FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[x] 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 0-17637
eVision USA.Com, Inc.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 45-0411501
------------------------------ -------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1700 Lincoln Street, Suite 3200, Denver, CO 80203
-------------------------------------------------
(Address of principal executive offices)
(303) 860-1700
--------------------------------------------------
(Registrant's telephone number, including area code)
Fronteer Financial Holdings, Ltd.
---------------------------------------------
(Former name, former address and former fiscal
year if changed since last report)
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.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
The registrant had 18,536,275 shares of its $.01 par value common stock
outstanding as of May 1, 1999.
<PAGE>
eVISION USA.COM, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements Page No.
a. Consolidated Balance Sheets as of March 31, 1999
(unaudited) and September 30, 1998.................................. 3
b. Unaudited Consolidated Statements of Operations for the three months
and six months ended March 31, 1999 and 1998........................ 5
c. Unaudited Consolidated Statement of Stockholders' Deficit for the six
months ended March 31, 1999......................................... 6
d. Unaudited Consolidated Statements of Cash Flows for the six months
ended March 31, 1999 and 1998....................................... 7
e. Notes to Unaudited Consolidated Financial Statements..................10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................18
Item 3. Quantitative and Qualitative Disclosures about Market Risk............23
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.....................................................23
Item 2. Changes in Securities.................................................23
Item 4. Submission of Matters to a Vote of Security Holders...................24
Item 5. Other Information.....................................................25
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits.......................................................25
b. Reports on Form 8-K............................................25
Signatures....................................................................26
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, September 30,
ASSETS 1999 1998
- ------ ---- -----
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ............................................................... $ 3,560,235 9,112,652
Receivables from brokers or dealers and clearing organizations .......................... 809,679 410,069
Trade receivables ....................................................................... 1,658,206 1,157,841
Other receivables ....................................................................... 387,826 667,425
Securities owned, at market value ....................................................... 1,793,332 1,688,085
Current portion of long-term notes receivable ........................................... 50,000 --
Current maturities of investments in debt securities .................................... 210,889 --
Other assets ............................................................................ 445,909 261,606
------------ ------------
Total current assets ............................................................... 8,916,076 13,297,678
PROPERTY, FURNITURE AND EQUIPMENT, net
of accumulated depreciation .......................................................... 1,431,367 1,541,131
LONG-TERM NOTES RECEIVABLE, net of current portion ...................................... 2,650,000 --
LONG-TERM INVESTMENTS IN DEBT SECURITIES ................................................ 4,565,540 --
FINANCING COSTS, net of accumulated amortization
of $50,055 ........................................................................... 888,319 --
OTHER LONG-TERM ASSETS .................................................................. 706,320 532,103
------------ ------------
Total assets ....................................................................... $ 19,157,622 15,370,912
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, CONTINUED
March 31, September 30,
LIABILITIES AND STOCKHOLDERS' DEFICIT: 1999 1998
---- ----
(Unaudited)
<S> <C> <C>
LIABILITIES:
Accounts payable and accrued expenses ................................................... $ 4,303,706 2,514,860
Accrued interest payable to related party ............................................... 207,500 157,111
Current portion of long-term debt ....................................................... 124,007 124,007
Current portion of convertible debentures to related party .............................. 500,000 500,000
Deferred revenue ........................................................................ -- 118,800
Other current liabilities ............................................................... 313,513 306,574
------------ ------------
Total current liabilities .......................................................... 5,448,726 3,721,352
LONG-TERM DEBT, net of current portion .................................................. 77,095 107,532
CONVERTIBLE DEBENTURES .................................................................. 6,691,444 6,101,448
CONVERTIBLE DEBENTURES TO RELATED PARTY ................................................. 7,500,000 6,500,000
DEFERRED RENT CONCESSIONS ............................................................... 1,597,746 1,654,766
------------ ------------
Total liabilities .................................................................. 21,315,011 18,085,098
------------ ------------
MINORITY INTEREST IN SUBSIDIARIES ....................................................... 1,300,624 328,991
------------ ------------
STOCKHOLDERS' DEFICIT:
Preferred stock, authorized 21,700,000 shares, $.10 par
value, no shares outstanding ......................................................... -- --
Series B preferred stock, authorized 3,300,000 shares,
$0.10 par value, 20,500 shares issued and outstanding ................................ 2,050 --
Common stock; authorized 100,000,000 shares $0.01 par
value; 18,117,084 and 17,140,857 shares issued and
outstanding as of March 31, 1999 and September 30,
1998, respectively ................................................................... 181,170 171,408
Additional paid-in capital .............................................................. 11,552,090 11,042,464
Accumulated deficit ..................................................................... (14,843,323) (13,907,049)
Unearned ESOP shares .................................................................... (350,000) (350,000)
------------ ------------
Total stockholders' deficit ........................................................ (3,458,013) (3,043,177)
------------ ------------
Total liabilities and stockholders' deficit ........................................ $ 19,157,622 15,370,912
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six months ended March 31, Three months ended March 31,
-------------------------- ----------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUE:
Brokerage commissions ................................... $ 9,671,542 6,848,614 5,696,175 3,560,080
Investment banking ...................................... 536,244 1,557,974 407,125 1,201,470
Trading profits, net .................................... 870,506 283,763 409,107 205,911
Other broker/dealer ..................................... 1,025,977 462,806 470,362 229,520
Computer hardware and software operations ............... 4,946,664 5,087,822 1,987,108 1,818,107
Interest income on investments in debt securities ....... 760,347 -- 499,087 --
Unrealized gain on securities ........................... 333,916 -- 99,981 --
Other ................................................... 34,872 -- 29,615 --
------------ ------------ ------------ ------------
18,180,068 14,240,979 9,598,560 7,015,088
------------ ------------ ------------ ------------
COST OF SALES AND OPERATING EXPENSES:
Broker/dealer commissions ............................... 5,955,727 5,216,489 3,575,673 2,877,626
Computer cost of sales .................................. 4,504,195 4,383,746 1,774,213 1,991,472
Interest expense on convertible debentures .............. 509,539 -- 220,615 --
General and administrative .............................. 7,281,444 6,233,642 3,725,968 3,352,740
Depreciation and amortization ........................... 208,841 178,758 102,491 91,287
------------ ------------ ------------ ------------
18,459,746 16,012,635 9,398,960 8,313,125
------------ ------------ ------------ ------------
Operating income (loss) ............................... (279,678) (1,771,656) 199,600 (1,298,037)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income ....................................... 40,385 140,721 21,013 68,480
Interest expense ...................................... (18,107) (17,511) (11,108) (8,045)
Interest expense to related party ..................... (405,611) (102,222) (207,499) (102,222)
Other ................................................. (64,946) (26,435) (64,946) (26,435)
------------ ------------ ------------ ------------
Total other income (expense) .......................... (448,279) (5,447) (262,540) (68,222)
Loss before minority interest and income taxes ............. (727,957) (1,777,103) (62,940) (1,366,259)
Minority interest in (earnings) loss ....................... (129,148) (12,546) (116,370) 133,135
------------ ------------ ------------ ------------
Loss from continuing operations before income
taxes ................................................... (857,105) (1,789,649) (179,310) (1,233,124)
Income tax (expense) benefit ............................... (79,169) 552,129 (57,768) 180,328
------------ ------------ ------------ ------------
Loss from continuing operations ............................ (936,274) (1,237,520) (237,078) (1,052,796)
Discontinued operations:
Loss on sale of discontinued operations, net ............ -- (317,905) -- (317,905)
Loss from discontinued operations, net .................. -- (186,581) -- (94,877)
------------ ------------ ------------ ------------
Net loss from discontinued operations ...................... -- (504,486) -- (412,782)
------------ ------------ ------------ ------------
Loss before extraordinary item ............................. (936,274) (1,742,006) (237,078) (1,465,578)
Extraordinary item, net of income taxes .................... -- 915,000 -- --
------------ ------------ ------------ ------------
Net loss ................................................... $ (936,274) (827,006) (237,078) (1,465,578)
============ ============ ============ ============
Weighted average number of common shares
outstanding ............................................. 17,875,490 16,849,865 18,117,084 16,827,690
============ ============ ============ ============
Basic and diluted loss per common share:
Continuing operations ................................... $ (.05) (.07) (.01) (.06)
Discontinued operations:
Loss on sale of discontinued operations .............. -- (.02) -- (.02)
Loss from discontinued operations .................... -- (.01) -- (.01)
Extraordinary item ...................................... -- .05 -- --
------------ ------------ ------------ ------------
Total ...................................................... $ (.05) (.05) (.01) (.09)
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
(Unaudited)
Additional Unearned
Preferred Common paid-in Accumulated ESOP
stock stock capital deficit stock Total
--------- ------ ---------- ----------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Balances as of
September 30, 1998 ........... $ -- 171,408 11,042,464 (13,907,049) (350,000) (3,043,177)
Issuance of common
shares for accrued
interest ..................... -- 7,262 347,960 -- -- 355,222
Issuance of common
shares for guarantee ......... -- 2,500 60,000 -- -- 62,500
Issuance of Series B
preferred stock, net
of issuance costs
of $101,284 .................. 2,050 -- 101,666 -- -- 103,716
Net loss ........................ -- -- -- (936,274) -- (936,274)
----------- ----------- ----------- ----------- ----------- -----------
Balances as of
March 31, 1999 ............... $ 2,050 181,170 11,552,090 (14,843,323) (350,000) (3,458,013)
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended March 31,
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................................................. $ (936,274) (827,006)
Adjustments to reconcile net loss to net cash provided by (used in)
continuing operations:
Depreciation and amortization ..................................................... 208,841 178,758
Amortization of financing costs ................................................... 50,055 --
Amortization of deferred rent ..................................................... (57,020) (28,515)
Loss from discontinued operations ................................................. -- 504,486
Extraordinary item, net of income taxes of $585,000 ............................... -- (915,000)
Accretion of discount on investments in debt securities ........................... (472,404) --
Accretion of original issue discount on convertible
debentures ...................................................................... 58,662 --
Unrealized gain on securities ..................................................... (333,916) --
Minority interests in earnings .................................................... 129,148 12,546
Changes in operating assets and liabilities:
Decrease (increase) in receivables from brokers or dealers
and clearing organizations .................................................... (399,610) 1,569,255
Increase in trade receivables ................................................... (500,365) (278,761)
Decrease in other receivables ................................................... 279,599 112,713
Decrease (increase) in securities owned, net of
securities sold but not yet purchased ......................................... 228,669 (2,643,899)
Decrease (increase) in other assets ............................................. (121,803) 748,196
Increase (decrease) in accounts payable
and accrued expenses .......................................................... 1,788,846 (1,515,360)
Increase (decrease) in deferred revenue ......................................... (118,800) 251,200
Increase (decrease) in other current liabilities ................................ 412,550 (266,236)
----------- -----------
Net cash provided by (used in) continuing operations ............................ 216,178 (3,097,623)
Net cash provided by discontinued operations .................................... -- 763,800
----------- -----------
Net cash provided by (used in) operating activities ............................. 216,178 (2,333,823)
----------- -----------
(Continued)
See accompanying notes to consolidated financial statements.
