and each other Holder of at least one
percent
8
<PAGE> 9
of the Series C Stock then outstanding enters into a substantially
identical agreement relating to such underwriting.
7. STOCKHOLDER LOCK-UP; AGREEMENT NOT TO SELL. Prior to the first anniversary
of the date hereof, no Holder of Registrable Shares may make any public sale of
Registrable Shares (pursuant to a Registration Statement, Rule 144 or
otherwise); provided, however, that nothing herein shall prevent any Holder (a)
that is a partnership or corporation from making a distribution of Registrable
Shares to the partners or shareholders thereof that are otherwise in compliance
with applicable securities laws, so long as such permitted distributees agree
to be bound by the terms and conditions of the Lock-up Conditions; (b) that
desires to sell any Registrable Shares in a private transaction in compliance
with applicable securities laws from consummating such a sale so long as the
purchaser in any private sale agrees in writing to be bound by the restrictions
set forth in this Section 7; or (c) that is an individual, from making a
transfer of Registrable Shares by gift, will or the laws of descent and
distribution, subject to the restrictions set forth in this Section 7.
8. MISCELLANEOUS.
(a) INFORMATION AND REPORTING.
(i) The Company shall, at all times during which it
is neither subject to the reporting requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), nor exempt from reporting
pursuant to Rule 12g3-2(b) under the Exchange Act, upon the
written request of any Stockholder, provide in writing to
such Stockholder and to any prospective transferee of the
Registrable Shares of such Stockholder the information
concerning the Company described in Rule 144A(d)(4) or any
successor rule under the Act ("Rule 144A Information"). Upon
the written request of any Stockholder, the Company shall
cooperate with and assist such Stockholder or any member of
the National Association of Securities Dealers, Inc. PORTAL
system in applying to designate and thereafter maintain the
eligibility of the Registrable Shares for trading through
PORTAL. The Company's obligations under this Section 8(a)(i)
shall at all times be contingent upon receipt from the
prospective transferee of Registrable Shares of a written
agreement to take all reasonable precautions to safeguard the
Rule 144A Information from disclosure to anyone other than
Persons who will assist such transferee in evaluating the
purchase of any Registrable Shares.
(ii) When it is first legally required to do so, the
Company shall register its Common Stock under Section 12 of
the Exchange Act and shall keep effective such registration
and shall timely file such information, documents and reports
as the Commission may require or prescribe under Section 13
of the Exchange Act. From and after the effective date of the
first registration statement filed by the Company under the
Act, the Company shall (whether or not it shall then be
required to do so) timely file such information, documents
and reports which a corporation, partnership or other entity
subject to Section 13 or 15(d) (whichever
9
<PAGE> 10
is applicable) of the Exchange Act is required to file. The
Company shall promptly upon request furnish any Holder of
Registrable Shares (a) a written statement by the Company that
it has complied with the reporting requirements of Section 13
or 15(d) of the Exchange Act, (b) a copy of the most recent
annual or quarterly report of the Company, and (c) such other
reports and documents filed by the Company with the Commission
as such Holder may reasonably request in availing itself of an
exemption for the sale of Registrable Shares without
registration under the Act. The Company acknowledges and
agrees that the purposes of the requirements contained in this
Section 8(a)(ii) are to enable any such Holder to comply with
the current public information requirement contained in
paragraph (c) of Rule 144 under the Act, should such Holder
ever wish to dispose of any of the securities of the Company
acquired by it without registration under the Act in reliance
upon Rule 144 (or any other similar exemptive provision), and
to qualify the Company for the use of registration statements
on Form S-3. In addition, the Company shall take such other
measures and file such other information, documents and
reports, as shall hereafter be required by the Commission as a
condition to the availability of Rule 144 under the Act (or
any similar exemptive provision hereafter in effect) and the
use of Form S-3. The Company also covenants to use its best
efforts, to the extent that it is reasonably within its power
to do so, to qualify for the use of Form S-3.
(b) NO INCONSISTENT AGREEMENTS. The Company will not hereafter (i) enter into
any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the Holders of Registrable Shares in this
Agreement, provided, however, that other purchasers of Series C Stock from the
Company may become Holders and parties to this Agreement by executing and
delivering to the Company a signature page to this Agreement or (ii) grant
registration rights that are superior to the registration rights granted
hereunder to any other Person other than to Persons who purchase Series C Stock
from the Company (unless consented to by a majority vote of the Stockholders).
(c) ADJUSTMENTS AFFECTING REGISTRABLE SHARES. The Company will not take any
action, or permit any change to occur, with respect to its securities for the
purpose of materially and adversely affecting the ability of the Holders of
Registrable Shares to include such Registrable Shares in a registration
undertaken pursuant to this Agreement or materially and adversely affecting the
marketability of such Registrable Shares in any such registration (including,
without limitation, effecting a stock split or a combination of shares);
provided that this Section 8(c) shall not apply to actions or changes with
respect to the Company's business, balance sheet, earnings or revenue where the
effect of such actions or changes on the Registrable Shares is merely
incidental.
