UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
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Commission file Number: 000-17637
eVision USA.Com, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Colorado 45-0411501
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1700 Lincoln Street, 32nd Floor
Denver, CO 80203
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (303) 860-1700
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Securities registered pursuant to Section 12(g) of the Act:
$0.01 Par Value common stock
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(Title of Class)
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 and, (2) has been subject to such filing requirements
for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of December 15, 1999, the aggregate market value of the Registrant's voting
stock held by non-affiliates was $23,472,842 based on the closing bid price of
$1.875 per share as of that date. As of December 15, 1999, Registrant had
20,266,882 shares of its $0.01 par value common stock issued and outstanding.
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TABLE OF CONTENTS
PART I
Item Page
1. Business ........................................................... 3
2. Properties ......................................................... 13
3. Legal Proceedings .................................................. 13
4. Submission of Matters to a Vote of Security Holders ................ 14
PART II
5. Market for Registrant's Common Stock and Related
Stockholder Matters ............................................. 14
6. Selected Financial Data ........................................... 17
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations ........................................ 19
7A.Quantitative and Qualitative Disclosures About Market Risk ......... 25
8. Financial Statements and Supplementary Data ........................ 26
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure .............................. 27
PART III
10. Directors and Executive Officers of the Registrant ................. 27
11. Executive Compensation ............................................. 31
12. Security Ownership of Certain Beneficial Owners and Management ..... 34
13. Certain Relationships and Related Transactions ..................... 37
PART IV
14. Exhibits, Financial Schedules, and Reports on Form 8-K ............ 39
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PART I
ITEM 1. BUSINESS
eVision USA.Com, Inc., (eVision or the Company) is a holding company that was
incorporated under the laws of the state of Colorado in September 1988.
eVision's consolidated subsidiaries include companies that:
o operate as a fully disclosed securities broker/dealer;
o intend to provide transaction processing, networking and Internet
based services;
o design, develop, install, market and support software systems for the
securities brokerage industry; and
o provide leveraged financing, including proposed financing over the
Internet.
American Fronteer Financial Corporation
General
American Fronteer Financial Corporation (American Fronteer or AFFC), a wholly
owned subsidiary of eVision, was incorporated in 1974 to engage in the retail
stock brokerage business in the Rocky Mountain Region of the United States.
American Fronteer is registered as a broker/dealer with the Securities and
Exchange Commission (Commission), is a member of the National Association of
Securities Dealers, Inc. (NASD) and the Boston Stock Exchange, is an associate
member of the American Stock Exchange, and is registered as a securities
broker/dealer in all 50 states. American Fronteer is a member of the Securities
Investor Protection Corporation (SIPC) and other regulatory and trade
organizations. American Fronteer is also licensed to sell insurance products in
certain states. American Fronteer's business consists of providing retail
securities brokerage and investment services, trading fixed income and equity
securities, providing investment banking services to corporate and municipal
clients, managing and participating in underwriting corporate and municipal
securities, and selling a range of professionally managed mutual funds and
insurance products.
American Fronteer conducts its business in four operating divisions as described
below. American Fronteer's principal executive office and Denver, Colorado
branch are located at One Norwest Center, 1700 Lincoln Street, 32nd Floor,
Denver, Colorado 80203. American Fronteer also has branch offices located in San
Francisco, California; Colorado Springs, Colorado; West Palm Beach, Florida;
Atlanta, Georgia; Chicago, Illinois; Metairie, Louisiana; Las Vegas, Nevada;
Albany, New York; New York, New York; Dallas, Texas; and Reston, Virginia.
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Retail Securities Brokerage Division
American Fronteer conducts its retail securities brokerage business through its
retail securities brokerage division. As of September 30, 1999, American
Fronteer had approximately 101 account executives and approximately 27,500
customer accounts. American Fronteer generates commission revenue when it acts
as a broker on an agency basis, or as a dealer on a principal basis, to effect
securities transactions for individual and institutional investors. Brokerage
commissions were $17,193,481 for the year ended September 30, 1999. American
Fronteer executes both listed and over the counter agency transactions for
customers, executes transactions and puts and calls on options exchanges as
agent for its customers, and sells a number of professionally managed mutual
funds and insurance products, primarily variable annuities. American Fronteer's
revenue from its sales of insurance products was approximately $70,340 for the
year ended September 30, 1999.
Corporate Finance Division
The corporate finance division of American Fronteer provides financial advisory
and capital raising services to corporate clients. Financial advisory services
involve advising clients in mergers and acquisitions and in various types of
corporate valuations. American Fronteer acts as a dealer, underwriter and
selling group member in public and private offerings of equity securities.
During the year ended September 30, 1999, American Fronteer earned revenue of
approximately $678,721 from its investment banking activities.
Trading Division
Trading securities involves the purchase and sale of securities by American
Fronteer for its own account. Profits and losses are derived from the spread
between bid and ask prices and market increases or decreases for the individual
security during the holding period. American Fronteer makes markets in corporate
equities and trades in municipal and corporate bonds and government securities.
As of September 30, 1999, American Fronteer made markets in 32 stocks.
Public Finance Division
The public finance division of American Fronteer provides professional financial
advisory services to public entities, participates in underwriting and selling
both negotiated and competitive bid municipal bond offerings, and structures and
participates in municipal bond refinancings. During the year ended September 30,
1999, American Fronteer's participation as manager of underwritings and private
placements in offerings of municipal securities yielded revenue of approximately
$620,488.
Financial Information
For the year ended September 30, 1999, American Fronteer's revenue of
$20,901,459 accounted for 61% of eVision's total revenue of $34,193,262.
American Fronteer's revenue for the years ended September 30, 1998 and 1997 was
$18,886,391, and $18,118,271, respectively. For the years ended September 30,
1999, 1998, and 1997, American Fronteer incurred operating losses of $2,521,660,
$3,910,741, and $2,160,897, respectively.
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American Fronteer Regulatory Net Capital
American Fronteer, as a registered securities broker/dealer, is subject to the
Commission's Uniform Net Capital Rule (Rule 15c3-1) and membership agreement
with the NASD. In accordance with the membership agreement, American Fronteer is
required to maintain "net capital" of not less than $250,000. As of September
30, 1999, American Fronteer had "net capital" of $419,273.
American Fronteer Proposed On-Line Broker/Dealer Division
American Fronteer is developing an on-line broker/dealer division,
OnLineBroker(TM), that American Fronteer believes will provide American Fronteer
with the ability to expand its broker/dealer business into Asian markets and
will provide American Fronteer's existing clients with the benefits of on-line
trading. American Fronteer plans to provide on-line broker/dealer services under
the name of OLBroker.Com, Inc. A letter of intent has been entered into by a
wholly owned subsidiary of eVision on behalf of American Fronteer pursuant to
which an unaffiliated party plans to develop a platform to facilitate American
Fronteer's on-line trading of United States securities in Hong Kong. A separate
broker/dealer license for the on-line business of American Fronteer may be
applied for and the on-line broker/dealer division of American Fronteer may
become a separate consolidated subsidiary of eVision.
eBanker USA.com, Inc.
General
Fronteer Development Finance Inc., a Delaware corporation (Fronteer
Development), was incorporated in the state of Delaware in March 1998 to operate
as a finance company. Fronteer Income Growth Inc. (FIGI), a wholly owned
subsidiary of Fronteer Development, was incorporated in September 1998 under the
International Business Companies Ordinances of the Territory of the British
Virgin Islands. In March 1999, Fronteer Development was merged into eBanker
USA.com, Inc. (eBanker), a Colorado corporation, primarily for the purpose of
effectuating a name change to eBanker and becoming a Colorado corporation.
eBanker USA.com, Inc. is a 29% owned consolidated subsidiary of eVision. In
addition to its 29% equity interest, eVision also has the right to cast 50% of
the vote in the election of eBanker's directors due to its ownership of the
preferred stock of eBanker. eBanker has entered into a management agreement with
eVision to assist in the management of eBanker's business including providing
assistance in the (i) identification of lending opportunities, (ii) credit
analysis of potential borrowers, (iii) structure of loans, including
yield-enhancing equity participation and collateral arrangements and (iv)
administration of loans. In exchange for such services, eVision is entitled to
an annual fee equal to 10% of eBanker's pretax profits as determined from
eBanker's annual audited financial statements.
eBanker was created with the purpose of providing a wide range of on-line
financial lending products and services. eBanker intends to identify, target and
serve high-margin, global financial market segments, through its interactive and
multimedia website. eBanker's website first became operational in September
1999. The website is still in its initial phase of development and will
continually be expanded. eBanker has been designed as a non-deposit taking,
broad financial services entity, so that it is not subject to the regulations
facing traditional financial institutions. eBanker believes that it has the
flexibility to serve many overlooked market niches with innovative financial
products and services. Over the next twelve months, eBanker intends to introduce
a number of financial products and services including but not limited to,
secured consumer credit cards, corporate credit cards and customized corporate
financing. Customized corporate financing refers to individualized corporate
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lending agreements whereby eBanker would receive both a fixed or floating rate
of interest combined with some form of participation. The participation may take
the form of revenue or profit sharing, common stock, warrants, stock options,
fixed assets or any other additional compensation mutually agreed upon between
eBanker and its client.
eBanker also intends to provide a number of business services in conjunction
with customized corporate financing. The services may include managerial advice,
accounting and administrative support, human resource services or any other
service where eBanker can cost-effectively assist its clients.
eBanker also plans to provide numerous informational services. These services
are designed to attract users to the eBanker website, with the intent of
generating traffic, revenues and brand recognition. eBanker plans to offer both
free and premium financial information. This information may range from stock
quotes to market commentary to current mortgage rates. eBanker also plans to
provide numerous links to external products and services with the intention of
receiving royalties in the process. eBanker also plans to track individual user
preferences and to solicit input from its customers, customizing websites to
meet individual needs and preferences.
To date, eBanker's activities have consisted of raising approximately
$13,000,000 from outside sources in private placements of securities, investing
in debt securities of Asian corporations and making loans to affiliated and
unaffiliated entities.
Financial Information
eBanker's revenue for the year ended September 30, 1999 and the period from
inception (May 26, 1998) through September 30, 1998 was $1,920,379 and $37,923,
respectively. Operating income (loss) for the periods ended September 30, 1999
and 1998 was $429,138 and $(46,255), respectively.
Q6 Technologies, Inc.
Q6 Technologies, Inc. (Q6 Technologies), is a Colorado corporation formed in
March 1999 by Q6 Group, LLC, a Pennsylvania limited liability company, and
eVision. Q6 Technologies is currently a development stage company with no
continuing operations. On June 18, 1999, Q6 Technologies acquired from eVision
72.8% of the outstanding common stock of Secutron Corp., a Colorado corporation
that designs, develops, installs, markets and supports software systems for the
securities brokerage industry (Secutron). Secutron has one wholly-owned
subsidiary, MidRange Solutions Corp., a Colorado corporation that is a
distributor and systems integrator of computer products to the Rocky Mountain
region (MidRange). Q6 Technologies' interests in Secutron were acquired in the
early formation and capitalization of Q6 Technologies with eVision. Q6
Technologies subsequently increased its ownership of Secutron to approximately
78% in September 1999 and 95% in December 1999in connection with the settlement
of a lawsuit by eVision and Secutron. Q6 Technologies determined that the
Secutron and MidRange businesses were not an appropriate part of Q6
Technologies' long-term business strategy. Effective December 17, 1999, Q6
Technologies transferred its ownership interests in Secutron and its wholly
owned subsidiary, MidRange, back to eVision in return for the cancellation of
5,000,000 shares of Class B Common Stock of Q6 Technologies previously held by
eVision and certain contractual concessions. Evision continues to hold 944,444
shares of Class A Common Stock and 555,556 shares of Class B Common Stock of Q6
Technologies.