7
<PAGE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(Unaudited)
Six months ended March 31,
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, furniture and equipment ..................................... $ (99,076) (291,103)
Purchases of debt securities ...................................................... (4,635,275) --
Proceeds from sale of debt securities ............................................. 331,250 --
Advances on long-term notes receivable ............................................ (2,700,000) --
Other investing activities ........................................................ (174,217) (508,647)
Net cash provided by discontinued operations ...................................... -- 221,975
----------- -----------
Net cash used in investing activities ............................................. (7,277,318) (577,775)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on debt ................................................................ -- 260,113
Principal payments on borrowings .................................................. (30,437) (332,393)
Net proceeds from issuance of convertible debentures,
net of offering costs ........................................................... 531,334 --
Net proceeds from issuance of convertible debentures to
related party ................................................................... 1,000,000 4,000,000
Net proceeds from issuance of Series B preferred stock,
net of offering costs ........................................................... 103,716 --
Other financing activities ........................................................ (95,890) 228,403
----------- -----------
Net cash provided by financing activities ......................................... 1,508,723 4,156,123
----------- -----------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS .................................................................. (5,552,417) 1,244,525
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD ............................................................................ 9,112,652 2,080,722
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD ............................................. $ 3,560,235 3,325,247
=========== ===========
(Continued)
See accompanying notes to consolidated financial statements.
8
<PAGE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(Unaudited)
Six months ended March 31,
1999 1998
---- ----
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES RELATED TO STATEMENTS OF CASH FLOWS
Cash payments for:
Interest:
Continuing operations ........................................................... $ 375,533 8,161
Discontinued operations ......................................................... -- 9,350
------------- -------
$ 375,533 17,511
============= =======
Income taxes:
Continuing operations ........................................................... $ -- 7,047
============= =======
Other investing and financing activities:
Forgivable loan recognized as extraordinary item, net
of income taxes of $585,000 ..................................................... $ -- 915,000
============= =======
Common stock received in disposition of net assets of
discontinued operations ......................................................... $ -- 493,500
============= =======
Stock issued for interest ......................................................... $ 355,222 --
============= =======
Stock issued for guarantee ........................................................ $ 62,500 --
============= =======
</TABLE>
See accompanying notes to consolidated financial statements.
9
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements of eVision USA.Com,
Inc. and subsidiaries (eVision or the Company) formerly known as Fronteer
Financial Holdings, Ltd. (Fronteer), have been prepared in accordance with the
instructions to Form 10-Q and, therefore, do not include all information and
disclosures necessary for a fair presentation of financial position, results of
operations, and cash flows in conformity with generally accepted accounting
principles. In the opinion of management, these financial statements reflect all
adjustments (which include only normal recurring adjustments) necessary for a
fair presentation of the results of operations and financial position for the
interim periods presented.
The preparation of interim financial statements 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.
These interim financial statements should be read in conjunction with the Annual
Report on Form 10-K as of and for the year ended September 30, 1998. Operating
results for the six or three months ended March 31, 1999, are not necessarily
indicative of the results that may be expected for the year ended September 30,
1999.
NOTE 2 - ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
eVision is a corporation, which was organized under the laws of the state of
Colorado in September 1988. On April 15, 1999, the shareholders voted to change
the name of the Company from Fronteer to eVision. The Company currently has the
following wholly owned operating subsidiaries: American Fronteer Financial
Corporation (AFFC), formerly known as RAF Financial Corporation, which operates
as a fully disclosed securities broker/dealer; RAF Services, Inc. of Texas, RAF
Services, Inc. of Louisiana and RAF Services, Inc. (collectively, RAF Services),
which were established in order to participate in insurance brokerage activities
in certain states; Fronteer Capital, Inc., which was formed to operate as a
holding company of investment opportunities in "small cap" companies; Corporate
Net Solutions, Inc., which was formed to invest in computer and Internet related
opportunities; and Fronteer Corporate Services, Inc., a Colorado corporation,
which was formed to provide corporate administrative services to eVision
subsidiaries and other companies. The Company also has a majority owned
subsidiary, Secutron Corp. (Secutron), which designs, develops, installs,
markets and supports software systems for the securities brokerage industry. The
Company owns approximately 73% of Secutron. Secutron has a wholly owned
subsidiary, MidRange Solutions Corp., which is a seller of hardware and software
products. AFFC, Secutron and MidRange Solutions Corp. are Colorado corporations;
Fronteer Capital, Inc. is a Delaware corporation; and RAF Services are
Louisiana, Nevada and Texas corporations. During 1998, Fronteer Asset Management
Corporate, Inc., a wholly owned subsidiary of Fronteer, was formed to provide
asset management services and was incorporated in Delaware. Corporate Net
Solutions, Inc. and Fronteer Asset Management Corporate, Inc., which were also
incorporated in Delaware in 1998, have not commenced operations.
10
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999, CONTINUED
eBanker USA.com, Inc. (eBanker), formerly Fronteer Development Finance Inc., a
Delaware corporation (Fronteer Development) was incorporated in the state of
Delaware, to operate as a finance company. eVision owns approximately 46% of
eBanker. In March 1999, Fronteer Development was merged into eBanker, a Colorado
corporation, primarily for the purpose of effectuating a name change to eBanker
and becoming a Colorado corporation. Fronteer Income Growth Inc. (FIGI), a
wholly owned subsidiary of eBanker, was incorporated in September 1998 under the
International Business Companies Ordinances of the Territory of the British
Virgin Islands. In January 1999, WWW.CREDITCARDWEB.COM CORPORATION, a wholly
owned subsidiary of eBanker, was incorporated in Delaware primarily to conduct
business as an Internet-based credit card company, but has not yet commenced
operations.
The Company formed a subsidiary, eBroker USA.Com, Inc. (eBroker) in March 1999.
eBroker is incorporated in Colorado and is expected to be operational in the
on-line brokerage business, subject to regulatory approval.
In March 1999, eVision formed a business venture which will focus on the
development of business opportunities in technology-based virtual processing
arenas. The new business venture, named Q6 Technologies, Inc., a Colorado
corporation, will focus initially on value-added transactions processing for
selected e-commerce applications, as well as the development of commercial
opportunities in digital geographic information services and in satellite
internet protocol multicasting. The Company currently owns 21%, and in May 1999
plans to increase its ownership to 65%, of the outstanding common stock of Q6
Technologies, Inc.
NOTE 3 - STOCKHOLDERS' DEFICIT
On January 28, 1999, Mr. Fai H. Chan, Chairman of the Board of Directors and
President of the Company, was granted options to purchase 8,000,000 shares of
the Company's common stock at $.30 per share. The options are exercisable
immediately through January 27, 2009. The grant was approved by a vote of the
Board of Directors in which Mr. Chan abstained.
As of September 30, 1998, the Company had accrued interest payable on the
convertible debentures to related party of $157,111. During the six months ended
March 31, 1999, a total of 726,227 shares of common stock were issued in payment
of accrued interest to Heng Fung Finance Company Limited (Heng Fung Finance). As
of March 31, 1999, the Company had $207,500 of accrued interest payable on the
convertible debentures to related party.
On October 16, 1998, the Company commenced a private placement of 1,500,000
shares of its Series B Preferred Stock at a price of $10.00 per share (1998
Private Offering). The net proceeds are intended to be used to fund working
capital and acquire other securities broker /dealers. Through March 31, 1999,
the Company received proceeds of $205,000, net of offering costs of $101,284, or
$103,716 from the sale of 20,500 shares of Series B Preferred Stock. Subsequent
to March 31, 1999, the Company received an additional $50,000, net of offering
costs of $5,000, or $45,000, from the sale of 5,000 shares of Series B Preferred
Stock.
11
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999, CONTINUED
With respect to the 1998 Private Offering, Heng Fung Holdings Company Limited,
an affiliate of the Company, (Heng Fung Holdings) has guaranteed through October
2003 the payment of each annual 8% cash dividend on the Series B Preferred Stock
sold by the Company if such dividend is not paid by the Company. In
consideration for making such guaranty, the Company issued Heng Fung Holdings
250,000 shares of the Company's common stock during the six months ended March
31, 1999. If Heng Fung Holdings is required to make payment as a result of its
guaranty, Heng Fung Holdings or its designee will receive a 12% convertible
debenture equivalent to the amount that Heng Fung Holdings is required to pay on
the guaranty unless the act of the Company in giving Heng Fung Holdings or its
designee the 12% convertible debenture would be deemed to be an illegal
distribution under the Colorado Business Corporation Act. Heng Fung Holdings or
its designee would receive such number of shares of the Company's common stock
as is equal to 90% of the market price of the common stock as of the close of
business on October 31 or the next business day, if October 31 is not a business
day, on which the dividend is payable divided into the amount of the dividend.
In May 1999, the Company plans to commence a private offering of 1,500,000
shares of Convertible Series B Preferred Stock. The Convertible Series B
Preferred Stock has a cumulative annual dividend rate of 8% in cash and 7% in
shares of the Convertible Series B Preferred Stock. The dividend is payable
annually beginning October 31, 1999, when and if declared by the Board of
Directors. The Convertible Series B Preferred Stock is immediately convertible
by the holder into the common stock of the Company at a price of $2.00 per share
of common stock. In addition, the Convertible Series B Preferred Stock is
automatically convertible into common stock at $2.00 per share at such time as
the closing market price of the common stock is at least $4.00 per share for 30
consecutive trading days. The Convertible Series B Preferred Stock is redeemable
by the Company on and after October 1, 2003, at a price of $12.50 per share plus
any accrued and unpaid dividends. Heng Fung Holdings has guaranteed the payment
of any cash dividends that accrue on the Convertible 1998 Private Offering
through October 31, 2003. Those who have invested in the 1998 Private Offering
will be given the right to exchange their Series B Preferred Stock for an equal
number of shares of Convertible Series B Preferred Stock.
12
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999, CONTINUED
NOTE 4 - INVESTMENTS IN DEBT SECURITIES
As of March 31, 1999, investments in debt securities of Asian corporations
traded on foreign stock exchanges are as follows:
<TABLE>
<CAPTION>
Coupon
Carrying Redemption Interest Maturity
Corporation Cost Value Value Rate Date
- ----------------------------------- ---- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Paul Y-ITC ........................ $ 686,600 849,251 1,680,000 5.00% 02/03/01
China Resources ................... 842,375 946,934 1,720,667 2.00% 04/30/04
Shanghai Industrial ............... 380,000 413,920 732,750 1.00% 02/24/03
Kerry Properties .................. 690,000 711,765 733,500 2.00% 06/15/07
Shum Yip .......................... 157,500 177,250 338,800 1.20% 08/08/02
First Pacific ..................... 588,750 639,635 1,005,968 2.00% 03/27/02
New World China Finance ........... 204,000 210,889 223,290 4.00% 12/31/99
New World Infrastructure, Ltd. .... 284,000 311,345 573,600 1.00% 04/15/03
Hon Kwok Land Capital ............. 466,300 515,440 790,600 5.30% 07/05/01
---------- ---------- ---------
$4,299,525 4,776,429 7,799,175
========== ========== =========
</TABLE>
The current maturities of carrying values at March 31, 1999 are $210,889 and the
long-term maturities are $4,565,540.
The carrying value differs from the original cost by the amount of purchase
discount and redemption premium accreted to interest income since the date of
purchase. The debt securities carry a premium redemption value over the face
amount of each security. If the security is held-to-maturity, the Company will
receive a guaranteed premium, above the face value. The purchase discount and
the premium for holding each security to maturity are being accreted to interest
income over the remaining life of the security.
During the quarter ended March 31, 1999, eBanker sold one of the securities from
the investments in debt securities portfolio. The investment in COSCO Treasury
was sold and eBanker realized a loss of $26,528. eBanker sold the security
because it had evidence of a significant deterioration of the issuer's
creditworthiness. Subsequent to the sale of the security, the issuer's published
credit ratings were downgraded. The proceeds were invested in another similar
debt instrument which eBanker intends to hold-to-maturity.