(d) NOTICES. All notices, requests, consents, and other communications under
this Agreement shall be in writing and shall be deemed effectively given when
delivered personally or by facsimile transmission or by overnight delivery
service or 72 hours after being mailed by first class certified or registered
mail, return recent requested, postage prepaid:
10
<PAGE> 11
(i) If to the Company, c/o Stuart Chasanoff, 1601 Elm Street,
Suite 4000, Dallas, Texas 75201, or at such other address or addresses
as may have been furnished in writing by the Company to the
Stockholders.
(ii) If to a Stockholder, to it at its address as set forth
in the applicable Subscription Agreement, or at such other address or
addresses as may have been furnished in writing by such Stockholder
with a copy to (which shall not constitute notice): White & Case LLP,
200 S. Biscayne Boulevard, Suite 4900, Miami, Florida 33131,
Attention: Thomas E Lauria, Esq. (Fax: 305-995-5282).
(e) REMEDIES. Any Person having rights under any provision of this Agreement
will be entitled to enforce such rights specifically to recover damages caused
by reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. The parties hereto agree and acknowledge that
money damages may not be an adequate remedy for any breach of the provisions of
this Agreement and that any party may in its sole discretion apply to any court
of law or equity of competent jurisdiction (without posting any bond or other
security) for specific performance and for other injunctive relief in order to
enforce or prevent violation of the provisions of this Agreement.
(f) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, no amendment,
modification, termination or cancellation of this Agreement shall be effective
unless made in writing signed by the Company and the Holders of a majority of
the shares of Registrable Shares; provided that no amendment may be made to
Sections 7 or 8(f) of this Agreement unless agreed upon by the Company and the
Holders of all the Registrable Shares.
(g) ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
register Registrable Shares pursuant to this Agreement may be assigned (but
only with all related obligations) by a Holder to any transferee (a "Qualified
Transferee") that acquires from a Holder either (i) 100,000 or more Registrable
Shares or (ii) if less than 100,000 Registrable Shares are owned by a Holder at
the time of a transfer, all of the Registrable Shares owned by such Holder, in
either case in connection with the permitted transfer of Registrable Shares.
Such assignment shall not affect the rights of Holders hereunder which shall
remain in full force in accordance with the terms hereof. Any transferring
Holder shall provide the Company with prior written notice of such
transfer(s)/assignment(s); provided, however, that the failure to provide such
notice shall not be deemed to preclude assignment hereunder.
(h) SEVERABILITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(i) ENTIRE AGREEMENT. This Agreement embodies the entire agreement of the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements relating to such subject matter.
11
<PAGE> 12
(j) HEADINGS. The headings of this Agreement are for convenience only and do
not constitute a part of this Agreement.
(k) GOVERNING LAW. The construction, validity and interpretation of this
Agreement will be governed by the internal laws of the State of New York
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York.
(l) FURTHER ASSURANCES. Each party to this Agreement hereby covenants and
agrees, without the necessity of any further consideration, to execute and
deliver any and all such further documents and take any and all such other
actions as may be necessary or appropriate to carry out the intent and purposes
of this Agreement and to consummate the transactions contemplated hereby.
(m) COUNTERPARTS. This Agreement may be executed by facsimile and in one or
more counterparts, each of which shall be deemed to be an original, but all of
which shall be one and the same document.
(Signature Page Follows)
12
<PAGE> 13
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the date first written above.
COMPANY:
eVENTURES GROUP, INC.
By:
Name:
Title:
[SIGNATURE PAGE FOR EACH STOCKHOLDER FOLLOWS]
13
<PAGE> 14
Signature page to Registration Rights Agreement dated December __, 1999 among
eVentures Group, Inc. the undersigned and certain of its other Stockholders.
STOCKHOLDER:
-----------------------------
Name of Stockholder
By:
Name:
Title:
14
<PAGE> 15
Signature page to Registration Rights Agreement dated January __, 2000 among
eVentures Group, Inc. the undersigned and certain of its other Stockholders.
STOCKHOLDER:
By:
Name:
Title:
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1999 AND THE
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 7,042,377
<SECURITIES> 0
<RECEIVABLES> 1,574,165
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,201,586
<PP&E> 14,555,967
<DEPRECIATION> 1,675,469
<TOTAL-ASSETS> 58,507,401
<CURRENT-LIABILITIES> 9,814,929
<BONDS> 0
0
0
<COMMON> 953
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 58,507,401
<SALES> 13,986,119
<TOTAL-REVENUES> 13,986,119
<CGS> 13,030,262
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,449,099
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 78,831
<INCOME-PRETAX> (6,597,294)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,597,294)
<EPS-BASIC> (0.17)
<EPS-DILUTED> (0.17)
</TABLE>