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Q6 Technologies has entered into non-binding letters of intent to purchase up to
a 50% initial ownership interest in two separate business opportunities, Do Not
Disturb, Inc., a Delaware corporation (Do Not Disturb) and CacheStream
Corporation, a Colorado corporation (CacheStream). Do Not Disturb is a
development stage company that is in the process of creating Internet consumer
privacy products and services. CacheStream is a company recently formed as a
joint venture between Q6 Technologies and IBTech Pte. Ltd., a Singapore company
(IBTech). Under the letter of intent, IBTech will transfer to CacheStream all
outstanding equity of its wholly owned subsidiary, Interactive Broadcast
Technology Sdn. Bhd., a Malaysian company (IBT Malaysia); upon the transfer of
designated funds from Q6 Technologies to CacheStream. IBT Malaysia is an
operating company that owns a proprietary software platform for high bandwidth
Internet multicasting. Although Q6 Technologies intends to pursue additional
potential business opportunities, it has not yet identified any specific
prospective business opportunities nor does it have other letters of intent,
agreements in principle, or other agreements to enter into business
opportunities. There are no assurances that Q6 Technologies will be successful
in its efforts to enter into a business opportunity with Do Not Disturb,
CacheStream or any other company. Q6 Technologies must obtain financing to take
advantage of these potential opportunities.
Do Not Disturb, Inc.
Do Not Disturb is a Delaware corporation formed in September 1999 and intends to
establish itself as an Internet company providing consumer privacy related
products and services. Do Not Disturb is a development stage company and has not
yet had any business operations. Do Not Disturb is currently in the process of
developing its initial consumer privacy related products and Web based systems,
which are not expected to be completed or tested until the first quarter of the
year 2000.
Q6 Technologies' management believes that there is a significant opportunity to
address the growing concern of consumers relating to information privacy as well
as the increased desire to control telemarketing and direct marketing
solicitations. Through Do Not Disturb, Q6 Technologies plans to develop and
launch a comprehensive consumer privacy Internet portal and associated enhanced
privacy information services, and to function as a trusted intermediary between
consumers and direct marketers. The basic services, which would be at a minimal
cost to consumers, would be registration based and supported by multiple
non-end-user revenue sources such as advertising, direct marketing, and Internet
site affiliation and transaction fees. A premium service may also be offered at
an additional cost. Consumers would be able to choose not only the types of
direct marketing contacts they wish to block across the Internet, telephone and
direct mail, but also to indicate specific information and companies from which
they wish to receive direct solicitations and information.
Q6 Technologies entered into a non-binding letter of intent with Do Not Disturb
on October 18, 1999, which provides that Q6 Technologies will invest a total of
$1.25 million over a period of six months commencing in December 1999 in return
for a 50% initial ownership interest in Do Not Disturb under the following
schedule: Q6 Technologies may invest $250,000 by December 31, 1999 in order to
obtain a 25% ownership interest; Q6 Technologies may invest an additional
$500,000 by February 29, 2000 for an additional 15% ownership interest; and Q6
Technologies may invest an additional $500,000 by March 31, 2000 for an
additional 10% ownership interest in Do Not Disturb. Once Q6 Technologies makes
the first payment under the letter of intent, Q6 Technologies will retain any
ownership interest obtained from its investments whether or not it makes any
subsequent investments in accordance with the proposed investment schedule. Q6
Technologies intends to finance its payments to Do Not Disturb through funds
obtained in a private placement or, if necessary, through loans obtained through
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eVision or its affiliates. Management of Q6 Technologies has no reason to
believe that it will not be able to extend its first payment deadline to January
15, 2000 should circumstances dictate.
Q6 Technologies and Do Not Disturb intend to pursue the participation of other
companies by licensing proprietary software and market research from such
companies in the area of privacy services in return for up to a 10% ownership
interest in Do Not Disturb. Q6 Technologies and Do Not Disturb also intend to
issue stock options to attract and retain quality and qualified management.
The letter of intent also provides that Q6 Technologies will hold a 50% voting
interest on the Board of Directors of Do Not Disturb until such time that Q6
Technologies fails to meet the investment schedule described above, at which
time Q6 Technologies' representation on the board of directors will be reduced
to be proportionate to its ownership interest. The commitments contained in the
letter of intent with Do Not Disturb are contingent upon development of a
mutually satisfactory business development plan and negotiating a mutually
acceptable acquisition agreement.
CacheStream Corporation
CacheStream is a Colorado corporation formed in December 1999. CacheStream was
formed in connection with the proposed joint venture between Q6 Technologies and
IBTech. Pursuant to the non-binding letter of intent entered into on October 19,
1999 between Q6 Technologies and IBTech, IBTech will transfer to CacheStream all
outstanding stock in its wholly-owned subsidiary, IBT Malaysia, upon the
transfer of designated funds from Q6 Technologies to CacheStream. IBT Malaysia
is an operating company that provides multicasting software for the intelligent
delivery and management of high bandwidth audio, video and Internet portal
content for personal computers. Multicasting allows companies to broadcast
audio, video, and Internet portal content directly to numerous designated
personal computers, rather than having each personal computer access the
company's server in separate transactions. Q6 Technologies and IBTech intend for
CacheStream to apply the Internet multicasting technologies to worldwide
opportunities in the arena of broadcasting Internet protocol content, from
screens through streaming audio and video direct to personal computers through
wireless satellite, terrestrial and wireline media. CacheStream is anticipated
to initially provide a technology platform in return for license or sale fees
and then plans to leverage its technology capabilities into participation in a
select set of branded content services.
IBTech and Q6 Technologies will jointly own CacheStream with allowance for
additional shares for the founders and management. IBTech intends to invest in
CacheStream all of the current assets and operations of IBT Malaysia, its wholly
owned subsidiary, including intellectual property rights, contracts, software,
equipment and ongoing business arrangements, but excluding certain service
operations in Singapore and Malaysia. Q6 Technologies intends to invest a total
of $3 million by June 30, 2000 in return for a 50% initial ownership interest in
CacheStream under the following schedule: Q6 Technologies may invest $1 million
by December 31, 1999 in order to obtain a 25% ownership interest; Q6
Technologies may invest an additional $1 million by March 31, 2000 for an
additional 15% ownership interest; and Q6 Technologies may invest an additional
$1 million by June 30, 2000 for an additional 10% ownership interest in
CacheStream. Once Q6 Technologies makes the first payment under the letter of
intent, Q6 Technologies will retain any ownership interest obtained from its
investments whether or not it makes any subsequent investments in accordance
with the proposed investment schedule. Q6 Technologies has entered into a verbal
agreement with IBTech to postpone its initial payment until January 15, 2000. Q6
Technologies has arranged to perform a full technological function test in early
January 2000 to ensure that IBT Malaysia is Year 2000 compliant, and will not
irrevocably commit its funds for CacheStream until this test process has been
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completed to its satisfaction. Q6 Technologies intends to finance the initial
payment through funds obtained in a private placement or, if necessary, through
loans obtained through eVision or its affiliates.
It is anticipated that John Cusick, President of Q6 Technologies, will serve as
the Chairman of the Board of CacheStream and that Adrian Rietberg of IBTech will
serve in a senior executive capacity with CacheStream. The letter of intent also
provides that Q6 Technologies will hold a 50% voting interest on the Board of
Directors of CacheStream until such time that Q6 Technologies fails to meet the
investment schedule described above, at which time Q6 Technologies's
representation on the Board of Directors will be reduced to be proportionate to
its ownership interest.
The commitments contained in the letter of intent are contingent upon completion
of technical, financial, legal and operational due diligence and development of
a mutually satisfactory business development plan for CacheStream.
Secutron Corporation
General
Secutron was incorporated in Colorado in May 1979. Secutron's business consists
of designing, developing, installing, marketing, and supporting software systems
for the securities brokerage industry. Secutron markets hardware and software to
securities brokerage firms. Secutron is also an Internet service provider
providing Internet services ranging from access to the Internet to development
and maintenance of websites. Secutron's wholly owned subsidiary, MidRange, is a
Colorado corporation formed on January 1, 1993. MidRange is an IBM business
partner selling IBM hardware and hardware manufactured by competitors of IBM,
and acts as a distributor for software products which are proprietary to third
parties. MidRange sells hardware and software to businesses in several different
industries, including manufacturers, distributors and health care providers.
Secutron offers the following software products to the securities brokerage
industry. The STARS software system is offered to broker/dealers who clear their
own transactions, and is a totally integrated software system, which performs
all of the functions, required by self-clearing broker/dealers. The BCATS
software system is offered to broker/dealers who clear their securities
transactions on a fully disclosed basis through a clearing broker/dealer, and is
also a fully integrated software system which performs all of the accounting
functions required by a fully disclosed broker/dealer. The BCATS-MF software
system is designed for use by broker/dealers engaging in transactions in mutual
funds. All such software systems are designed to run on IBM computers. Both
Secutron and MidRange provide consulting, programming and facilities management
services to their respective clients to support the software and hardware sold
by them. As a result of internal testing results, Secutron has determined the
STARS and BCATS applications are Year 2000 compliant.
Subsequent to September 30, 1999, eVision entered into an agreement to sell the
assets of MidRange. MidRange is included in the Q6 Technologies and Secutron
business segment, which includes computer hardware, software and related
technology investments of eVision.
For the years ended September 30, 1999, 1998 and 1997, MidRange revenue was
$8,391,914, $7,117,007 and $4,666,588, respectively. Costs of goods sold and
general administrative expenses for the years ended September 30, 1999, 1998 and
1997, were $8,955,205, $7,130,613 and $4,784,780, respectively. Accordingly, the
loss from operations was $563,291, $13,606 and $118,192 for the years ended
September 30, 1999, 1998 and 1997, respectively. The assets to be sold include
$21,164 of furniture and equipment including computer equipment, net of
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accumulated depreciation of $66,292. The agreement provides for a purchase price
of $75,000, to be paid in three installments of $25,000, $30,000 and $20,000
beginning December 1999 and ending February 2000.
Financial Information
Secutron's consolidated revenue for the years ended September 30, 1999, 1998 and
1997 was $9,829,589, $8,866,606, and $7,436,143, respectively. Operating profit
(loss) for the years ended September 30, 1999, 1998 and 1997 was $(433,330),
$(281,785), and $129,215, respectively. The revenue and expenses for Secutron in
future years will be significantly reduced as a result of the sale of the assets
of MidRange described above.
Other Subsidiaries
eVision also has the following wholly owned subsidiaries for which operations
either have not commenced or are not significant: eBroker USA.Com, Inc., a
Colorado corporation; eFunds Global.Com, Inc., a Colorado corporation; Fronteer
Corporate Services, Inc., a Colorado corporation; Corporate Net Solutions, Inc.,
a Delaware corporation; Fronteer Corporate Services, Inc., a Colorado
corporation; Fronteer Asset Management Corporate, Inc., a Delaware corporation;
Neuro Web, Inc., a Colorado corporation; Neuro Web Canada, Inc., a Canadian
corporation; RAF Services, Inc. of Texas., a Texas corporation; RAF Services,
Inc. of Louisiana., a Louisiana corporation; and RAF Services, Inc., a Nevada
corporation. The Company is in the process of changing the name of eBroker
USA.Com, inc. to OLBroker.Com, Inc. OLBroker.Com, Inc. in the intended holding
company for American Fronteer and the OnLineBroker (TM) division.
eFunds Global.Com, Inc. was created with the intention of acquiring and
establishing mutual fund products for distribution to the eVision client base.
eFunds Global.Com, Inc. also plans to develop one or more internally managed
hedge funds. Fronteer Corporate Services, Inc. provides back office, accounting
and administrative support to companies affiliated with eVision. By establishing
a separate subsidiary to provide these services to all of the eVision companies,
the benefits of economies of scale and specialization are exploited. Corporate
Net Solutions, Inc. is designed to leverage the existing wide area network
infrastructure of American Fronteer, creating leading edge Internet and intranet
products and services. American Fronteer has established an extensive wide area
network, linking its twelve offices across the United States via a high
bandwidth intranet. This established network can be expanded at a low cost,
providing additional capacity for external uses.
Competition
American Fronteer
The securities industry has become considerably more concentrated and more
competitive in recent periods as numerous securities firms have either ceased
operations or have been acquired by or merged with other firms. In addition,
companies not engaged primarily in the securities business, but having
substantial financial resources, have acquired securities firms. The securities
industry is now dominated by relatively few very large securities firms offering
a wide variety of investment related services nationally and internationally. In
addition, numerous commercial banks have entered into a variety of new
securities activities.
In 1999 legislation was enacted which now permits commercial banks to engage in
other types of securities related activities. These developments or other
developments of a similar nature may lead to the creation of integrated
financial service firms that offer a broader range of financial services than
those offered by American Fronteer. These developments have created large,
well-capitalized, integrated financial service firms with which American
Fronteer must compete. The securities industry has also experienced substantial
commission discounting by broker/dealers competing for institutional and
individual brokerage business. An increasing number of specialized firms offer
"discount" services to individual customers. Many of these services are offered
over the Internet for little or no transaction fees. Online trading firms
generally effect transactions for their customers on an "execution only" basis
without offering other services such as investment recommendations and research.