13
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999, CONTINUED
A summary of the investments in debt securities by maturity is as follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
Carrying Holding Holding Fair
Held to Maturity Value Gains Losses Value
- ------------------------------------------ -------- ---------- ---------- -----
<S> <C> <C> <C> <C>
Due within one year ...................... $ 210,889 4,371 -- 215,260
Due after one year through five years .... 3,618,606 132,540 237,406 3,513,740
Due after five years ..................... 946,934 52,029 -- 998,963
---------- ---------- ---------- ----------
$4,776,429 188,940 237,406 4,727,963
========== ========== ========== ==========
</TABLE>
NOTE 5 - eBANKER PRIVATE PLACEMENTS
On May 26, 1998, Fronteer Development commenced a private placement of 30,000
units (Units) each consisting of (i) one $1,000 convertible debenture, due
August 1, 2008, paying 10% per annum; (ii) 100 Class A shares of common stock
and (iii) warrants exercisable at $3.00 per share for 500 Class A shares of
common stock (Private Placement). Each Unit sold for $1,000. The convertible
debentures are convertible into Class A shares of common stock at a conversion
price of $5.00 per share. The Private Placement terminated November 30, 1998.
Prior to termination, 7,958 Units, comprising 795,800 shares of Class A common
stock; 7,958 convertible debentures and warrants to purchase 3,979,000 shares of
Class A common stock at $3.00 per share were issued in the Private Placement for
proceeds of $6,832,851 net of issuance costs of $1,125,149. The Offering
Memorandum for the Private Placement included 3,000,000 shares of authorized
Class B common stock, and required eVision to purchase Class B common stock in
the amount of no less than 26.67% of the dollar amount of Units purchased by
outside investors. As of March 31, 1999, eVision had purchased 667,461 shares of
the Class B common stock for $2,002,384. Pursuant to the terms of the Private
Placement, eVision purchased an additional 40,005 shares of Class B common stock
at $3.00 per share or $120,015 prior to April 30, 1999. There are no commissions
or expenses associated with the Class B common stock issuance.
The offering costs of $1,125,149 have been allocated to the shares of Class A
common stock of Fronteer Development and to the convertible debentures in
accordance with the allocation of proceeds per the Private Placement. Offering
costs of $186,775 were allocated to the Class A common stock of Fronteer
Development. Financing costs of $938,374 are being amortized to interest expense
over the term of the convertible debentures, ten years. Accumulated amortization
at March 31, 1999 was $50,055.
Each share of Class A common stock of Fronteer Development was entitled to one
vote. The Class B common stock was owned 100% by eVision. Each share of Class B
common stock of Fronteer Development was entitled to 30 votes per share.
14
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999, CONTINUED
On February 19, 1999, the Board of Directors of Fronteer Development and eBanker
voted to approve the merger of Fronteer Development into eBanker USA.com, Inc.,
subject to the approval by the shareholders. The Class A and Class B common
stock of Fronteer Development was exchanged for an equivalent number of shares
of eBanker common stock. As a result, all shares of the common stock have the
identical rights, powers, preferences, privileges and restrictions. The merger
of Fronteer Development into eBanker was effective in March 1999 and resulted in
the issuance of 1,463,261 shares of eBanker common stock in exchange for all of
the Class A and Class B common stock of Fronteer Development. eBanker also
authorized the issuance of preferred stock. The preferred stock may be issued
from time to time in one or more series as the Board of Directors may determine,
without shareholder approval. The Board of Directors is empowered to fix and
determine the designations, preferences, rights, qualifications, limitations and
restrictions of the series.
In March 1999, the Board of Directors, with the consent of eVision, voted to
designate one share of Series A Preferred Stock. The share is entitled to 50% of
all votes entitled to be cast in the election of directors. Other than in the
election of directors, the share of Series A Preferred Stock has no voting
rights. The share will be sold for $1,000 to eVision in May 1999. Accordingly,
on purchase of the share of Series A Preferred Stock, eVision will be entitled
to 73% of the votes entitled to be cast in the election of directors and 46% of
the votes entitled to be cast in other matters.
The Private Placement contained a provision for warrants to be issued to the
placement agent. AFFC, as placement agent, received warrants to purchase 79,580
shares of Class A common stock at an exercise price of $3.00 per share. Under
the terms of the warrant agreement relating to these warrants, AFFC or its
assigns can exercise up to 25% of the warrants through March 30, 1999, as
amended by the Board of Directors, and the remaining 75% may be exercised
between November 30, 1999 and November 30, 2000. AFFC assigned the warrants to
certain individuals who exercised 9,145 warrants in March 1999 for which eBanker
received $27,435.
In March 1999, eBanker commenced a second private placement (Second Private
Placement) of 3,000,000 units (Second Private Placement Units) each consisting
of one share of common stock and one detachable warrant to purchase one share of
common stock. Each unit is being offered at a price of $6.00. The detachable
warrants will be exercisable to purchase one share of common stock at an
exercise price of $8.00 per share after the earlier of 120 days after an initial
public offering of the Company's securities or one year after the date of the
Second Private Placement until August 31, 2000.
NOTE 6 - LONG-TERM NOTES RECEIVABLE
Included in long-term notes receivable at March 31, 1999 are notes receivable
from Global Med Technologies, Inc. (Global) which total $2,650,000.
15
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999, CONTINUED
In September 1998, eBanker agreed to an assignment of a loan commitment from
Fronteer Capital to Global. Fronteer Capital had originally committed to lend
Global $1,650,000 in April 1998 primarily for working capital. In consideration
for the commitment, Fronteer Capital earned warrants to purchase 1,000,000
shares of Global common stock at $0.25 per share. The loan commitment provided
for additional warrants to purchase 5,000,000 shares of Global common stock when
any amount was drawn on the loan. The initial draw on the loan was during
October 1998. Therefore, eBanker received the 5,000,000 warrants to purchase
common shares of Global at $0.25 per share. As of March 31, 1999, Global had
drawn the full $1,650,000 loan amount.
Also in 1998, eBanker purchased a portion of notes receivable from Global to
Heng Fung Finance. The total note receivable from Global was $1,500,000. Of this
amount, eBanker purchased $1,000,000 from Heng Fung Finance for $1,100,000 and a
warrant to purchase 4,000,000 common shares of Global at $0.25 per share.
The total amount owed eBanker as of March 31, 1999 from Global was $2,650,000.
The total warrants held by eBanker and Fronteer Capital to purchase shares of
common stock of Global for $0.25 per share is 9,000,000 by eBanker and 1,000,000
by Fronteer Capital, or 10,000,000. The warrants are carried at a cost of
$100,000, and are included in other assets. Interest on the loans is 12% per
annum. The loans were originally due and the commitment was to expire on April
15, 1999.
If Global defaults on the repayment of any amount borrowed by Global pursuant to
the notes originally issued to Heng Fung Finance, all existing members of the
board of directors of Global will have to resign and Heng Fung Finance will have
the right to appoint all new members to the board of directors. If there is no
default on the repayment to Heng Fung Finance, or if there is a default and Heng
Fung Finance does not exercise its rights on default, eBanker will have the same
rights on default on the repayment of any amounts borrowed pursuant to the
Fronteer Capital commitment as Heng Fung Finance as are specified above. In
addition, if Global defaulted on the repayment of amounts owed to eBanker and
Heng Fung Finance, the loans originally provided that they could be converted to
common stock of Global at a default conversion price of $0.05 per share.
In March 1999, eBanker granted an extension of the loan due date until April 15,
2000. In addition, the default conversion price was increased to $0.25 per share
from $0.05 per share. In consideration for the extension, Global agreed to pay
eBanker a 2% fee of $53,000, payable in shares of Global common stock.
NOTE 7 - DISCONTINUED OPERATIONS
On March 20, 1998, the Company entered into an agreement with North Country
Yellow Pages, Inc. (North Country) to sell the remaining net assets used in the
directory and telemarketing operations for 493,500 shares of the Company's
common stock held by the principals of North Country, Dennis Olson and Lance
Olson, former employees of the Company. Mr. Dennis Olson is the former president
and director of the Company. The purchase price was based on third party
appraisals and management's estimates relating to specific assets and
liabilities. The Board of Directors approved the sale on May 14, 1998. Closing
was on May 27, 1998. The Company has included in its consolidated financial
statements as of and for the six and three months ended March 31, 1998, the loss
on disposition related to the sale of the net assets to North Country.
16
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999, CONTINUED
NOTE 8 - CONVERTIBLE DEBENTURES TO RELATED PARTY
The Company previously sold Heng Fung Finance a ten year $4,000,000 10%
Convertible Debenture that is convertible into shares of common stock of the
Company and an option to purchase an $11,000,000 12% Convertible Debenture that
is convertible into shares of common stock of the Company. As of March 31, 1999,
Heng Fung Finance had purchased a total of $8,000,000 of convertible debentures,
of which $1,000,000 had been purchased during the six months ended March 31,
1999. The option to purchase the $11,000,000 12% Convertible Debenture has
$7,000,000 available under option. The principal is due in ten years except for
one installment of $500,000 which was due in March 1999, for which the
installment due date was extended to March 2000. The Company is to pay Heng Fung
Finance a fee of 5% or $25,000, payable in 44,092 common shares of the Company
for the extension as determined by the average closing bid price for 15 business
days prior to March 23, 1999, or $0.567 per share.
NOTE 9 - EXTRAORDINARY ITEM
On July 23, 1996, the Company sold AFFC's securities brokerage clearing division
(Clearing Operation) to MultiSource Services, Inc. (MSI), a new broker/dealer,
for a purchase price of $3,000,000, including a $1,500,000 contingency in the
form of a forgivable loan, plus the net assets of the Clearing Operation. The
loan of $1,500,000 was recorded as a loan payable to MSI and was forgivable
based on MSI's revenues during the 28 months following the closing date. MSI
reached its revenue targets for the first portion of the forgivable loan by
October 1997. As a result, the first $750,000 of the $1,500,000 forgivable loan
was recognized as income during the six months ended March 31, 1998. The second
and final portion of the loan plus accrued interest payable was canceled in
accordance with provisions in the forgivable loan agreement relating to MSI's
decision to cease being engaged in the clearing business. The remaining $750,000
was also recognized as income during the six months ended March 31, 1998. Both
amounts are shown net of taxes in the consolidated statements of operations.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
A former officer, director and shareholder; individually, and in conjunction
with his consulting company, filed claims on July 30, 1998 in the District Court
for the City and County of Denver, Colorado against the Company, Secutron and
MidRange and against certain current and former officers, directors,
shareholders and affiliates. The claims asserted that these entities and
individuals breached their fiduciary duties, breached contracts, approved an
illegal distribution and participated in a fraudulent conveyance. In total,
there are twelve asserted claims for relief, which seek actual, exemplary
damages, costs and attorneys' fees, an injunction and other similar relief. The
vast majority of claims for relief are based upon a transaction, which was not
completed. The Company and its counsel filed a motion for summary judgment
regarding those claims on the basis that the transaction assumed to have taken
place in the complaint did not, in fact, take place. However, the remaining
claims are based upon a written contract entitled Settlement Agreement among
Secutron, the claimant and his consulting company. The Settlement Agreement
provided for Secutron to pay $10,000 per month through January 2011 to the
consulting company for which $1,500,000 on the breach of contract has been
claimed. Discovery continues at this time. Management is of the opinion that the
ultimate outcome will not adversely affect the consolidated financial position
or consolidated results of operations of the Company.