Such discounting and an increase in the number of new and existing firms
offering such discounts could adversely affect American Fronteer's retail
securities business.
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eBanker
eBanker is engaged in a highly competitive business. eBanker competes for
lending opportunities with many companies, including numerous financial
institutions that have been in existence for longer periods of time. Many of
eBanker's competitors are significantly larger than eBanker, have established
operating histories and procedures, have access to significantly greater capital
and other resources, have management personnel with more experience than the
management of eBanker and have other advantages over eBanker in conducting
certain businesses and providing certain services.
Q6 Technologies
The business of obtaining and maintaining interests in business opportunities is
highly competitive. Additionally, the market for software and other technology
based products is very competitive. Many of Q6 Technologies' anticipated
competitors may be significantly larger than Q6 Technologies, have established
operating histories and procedures, have access to significantly greater capital
and other resources, have management personnel with more experience than the
management of Q6 Technologies, and may have other advantages over Q6
Technologies in conducting certain businesses and providing certain services.
There can be no assurance that Q6 Technologies can compete successfully.
Secutron Corp.
Secutron competes with numerous software distribution firms, many of which are
larger than Secutron and have greater financial resources. Secutron also
competes with firms that specialize in industry specific software and those that
offer a variety of software products to businesses in various industries.
Regulation
The securities industry in the United States is subject to extensive regulation
under federal and state laws. The Commission is a federal agency charged with
administration of the federal securities laws. Much of the regulation of
broker/dealers has been delegated to self regulatory organizations, principally
the NASD and the exchanges. These self-regulatory organizations adopt rules
(which are subject to approval by the Commission) for governing the industry and
conduct periodic examinations of member broker/dealers. Securities firms are
also subject to regulation by state securities commissions in the states in
which they do business. Broker/dealers are subject to regulations that cover all
aspects of the securities business, including sales methods, trading practices
among broker/dealers, capital structure of securities firms, record keeping, and
the conduct of directors, officers, and employees. Additional legislation,
changes in rules promulgated by the Commission and by self-regulatory
organizations, or changes in the interpretation or enforcement of existing laws
and rules often directly affect the method of operation and profitability of
broker/dealers. The Commission, the self regulatory authorities, and the state
securities commissions may conduct proceedings which can result in censure,
fine, suspension, or expulsion of a broker/dealer, its officers, or employees.
American Fronteer is required by federal law to belong to the SIPC. When the
SIPC fund falls below a certain minimum amount, members are required to pay
annual assessments. The SIPC fund provides protection for securities held in
customer accounts up to $500,000 per customer, with a limitation of $100,000 on
claims for cash balances.
American Fronteer is subject to the Commission's Uniform Net Capital Rule which
is designed to measure the financial integrity and liquidity of a broker/dealer
and the minimum net capital deemed necessary to meet its commitments to its
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customers. American Fronteer is in compliance with the Rule. Failure to maintain
the required net capital may subject American Fronteer to suspension by the
Commission or other regulatory bodies and may ultimately require its
liquidation. eVision is not itself a registered broker/dealer and is not subject
to the Rule. However, under the Rule, eVision could be affected by the
requirement that a broker/dealer such as American Fronteer may be prohibited or
temporarily restricted by the Commission from the withdrawal of equity capital
by a stockholder such as eVision.
American Fronteer is also subject to regulation under federal and state laws
surrounding the insurance industry for the insurance products, primarily
variable annuities, which its insurance licensed registered representatives
sell.
Private Placements
eBanker
On May 26, 1998, Fronteer Development, which was merged into eBanker in March
1999, commenced a private placement of 30,000 units each consisting of:
o one $1,000 convertible debenture, due August 1, 2008, paying 10% per
annum;
o 100 Class A common shares; and
o warrants exercisable at $3.00 per share for 500 Class A common shares.
Prior to closing of the offering in December 1998, 7,958 units were issued in
the private placement resulting in proceeds of $6,832,851, net of issuance costs
of $1,125,149. For participating in the offering American Fronteer received
warrants to purchase shares of Fronteer Development's common stock, received a
commission of 10% of the proceeds and received a non-accountable expense
allowance of 3% the proceeds. 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 amount of units purchased by outside investors. eVision purchased 707,466
shares of the Class B common stock for $2,122,398. There were no commissions or
expenses associated with the Class B common issuance.
On March 3, 1999, eBanker commenced a second private placement of 3,000,000
units, each consisting of one share of common stock and one detachable warrant
to purchase one share of common stock. The offering closed in July 1999. In the
private placement, 899,444 units were issued resulting in proceeds of
$4,678,754, net of issuance costs of $717,912. For participating in the offering
American Fronteer received five year warrants to purchase 89,944 shares of
eBanker's common stock, received a commission of 10% of the proceeds and
received a non-accountable expense allowance of 3% the proceeds.
eVision
On October 16, 1998, eVision commenced a private placement of 1,500,000 shares
of its Series B Preferred Stock at a price of $10.00 per share. Before the
offering was terminated, 25,500 shares were sold. On May 12, 1999, eVision
commenced a second private placement of 1,500,000 shares of its Convertible
Series B Preferred Stock at $10.00 per share. The 25,500 shares of Series B
Preferred Stock sold in eVision's first offering were exchanged for Convertible
Series B Preferred Stock. Including the shares exchanged from the first
offering, 110,500 shares of Convertible Series B Preferred Stock were sold in
the second offering before it was terminated. eVision received $860,147 net of
offering costs of $244,853 for the 110,500 shares. The Convertible Series B
Preferred Stock was offered by American Fronteer, which was issued warrants,
which would allow the holder to purchase shares of eVision's Convertible Series
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B Convertible Preferred Stock at a purchase price of $12.00 per share for five
years. American Fronteer also was to receive a commission of 10% and a
non-accountable expense allowance of 3% of the total amount sold in the
offering.
On September 27, 1999, eVision commenced a third private offering of 1,500,000
shares of its Convertible Series B-1 Preferred Stock at a price of $10.00 per
share and 110,500 shares were being offered in exchange for the Convertible
Series B Preferred Stock on a one-for-one basis. The Convertible Series B-1
Preferred Stock is being offered by American Fronteer, which will be issued a
maximum of 150,000 warrants, depending on the proceeds of the offering, that
allow the holder to purchase shares of eVision's Convertible Series B-1
Preferred Stock at a purchase price of $12.00 per share for five years. American
Fronteer also is to receive a commission of 10% and a non-accountable expense
allowance of 3% of the total amount sold in the offering. The offering of the
Convertible Series B-1 Preferred Stock will continue until all 1,500,000 shares
of Convertible Series B-1 Preferred Stock are sold or exchanged or until
December 31, 1999, whichever is earlier. eVision has reserved the right to
continue the offering beyond December 31, 1999. Through December 24, 1999,
approximately 350,000 shares of Convertible Series B-1 Preferred Stock have been
sold for gross proceeds of $3,500,000.
The Convertible Series B-1 Preferred Stock has a cumulative annual dividend rate
payable semi-annually of 8% in cash and 7% in additional shares of the
Convertible Series B-1 Preferred Stock. Online International has guaranteed the
payment of any cash dividends that accrue on the Convertible Series B-1
Preferred Stock through October 31, 2002. The semi-annual dividend payable on
shares of Convertible Series B-1 Preferred Stock will be equivalent to three and
one-half one hundredths of a share of Convertible Series B-1 Preferred Stock for
each outstanding share of Convertible Series B-1 Preferred Stock. Any
Convertible Series B-1 Preferred Stock issued as a dividend on the Convertible
Series B-1 Preferred Stock will have the same dividend and the same terms as the
Convertible Series B-1 Preferred Stock. The dividend on the Convertible Series
B-1 Preferred Stock is payable semi-annually beginning October 31, 1999, and
continuing each April 30 and October 31 thereafter, when and if declared by the
Board of Directors. Each share of Convertible Series B-1 Preferred Stock is
immediately convertible by the holder into 10 shares of eVision's common stock
which is equivalent to a price of $1.00 per share of common stock. If the common
stock does not have a closing bid price of at least $1.15 per share for at least
20 trading days during the period commencing on September 30, 1999, and ending
on September 30, 2000, the Convertible Series B-1 Preferred Stock will be
convertible by the holder into common stock determined by dividing $10 by a
price equal to the higher of the five day average closing bid price of the
common stock prior to September 30, 2000, or $0.50 per share. In addition, each
share of Convertible Series B-1 Preferred Stock is automatically convertible
into 10 shares of common stock at $1.00 per share at such time as the closing
bid price of the common stock is at least $4.00 per share for 30 consecutive
trading days. The Convertible Series B-1 Preferred Stock is redeemable by
eVision on or after October 1, 2003, at a price of $12.50 per share plus any
accrued and unpaid dividends.
Online International has guaranteed through October 31, 2002, the payment of
each annual 8% cash dividend on the Convertible Series B-1 Preferred Stock that
is being offered by eVision if such dividend is not paid by eVision. In
consideration for making such guaranty, eVision issued an affiliate of Online
International 250,000 shares of eVision's common stock which had a value of
$62,500 based on the closing price of $0.25 per share of the common stock on the
date of the agreement. If Online International is required to make payment as a
result of its guaranty, Online International or its designee will receive a 12%
convertible debenture equivalent to the amount that Online International is
required to pay on the guaranty unless the act of eVision in giving Online
International or its designee the 12% convertible debenture would be deemed to
be an illegal distribution under the Colorado Business Corporation Act. In such
event, Online International or its designee would receive, instead of a 12%
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convertible debenture, the number of shares of common stock as is equal to the
total amount of the dividend paid divided by 90% of the conversion price of the
common stock as defined in the 12% convertible debenture. In general, the
conversion price of the convertible debenture will be the market price of the
common stock on the date of conversion.
Sale of Fronteer Capital
On July 30, 1999, eVision entered into a Stock Purchase Agreement with Ladsleigh
Investments Limited, BVI whereby eVision agreed to sell and Ladsleigh agreed to
purchase 100% of the stock of a wholly owned subsidiary of eVision, Fronteer
Capital, Inc., for $3,000,000, excluding cash and warrants to purchase equity in
a publicly traded company. The primary assets were approximately 122,084,000
shares of the common stock of Online International, that were originally
purchased in open market transactions on the Hong Kong Stock Exchange and that
were accounted for as trading securities. The purchase price of Fronteer Capital
was based on the fair value of the primary assets held by Fronteer Capital as of
July 30, 1999 based on a third party quotation service. Unrealized gains on the
securities held by Fronteer Capital through July 30, 1999 of approximately
$1,682,000 have been recognized. The purchase price was paid in cash of $150,000
and in the form of a promissory note for $2,850,000, which bears interest at 14%
and is due July 30, 2000. To secure the promissory note, eVision holds all the
primary assets of Fronteer Capital in escrow. Prior to the transaction, there
was no material relationship between Ladsleigh and eVision or any of its
affiliates, directors or officers.
Proposed Investment in Mutual Fund Developer and Sponsor
eVision has entered into a letter of intent to acquire control of Quaker Funds,
Inc. which is the developer and sponsor of the Quaker Family of Funds, a group
of six mutual funds having approximately $70,000,000 in assets under management.
An independent institutional investment advisor manages each fund. As proposed,
the acquisition includes the issuance of 4,666,667 shares of eVision's common
stock for approximately 60% of the outstanding common stock of Quaker Funds. The
shareholders of Quaker Funds that receive eVision's common stock will be able to
sell their common stock back to eVision if eVision's common stock does not trade
at an average price of $3.00 per share for a period of time between one and two
years after the closing. There are also provisions whereby the Quaker Funds
shareholders may sell their remaining 40% ownership in Quaker Funds to eVision
or buy back their 60% interest in Quaker Funds. The transaction is subject to
the execution of a definitive agreement, which is currently being negotiated.
There are no assurances that the transaction will be consummated on the terms
specified in the letter of intent or at all.
Employees
As of September 30, 1999, eVision and its subsidiaries had 196 full time
employees. One hundred sixty-five were employed by American Fronteer; eleven
were employed by Fronteer Corporate Services, Inc., a wholly owned subsidiary of
eVision that provides management, accounting and administrative services to
eVision; three were employed by Corporate Net Solutions, a wholly owned
subsidiary of eVision that established American Fronteer's wide area network
linking its twelve offices via a high bandwidth intranet; one was employed by Q6
Technologies, Inc.; and 16 were employed by Secutron and MidRange.