17
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999, CONTINUED
The Company is a defendant in certain arbitration and litigation matters arising
from its activities as a broker/dealer. In the opinion of management, these
matters including any damages awarded against the Company have been adequately
provided for in the accompanying consolidated financial statements, and the
ultimate resolution of the other arbitration and litigation will not have a
significant adverse effect on the consolidated results of operations or the
consolidated financial position of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1999 COMPARED TO SIX MONTHS ENDED MARCH 31, 1998.
Revenues for the six months ended March 31, 1999 were $18,180,068, an increase
of $3,939,089 or 27.7% over the revenues of $14,240,979 for the six months ended
March 31, 1998. The increase primarily relates to increased brokerage
commissions of $2,822,928; an increase in trading profits of $586,743; increased
other broker/dealer revenues of $563,171; earnings on investments in debt
securities of $760,347 and $333,916 of unrealized gain on investments in equity
securities, offset by a decrease in investment banking activity of $1,021,730.
The increase in brokerage commissions of $2,822,928 is due primarily to an
increase in trading activity. Customer transactions increased approximately 96%
for the six months ended March 31, 1999 compared to the six months ended March
31, 1998. This was partially offset by a decrease in the average commission per
transaction ticket of 16%. The primary reasons for the increased activity were
general market conditions and positive results from the Company's research
recommendations that were acted upon by customers. In addition, branch offices
opened during the six months ended March 31, 1998 were open for the entire six
month period in the current year.
Trading profits increased $586,743 due primarily to general market conditions
and positive results from the Company's research recommendations that were acted
upon by customers as well as increases in the Company's positions in securities
in which the Company makes a market.
Other broker/dealer revenues increased partly due to commissions earned from
loans to Global Med Technologies, Inc., for which AFFC earns a commission.
Additionally, the increase in transaction revenue from customers is reflected in
this line item. This increase is directly correlated to the increase in trading
activity described above.
Computer hardware and software revenues for the six months ended March 31, 1999
were fairly consistent at $4,946,664, a $141,158 or 2.8% decrease from the
revenues of $5,087,822 for the six months ended March 31, 1998.
During the six months ended March 31, 1999, the Company invested, through its
subsidiary, eBanker, in debt securities of various corporations, which are
traded on foreign stock exchanges. The debt securities carry a premium
redemption value over the face amount of each security. If the security is
18
<PAGE>
held-to-maturity, the Company will receive a guaranteed premium, above the face
value. The purchase discount and the premium for holding each security to
maturity are being accreted to interest income over the remaining life of the
security. Interest income on the investments in debt securities for the six
months ended March 31, 1999 was $760,347.
A portion of the proceeds of the $4,000,000 convertible debenture purchased by
Heng Fung Private in December 1997 was used to purchase approximately
116,430,000 shares of the common stock of Heng Fung Holdings in open market
transactions on the Hong Kong Stock Exchange at an average price of
approximately $0.02 per share. For the six months ended March 31, 1999, the
Company had recognized an unrealized gain of $333,916 on the investment in Heng
Fung Holdings.
Investment banking revenues of $536,244 for the six months ended March 31, 1999
decreased $1,021,730 from the six months ended March 31, 1998 due primarily to
the decreased participation in corporate finance underwritings.
The increase in broker/dealer commissions expense of $739,238 or 14.2% for the
six months ended March 31, 1999 over the prior period correlates to the increase
in brokerage commissions of $2,822,928 over the six months ended March 31, 1998.
Interest expense on the convertible debentures of eBanker for the six months
ended March 31, 1999 was $509,539.
The increase in general and administrative expenses for the six months ended
March 31, 1999 of $1,047,802 or 16.8% over the comparable prior period reflects
increased expenses associated with new branch openings in San Francisco, and New
York City. Although the new offices were opened during 1998, they were not open
for the entire comparable six month period.
Interest expense to related party of $405,611 increased from the prior period
amount of $102,222 as a result of the convertible debentures issued to Heng Fung
Finance during 1998.
The minority interest in (earnings) loss represents the minority interest
investment in Secutron and eBanker.
The loss from discontinued operations in the prior period represents the loss on
sale and net loss from operating activity of the Company's directory and
telemarketing businesses of which all of the primary operating assets were sold
during 1998.
The extraordinary item in the prior period represents the recognition of the
forgivable loan with MSI in accordance with the terms and conditions of the
forgivable loan agreement. These terms and conditions included the forgiveness
of the loan based on revenue targets for MSI. MSI reached the target for
forgiveness of $750,000 and thus it was recognized as income. The remaining
$750,000 was recognized as income as MSI discontinued operating as a clearing
firm in the securities industry which allowed the Company to recognize the
remainder in accordance with the agreement. Both of these amounts are shown net
of taxes in the consolidated statement of operations.
19
<PAGE>
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31,
1998
Revenues for the three months ended March 31, 1999 were $9,598,560, an increase
of $2,583,472 or 36.8% over the revenues of $7,015,088 for the three months
ended March 31, 1998. The increase primarily relates to increased brokerage
commissions of $2,136,095; an increase in trading profits of $203,196; increased
other broker/dealer revenues of $240,842; earnings on investments in debt
securities of $499,087 and $99,981 of unrealized gain on investments in equity
securities, offset by a decrease in investment banking activity of $794,345.
The increase in brokerage commissions of $2,136,095 is due primarily to an
increase in trading activity. Customer transactions increased approximately 82%
partially offset by a decrease in the average commission per ticket of 15%, for
the three months ended March 31, 1999 compared to the three months ended March
31, 1998. The primary reasons for the increased activity were general market
conditions and positive results from the Company's research recommendations that
were acted upon by customers. In addition, branch offices opened during the
three months ended March 31, 1998 were open for the entire three month period in
the current year.
Trading profits increased 98.7% or $203,196 due primarily to general market
conditions and positive results from the Company's research recommendations that
were acted upon by customers as well as increases in the Company's positions in
securities in which the Company makes a market.
Other broker/dealer revenues increased partly due to commissions earned from
loans to Global Med Technologies, Inc., for which AFFC earns a commission.
Additionally, the increase in transaction revenue from customers is reflected in
this line item. This increase is directly correlated to the increase in trading
activity described above.
Computer hardware and software revenues for the three months ended March 31,
1999 were $1,987,108, compared to revenues of $1,818,107, an increase of
$169,001 or 9.2% over the three months ended March 31, 1998. This increase
reflects Secutron's time and efforts spent with current clients to ensure
proprietary software is Year 2000 compliant. The decrease in computer costs of
sales of $217,259 or 10.9% compared to the revenue increase for the three months
ended March 31, 1999 also reflects Secutron's emphasis on Year 2000 compliance
for its proprietary software users and less hardware being sold.
During the first quarter of the fiscal year ending September 30, 1999, the
Company, through its subsidiary, eBanker, invested in debt securities of various
corporations, which are traded on foreign stock exchanges. The debt securities
carry a premium redemption value over the face amount of each security. If the
security is held-to-maturity, the Company will receive a guaranteed premium,
above the face value. The purchase discount and the premium for holding each
security to maturity are being accreted to interest income over the remaining
life of the security. Interest income on the investments in debt securities for
the three months ended March 31, 1999 was $499,087.
A portion of the proceeds of the $4,000,000 convertible debenture purchased by
Heng Fung Private in December 1997 was used to purchase approximately
116,430,000 shares of the common stock of Heng Fung Holdings in open market
transactions on the Hong Kong Stock Exchange at an average price of
approximately $0.02 per share. For the three months ended March 31, 1999, the
Company had recognized an unrealized gain of $99,981 on the investment in Heng
Fung Holdings.
Investment banking revenues of $407,125 for the three months ended March 31,
1999 are down $794,345 from the three months ended March 31, 1998 due primarily
to the decreased participation in corporate finance underwritings.
20
<PAGE>
The increase in broker/dealer commissions expense for the three months ended
March 31, 1999 compared to the prior 1998 period of $698,047 or 24.3% correlates
to the increase in brokerage commission revenues.
Interest expense on the convertible debentures of eBanker for the three months
ended March 31, 1999 was $220,615.
The increase in general and administrative expenses for the three months ended
March 31, 1999 of $373,228 or 11.1% over the comparable prior period reflects
increased expenses associated with new branch openings in San Francisco, and New
York City. Although the new offices were opened during 1998, they were not open
for the entire comparable three month period.
Interest expense to related party increased for the period as a result of the
convertible debentures issued to Heng Fung Finance during 1998.
The minority interest in (earnings) losses represents the minority interest
investment in Secutron and eBanker.
The loss from discontinued operations in the prior period represents the loss on
sale and net loss from operating activity of the Company's directory and
telemarketing businesses of which all of the primary operating assets were sold
during 1998.
The extraordinary item in the prior period represents the recognition of the
forgivable loan with MSI in accordance with the terms and conditions of the
forgivable loan agreement. These terms and conditions included the forgiveness
of the loan based on revenue targets for MSI. MSI reached the target for
forgiveness of $750,000 and thus it was recognized as income. The remaining
$750,000 was recognized as income as MSI discontinued operating as a clearing
firm in the securities industry which allowed the Company to recognize the
remainder in accordance with the agreement. Both of these amounts are shown net
of taxes in the consolidated statement of operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company, as of March 31, 1999, had $3,560,235 in cash and cash equivalents
and $3,467,350 in working capital. Cash flows provided by operating activities
totaled $216,178. Cash flows used by investing activities was $7,277,318 and
consisted primarily of purchases of debt securities of $4,635,275 and advances
on long-term notes receivable of $2,700,000. Cash flows from financing
activities of $1,508,723 consisted primarily of proceeds from the issuance of
convertible debentures of $531,334; proceeds from the issuance of the
convertible debentures to related party of $1,000,000; and $103,716 of net
proceeds from the Series B Preferred Stock private placement.
On October 16, 1998, the Company commenced a private placement of 1,500,000
shares of its Series B Preferred Stock at a price of $10.00 per share (1998
Private Offering). The net proceeds are intended to be used to fund working
capital and acquire other securities broker /dealers. Through March 31, 1999,
the Company received proceeds of $205,000, net of offering costs of $101,284, or
$103,716, from the purchase of 20,500 shares of Series B Preferred Stock.
Subsequent to March 31, 1999, the Company received an additional $50,000 for
5,000 shares of Series Preferred Stock. In May 1999, the Company plans to
commence a private placement of 1,500,000 shares of its Convertible Series B
Preferred Stock.
21
<PAGE>
On April 14, 1998, Fronteer Capital and Heng Fung Finance committed to provide
to Global Med Technologies, Inc. (Global) lines of credit for up to $1,650,000
and $1,500,000, respectively, for a total combined loan commitment of $3,150,000
over the following twelve months. Fronteer Capital subsequently assigned its
commitment to eBanker. The loans bear interest calculated at a rate of 12% per
annum and will mature April 15, 2000. As of March 31, 1999, Global had drawn the
full amount of $1,650,000 on the eBanker line of credit.
The Company previously sold Heng Fung Finance a ten year $4,000,000 10%
Convertible Debenture that is convertible into shares of common stock of the
Company and an option to purchase an $11,000,000 12% Convertible Debenture that
is convertible into shares of common stock of the Company. As of March 31, 1999,
Heng Fung Finance had purchased a total of $8,000,000 of convertible debentures,
of which $1,000,000 had been purchased during the six months ended March 31,
1999. The option to purchase the $11,000,000 12% Convertible Debenture has
$7,000,000 available remaining under option. The principal is due in ten years
except for one installment of $500,000 which was due in March 1999, for which
the installment due date was extended to March 2000. The Company is to pay Heng
Fung Finance a fee of 5%, or $25,000, payable in 44,092 common shares of the
Company as determined by the average closing bid price for 15 business days
prior to March 23, 1999, or $0.567 per share.