ITEM 2. PROPERTIES
The offices for eVision, its wholly owned subsidiaries and eBanker are located
at One Norwest Center, 1700 Lincoln Street, 32nd Floor, Denver, Colorado, 80203.
The offices consist of approximately 47,071 square feet of subleased space. The
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sublease expires on April 30, 2007. eVision currently pays monthly rent of
$62,800 for the space. eVision also leases space for its branch offices pursuant
to leases that have various rental rates and expire at various dates.
The offices for Secutron are located at 3773 Cherry Creek North Drive, Suite
825, Denver, Colorado, 80209. The offices consist of approximately 5,946 square
feet of leased space. The lease expires on August 31, 2000 and requires the
payment of monthly rentals of $6,784 for the space.
ITEM 3. LEGAL PROCEEDINGS
eVision 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 eVision, have been adequately
provided for in the accompanying consolidated financial statements, and the
ultimate resolution of the other arbitration and litigation matters will not
have a significant adverse effect on the consolidated results of operations or
the consolidated financial position of eVision.
Anthony R. Kay, a former officer, director and shareholder of Secutron,
individually, and in conjunction with his consulting company, ARK Consulting
Services Inc., filed claims on July 30, 1998, in the District Court for the City
and County of Denver, Colorado against eVision, Secutron and Midrange and
against certain current and former officers, directors, shareholders and
affiliates of eVision. Secutron and the other named defendants have entered into
an agreement to settle the lawsuit. Pursuant to the terms of the settlement,
Secutron paid Mr. Kay $400,000 in cash and eVision issued Mr. Kay 550,000 shares
of common stock. In addition, eVision agreed to register Mr. Kay's shares of
common stock for resale. eVision and the other defendants also agreed that if
Mr. Kay does not receive a net amount of at least $325,000 from the sale of the
common stock, Secutron and the other defendants will pay Mr. Kay the difference
between what Mr. Kay does receive and $325,000 or provide Mr. Kay with
additional shares of common stock to make up the deficiency based upon the then
current trading prices of the common stock. If Mr. Kay does not realize $325,000
from the sale of all of the common stock by April 1, 2000, Mr. Kay is entitled
to receive the deficiency in cash. Any sales by Mr. Kay of the common stock must
be made in a commercially reasonable manner. As part of the agreement, all of
the common stock of Secutron held by Anthony R. Kay and his family, which
approximated 5% of the outstanding common stock of Secutron, were returned to
Secutron and the other defendants or their assigns. In addition, ARK Consulting
agreed to cancel the settlement agreement that required payments to ARK
Consulting of $10,000 per month through the year 2011.
On December 23, 1996, AFFC received notification of an arbitration award in NASD
Arbitration No. 95- 05062, Chang, et al. v. AFFC that was originally filed on
October 21, 1995. The allegations in the case relate to a private placement sold
by a former broker at AFFC, all of which sales occurred prior to his employment
by AFFC. In 1996, AFFC provided for damages that were awarded in the amount
$424,824 against AFFC, which AFFC appealed. During the year ended September 30,
1999, AFFC lost the first appeal and the court ordered AFFC to place on deposit,
in a restricted cash account, the amount of $575,000. The deposit will remain in
the restricted account pending the outcome of the next level of appeal.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of eVision's security holders during eVision's
fiscal quarter ended September 30, 1999.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
(a) Market Information. eVision's common stock was traded on the NASDAQ SmallCap
Market under the symbol FDIR from March 27, 1989 to October 21, 1998, when it
began trading on the OTC Bulletin Board. eVision's common stock is now traded
under the symbol EVIS. The following table shows the range of high and low
closing bid quotations for the common stock, for each quarterly period since
October 1, 1997. These quotations represent prices between dealers and do not
include retail markups, markdowns, or commissions and may not necessarily
represent actual transactions.
COMMON STOCK
Fiscal Quarter Ended: High Low
-------------------- ---- ---
September 30, 1999 $ 0.910 0.420
June 30, 1999 1.280 0.460
March 31, 1999 0.875 0.180
December 31, 1998 0.375 0.063
September 30, 1998 0.813 0.313
June 30, 1998 1.031 0.688
March 31, 1998 1.281 0.656
December 31, 1997 0.750 0.406
Trading in eVision's common stock is currently conducted in the non-NASDAQ
over-the-counter market in what is commonly referred to as the electronic
bulletin board or the "pink sheets." As a result, an investor may find it more
difficult to dispose of or to obtain accurate quotations as to the market value
of eVision's common stock. In addition, eVision is subject to a rule promulgated
by the Commission, which provides that various sales practice requirements are
imposed on broker/dealers who sell eVision's common stock to persons other than
established customers and accredited investors. For these types of transactions,
the broker/dealer has to make a special suitability determination for the
purchaser and have received the purchaser's written consent to the transactions
prior to sale. Consequently, the rule may have an adverse effect on the ability
of broker/dealers to sell eVision's common stock, which may affect the ability
of purchasers to sell eVision's common stock in the market.
(b) Holders. As of September 30, 1999, eVision had approximately 900 holders of
record of its common stock.
(c) Dividends. eVision has not declared cash dividends on its common stock since
its inception and eVision does not anticipate paying any dividends in the
foreseeable future. eVision is currently precluded from paying dividends on its
common stock by a convertible debenture agreement.
(d) Recent Sales of Unregistered Securities.
In December 1997, eVision sold Heng Fung Finance Company Limited, now known as
Online Credit Limited (Online Credit) a ten year $4,000,000 10% Convertible
Debenture that is convertible into shares of common stock of eVision at a price
of $0.53125 per share until December 15, 2007, unless sooner paid, and an option
to purchase a $11,000,000 Convertible Debenture that is convertible into shares
of common stock of eVision at a price of $0.61 per share until ten years from
the date of issue unless sooner paid. Subsequently, Online Credit partially
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exercised the option and purchased additional 10% Convertible Debentures
totaling $2,500,000. On September 23, 1998, Online Credit and eVision agreed to
amend the terms of the remaining $8,500,000 of the $11,000,000 10% Convertible
Debenture by increasing the interest rate to 12%, changing the conversion price
to the lower of $0.35 or the fair market value per share, and changing the
default conversion price to $0.10 per share. On November 11, 1998, Online Credit
partially exercised its option to purchase $8,500,000 of 12% Convertible
Debentures by purchasing a $1,000,000 12% Convertible Debenture from eVision. As
of September 30, 1999, Online Credit had purchased a total of $8,000,000 in
convertible debentures. During the year ended September 30, 1999, eVision issued
1,569,417 shares of common stock in payment of interest on the convertible
debentures. The interest on the convertible debentures accrued as of September
30, 1999 of $212,111 was paid with 428,583 shares of eVision's common stock
subsequent to year end.
The sales of the convertible debentures and issuance of shares for interest 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 purchaser had access
to full information concerning eVision. The certificates for the shares and the
convertible debentures contain a restrictive legend advising that the shares and
the convertible debentures 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.
Between May and September 1999, eVision issued 110,500 shares of its Convertible
Series B Preferred Stock to various investors. eVision issued 25,500 shares of
Convertible Series B Preferred Stock in exchange for 25,500 shares of Series B
Preferred Stock and 85,000 shares of Convertible Series B Preferred Stock were
issued at a purchase price of $10.00 per share. The sales of preferred stock
were made in reliance upon the exemptions from registration provided by Section
4(2) of the Securities Act of 1933, as amended and Rule 506 of Regulation D
adopted under the 1933 Act. The purchasers had access to full information
concerning eVision and represented that they purchased the shares for the
purchasers' own accounts and not for the purpose of distribution. The
certificates for the shares contain a restrictive legend advising that the
shares 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. American Fronteer was the underwriter for the
offering and received a 10% commission in addition to a 3% non-accountable
expense allowance and warrants.
On September 18, 1999, eVision issued Anthony R. Kay 550,000 shares of common
stock in consideration of the settlement of a lawsuit. The issuance of the
common stock was made in reliance upon the exemption from registration provided
by Section 4(2) of the 1933 Act. Mr. Kay had access to full information
concerning eVision and represented that he accepted the common stock for his own
account and not for the purpose of distribution. The certificate for the common
stock contains a restrictive legend advising that the common 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. No underwriters were involved in the transaction.
ITEM 6. SELECTED FINANCIAL DATA
On February 25, 1997, McLeod USA Publishing Company purchased from eVision the
primary operating assets of a directory business for approximately $2,800,000
including the application of a $500,000 non-recourse loan from McLeod in
accordance with an option agreement. On the same date, a third party purchased
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another directory from eVision for approximately $202,000 in cash. On September
15, 1997, a third party purchased all of the primary operating assets of
Fronteer Marketing Group, Inc. for approximately $421,000. On March 20, 1998,
eVision sold the remaining net assets, which were not previously identified by
eVision as part of discontinued operations for the return of 493,500 shares of
eVision's common stock. As a result of these sales, the directory business and
Fronteer Marketing Group, Inc. have been accounted for as discontinued
operations in the consolidated financial statements.
On July 23, 1996, eVision sold its clearing operation to MultiSource Services,
Inc. for $3,000,000, but included a $1,500,000 contingency in the form of a
forgivable loan payable to MultiSource, plus the net assets of the clearing
operation. The loan was forgiven and recognized as an extraordinary item net of
tax during the year ended September 30, 1998.
On April 26, 1995, eVision acquired the assets of RAFCO, Ltd. As a result of
this transaction, the former shareholders of RAFCO, acquired a 55% interest in
eVision. Accordingly, the transaction was accounted for as a "reverse
acquisition" of eVision by RAFCO using the purchase method of accounting.
eVision's assets and liabilities prior to the transaction were adjusted to their
fair market value as of the date of the business combination. eVision's
operations are included in the consolidated financial statements beginning May
1, 1995, the effective date of the business combination. As a result of the
reverse acquisition accounting, historical financial statements presented for
periods prior to the business combination date include the consolidated assets,
liabilities, equity, revenues, and expenses of RAFCO only.
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The following is selected consolidated financial data (in thousands, except per
share data) for eVision as of September 30, 1999, 1998, 1997 and 1996 and for
the years then ended and as of and for the nine months ended September 30, 1995.
This information should be read in conjunction with the consolidated financial
statements.
<TABLE>
<CAPTION>
Nine months
ended
Year ended September 30, September 30,
---------------------------------------------- ------------
1999 1998 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue ................................................ $ 34,193 27,387 25,100 21,369 13,153
Loss from continuing operations ........................ (3,189) (6,979) (1,990) (990) (806)
Loss on sale of discontinued operations, net of
income tax benefit of $160 and $410 for 1998
and 1997, respectively ................................. -- (250) (667) -- --
Loss from discontinued operations, net of
income tax benefit of $102 and $412 for 1998
and 1997, respectively ................................. -- (159) (799) (1,369) (1,086)
Extraordinary item, net of income taxes of
$585,000 ............................................... -- 915 -- -- --
Preferred stock dividend ............................... (48) -- -- -- --
-------- -------- -------- -------- --------
Net loss applicable to common shareholders ............. (3,237) (6,473) (3,456) (2,418) (1,925)
======== ======== ======== ======== ========
Basic earnings (loss) per common share:
Continuing operations ............................... $ (0.18) (0.42) (0.12) (0.07) (0.09)
Discontinued operations:
Loss on sale of discontinued operations ......... -- (0.02) (0.04) -- --
Loss from discontinued operations ............... -- (0.01) (0.05) (0.10) (0.11)
Extraordinary item .................................. -- 0.06 -- -- --
-------- -------- -------- -------- --------
Total ........................................... $ (0.18) (0.39) (0.21) (0.17) (0.20)
======== ======== ======== ======== ========
Working capital ........................................ $ 15,427 10,076 3,595 4,991 4,130
======== ======== ======== ======== ========
Total assets ........................................... $ 22,740 15,371 11,003 14,524 17,282
======== ======== ======== ======== ========
Total long-term liabilities ............................ $ 15,877 14,864 2,732 3,492 3,269
======== ======== ======== ======== ========
Total stockholders' equity (deficit) ................... $ (3,930) (3,043) 3,352 6,086 5,442
======== ======== ======== ======== ========
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
Results of Operations
Year ended September 30, 1999 compared to year ended September 30, 1998
Revenue for the year ended September 30, 1999 was $34,193,262, an increase of
$6,805,958 or 24.9% over revenue of $27,387,304 for the year ended September 30,
1998. The increase primarily relates to increased brokerage commissions of
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$2,430,194; an increase in trading profits of $679,227; increased computer
hardware and software operations revenue of $1,250,948; increased interest
income on investments of $1,411,992 and a gain on the sale of assets of
$2,129,864, offset by a decrease in investment banking activity of $928,080.