A good portion of the Company's assets are highly liquid, consisting mainly of
assets that are readily convertible into cash. These assets are financed by the
Company's equity capital, convertible debentures and accounts payable. Changes
in the amount of securities owned by the Company and receivables from brokers or
dealers and clearing organizations directly affect the amount of the Company's
financing requirements.
Management believes that the Company's cash flows from operations, the
possibility of additional purchases of convertible debentures by Heng Fung
Finance, proceeds expected to be received from the 1998 Private Offering and the
planned private placement of 1,500,000 shares of its Convertible Series B
Preferred Stock and cash on hand will be sufficient to fund its debt service,
expected capital costs and other liquidity requirements for the foreseeable
future.
Year 2000
To address the Year 2000 issue, the Company has continued with the
implementation of its corporate plan as reported in the Company's Annual Report
on Form 10-K as of the fiscal year ended September 30, 1998. The Company has
continued working with third-party suppliers of software and related services in
resolving Year 2000 issues and anticipates testing will be completed by
mid-calendar year 1999. No matters have come to the attention of management of
the Company which would indicate that the estimated total cost of the program
should be revised. The cost had been estimated to be less than $50,000. No
significant amounts were expended during the quarter ended March 31, 1999. If
the Company and the third parties on which it relies are unable to address the
Year 2000 issue in a timely manner, it could result in a material financial risk
to the Company.
Inflation
The effect of inflation on the Company's operations is not material and is not
anticipated to have any material effect in the future.
22
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of September 30, 1998, the Company had investments in Asian equity
securities, which exposed the Company to foreign exchange rate risk and equity
price risk. During the six months ended March 31, 1999, the Company purchased
debt securities of certain Asian corporations. These securities expose the
Company to exchange rate risk as well as credit risk. The following table
summarizes the market risks for the Company:
<TABLE>
<CAPTION>
March 31, 1999 September 30, 1998
Fair Value Carrying Value Fair Value Carrying Value
---------- -------------- ---------- --------------
<S> <C> <C> <C> <C>
Foreign Exchange Rate Risk:
Equity Securities ......................... $1,441,554 1,441,554 1,066,972 1,066,972
Debt Securities ........................... 4,727,963 4,776,429 -- --
Equity Price Risk:
Equity Securities* ........................ 1,793,332 1,793,332 1,688,085 1,688,085
Credit Risk:
Debt Securities ........................... 4,727,963 4,776,429 -- --
</TABLE>
*Includes the equity securities of the Asian corporations.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
A former candidate for employment, Jack F. Bruscianelli, filed claims on March
29, 1999 with the National Association of Securities Dealers (NASD) against
AFFC, Robert H. Taggart, Robert H. Trapp, Jodee M. Brubaker, Gary L. Cook, and
John E. Shuster. The claims assert AFFC and the individuals breached an
employment contract and implied obligations of good faith and fair dealing, and
asserts fraudulent inducement, misrepresentations and omissions. The former
candidate for employment is claiming $450,000 in actual damages; $900,000 in
punitive damages; and $30,000 in attorneys' fees. Management is of the opinion
that the ultimate outcome will not adversely affect the consolidated financial
position or consolidated results of operations of the Company.
The Company is a defendant in certain arbitration and litigation matters arising
from its activities as a broker/dealer. In the opinion of management, these
matters including any damages awarded against the Company have been adequately
provided for in the accompanying consolidated financial statements, and the
ultimate resolution of the other arbitration and litigation will not have a
significant adverse effect on the consolidated results of operations or the
consolidated financial position of the Company.
ITEM 2. CHANGES IN SECURITIES
Recent Sales of Unregistered Securities
The Company previously sold Heng Fung Finance a ten year $4,000,000 10%
Convertible Debenture that is convertible into shares of common stock of the
Company and an option to purchase an $11,000,000 12% Convertible Debenture that
is convertible into shares of common stock of the Company. As of March 31, 1999,
Heng Fung Finance had purchased a total of $8,000,000 in convertible debentures.
The accrued interest on the convertible debentures as of December 31, 1998 was
paid with 442,609 shares of common stock of the Company during the quarter ended
March 31, 1999.
23
<PAGE>
On January 28, 1999, Mr. Fai H. Chan, Chairman of the Board of Directors and
President of the Company, was granted an option to purchase 8,000,000 shares of
the Company's common stock at $.30 per share. The option is exercisable
immediately through January 27, 2009. The grant was approved by a vote of the
Board of Directors in which Mr. Chan abstained.
The sales of the convertible debentures, the issuance of shares for interest and
the issuance of the option were made in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as amended
(1933 Act). The purchasers had access to full information concerning the Company
and represented that they purchased the securities for the purchasers' own
accounts and not for the purpose of distribution. The convertible debentures,
shares and option contain a restrictive legend advising that such securities may
not be offered for sale, sold or otherwise transferred without having first been
registered under the 1933 Act or pursuant to an exemption from registration
under the 1933 Act. No underwriters were involved in the transaction.
On October 16, 1998, the Company commenced a private placement of 1,500,000
shares of its Series B Preferred Stock at a price of $10.00 per share (1998
Private Offering). During the quarter ended March 31, 1999, the Company sold
20,500 shares of Series B Preferred Stock to five persons. Subsequent to March
31, 1999, the Company sold an additional 5,000 shares of Series B Preferred
Stock to two persons.
The sales of the Series B Preferred Stock were made in reliance upon the
exemption from registration provided by Section 4(2) of the 1933 Act and
Regulation D promulgated thereunder. The purchasers had access to full
information concerning the Company and represented that they purchased the
Series B Preferred Stock for the purchasers' own accounts and not for the
purpose of distribution. The Series B Preferred Stock contains a restrictive
legend advising that the Series B Preferred Stock may not be offered for sale,
sold or otherwise transferred without having first been registered under the
1933 Act or pursuant to an exemption from registration under the 1933 Act. A
Form D was filed in connection with the sales. AFFC is the underwriter involved
in the transaction and received commissions of $20,500.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders held on April 15, 1999, the
following members were elected to the Board of Directors:
For Withheld
--- --------
Fai H. Chan 12,981,984 3,838
Robert H. Trapp 12,981,484 4,338
Kwok Jen Fong 12,981,984 3,838
Jeffrey M. Busch, Esq. 12,981,484 4,338
Robert Jeffers, Jr. 12,981,984 3,838
The stockholders voted to adopt an amendment to the Articles of Incorporation of
the Company to change the name of the Company to "eVision USA.Com, Inc." There
were 12,799,509 votes in favor of the amendment; 168,313 votes against the
amendment; and 18,000 votes abstained.
24
<PAGE>
The stockholders voted not to authorize a maximum one-for-twenty reverse split
of the Company's outstanding stock. There were 5,305,017 votes in favor of the
proposal; 7,545,305 votes against the proposal; and 135,500 votes abstained.
The stockholders voted to adopt an amendment to the September 1996 Incentive and
Nonstatutory Stock Option Plan to increase the number of shares of common stock
of the Company that are authorized to be optioned and sold under such plan from
2,500,000 to 7,500,000. There were 8,335,512 votes in favor of the amendment;
959,463 votes against the amendment; 4,250 votes abstained; and 3,686,597 were
not voted.
ITEM 5. OTHER INFORMATION
On April 30, 1999, the common stock of the Company began trading under the
symbol EVIS on April 30, 1999 on the OTC Bulletin Board. The previous symbol was
FDIR.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits:
3.1 Articles of Amendment to the Articles of Incorporation of the
Company, dated April 19, 1999.
3.2 Articles of Amendment to the Articles of Incorporation of the
Company, dated April 23, 1999.
10.1 Amendment No.1 to $500,000 12% Convertible Debenture, dated March 23,
1999.
10.2 Guaranty Agreement between the Company and Heng Fung Holdings
Company Limited, dated May 5, 1999.
10.3 Amendment to the 1996 Incentive and Nonstatutory Stock Option Plan of
the Company, dated November 25, 1998.
10.4 First Amendment to Loan Agreement among Global Med Technologies, Inc.,
Michael I. Ruxin, M.D., eBanker USA.Com, Inc. and Heng Fung Finance
Company Limited dated March 18, 1999.
27.0 Financial Data Schedule.
(b) Reports on Form 8-K:
During the quarter ended March 31, 1999, the Company filed no Current
Reports on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 10, 1999 eVISION USA.COM, INC.,
a Colorado Corporation
By: /s/ Robert H. Trapp
----------------------------------
Robert H. Trapp
Managing Director
By: /s/ Gary L. Cook
---------------------------------
Gary L. Cook
Chief Financial Officer and
Principal Accounting Officer
25
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
FRONTEER FINANCIAL HOLDINGS, LTD.
Pursuant to the provisions of the Colorado Business Corporation Act (the
"Act"), the undersigned corporation adopts the following Articles of Amendment
to its Articles of Incorporation:
FIRST: The name of the corporation is Fronteer Financial Holdings, Ltd.
SECOND: The following amendment to the Articles of Incorporation was duly
recommended to the shareholders of the corporation by the board of directors of
the corporation on January 28, 1999, and was adopted by the shareholders of the
corporation on April 15, 1999, in accordance with the Act. The number of votes
cast for the amendment by each voting group entitled to vote separately on the
amendment was sufficient for approval by that voting group.
Article I of the Articles of Incorporation is amended in its entirety so
that as amended it reads as follows:
ARTICLE I
NAME OF CORPORATION
That the name of the Corporation is "eVision USA.Com, Inc."
Dated: April 19, 1999
FRONTEER FINANCIAL HOLDINGS, LTD.,
a Colorado corporation
By: /s/ Gary L. Cook
------------------------------------------
Gary L. Cook, Secretary and Treasurer
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
eVISION USA.Com, Inc.
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned Corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the Corporation is eVision USA.Com, Inc.
SECOND: The following amendments to the Articles of Incorporation were duly
adopted by the board of directors on April 23, 1999, in accordance with Section
7-106-102 of the Colorado Business Corporation Act.
Article VII of the Articles of Incorporation is hereby amended by adding
the following Section 7.5:
Section 7.5 Convertible Series B Preferred Stock. 2,000,000 shares of
the Corporation's preferred stock shall consist of Convertible Series B
Preferred Stock ("Convertible Series B"). The rights, preferences,
privileges and restrictions imposed upon the Convertible Series B are set
forth in this Section 7.5 of this Article VII.
(a) Dividends. The Convertible Series B is entitled to receive,
out of funds legally available therefor, cumulative dividends at the
rate of 8% percent per annum in cash and 7% per annum in shares of
Convertible Series B, when and if declared by the Board of Directors.
The dividend payable in shares of Convertible Series B will be
equivalent to .07 share of Convertible Series B for each outstanding
share of Convertible Series B. The dividend on the Convertible Series
B is payable annually beginning October 31, 1999, when and if declared
by the Board of Directors. Any dividends earned on the Convertible
Series B prior to October 31, 1999, shall be earned pro rata from the
Original Issue Date. The Convertible Series B is redeemable by the
Company on and after October 1, 2003, at a price of $10.00 per share
plus any accrued and unpaid dividends.
If any dividends payable on the Convertible Series B are not paid
for any reason, the right of the holders of the Convertible Series B
to receive payment of such dividends shall not lapse or terminate, but
said unpaid dividends shall accumulate and shall be paid without
interest to the holders of the Convertible Series B, when and if
declared by the Board of Directors of the Corporation, before any sum
or sums shall be set aside for or applied to the purchase or
redemption of the Convertible Series B or the purchase, redemption or
other acquisition for value of the Common Stock and before any
dividend shall be paid or declared, or any other distribution shall be
ordered or made, upon the Common Stock. After cumulative dividends on
the Convertible Series B for all past dividend periods and for the
then current year dividend period shall have been declared and paid or
set apart, if the Board of Directors shall declare dividends out of
funds legally available therefor, such additional dividends may be
declared on the Common Stock.