The increase in brokerage commissions of $2,430,194 is due primarily to an
increase in commission activity. Ticket transactions increased approximately 49%
for the year ended September 30, 1999 compared to the year ended September 30,
1998. This was partially offset by a decrease in the average commission per
transaction ticket of 17%. The primary reasons for the increased activity were
general market conditions and positive results from AFFC's research
recommendations that were acted upon by customers. In addition, branch offices
opened during the year ended September 30, 1998 were open for the entire current
year.
Trading profits increased $679,227 due primarily to general market conditions,
as well as increases in positions in securities in which American Fronteer,
eVision's securities broker/dealer, makes a market.
Computer hardware and software revenues for the year ended September 30, 1999
increased primarily due to a hardware system upgrade by a customer and software
enhancements to proprietary software products for customers.
During the year ended September 30, 1999, eBanker invested in debt securities of
various corporations that are traded on foreign stock exchanges. The debt
securities carry a premium redemption value over the face amount of each
security. If the security were held until maturity, eBanker would receive a
guaranteed premium above the face value. The purchase discount and the premium
for holding each security to maturity were being accreted to interest income
over the remaining life of the security. Interest income on the investments in
debt securities for the year ended September 30, 1999, was $1,411,992. During
the year ended September 30, 1999, eBanker decided to change its investment
strategy with respect to the bond investments to systematically sell these
securities. Therefore, they have been classified as available-for-sale and
unrealized gains have been recognized as other comprehensive income. Realized
gains of $447,864 are included in gain on sale of assets.
The net loss for the year ended September 30, 1999 includes an unrealized loss
of $65,315 on certain foreign held investments for the year ended September 30,
1999, compared to an unrealized loss of $1,751,792 on certain foreign held
investments for the year ended September 30, 1998. A majority of this activity
in 1998 related to eVision's investment in approximately 122,084,000 common
shares of Online International that were purchased in the open market by
Fronteer Capital. During the year ended September 30, 1999, eVision sold
Fronteer Capital and the unrealized gain of $1,682,000 on these trading
securities was reclassified to gain on sale of assets.
Investment banking revenues of $1,299,209 for the year ended September 30, 1999
decreased $928,080 from the year ended September 30, 1998 due primarily to the
decreased participation in corporate finance underwritings.
The increase in broker/dealer commissions expense was $90,992 or 0.9% for the
year ended September 30, 1999 compared to the increase in brokerage commission
and investment banking revenue combined of $1,502,114 or 8.8% for the year ended
September 30, 1999 over the year ended September 30, 1998. The lower expense
percentage increase reflects adjustments to branch manager overrides and other
payouts to correlate closer to actual production results and the market.
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Interest expense on the convertible debentures of eBanker for the year ended
September 30, 1999 was $1,012,956 compared to $84,031 for the year ended
September 30, 1998. Most convertible debentures were outstanding for a shorter
period of time in 1998 than in 1999 which accounts for the increased 1999
interest expense.
The increase in general and administrative expenses for the year ended September
30, 1999 of $2,076,219 or 15.5% over the year ended September 30, 1998 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 year as they were in 1999.
Interest expense to related party of $827,527 increased for the year ended
September 30, 1999 from the amount of $388,129 for the year ended September 30,
1998 as a result of the convertible debentures issued to Online Credit during
1998. These convertible debentures were outstanding for the full 1999 period.
The minority interest in (earnings) loss represents the minority interest
investments in Q6 Technologies and eBanker.
The loss from discontinued operations for the year ended September 30, 1998,
represents the loss on sale and net loss from operating activity of eVision's
directory and telemarketing businesses of which all of the primary operating
assets were sold during 1998.
The extraordinary item for the year ended September 30, 1998 represents the
recognition of the forgivable loan to MultiSource of $1,500,000 net of income
taxes of $585,000.
Year ended September 30, 1998 compared to year ended September 30, 1997
Revenue for the year ended September 30, 1998 was $27,387,304 compared to
revenue for the year ended September 30, 1997 of $25,100,414. This represents an
increase of $2,286,890 or 9%.
The increase is primarily due to the increase in brokerage commissions of
$983,810 or 7%, an increase of $1,472,136 or 21% in computer hardware and
software sales offset by a decrease in investment banking activity of $776,505.
The increase in brokerage commissions is primarily the result of the additional
offices opened during the previous fiscal year being open for the entire year
ended September 30, 1998. The increase in computer hardware and software revenue
is primarily due to additional contracts for software development and increased
hardware sales. Certain of the software development contracts were for the
purposes of ensuring customers are Year 2000 compliant.
Broker/dealer commissions expense for the year ended September 30, 1998 were
$10,521,902, an increase of $253,138 or 2% over expenses of $10,268,764 for the
year ended September 30, 1997. This increase correlates to the increase in
broker commissions. The 2% increase in commission expense versus the 7% increase
in commission revenue partly reflects adjustments made to branch manager
overrides and broker payouts.
Computer cost of sales for the year ended September 30, 1998 were $7,979,162
compared to $5,767,136 for the prior year. This increase of $2,212,026 or 38%
relates to increased sales and costs associated with assuring that proprietary
software is Year 2000 compliant.
General and administrative expenses were $13,359,245 for the year ended
September 30, 1998 or $2,106,498 greater than general and administrative
expenses of $11,252,747 for the year ended September 30, 1997. This increase of
19% is primarily attributable to the prior year branch openings being in
operation for the entire year ended September 30, 1998, and the new branches
21
<PAGE>
opened during the year ended September 30, 1998. During the year ended September
30, 1998, the Kansas City, San Francisco and New York City branches were opened.
The increase in general and administrative expenses is partially offset by a
decrease in legal fee expense and arbitration settlements of $974,872 in the
year ended September 30, 1998.
A portion of the proceeds of the $4,000,000 convertible debenture purchased by
Online Credit in December 1997 was used to purchase approximately 122,084,000
shares of the common stock of Online International in open market transactions
on the Hong Kong Stock Exchange. For the year ended September 30, 1998, eVision
had recognized an unrealized loss of $1,573,793 on the investment in Online
International.
Depreciation and amortization expense for the year ended September 30, 1998 of
$389,234 represents an increase of $50,289 or 15% over the amount of $338,945
for the year ended September 30, 1997. The increase is primarily due to the
addition of the new branch offices.
Interest income increased $150,502 or 100% from $150,203 for the year ended
September 30, 1997 to $300,705 for the year ended September 30, 1998. This is
due to increased cash balances resulting from the convertible debenture issues
during the year ended September 30, 1998. Interest expense to a related party
relates to the convertible debentures payable to the Online International
related entities.
The loss from discontinued operations and loss on sale of discontinued
operations represents activity for the remaining assets of the directory and
telemarketing business and the final sale of the assets of these businesses,
which were not previously identified by eVision as part of discontinued
operations.
The minority interest in (earnings) loss of $129,363 for the year ended
September 30, 1998 represents the minority shareholders' interest in Secutron's
loss for the year.
Liquidity and Capital Resources
As of September 30, 1999, eVision had $7,593,772 in cash and cash equivalents
and $15,427,043 in working capital. Its current ratio is 4.1:1. Cash flows used
by operating activities during the year ended September 30, 1999, totaled
$4,063,443. Cash flows used for investing activities during the year were
$4,541,623, and consisted primarily of purchases of debt securities of
$4,635,275, less sales of debt securities of $4,306,603, and advances on notes
receivable of $3,700,000. Cash flows from financing activities during the year
of $7,086,186 consisted primarily of net proceeds from the issuance of
convertible debentures of $534,953; net proceeds from the sale of eBanker
securities of $4,678,754; the issuance of the convertible debentures to a
related party of $1,000,000; and $860,147 of net proceeds from a private
placement of eVision's preferred stock.
In May 1999, eVision commenced a private placement of 1,500,000 shares of its
Convertible Series B Preferred Stock at a price of $10.00 per share. The net
proceeds were intended to be used to fund working capital and acquire other
securities broker/dealers. Through September 30, 1999, eVision sold 110,500
shares of Convertible Series B Preferred Stock for net proceeds of $860,147, net
of offering costs of $244,853. eVision then discontinued its private placement
of the Convertible Series B Preferred Stock and, on September 27, 1999,
commenced a second private placement of 1,500,000 shares of its newly designated
Convertible Series B-1 Preferred Stock. eVision is in the process of exchanging
the 110,500 shares of Convertible Series B Preferred Stock sold in the second
offering for an equal amount of shares of Convertible Series B-1 Preferred
Stock.
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<PAGE>
On March 3, 1999, eBanker commenced a second private placement of 3,000,000
units, each consisting of one share of common stock and one detachable warrant
to purchase one share of common stock. The offering closed in July 1999. In the
private placement, 899,444 units were issued resulting in proceeds of
$4,678,754, net of offering costs of $717,912. For participating in the offering
American Fronteer received five year warrants to purchase 89,944 shares of
eBanker's common stock , received a commission of 10% of the proceeds and
received a non-accountable expense allowance of 3% the proceeds.
In April 1998, Fronteer Capital, a formerly wholly owned subsidiary of eVision,
and Online Credit committed to provide to Global Med Technologies, Inc. (Global
Med) 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. During fiscal
1999, eBanker purchased $1,000,000 of Online Credit's outstanding loan of
$1,500,000. The loans bear interest calculated at a rate of 12% per annum and
will mature April 15, 2000. As of September 30, 1999, Global Med had drawn
$2,650,000 on these lines of credit.
In May 1999, eBanker extended Global Med a $750,000 bridge loan commitment of
which $750,000 was drawn as of September 30, 1999. Outstanding principal amounts
under the loan are due December 31, 1999 and accrue at an interest rate of 12%.
On October 4, 1999, eBanker extended to Global Med a $2,000,000 bridge loan
commitment, of which a total of $600,000 was drawn in October and November 1999.
Outstanding principal amounts under the loan are due April 12, 2000 and accrue
at an interest rate of 12%.
eVision previously sold Online Credit a ten year $4,000,000 10% Convertible
Debenture that is convertible into shares of common stock of eVision and an
option to purchase an $11,000,000 12% Convertible Debenture that is convertible
into shares of common stock of eVision. As of September 30, 1999, Online Credit
had purchased a total of $8,000,000 of convertible debentures, of which
$1,000,000 had been purchased during the year ended September 30, 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 that was due March 1999. The installment due date
was extended to March 2000. eVision paid Online Credit a fee of 5%, or $25,000,
paid in 44,092 common shares of eVision for the extension as determined by the
average closing bid price of eVision's common stock for 15 business days prior
to March 23, 1999, or $0.567 per share.
In July 1999, eVision sold the stock of Fronteer Capital for $3,000,000 which
was received in the form of $150,000 cash at closing and a promissory note in
the amount of $2,850,000, due in one year and bearing interest at 14% per annum.
A majority of eVision's assets are highly liquid, consisting mainly of assets
that are readily convertible into cash. Changes in the amount of securities
owned by eVision and receivables from brokers or dealers and clearing
organizations directly affect the amount of eVision's financing requirements.
Management believes that eVision's cash flows from operations, the possibility
of additional purchases of convertible debentures by Online Credit, proceeds
received and expected to be received from the sale of Convertible Series B-1
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.
AFFC is subject to the SEC's net capital rules. AFFC has historically operated
in excess of the minimum requirements. At September 30, 1999, AFFC's net capital
exceeded the SEC's minimum requirement by $169,273.
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<PAGE>
Inflation
The effect of inflation on eVision's operations is not material and is not
anticipated to have any material effect in the future.
Recently Issued Financial Accounting Standards
In June 1998, the FASB issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement was effective for all fiscal
quarters beginning after June 15, 1999. In July 1999, the FASB issued Statement
No. 137, Accounting for Derivative Instruments and Hedging Activities -Deferral
of the Effective Date of FASB Statement No. 133. This Statement defers the
effective date of Statement No. 133 to all fiscal quarters of all fiscal years
beginning after June 15, 2000. eVision has not completed its evaluation of the
impact of this Statement.