<PAGE>
(b) Liquidation and Dissolution. Upon the voluntary or
involuntary liquidation, winding up or dissolution of the Corporation,
out of the assets available for distribution to shareholders each
share of Convertible Series B shall be entitled to receive, in
preference to any payment on the Common Stock only, an amount equal to
Ten Dollars ($10.00) per share, plus cumulative dividends as provided
in Section 7.5(a) of this Article VII accrued and unpaid to the date
payment is made available to the Convertible Series B. After the full
preferential liquidation amount has been paid to, or determined and
set apart for, Convertible Series B, the remaining assets shall be
payable to the holders of the Common Stock. In the event the assets of
the Corporation are insufficient to pay the full preferential
liquidation amount required to be paid to the Convertible Series B,
the Convertible Series B shall receive such funds pro rata on a share
for share basis until the full liquidating preference on the
Convertible Series B is paid in full, and the balance, if any, to the
Common Stock.
A reorganization shall not be considered to be a liquidation,
winding up or dissolution within the meaning of this Section 7.5(b) of
this Article VII and the Convertible Series B shall be entitled only
to the rights provided in the plan of reorganization.
(c) Voting. A holder of a share of Convertible Series B shall be
entitled to one vote on any and all matters, including the election of
directors, and shall, except as otherwise may be provided by law, vote
as a class with the holders of outstanding Common Stock.
(d) Conversion Rights. The holders of Convertible Series B have
the following conversion rights (the "Conversion Rights"):
(i) Right to Convert. Each share of Convertible Series B
shall be convertible into Common Stock, at the option of the
holder thereof, subject to any prior redemption or conversion by
the Board of Directors of the Corporation. Each share of
Convertible Series B shall be convertible, pursuant to this
paragraph, at the office of the Corporation or of any transfer
agent for such Convertible Series B, as the case may be, into
fully paid and nonassessable shares of Common Stock, at a price
of $2.00 per share of Common Stock, subject to adjustment
pursuant to paragraph (d)(iv) below ("Conversion Price").
(ii) Automatic Conversion. Each share of Convertible Series
B shall be automatically converted into Common Stock at such time
as the last sale price of the Common Stock closes in the market
where it predominately trades ("Market Price") is at least $4.00
per share for 30 consecutive trading days. Upon the occurrence of
such event, each share of Convertible Series B shall be converted
into fully paid and nonassessable shares of Common Stock at the
Conversion Price.
(iii) Mechanics of Conversion. Before any holder of shares
of Convertible Series B shall be entitled to convert the same
into full shares of Common Stock pursuant to paragraph (d)(i)
above, the holder shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of
any transfer agent for such Convertible Series B, as the case may
be, and shall give written notice to the Corporation at such
office that the holder elects to convert the same and shall state
2
<PAGE>
therein the holder's name or the name or names of the holder's
nominees in which the holder wishes the certificate or
certificates for shares of Common Stock to be issued. The
Corporation shall, as soon as practicable thereafter, issue and
deliver or cause to be issued and delivered at such office to
such holder, or to the holder's nominee or nominees, a
certificate or certificates for the number of full shares of
Common Stock to which the holder shall be entitled as aforesaid.
A conversion pursuant to paragraph (d)(i) above shall be deemed
to have occurred immediately prior to the close of business on
the date of such surrender of the shares of Convertible Series B
to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such
shares of Common Stock on such date.
Upon automatic conversion of Convertible Series B into full
shares of Common Stock pursuant to paragraph (d)(ii) above, the
holder of the Convertible Series B shall, upon request by the
Corporation, surrender the certificate or certificates therefor,
duly endorsed, at the office of the Corporation or any transfer
agent for such Convertible Series B, as the case may be, and
shall give written notice to the Corporation at such office that
the holder elects to convert the same and shall state therein the
holder's name or the name or names of the holder's nominees in
which the holder wishes the certificate or certificates for
shares of Common Stock to be issued. The Corporation shall, as
soon as practicable thereafter, issue and deliver or cause to be
issued and delivered at such office to such holder, or to the
holder's nominee or nominees, a certificate or certificates for
the number of full shares of Common Stock to which the holder
shall be entitled as aforesaid. A conversion pursuant to
paragraph (d)(ii) above shall be deemed to have occurred
immediately upon close of business on the 30th consecutive
trading day the Market Price of the Common Stock is at least
$4.00 per share. Each holder of the Convertible Series B whose
Convertible Series B is converted to Common Stock shall be
entitled to, and the Corporation shall promptly pay in cash, or
set aside for payment, all unpaid dividends with respect to such
converted shares of the Convertible Series B, to and including
the time of conversion. A holder of the Convertible Series B
shall not be entitled to any remaining dividends with respect to
the Convertible Series B so converted, but shall be entitled to
receive, on the date of the conversion, the arrearages, if any,
with respect to any shares of the Convertible Series B so
converted.
(iv) Adjustments to Conversion Price.
(1) Special Definition. For purposes of this paragraph
(d)(iv), the "Original Issue Date" shall mean, the original
date on which a share of Convertible Series B was first
issued to each preferred shareholder.
(2) Adjustment for Stock Splits and Combinations. If
the Corporation shall at any time or from time to time after
the Original Issue Date effect a subdivision of the
outstanding Common Stock, the applicable Conversion Price
then in effect immediately before that subdivision shall be
proportionately decreased and, conversely, if the
Corporation shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common
Stock, the applicable Conversion Price then in effect
immediately before the combination shall be proportionately
increased. Any adjustments under this paragraph (d)(iv)(2)
shall become effective at the close of business on the date
the subdivision or combination becomes effective.
3
<PAGE>
(3) Adjustment for Certain Dividends and Distributions.
In the event the Corporation at any time, or from time to
time, after the Original Issue Date shall make or issue, or
fix a record date for the determination of holders of Common
Stock entitled to receive, a dividend or other distribution
payable in shares of Common Stock, then and in each event
the applicable Conversion Price then in effect shall be
decreased as of the time of such issuance or, in the event
such a record date shall have been fixed, as of the close of
business on such record date, by multiplying the Conversion
Price then in effect by a fraction:
a) the numerator of which shall be the total
number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the
close of business on such record date, and
b) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the
close of business on such record date plus the number
of shares of Common Stock issuable in payment of such
dividend or distribution; provided, however, if such
record date shall have been fixed and such dividend is
not fully paid or if such distribution is not fully
made on the date fixed therefor, the Conversion Price
shall be recomputed accordingly as of the close of
business on such record date and thereafter such
Conversion Price shall be adjusted pursuant to this
paragraph (d)(iv)(3) as of the time of actual payment
of such dividends or distributions.
(4) Adjustment for Other Dividends and Distributions.
In the event the Corporation at any time or from time to
time after the Original Issue Date shall make or issue, or
fix a record date for the determination of holders of Common
Stock entitled to receive, a dividend or other distribution
payable in securities of the Corporation other than shares
of Common Stock, then and in such event provisions shall be
made so that the holders of Convertible Series B shall
receive upon conversion thereof, in addition to the number
of shares of Common Stock receivable thereon, the amount of
securities of the Corporation which they would have received
had their Convertible Series B been converted into Common
Stock on the date of such event and had thereafter, during
the period from the date of such event to and including the
conversion date, retained such securities (together with any
distributions payable thereon during such period) receivable
by them as aforesaid during such period, giving application
to all adjustments called for during such period under this
paragraph (d) with respect to the rights of the holders of
the Convertible Series B.
(5) Adjustment for Reclassification, Exchange, or
Substitution. If the Common Stock issuable upon the
conversion of the Convertible Series B at any time or from
time to time after the Original Issue Date, shall be changed
into the same or different number of shares of any class or
4
<PAGE>
classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or
combination of shares or stock dividends provided for in
paragraphs (d)(iv)(2) and (3) above, or a reorganization,
merger, consolidation, or sale of assets provided for in
paragraph (d)(iv)(6) below, then, and in each such event,
provisions shall be made (by adjustment to the Conversion
Price or otherwise) so that the holder of each share of
Convertible Series B shall have the right thereafter to
convert each share of Convertible Series B into the kind and
amount of shares of stock and other securities receivable
upon such reorganization, reclassification, or other change,
by holders of the number of shares of Common Stock into
which such share of Convertible Series B might have been
converted immediately prior to such reorganization,
reclassification, or change, all subject to further
adjustment as provided herein.
(6) Adjustment for Reorganization, Merger,
Consolidation or Sales of Assets. If at any time or from
time to time after the Original Issue Date of the
Convertible Series B there shall be a capital reorganization
of the Corporation (other than a subdivision, combination,
reclassification, exchange or substitution of shares
provided for in paragraphs (d)(iv)(2) and (5) above) or a
merger or consolidation of the Corporation with or into
another corporation, or the sale of all or substantially all
of the Corporation's properties and assets to any other
person or entity, then, as a part of such reorganization,
merger, consolidation, or sale, provision shall be made (by
adjustment to the Conversion Price or otherwise) so that the
holders of the Convertible Series B shall thereafter be
entitled to receive upon conversion of the Convertible
Series B, the number and kind of shares of stock or other
securities or property of the Corporation, or of any
successor corporation resulting from such merger or
consolidation or sale, to which a holder of Common Stock
deliverable upon conversion of such shares would have been
entitled if such capital reorganization, merger,
consolidation, or sale occurred on the date of the
conversion.
(v) No Impairment. The Corporation will not, by amendment of
its Articles of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the
provisions of this paragraph (d) and in the taking of all such
action as may be necessary or appropriate, in order to protect
the conversion rights of the holders of the Convertible Series B
against impairment.
(vi) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Price or any
other adjustment pursuant to this paragraph (d), the Corporation
at its expense shall, upon request by a holder of Convertible
Series B, promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to each holder of
such Convertible Series B a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of such
affected Convertible Series B, furnish or cause to be furnished
5
<PAGE>
to such holder a like certificate setting forth the (i) such
adjustment and readjustment, (ii) the Conversion Price at the
time in effect, and (iii) the number of shares of Common Stock
and the amount, if any, of other property which at the time would
be received upon the conversion of a share of such Convertible
Series. B.
(vii) Notices of Record Date. In the event that:
(1) the Corporation shall set a record date for the
purpose of entitling the holders of its shares of Common
Stock to receive a dividend, or other distribution, payable
otherwise than in cash;
(2) the Corporation shall set a record date for the
purpose of entitling the holders of its shares of Common
Stock to subscribe for or purchase any shares of any class
or to receive any other rights;
(3) there shall occur any capital reorganization of the
Corporation, reclassification of the shares of the
Corporation (other than a subdivision or combination of its
outstanding common stock), consolidation or merger of the
Corporation with or into another corporation or conveyance
of all or substantially all of the assets of the Corporation
to another person or entity; or
(4) there shall occur a voluntary or involuntary
dissolution, liquidation, or winding up of the Corporation;
then, and in any such case, the Corporation shall cause to be
mailed to the holders of record of the outstanding shares of the
Convertible Series B, at least 10 days prior to the date
hereinafter specified, a notice stating (a) the date which (x)
has been set as the record date for the purpose of such dividend,
distribution, or rights, or (y) such reclassification,
reorganization, consolidation, merger, conveyance, dissolution,
liquidation or, winding up is to take place and (b) the record
date as of which holders of Common Stock of record shall be
entitled to other property deliverable upon such
reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
(viii) Notices. Any notice required by the provisions of
this paragraph (d) to be given to the holders of shares of
Convertible Series B shall be in writing and shall be delivered
by personal service or agent, by registered or certified mail,
return receipt requested, with postage thereon fully prepaid. All
such communications shall be addressed to each holder of record
at its address appearing on the books of the Corporation. Service
of any such communication made only by mail shall be deemed
complete on the date of actual delivery as shown by the
addressee's registry or certification receipt or at the
expiration of the fourth business day after the date of mailing,
whichever is earlier in time.
(ix) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of Convertible Series B. In lieu
of any fractional shares to which the holder would otherwise be
entitled, the Corporation shall pay cash equal to the product of
such fraction multiplied by the Market Price of one share of the
Corporation's Common Stock on the date of conversion.
6
<PAGE>
(x) Payment of Taxes. The Corporation will pay all taxes
(other than taxes based upon income) and other governmental
charges that may be imposed with respect to the issue or delivery
of shares of Common Stock upon conversion of shares of
Convertible Series B, including without limitation any tax or
other charge imposed in connection with any transfer involved in
the issue and delivery of shares of Common Stock in a name other
than that in which the shares of the Convertible Series B so
converted were registered.
(xi) Reservation of Common Stock. 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
effecting the conversion of the Convertible Series B, the full
number of shares of Common Stock deliverable upon the conversion
of all shares of Convertible Series B from time to time
outstanding. The Corporation shall from time to time increase the
authorized number of shares of Common Stock if the remaining
unissued authorized shares of Common Stock shall not be
sufficient to permit the conversion of all of the Convertible
Series B at the time outstanding.
(xii) Retirement of Convertible Series B Converted. No
shares of Convertible Series B that have been converted shall
ever again be reissued, and all such shares so converted shall,
upon such conversion, cease to be a part of the authorized shares
of the Corporation.
(e) No Preemptive Rights. No holder of the Convertible Series B
shall be entitled as of right to subscribe for, purchase, or receive
any part of any new or additional shares of any class, whether now or
hereafter authorized, or of bonds, debentures, or other evidences of
indebtedness convertible into or exchangeable for shares of any class,
but all such new or additional shares of any class, or bonds,
debentures, or other evidences of indebtedness convertible into or
exchangeable for shares, may be issued and disposed of by the Board of
Directors on such terms and for such consideration (to the extent
permitted by law), and to such person or persons as the Board of
Directors in their absolute discretion may deem advisable.
7
<PAGE>
(f) Optional Redemption of Convertible Series B.
(i) Redemption. On and after October 1, 2003, the
Convertible Series B is subject to redemption, out of funds
legally available therefor, in whole, or from time to time, in
part, at the option of the Board of Directors. If only a part of
the shares of Convertible Series B is to be redeemed, the
redemption shall be carried out pro rata subject to adjustment to
avoid redemption of fractional shares. The redemption price shall
be Ten Dollars ($10.00) per share plus cumulative dividends as
provided in Section 7.5(a) of this Article VII accrued and unpaid
to the date fixed for redemption.
(ii) Adjustment for Stock Splits and Combinations. If the
Corporation shall at any time or from time to time after the
Original Issue Date applicable to Convertible Series B effect a
subdivision of the outstanding Convertible Series B, the
applicable Convertible Series B redemption price then in effect
immediately before that subdivision shall be proportionately
decreased and, conversely, if the Corporation shall at any time
or from time to time after the Original Issue Date applicable to
Convertible Series B combine the outstanding shares of
Convertible Series B, the applicable Convertible Series B
redemption price then in effect immediately before the
combination shall be proportionately increased. Any adjustments
under this Section 7.5(g)(ii) of this Article VII shall become
effective at the close of business on the date the subdivision or
combination becomes effective.
(iii) Notice. At least 45 days before the date fixed for
redemption (hereinafter referred to as the "Redemption Date"),
written notice (hereinafter referred to as the "Redemption
Notice") shall be mailed postage prepaid, to each holder of
record of the Convertible Series B which is to be redeemed, at
the holder's address shown on the records of the Corporation. The
Redemption Notice shall contain the following information:
(1) the number of shares of Convertible Series B held
by the holder which are to be redeemed by the Corporation,
and the total number of shares of Convertible Series B held
by all holders to be so redeemed;
(2) the Redemption Date and the applicable Redemption
Price; and
(3) that the holder is to surrender to the Corporation,
at the place designated therein, the holder's certificate or
certificates representing the shares of Convertible Series B
to be redeemed.
(iv) Surrender. Each holder of shares of Convertible Series
B to be redeemed shall surrender the certificate or certificates
representing such shares to the Corporation at the place
designated in the Redemption Notice, and thereupon the applicable
redemption price for such shares as set forth herein shall be
paid to the order of the person or entity whose name appears on
such certificate or certificates and each surrendered certificate
shall be cancelled and retired.
(v) Dividends. From and after the later of the Redemption
Date or 45 days from the date the Corporation shall have given
the Redemption Notice, no shares of Convertible Series B
thereupon subject to redemption shall be entitled to any further
accrual of any dividends.
8
<PAGE>
(vi) Payment. The Corporation's deliverance of payment of
the redemption price shall be good and sufficient discharge to
the Corporation of the Convertible Series B redeemed. If less
than the full number of a holder's shares of Convertible Series B
is redeemed, the Corporation shall deliver to the holder a new
Convertible Series B certificate representing the balance of the
holder's shares of Convertible Series B.
Dated: April 23, 1999
FRONTEER FINANCIAL HOLDINGS, LTD.,
a Colorado corporation
By: /s/ Gary L. Cook
-------------------------------------
Gary L. Cook, Secretary and Treasurer
9
AMENDMENT NO. 1 TO $500,000
12% CONVERTIBLE DEBENTURE
THIS AMENDMENT NO. 1 TO $500,000 12% CONVERTIBLE DEBENTURE is made and
entered into this 23rd day of March, 1999, by and between FRONTEER FINANCIAL
HOLDINGS, LTD. ("Corporation") and HENG FUNG FINANCE COMPANY LIMITED ("Holder").
R E C I T A L S
A. The Corporation granted a convertible debenture to Holder dated September
25, 1998, which is attached hereto as Exhibit A and incorporated herein by
reference ("Original Debenture").
B. The Corporation and the Holder desire to amend the Original Debenture.
C. Terms in this amendment that are capitalized but are not defined shall have
the same meanings as they have in the Original Debenture.
NOW THEREFORE, in consideration of the premises and agreements contained
herein, the parties hereto do hereby agree as follows:
1. Amendment. The Maturity Date shall be extended from March 24, 1999 to
March 24, 2000.
2. Fee. In consideration of the extension of the Maturity Date, the
Corporation shall pay to the Holder, $25,000 in the form of 44,092
shares of common stock of the Corporation. This agreement shall be
deemed to be effective March 24, 1999.
3. Confirmation of Terms of Original Debenture. In all other respects the
Original Debenture, shall remain unaffected, unchanged and unimpaired
by reason of the foregoing amendment.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this agreement to be made
effective on the day and year first above written.
CORPORATION:
FRONTEER FINANCIAL HOLDINGS, LTD.,
a Colorado corporation
By: /s/ Gary L. Cook
-------------------------------------
Gary L. Cook, Secretary and Treasurer
HOLDER:
HENG FUNG FINANCE COMPANY LIMITED.,
a Hong Kong corporation
By: /s/ Fai H. Chan
------------------------------------
Its: Managing Director
2
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT (the "Guaranty") is given by HENG FUNG HOLDINGS
COMPANY LIMITED, a Hong Kong corporation (the "Guarantor"), for the benefit of
the purchasers ("Investors") of the shares of Series B Convertible Preferred
Stock to be offered by eVISION USA.COM, INC., a Colorado corporation ("Issuer"),
pursuant to a confidential offering memorandum. In consideration of the
substantial direct and indirect benefits, the Guarantor, as a major beneficial
shareholder of the Issuer, will derive therefrom, the Guarantor gives the
following guaranty to the Investors.
Section 1. The Guaranty. The Guarantor hereby UNCONDITIONALLY AND
IRREVOCABLY GUARANTEES the full and punctual payment by the Issuer to Investors
when due of all cash dividends on the Series B Convertible Preferred Stock
through October 31, 2003. As used in this Guaranty, the term "Obligations" shall
refer to the obligations of payment, which the Guarantor has undertaken and
assumed pursuant to this Guaranty.
Section 2. Nature of the Guaranty. This Guaranty: (a) is (i) irrevocable;
(ii) absolute and unconditional; (iii) direct, immediate and primary; and (iv)
one of payment and not just collection; and (b) makes the Guarantor a surety to
Investors and primarily liable with the Issuer.
Section 3. Investors Need Not Pursue Other Rights Before Enforcing
Guaranty. Investors shall be under no obligation to pursue their rights against
the Issuer or against any other guarantor or any other person that is now or
hereafter liable upon or in connection with any of the obligations of the
Guarantor or the Issuer to Investors.
Section 4. Waivers by the Guarantor. The Guarantor hereby waives any and
all notices whatsoever with respect to this Guaranty or with respect to any of
the obligations of the Issuer to Investors, including, but not limited to,
notice of: (i) Investors' acceptance hereof or Investors' intention to act, or
Investors' action, in reliance hereon; (ii) the present existence or future
incurring of any of the Obligations of the Issuer to Investors or any terms or
amounts thereof or any change therein; and (iii) any default by the Issuer.
Section 5. Unenforceability of Obligations of the Issuer. This Guaranty
shall be valid, binding, and enforceable even if the obligations of the Issuer
to Investors, which are guaranteed hereby, are now or hereafter become invalid
or unenforceable for any reason.
Section 6. No Conditions Precedent. This Guaranty shall be effective and
enforceable immediately upon its execution. The Guarantor acknowledges that no
unsatisfied conditions precedent to the effectiveness and enforceability of this
Guaranty exist as of the date of its execution and that the effectiveness and
enforceability of this Guaranty are not in any way conditioned or contingent
upon any event, occurrence, or happening, or upon any condition existing or
coming into existence either before or after the execution of this Guaranty.
<PAGE>
Section 7. Obligations Unconditional. The payment and performance of the
Obligations shall be the absolute and unconditional duty and obligation of the
Guarantor, and shall be independent of any defense or any rights of set-off,
recoupment or counterclaim which the Guarantor might otherwise have against
Investors, and the Guarantor shall pay and perform the Obligations, free of any
deductions and without abatement, diminution or set-off; and until such time as
the Obligations have been fully paid and performed, the Guarantor: (a) shall not
suspend or discontinue any payments provided for in this Guaranty; (b) shall
perform and observe all of the covenants and agreements contained in this
Guaranty; and (c) shall not terminate or attempt to terminate this Guaranty for
any reason. No delay by Investors in making demand on the Guarantor for
satisfaction of the Obligations shall prejudice or in any way impair Investors'
ability to enforce this Guaranty.
Section 8. Defenses Against Issuer. The Guarantor waives any right to
assert against Investors any defense (whether legal or equitable), claim,
counterclaim, or right of set-off or recoupment which the Guarantor may now or
hereafter have against the Issuer.
Section 9. Expenses of Collection and Attorneys' Fees. The Guarantor shall
pay all reasonable costs and expenses incurred by Investors in collecting sums
due under this Guaranty, including, without limitation, the costs of any lien,
judgment or other record searches, appraisals, travel expenses and the like.