Year 2000
The Year 2000 issue refers to the fact that many computer systems were
originally programmed using two digits rather than four digits to identify the
applicable year. When the year 2000 occurs, these systems could interpret the
year as 1900 rather than 2000. Unless hardware, system software and applications
are corrected to be Year 2000 compliant, computers and the devices they control
could generate miscalculations and create operational problems. Various systems
could be affected ranging from complex information technology (IT) computer
systems to non-IT devices such as an individual machine's programmable logic
controller.
To address this issue, eVision developed a corporate plan including the
formation of a team consisting of internal resources and, as deemed necessary,
third party experts. The phases of the plan included: conducting inventory of
the affected technology and assessing the impact of the Year 2000 issue;
developing solution plans; modification or replacement; testing and
certification; and developing contingency plans. All significant components of
software and hardware of eVision have been tested.
eVision expects to be Year 2000 compliant.
eVision relies on third-party suppliers for many services and eVision may be
adversely impacted if these suppliers have not made the necessary changes to
their own systems and products successfully and in a timely manner. eVision
worked with the Securities Industry Association to ascertain the state of Year
2000 readiness and/or compliance of eVision's suppliers. eVision implemented a
plan to communicate with its customers and suppliers on this issue in an effort
to minimize any potential Year 2000 compliance impact; however, it is not
possible to guarantee their compliance.
The total cost of the program was estimated to be less than $50,000, of which
most had been spent through September 30, 1999.
Management of eVision believes it had an effective program in place to resolve
the Year 2000 issues. Nevertheless, since it is not possible to anticipate all
possible future outcomes, especially when third parties are involved, there
could be circumstances in which eVision would be unable to take customer orders,
or collect payments. In addition, disruptions in the economy generally resulting
from Year 2000 issues could materially adversely affect eVision. eVision could
be subject to litigation for computer systems product failure, for example,
equipment shutdown or failure to properly date transaction records. The amount
of potential liability and lost revenue cannot be reasonably estimated at this
time.
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<PAGE>
eVision completed its contingency plan. eVision's contingency plan includes the
use of cellular phones in the event of local telephone system line failures,
manual tracking of trading and inventory positions, direct calls to the clearing
organizations in the event of online system failures and use of the Internet for
delayed quotations in the event of real-time quotations system failures.
eVision's payroll and accounting software have been obtained from national
vendors who have certified their products as Year 2000 compliant.
General
The foregoing discussion contains certain forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which
are intended to be covered by the safe harbors created thereby. These statements
include the plans and objectives of management for future operations, including
plans and objectives relating to expansion and the general development of the
business of eVision. The forward-looking statements included herein are based on
current expectations that involve numerous risks and uncertainties. Assumptions
relating to the foregoing involve judgments with respect to, among other things,
future economic, competitive and market conditions and future business
decisions, all of which are difficult or impossible to predict accurately and
many of which are beyond the control of eVision. Although eVision believes that
the assumptions underlying the forward-looking statements are reasonable, any of
the assumptions could be inaccurate and, therefore, there can be no assurance
that the forward-looking statements included in this Annual Report on Form 10-K
will prove to be accurate. In light of the significant uncertainties inherent in
the forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation by eVision or any other
person that the objectives and plans of eVision will be achieved.
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<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk generally represents the risk of loss that may result from the
potential change in the value of a financial instrument as a result of
fluctuations in interest and currency exchange rates, equity and commodity
prices, changes in the implied volatility of interest rates, foreign exchange
rates, equity and commodity prices and also changes in the credit ratings of
either the issuer of the financial instrument or its related country of origin.
Market risk is inherent to many non-derivative financial instruments, and
accordingly, the scope of eVision's market risk management procedures includes
all market risk sensitive financial instruments. eVision's exposure to market
risk is directly related to its role as a financial intermediary in
customer-related transactions and to its proprietary trading activities.
eVision is an active market maker and conducts block-trading activities in the
listed and over-the-counter equity markets. In connection with these activities,
eVision may be required to maintain significant inventories in order to ensure
availability and to facilitate customer order flow.
eVision faces two types of market risk: foreign exchange rate risk and equity
price risk.
Foreign Exchange Rate Risk. Foreign exchange rate risk arises from the
possibility that changes in foreign exchange rates will impact the value of
financial instruments. When eVision buys or sells a financial instrument
denominated in a currency other than US dollars, exposure exists from a net open
currency position. eVision is then exposed to a risk that the exchange rate may
move against it. At September 30, 1999 and 1998, the currency creating foreign
currency risk for eVision was the Hong Kong dollar.
Equity Price Risk. eVision is exposed to equity price risk as a consequence of
making markets in equity securities. Equity price risk results from changes in
the level or volatility of equity prices, which affect the value of equity
securities or instruments that derive their value from a particular stock, a
basket of stocks or a stock index. eVision attempts to reduce the risk of loss
inherent in its inventory of equity securities by entering into transactions
designed to mitigate eVision's market risk profile.
eVision utilizes a wide variety of market risk management methods, including:
limits for each trading activity; marking all positions to market on a daily
basis; daily profit and loss statements; position reports; aged inventory
position reports; and independent verification of inventory pricing.
Additionally, management of each trading department reports positions, profits
and losses, and trading strategies to management on a daily basis. eVision
believes that these procedures, which stress timely communication between
trading department management and senior management, are the most important
elements of the risk management process.
Efforts to further strengthen eVision's management of market risk are
continuous, and the enhancement of risk management systems is a priority of
eVision. This includes the development of quantitative methods, profit and loss
and variance reports, and the review and approval of pricing models.
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<PAGE>
The table below provides a comparison of the carrying amount to the fair value
of the securities owned by eVision that are classified as trading and available
for sale securities.
September 30, 1999 September 30, 1998
------------------------- --------------------------
Fair Value Carrying Value Fair Value Carrying Value
---------- -------------- ---------- --------------
Foreign Exchange Rate Risk:
Equity Securities $ 621,171 621,171 1,066,972 1,066,972
Debt Securities 1,991,258 1,991,258 -- --
Equity Price Risk:
Equity Securities* 1,495,701 1,495,701 1,688,085 1,688,085
Credit Risk:
Debt Securities 1,991,258 1,991,258 -- --
*Includes equity securities denominated in Hong Kong dollars.
In accordance with generally accepted accounting principles, securities
classified as trading securities are marked-to-market and the resulting
unrealized gain or loss is reflected in the statement of operations. For the
year ended September 30, 1998, eVision recognized unrealized losses of
$1,730,917 on the equity securities denominated in Hong Kong dollars. During the
year ended September 30, 1999, eVision realized a gain of approximately
$1,682,000 on the equity securities denominated in Hong Kong dollars.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements that constitute Item 8 are attached at the
end of this Annual Report on Form 10-K. An Index to these Consolidated Financial
Statements is also included in Item 14 (a) of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
On September 3, 1999, KPMG LLP was dismissed as the independent accountants of
eVision. KPMG LLP acted as the independent accountants for eVision for the years
ended September 30, 1998 and 1997. KPMG LLP's reports on eVision's financial
statements for the past two years ended September 30, 1998 and 1997 did not
contain an adverse opinion or disclaimer of opinion and were not modified as to
uncertainty, audit scope or accounting principles.
The decision to change accountants was approved by eVision's board of directors.
During eVision's two most recent fiscal years and subsequent interim period up
to the date of the change in independent accountants, there were no
disagreements with KPMG LLP on any matter of accounting principle or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreement(s), if any, whether or not resolved to the satisfaction of KPMG
LLP, would have caused KPMG LLP to make a reference to the subject matter of the
disagreement(s) in connection with its reports.
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<PAGE>
On September 13, 1999, eVision engaged the accounting firm of Deloitte & Touche
LLP as eVision's independent accountants for the year ended September 30, 1999.
Deloitte & Touche LLP also are independent accountants for Online International.
During eVision's two most recent fiscal years and subsequent fiscal interim
period up to the date of the engagement of Deloitte & Touche LLP, eVision did
not consult with Deloitte & Touche LLP with regard to any matter concerning the
application of accounting principles to any specific transactions, either
planned or proposed, or the type of audit opinion that might be rendered with
respect to eVision's financial statements.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors. The present term of office of each director
expires at the next annual meeting of shareholders and when his successor has
been elected and qualified. The name, position with eVision, age of each
director and the period during which each director has served are as follows:
Name and Position in eVision Age Director Since
- ---------------------------- --- --------------
Fai H. Chan 55 1997
Chairman, President and Director
Robert H. Trapp 44 1997
Managing Director,
President of American Fronteer
Financial Corporation
Jeffrey M. Busch 42 1998
Director
Robert Jeffers, Jr. 51 1998
Director
Kwok Jen Fong 50 1998
Director
Tony T. W. Chan (1) 25 1999
Director
(1) Tony T. W. Chan is the son of Fai H. Chan.
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<PAGE>
(b) Identification of Executive Officers. Each executive officer holds office
until his successor is duly appointed and qualified, until his death or
resignation or until he shall be removed in the manner provided by eVision's
bylaws. eVision's current executive officers, their ages, positions with eVision
and periods during which they served are as follows:
Name of Executive Officer and Position in eVision Age Officer Since
- ------------------------------------------------- --- -------------
Fai H. Chan 55 February
Chairman of the Board and President 1998
Robert H. Trapp 44 February
Managing Director and President of American Fronteer 1998
Gary L. Cook
Chief Financial Officer, Secretary and Treasurer 41 February
1998
There was no arrangement or understanding between any executive officer and any
other person pursuant to which any person was selected as an executive officer.
(c) Identification of Certain Significant Employees. Not applicable.
(d) Family Relationships. Tony T. W. Chan is the son of Fai H. Chan.
(e) Business Experience.
Background. The following is a brief account of the business experience during
the past five years of each director and executive officer of eVision:
Name of Director
or Officer Principal Occupation During the Last Five Years
---------------- -----------------------------------------------
Fai H. Chan Director of eVision since December 26, 1997;
Chairman and President since February 1998.
Mr. Chan is the Chairman and Managing
Director of Online International and has been
a Director of Online International since
September 2, 1992. Mr. Chan was elected
Managing Director of Online International on
May 1, 1995 and Chairman on June 3, 1995.
Online International's primary business
activities include real estate investment and
development, merchant banking, the
manufacturing of building material machinery,
pharmaceutical products and retail fashion.
Mr. Chan has been the President and a
Director of Asia SuperNet Corporation and its
predecessor, which previously owned various
industrial and real estate companies, since
June 1994 and Chief Executive Officer thereof
since June 1995; a Director of Intra-Asia
Equities, Inc., a merchant banking company,
since June 1993; Executive Director of Hua
Jian International Finance Co., Ltd. From
December 1994 until December 1996; and
Chairman of the Board of Directors of
29
<PAGE>
American Pacific Bank since March 1988 and
Chief Executive Officer thereof between April
1991 and April 1993. Mr. Chan is also a
director of Global Med Technologies, Inc.
Robert H. Trapp Director of eVision since December 26, 1997,
and the Managing Director and member of the
audit committee of eVision since February
1998, and the President of American Fronteer
Financial Corporation since February 1998.
Mr. Trapp has been a director of Online
International since May 1995; a Director of
Inter-Asia Equities, Inc., a merchant banking
company, since February 1995 and the
Secretary thereof since April 1994; Director,
Secretary and Treasurer Asia SuperNet
Corporation and its predecessor,, which owned
various industrial and real estate companies;
and the Canadian operational manager of
Pacific Concord Holding (Canada) Ltd. of Hong
Kong, which operates in the consumer products
industry, from July 1991 until November 1997.
Mr. Trapp is also a director of Global Med
Technologies, Inc.
Jeffrey M. Busch Director of eVision since February 1998. Mr.
Busch is a member of eVision's audit
committee and has been a practicing attorney
for at least the last five years. Mr. Busch
is also a director of Global Med
Technologies, Inc.
Robert Jeffers, Jr. Director of eVision since February 1998. Mr.
Jeffers is a member of eVision's audit
committee and has been a practicing attorney
for at least the last five years.
Kwok Jen Fong Director of eVision since February 1998. Mr.
Fong has been a director of Online
International since 1995. Mr. Fong has been a
practicing solicitor in Singapore for at
least the last five years. Mr. Fong is also a
director of Global Med Technologies, Inc.