Section 10. Enforcement During Bankruptcy. Enforcement of this Guaranty
shall not be stayed or in any way delayed, as a result of the filing of a
petition under the United States Bankruptcy Code, as amended, or other similar
statutory scheme, by or against the Issuer. Should Investors be required to
obtain an order of the United States Bankruptcy Court or other court of
competent jurisdiction to begin enforcement of this Guaranty after the filing of
a petition under the United States Bankruptcy Code, as amended, or other similar
statutory scheme, by or against the Issuer, the Guarantor hereby consents to
this relief and agrees to file or cause to be filed all appropriate pleadings to
evidence and effectuate such consent and to enable Investors to obtain the
relief requested.
Section 11. Remedies Cumulative. All of Investors' rights and remedies
shall be cumulative and any failure of Investors to exercise any right hereunder
shall not be construed as a waiver of the right to exercise the same or any
other right at any time, and from time to time, thereafter.
Section 12. Discharge of Guaranty. This Guaranty shall not be discharged
and the Guarantor shall not be released from liability until all Obligations
have been satisfied in full and the satisfaction of the Obligations is not
subject to challenge or contest. If all or any portion of the Obligations are
satisfied and Investors are required for any reason to pay to any person the
sums used to satisfy the Obligations, the Obligations shall remain in effect and
enforceable to the extent thereof.
Section 13. Termination. This Guaranty may be terminated only in writing by
the Investors.
Section 14. Choice of Law. The laws of the State of Colorado (excluding,
however, conflict of law principles) shall govern and be applied to determine
all issues relating to this Guaranty and the rights and obligations of the
Guarantor, including the validity, construction, interpretation, and
enforceability of this Guaranty and its various provisions and the consequences
and legal effect of all transactions and events which resulted in the issuance
of this Guaranty or which occurred or were to occur as a direct or indirect
result of this Guaranty having been executed.
2
<PAGE>
Section 15. Consent to Jurisdiction; Agreement as to Venue. The Guarantor
irrevocably consents to the non-exclusive jurisdiction of the federal and state
courts located in the State of Colorado. The Guarantor agrees that venue shall
be proper in any such courts.
Section 16. Invalidity of Any Part. If any provision or part of any
provision of this Guaranty shall for any reason be held invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions or the remaining part of any effective
provisions of this Guaranty, and this Guaranty shall be construed as if such
invalid, illegal, or unenforceable provision or part thereof had never been
contained herein, but only to the extent of its invalidity, illegality, or
unenforceability.
Section 17. Amendment or Waiver. This Guaranty may be amended only by a
writing. No waiver by any of the Investors of any of the provisions of the
Guaranty or any of the rights or remedies of Investors with respect hereto shall
be effective or enforceable unless in writing.
Section 18. Binding Nature. This Guaranty shall inure to the benefit of and
be enforceable by Investors and their successors and assigns, including any
person to whom any of the Investors may transfer their Series B Preferred Stock,
and shall be binding upon and enforceable against the Guarantor and the
Guarantor's successors and permitted assigns.
Section 19. Assignability. Without any notice to Guarantor, this Guaranty
shall automatically be assigned whenever an Investor transfers Series B
Convertible Preferred Stock. Upon such assignment, the person who is assigned
the Series B Convertible Preferred Stock shall be deemed to be an Investor as
such term is defined in this Guaranty and shall have all of the rights and
obligations as an Investor.
Section 20. Notices. Any notice or demand required or permitted by or in
connection with this Guaranty, without implying the obligation to provide any
notice or demand, shall be in writing at the address set forth below or to such
other address as may be hereafter specified by written notice to Investors by
the Guarantor. Any such notice or demand shall be deemed to be effective as of
the date of hand delivery or facsimile transmission, one (1) day dispatch if
sent by overnight delivery, express mail or federal express, or five (5) days
after mailing if sent by first class mail with postage prepaid.
Section 21. Final Agreement. This Guaranty contains the final and entire
agreement of the Guarantor with respect to the guaranty by the Guarantor of the
Issuer's obligations to Investors. There are no separate oral or written
understanding between Investors and the Guarantor with respect thereto.
Section 22. Tense, Gender, Defined Terms, Captions. As used herein, the
plural shall refer to and include the singular, and the singular, the plural,
and the use of any gender shall include and refer to any other gender. All
captions are for the purpose of convenience only.
Section 23. Seal and Effective Date. This Guaranty is an instrument
executed under seal and is effective and enforceable as of the date set forth
below, independent of the date of actual execution.
3
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed, under seal, by one of its duly authorized officers as of the 5th day
of May, 1999.
WITNESS HENG FUNG HOLDINGS COMPANY LIMITED
/s/ Gary L. Cook By: /s/ Fai H. Chan
- ------------------------------- ---------------------------------
Fai H. Chan, Managing Director
Address:
Heng Fung Holdings Company Limited
10th Floor, Lippo Protective Tower
231 -235 Gloucester Road
Wan Chai, Hong Kong
4
SECOND AMENDMENT TO
FRONTEER FINANCIAL HOLDINGS, LTD.
SEPTEMBER 1996 INCENTIVE AND NONSTATUTORY
STOCK OPTION PLAN
THIS SECOND AMENDMENT ("Amendment") is made as of this 25th day of
November, 1998 to the Fronteer Financial Holdings, Ltd. ("Company") September
1996 Incentive and Nonstatutory Stock Option Plan ("Plan"). In the event of any
conflict between the terms of this Amendment and the terms of the Plan, the
terms of this Amendment shall control. All capitalized terms not defined in this
Amendment shall have their respective meanings set forth in the Plan.
The Plan shall be amended as follows:
1. Stock Subject to the Plan. The first sentence of Section 3 of the Plan
is hereby deleted and replaced with the following sentence:
"Subject to the provisions of Section 11 of the Plan, the
maximum aggregate number of Shares which may be optioned and
sold under the Plan is 7,500,000 shares of Common Stock."
2. Amendment and Termination of the Plan. Subsection 13.a.(i) of the Plan
is hereby deleted and replaced with the following;
"(i) An increase in the number of Shares subject to the Plan
above 7,500,000 Shares, other than in connection with an
adjustment under Section 11 of the Plan;"
3. Ratification. Except as modified herein, the terms and conditions of the
Plan are hereby ratified by this Amendment.
IN WITNESS WHEREOF, the Company has caused its duly authorized officer to
execute this Amendment effective as of the date first set forth above.
FRONTEER FINANCIAL HOLDINGS, LTD.,
a Colorado corporation
By: /s/ Fai H. Chan
------------------------------------------------
Fai H. Chan, Chairman of the Board and President
FIRST AMENDMENT TO LOAN AGREEMENTS
THIS FIRST AMENDMENT TO LOAN AGREEMENT ("Agreement") is made and entered
into this 18th day of March, 1999 by and among GLOBAL MED TECHNOLOGIES, INC., a
Colorado corporation ("Global"), MICHAEL I. RUXIN, M.D., an individual ("Ruxin")
and eBANKER USA.COM, INC., a Colorado corporation ("eBanker") and HENG FUNG
FINANCE COMPANY LIMITED ("Heng Fung Finance").
WHEREAS, Global and Fronteer Capital, Inc. ("Capital") entered into that
certain Loan Agreement dated August 12, 1998 ("Loan agreement") whereby Capital
agreed, subject to certain terms, provisions and conditions among other things,
to make available to Global a loan in the maximum principal balance of
$1,650,000.00 pursuant to one or more Promissory Notes ("Notes") from Global to
Capital;
WHEREAS, pursuant to that certain Assignment, Assumption and Consent
Agreement dated September 11, 1998, by and between Global, Ruxin, Capital and
Fronteer Development Finance, Inc. ("Development"), Capital assigned,
Development assumed and Global and Ruxin consented to the assignment by Capital
and assumption by Development of the rights, duties and obligations of the Loan
Agreement;
WHEREAS, Heng Fung Finance entered into certain Loan Agreement dated August
12, 1998 ("Heng Fung Finance Loan Agreement") with Global whereby Heng Fung
Finance agreed, subject to certain term, provisions and conditions, among other
things to make available to Global a loan in the maximum principal amount of
$1,500,000 pursuant to one or more promissory notes ("Heng Fung Finance Notes")
from Global to Heng Fung Finance;
WHEREAS, pursuant to that certain Loan and Warrant Purchase and Sale
Agreement dated October 7, 1998 by and between Heng Fung Finance, Development
and Global, Heng Fung Finance sold and Development purchased, among other
things, a portion of the Heng Fung Finance Notes ("Acquired Notes");
WHEREAS, on March 4, 1999 Development merged into eBanker and eBanker
assumed Development's rights, duties and obligations under the Loan Agreement,
the Notes and the Acquired Notes;
WHEREAS, the obligation of Global under the Loan Agreement and the
corresponding Notes and Acquired Notes are guaranteed by Ruxin pursuant to
personal guaranties dated August 12, 1998 ("Guaranty");
WHEREAS, the parties to this Agreement desire to amend the terms of the
Loan Agreement and the corresponding Notes and the Acquired Notes; and
WHEREAS, capitalized terms not defined in this Agreement which are defined
in the Loan Agreement shall have the meaning set forth in the Loan Agreement.
<PAGE>
NOW THEREFORE in consideration of the premises, the mutual covenants and
agreements contained herein and other good and valuable consideration, the
receipt, sufficiency and adequacy of which are hereby acknowledged, the parties
hereto agree as follows:
1. Amendment to Section 1.2. The last sentence of Section 1.2 of the Loan
Agreement (and the Heng Fung Loan Agreement as applicable to the Acquired Notes)
shall be amended so that as amended, it reads as follows:
If not sooner paid, the entire outstanding principal balance of the
Notes, together with all accrued but unpaid interest thereon, all
additional interest and all other sums due thereunder, shall be due
and payable in full on April 15, 2000.
2. Amendment to Section 6.2. Section 6.2(b)(iii) of the Loan Agreement (and
the Heng Fung Loan Agreement as applicable to the Acquired Notes) shall be
amended so that as amended, it reads as follows:
i. Convert any or all of the amounts due under any of the Notes
into common stock of the Borrower ("Conversion Shares") at an exercise
price equal to $0.25 per share. Lender shall make such standard
investment representations to show an exemption from registration
exists for the issuance of such Conversion Shares.
3. Consideration. At consideration of eBanker's agreement to modify terms
of the Loan Agreement (and the Heng Fung Loan Agreement as applicable to the
Acquired Notes), Global hereby agrees to pay to eBanker an additional fee equal
to two percent (2%) of the total amount due and committed under the Acquired
Notes, the Notes and the Loan Agreement ($53,000). This fee shall be payable in
the common stock of global by dividing the total amount of the fee by the
average bid and asked prices of the common stock of Global over the ten business
days prior to the date of this Agreement.
4. Confirmation of Terms of Loan Agreement and Guaranty. In all other
respects, the Loan Agreement (and the Heng Fung Loan Agreement as applicable to
the Acquired Notes) and Guaranty, described above, shall remain unaffected,
unchanged and unimpaired by reason of this Agreement. All Notes made by Global
under the Loan Agreement (and the Heng Fung Loan Agreement as applicable to the
Acquired Notes shall automatically be modified to comply with the terms of this
Agreement.
Executed as of the day and year first written.
eBANKER USA.COM, INC.,
a Colorado corporation
By: /s/ Fai H. Chan
---------------------------------------
Its: Chairman, President and CEO
GLOBAL MED TECHNOLOGIES, INC.
a Colorado corporation
By: /s/ Michael I. Ruxin
----------------------------------------
Its: Chairman and CEO
2
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