Gary L. Cook Secretary and Treasurer of eVision since
February 1998, and Chief Financial Officer of
eVision since September 1998. From 1994 to
1996, Mr. Cook was a principal of a small
venture in which he had majority ownership,
and from 1982 to 1994, was a Senior Manager
for KPMG LLP where he managed all auditing
services for several clients in various
financial and other industries, and developed
and implemented accounting, financial
reporting and Securities and Exchange
Commission reporting systems for growth
companies. Mr. Cook is a director of Global
Med Technologies, Inc.
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<PAGE>
Tony T. W. Chan Director of eVision since 1999. In 1999, Mr.
Chan became the President of OLBroker.Com,
Inc. Prior to April 1999, Mr. Chan worked as
an Investment Banker for Fronteer Securities
(H.K.) Limited, a Hong Kong company in which
Online International indirectly holds a
minority interest. From 1998 to April 1999,
Mr. Chan worked as an Investment Banker for
Commerzbank, Global Equities, Hong Kong. From
1996 to 1998, Mr. Chan worked in equity
derivatives for Peregrine Derivatives. Mr.
Chan received a Bachelor of Commerce degree
in Finance with honors from the University of
British Columbia. In December 1999, Mr. Chan
was appointed to the board of directors of
Global Med Technologies, Inc.
Directorships. No director of eVision is a director of any other entity
that has its securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, or subject to the requirements of Section 15(d) of
the 1934 Act except Messrs. Fai H. Chan, Trapp, Busch, Fong, Cook and Tony
T. W. Chan who are directors of Global Med Technologies, Inc. and Messrs.
Fai H. Chan and Trapp who are directors of Asia SuperNet Corporation.
(f) Involvement in Certain Legal Proceedings. No event required to be reported
hereunder has occurred during the past five years.
(g) Promoters and Control Persons. Disclosure under this paragraph is not
applicable to eVision.
Section 16(a) Beneficial Ownership Reporting Compliance
To eVision's knowledge, during and for eVision's year ended September 30, 1999,
there were no directors or officers or more than 10% shareholders of eVision who
failed to timely file a Form 3, Form 4 or Form 5, other than the following:
a. Fai H. Chan failed to timely file a Form 4 in which two transactions were
reported.
b. Robert Jeffers, Jr. failed to timely file a Form 5 in which one transaction
was reported.
c. Kwok Jen Fong failed to timely file a Form 5 in which one transaction was
reported.
d. Online International failed to timely file four Forms 4 in which five
transactions were reported and an Amended Form 4, in which certain
previously reported transactions will be amended and one transaction by
Heng Fung Capital [S] Private Limited will be reported.
e. Online Credit failed to timely file two Forms 4 in which three transactions
were reported and an Amended Form 4, in which certain previously reported
transactions will be amended.
f. Heng Fung Capital [S] Private Limited failed to timely file four Forms 4 in
which five transactions were reported and an Amended Form 4, in which
certain previously reported transactions will be amended and one
transaction will be reported.
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<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
(b) Summary Compensation Table
The following table provides certain information pertaining to the compensation
paid by eVision and its subsidiaries during eVision's last three fiscal years
for services rendered by Fai H. Chan, the Chairman of the Board and the
President of eVision, and Gary L. Cook, the Chief Financial Officer, Secretary
and Treasurer of eVision.
Annual Compensation
<TABLE>
<CAPTION>
Long-Term
Compensation Awards
Other -------------------------
Period Annual Securities All Other
Name and Ended Compen- Underlying Compen-
Principal Position September 30, Salary ($) Bonus ($) sation ($) Options (#) sation ($)
- ------------------ ------------ --------- -------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Fai H. Chan 1999 -- -- -- 9,000,000(a) --
Chairman of the 1998 -- -- -- -- --
Board of Directors 1997 -- -- -- -- --
and President of the
Company
Gary L. Cook 1999 131,937 600 -- 500,000(b) 5,960(c)
Chief Financial 1998 100,728 -- -- -- 4,092(c)
Officer, Secretary 1997 90,000 -- -- -- 3,344(c)
and Treasurer of the
Company and AFFC
</TABLE>
(a) On January 28, 1999, Mr. Chan was granted a ten year option to purchase
8,000,000 shares of common stock at an exercise price of $0.30, which is
currently exercisable. On November 25, 1998, he was also granted options to
purchase 1,000,000 shares subject to certain provisions.
(b) On November 25, 1998, Mr. Cook was granted a ten year option to purchase
shares of common stock at an exercise price of $0.20, as amended, 400,000
of which are subject to certain conditions. The option is exercisable as to
66,666 shares.
(c) Represents matching contributions to a 401(k) and, disability insurance
premiums and savings plan and health club dues for 1999, 1998 and 1997.
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<PAGE>
(c) Option Grants in Last Fiscal Year
The following table sets forth the individual grants of stock options made
during the last completed fiscal year to each of the named executive officers:
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Number of Percent of Total
Securities Options Granted
Underlying to Employees in Exercise
Name Options Granted Fiscal Year Price Expiration Date
---- --------------- ---------------- -------- ------------------
<S> <C> <C> <C> <C>
Fai H. Chan 8,000,000 42.2% $0.30 January 27, 2009
1,000,000 5.3% $0.20 November 24, 2008
Gary L. Cook 500,000 2.6% $0.20 November 24, 2008
</TABLE>
(d) Aggregated Option Exercises and Fiscal Year End Option Value Table
The following table provides information with respect to Fai H. Chan and Gary L.
Cook concerning unexercised options to purchase eVision's common stock held by
them as of the end of the fiscal year ended September 30, 1999:
Fiscal Year End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year End at Fiscal Year End
Name Exercisable/Unexercisable Exercisable/Unexercisable(1)
---- -------------------------- ---------------------------
Fai H. Chan 8,000,000 / 1,000,000 $960,000 / $220,000
Gary L. Cook 33,333 / 466,667 $7,333 / $102,667
(1) Calculated by multiplying the difference between the exercise price and the
closing bid price of $0.42 per share by the applicable shares. Does not give
consideration to commissions or other market conditions.
(e) Long Term Incentive Plan (LTIP) Awards Table
eVision granted no long-term incentive plan awards to Fai H. Chan, Robert H.
Trapp, and Gary L. Cook during the year ended September 30, 1999.
(g) Compensation of Directors-Standard Arrangement
Directors of eVision receive no compensation for their services as directors.
33
<PAGE>
(h) Employment Contracts and Termination of Employment and Change-In-Control
Arrangements
eVision had no such contracts or agreements.
(j) Compensation Committee Interlocks and Insider Participation
eVision has no compensation committee and no officer or employee or former
officer of eVision or any of its subsidiaries during the fiscal year ended
September 30, 1999 participated in deliberations with eVision's Board of
Directors concerning executive officer compensation.
Stock Option Plans
Effective September 30, 1988, as amended September 10, 1996, eVision adopted an
Incentive Stock Option Plan ("Plan"). The Plan authorized the granting of
options to officers, directors, and employees of eVision to purchase 600,000
shares of eVision's common stock. No options could be granted after September
30, 1998. As of September 30, 1999, options to purchase 128,500 shares of
eVision's common stock at $.625 per share through September 8, 2006, were
outstanding and exercisable under the Plan.
On April 8, 1996, as amended on September 10, 1996, eVision adopted the 1996
Incentive and Nonstatutory Option Plan ("1996 Plan"). The 1996 Plan authorizes
the granting of options to officers, directors, employees and consultants of
eVision to purchase 1,250,000 shares of eVision's common stock. No option may be
granted after April 8, 2006. As of September 30, 1999, options to purchase
128,500 shares of eVision's common stock at $.625 per share through September 9,
2009 were outstanding. Of such options, options to purchase 64,250 shares were
exercisable under the 1996 Plan.
On April 8, 1996, as amended on February 19, 1997 and on November 25, 1998,
eVision adopted the September 1996 Incentive and Nonstatutory Option Plan
("September 1996 Plan"). The September 1996 Plan authorizes the granting of
options to purchase 7,500,000 shares of eVision's common stock. No options may
be granted after April 8, 2006. As of September 30, 1999, options to purchase
6,963,833 shares of eVision's common stock at $.20 to $1.00 per share through
December 31, 2010 were outstanding. Of such options, options to purchase
2,140,222 shares were exercisable provided that options totaling 700,000 issued
to two officers of eVision will not be exercisable until and unless basic
earnings per share of eVision for any fiscal year commencing with the fiscal
year ending September 30, 1999, are equal to or exceed $0.10 per share.
As of September 30, 1999, eVision had also granted nonqualified stock options to
purchase 10,839,333 shares of eVision's common stock to certain directors,
officers and consultants at an exercise price of between $0.20 and $0.70 per
share. These options expire in 2008 and 2009. As of September 30, 1999,
8,000,000 of these options are exercisable.
Employee Stock Ownership Plan
On September 22, 1989, eVision's Board of Directors adopted an employee stock
ownership plan ("ESOP") which provides in pertinent part that eVision may
annually contribute tax deductible funds to the ESOP, at its discretion, which
are then allocated to eVision's employees based upon the employees' wages in
relation to the total wages of all employees in the ESOP.
34
<PAGE>
The ESOP provides that more than half of the assets in the ESOP must consist of
eVision's common stock. The ESOP is administered by a board of trustees under
the supervision of an advisory committee, both of which are appointed by
eVision's Board of Directors. As of September 30, 1999, the ESOP owned 418,682
shares of eVision's common stock and no other marketable securities. The shares
are contributed at the discretion of the Board of Directors. For the year ended
September 30, 1999, no shares were contributed. Employees become vested in the
shares of eVision's common stock after six years in the ESOP. Employees are 20%
vested after two years, vesting an additional 20% each year up to 100% after six
years in the ESOP.
Savings Plan
eVision has two retirement saving plans covering all employees who are over 21
years of age and have completed one year of eligibility service. The plans meet
the qualifications of Section 401(k) of the Internal Revenue Code. Under the
plans, eligible employees can contribute through payroll deductions up to 15% of
their base compensation. eVision makes a discretionary matching contribution
equal to a percentage of the employee's contribution. Officers participate in
the plans in the same manner as other employees.
eVision has no other bonus, profit sharing, pension, retirement, stock purchase,
deferred compensation, or other incentive plans.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a)(b) Security Ownership of Certain Beneficial Owners and Management. The
following table sets forth as of December 15, 1999, the number of shares of
eVision's outstanding common stock beneficially owned by each of eVision's
current directors and officers, sets forth the number of shares of eVision's
common stock beneficially owned by all of eVision's current directors and
officers as a group and sets forth the number of shares of eVision's common
stock owned by each person who owned of record, or was known to own
beneficially, more than 5% of eVision's outstanding shares of common stock
respectively:
35
<PAGE>
Name and Address of Amount and Nature
Beneficial Owner or Name of Beneficial
of Officer or Director Ownership (l) Percent of Class
------------------------ ----------------- ----------------
Fai H. Chan 52,661,520 (2)(9) 80.8%
Bank of Communications Tower 10th Floor
231-235 Gloucester Road
Wanchai, Hong Kong 040
Robert H. Trapp 120,000 (3)(4) ***%
1700 Lincoln Street, 32nd Floor
Denver, Colorado 80203
Kwok Jen Fong 50,000 (4)(5) ***%
7 Temasek Blvd #43-03
Suntec Tower One
Singapore 038987
Jeffrey M. Busch 200,000 (6) ***%
3828 Kennett Pike, Suite 206
Greenville, DE 19807
Robert Jeffers, Jr 50,000 (7) ***%
6101 16th St. SW Suite 511
Washington, DC 20011
Tony T. W. Chan -- --%
1700 Lincoln Street, 32nd Floor
Denver, Colorado 80203
Gary L. Cook 146,666 (8) **%
1700 Lincoln Street, 32nd Floor
Denver, Colorado 80203
All officers and directors 53,268,186 (9) 81.7%
As a group (7 persons)
Online Credit International Limited 43,661,520 (9) 66.9%
Bank of Communications Tower 10th Floor
231-235 Gloucester Road
Wanchai, Hong Kong 040
**Less than 1%
(1) Except as indicated below, each person has the sole voting and/or
investment power over the shares indicated.
36
<PAGE>
(2) Includes 8,200,000 shares underlying stock options, of which 200,000
are exercisable only if the basic earnings per share of eVision for
any fiscal year commencing with the fiscal year ended September 30,
1999, are equal to or exceed $0.10 per share. Also includes 43,661,520
shares beneficially owned by Online Credit International Limited. Mr.
Chan is an executive officer, a director and an 11% stockholder of
Online International.
(3) Consists of shares underlying stock options that are exercisable only
if the basic earnings per share of eVision for any fiscal year
commencing with the fiscal year ended September 30, 1999, are equal to
or exceed $0.10 per share.
(4) Messrs. Trapp and Fong are directors of Online International. Messrs.
Trapp and Fong disclaim beneficial ownership of the shares
beneficially owned by Online International.
(5) Consists of shares underlying stock options that are exercisable on
only if the basic earnings per share of eVision for any fiscal year
commencing with the fiscal year ended September 30, 1999, are equal to
or exceed $0.10 per share.
(6) Consists of shares underlying stock options that are exercisable only
if the basic earnings per share of eVision for any fiscal year
commencing with the fiscal year ended September 30, 1999, are equal to
or exceed $0.10 per share.
(7) Consists of shares underlying stock options that are exercisable only
if the basic earnings per share of eVision for any fiscal year
commencing with the fiscal year ended September 30, 1999, are equal to
or exceed $0.10 per share.
(8) Consists of shares underlying stock options, of which 80,000 are
exercisable only if the basic earnings per share of eVision for any
fiscal year commencing with the fiscal year ended September 30, 1999,
are equal to or exceed $0.10 per share.
(9) Includes 35,913,487 shares underlying convertible debentures owned or
that may be acquired upon exercise of an option. Online International
is the parent company of Heng Fung Capital [S] Private Limited (Heng
Fung Private). Heng Fung Private is the parent company of Online
Credit. 43,411,520 of the shares beneficially owned by Online
International are beneficially owned by Heng Fung Private, of which
38,718,379 of the shares are beneficially owned by Online Credit. Of
the 38,718,379 shares beneficially owned by Online Credit, 35,913,487
of the shares are beneficially owned pursuant to a convertible
debenture agreement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a)(b) Transactions with Management and Others and Certain Business
Relationships.
Global Med Technologies, Inc.
In April 1998, Fronteer Capital, formerly a wholly owned subsidiary of eVision,
and Online Credit Limited committed to provide to Global Med lines of credit for
37
<PAGE>
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
September 30, 1999, Global Med had drawn $2,650,000 on these lines of credit.
On October 7, 1998, eBanker, Online Credit, and Global Med entered into an
agreement whereby eBanker purchased, Online Credit sold and Global Med consented
to the sale of $1,000,000 principal amount of loans made by Online Credit to
Global Med along with a warrant to purchase an aggregate of 4,000,000 shares of
Global Med's common stock. eBanker paid Online Credit $1,100,000 for the loans
and warrant. The loans and warrant purchased by eBanker were a portion of loans
and warrant given pursuant to a joint loan commitment made by Online Credit and
Fronteer Capital (subsequently transferred to eBanker) for the benefit of Global
Med.
In May 1999, eBanker extended Global Med a $750,000 bridge loan commitment of
which $750,000 was drawn as of September 30, 1999. Outstanding principal amounts
under the loan are due December 31, 1999 and accrue at an interest rate of 12%.
On October 4, 1999, eBanker extended to Global Med a $2,000,000 bridge loan
commitment, of which $600,000 has been drawn. Outstanding principal amounts
under the loan are due April 12, 2000 and accrue at an interest rate of 12%.
Lockup Agreement
On October 25, 1999, Global Med entered into a Lockup Agreement with eBanker and
a Lockup Agreement with eVision. The agreements provide that eBanker and eVision
will not, between October 25, 1999 and October 28, 2000, without Global Med's
prior written consent, publicly offer, sell, contract to sell, grant any option
for the sale of, or otherwise dispose of, directly or indirectly, (i) warrants
to purchase 9,000,000 shares of Global Med's common stock at $0.25 per share
held by eBanker or the warrants to purchase 1,000,000 shares of Global Med's
common stock at $0.25 per share held by eVision and (ii) any shares (the Shares,
and, together with the warrants, the Securities) of common stock issuable upon
the exercise of the warrants; provided, however, that eBanker or eVision may
offer, sell, contract to sell, grant an option for the sale of, or otherwise
dispose of all or any part of the Securities or other such security or
instrument of Global Med during such period if such transaction is private in
nature and the transferee of such Securities or other securities or instruments
agrees, prior to such transaction, to be bound by all of the provisions of the
lockup agreements. In exchange for entering into the agreements, eBanker and
eVision were issued 450,000 shares and 50,000 shares of common stock of Global
Med, respectively.
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<PAGE>
In addition, the agreements provide (i) eBanker and eVision will not be
restricted from disposing of the Securities in the event that an unaffiliated
third party commences a tender offer for the outstanding common stock, and (ii)
eBanker and eVision will not be restricted from disposing of 450,000 and 50,000
shares, respectively, of the Securities in the aggregate if the closing sale
price for the Global Med common stock on the principal market on which it then
trades equals or exceeds $5.00 per share for any ten consecutive trading day
period preceding the date of such sale, and (iii) that there will be no
restrictions upon the ability of eBanker or eVision to exercise the warrants.
Online Credit International Limited
Convertible Debentures
eVision previously sold Online Credit a ten year $4,000,000 10% convertible
debenture that is convertible into shares of common stock of eVision at a price
of $0.53125 per share until December 15, 2007, unless sooner paid, and an option
to purchase an $11,000,000 convertible debenture that was convertible into
shares of common stock of eVision at a price of $0.61 per share until ten years
from the date of issue unless sooner paid. Subsequently, Online Credit partially
exercised the option and purchased additional 10% convertible debentures
totaling $2,500,000. On September 23, 1998, Online Credit and eVision agreed to
amend the terms of the remaining $8,500,000 of the $11,000,000 10% convertible
debenture by increasing the interest rate to 12%, changing the conversion price
to the lower of $0.35 or the fair market value per share and changing the
default conversion price to $0.10 per share. As of October 31, 1999, Online
Credit had purchased a total of $8,000,000 of convertible debentures, of which
$1,000,000 were purchased during the year ended September 30, 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 that was due March 1999. The installment due date was
extended to March 2000. eVision paid Online Credit a fee of 5%, or $25,000, paid
in 44,092 common shares of eVision for the extension as determined by the
average closing bid price of eVision's common stock for 15 business days prior
to March 23, 1999, or $0.567 per share.
Each 12% convertible debenture that Online Credit or its designee receives will
bear interest at a rate of 12% per annum and interest only will be payable
quarterly with the final payment of the entire unpaid principal balance and all
accrued and unpaid interest, if not sooner paid, due and payable five years
after the date of issuance. Interest is payable in cash or in shares of
eVision's common stock at the election of Online Credit or its designee. Each
12% convertible debenture will be convertible into shares of eVision's common
stock at a price equal to the lower of $0.35 or the market price of eVision's
common stock at the time of conversion. In the case of default, the conversion
price will be $0.10 per share of eVision's common stock.
Interest payments of $984,638 that were due through September 30, 1999, arising
out of convertible debentures acquired pursuant to the convertible debenture
agreement, were paid by the issuance of 1,998,000 shares of common stock. The
values of the shares of common stock were determined in accordance with the
convertible debenture agreement.
39
<PAGE>
Convertible Series B-1 Preferred Stock Dividend Guaranty
Online International has guaranteed through October 31, 2002, the payment of
each annual 8% cash dividend on the Convertible Series B-1 Preferred Stock that
is being offered by eVision if such dividend is not paid by eVision. In
consideration for making such guaranty, eVision issued an affiliate of Online
International 250,000 shares of eVision's common stock which had a value of
$62,500 based on the closing price of $0.25 per share of the common stock on the
date of the agreement. If Online International is required to make payment as a
result of its guaranty, Online International or its designee will receive a 12%
convertible debenture equivalent to the amount that Online International is
required to pay on the guaranty unless the act of eVision in giving Online
International or its designee the 12% convertible debenture would be deemed to
be an illegal distribution under the Colorado Business Corporation Act. In such
event, Online International or its designee would receive, instead of a 12%
convertible debenture, the number of shares of common stock as is equal to the
total amount of the dividend paid divided by 90% of the conversion price of the
common stock as defined in the 12% convertible debenture. In general, the
conversion price of the convertible debenture will be the market price of the
common stock on the date of conversion.
Online International has advised eVision that Online International would, at
this time, have sufficient liquid assets to pay on its guaranty if it were
required to do so. There are no assurances, however, that Online International
will have sufficient assets to pay on its guaranty if it were required to do so
in the future.
Fronteer Capital, Inc.
Since January 1, 1998, Fronteer Capital, which received the proceeds of the
$4,000,000 convertible debenture purchased by Online Credit in December 1997
pursuant to the convertible debenture agreement, used a portion of the proceeds
to purchase shares of the common stock of Online International in open market
transactions on the Hong Kong Stock Exchange. Fai H. Chan and Robert H. Trapp
are the directors and officers of Fronteer Capital and are directors of Online
International, which owns Online Credit. In addition, Mr. Chan beneficially owns
approximately 11% of the outstanding common stock of Online International.
Fronteer Capital was sold by eVision in July 1999 for $3,000,000, which was paid
in the form of $150,000 cash at closing and a promissory note in the amount of
$2,850,000, due in one year and bearing interest at a rate of 14% per annum.
eBanker Organization
In March, 1999, the board of directors of Fronteer Development, with the
approval of eVision, agreed to cause Fronteer Development to merge into eBanker
USA.com, Inc., which was a Colorado corporation formed for the merger. The
merger was effective March 4, 1999. As a result of the merger, the Fronteer
Development Class B Common Stock, which had a 30 to 1 voting preference and was
owned by eVision (giving eVision 96% of the voting power and 46% of the equity
interest), was exchanged for an equivalent number of shares of eBanker common
stock. The eBanker common stock has one vote per share. After the merger,
eVision held 46% of the voting and equity interest in eBanker. In addition, the
articles of incorporation of eBanker designated a share of Series A Preferred
Stock. The Series A Preferred Stock gives the holder 50% of the vote in the
election of Directors of eBanker. eBanker sold the Series A Preferred Stock for
$1,000 to eVision.
40
<PAGE>
Q6 Technologies, Inc.
In June 1999, eVision entered into an exchange and sale of stock agreement with
Q6 Technologies. Pursuant to the agreement eVision agreed to exchange its
130,494,385 shares of Secutron common stock, which represented 72.80% of the
outstanding common stock, and $100,000 for 5,555,556 shares of Class B common
stock of Q6 Technologies.
Anthony R. Kay, a former officer, director and shareholder of Secutron,
individually, and in conjunction with his consulting company, ARK Consulting
Services Inc., filed claims against eVision, Secutron, MidRange and certain
current and former officers, directors, shareholders and affiliates of eVision,
who entered into an agreement to settle the lawsuit. Pursuant to the terms of
the settlement, Secutron paid Mr. Kay $400,000 in cash and eVision issued Mr.
Kay 550,000 shares of common stock. In addition, eVision agreed to register Mr.
Kay's shares of common stock for resale. eVision and the other defendants also
guaranteed Mr. Kay would receive a net amount of at least $325,000 from the sale
of the common stock.
PART IV
ITEM 14. EXHIBITS, FINANCIAL SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements and Financial Statement Schedules
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Page
----
Independent Auditors' Reports F-1
Consolidated Balance Sheets as of September 30, 1999 and 1998 F-3
Consolidated Statements of Operations for the three year
period ended September 30, 1999 F-5
Consolidated Statements of Comprehensive Income (loss)
for the three year period ended September 30, 1999 F-7
Consolidated Statements of Stockholders' Equity (Deficit) for the
three year period ended September 30, 1999 F-8
Consolidated Statements of Cash Flows for the three year
period ended September 30, 1999 F-9
Notes to Consolidated Financial Statements F-12
All schedules are omitted because the required information is not present in
amounts sufficient to require submission of the schedule or because the
information required is included in the Consolidated Financial Statements and
Notes thereto.
(a) (2) Financial Statement Schedules. None.
(a) (3) Exhibits. See "EXHIBIT INDEX" on page 44.
41
<PAGE>
(b) Current Reports on Form 8-K:
A Current Report on Form 8-K dated July 30, 1999, was filed on August 5, 1999 to
report a transaction under Item 2 relating to the disposition of a subsidiary.
The transaction was the sale of the stock of Fronteer Capital to an unaffiliated
third party for $3,000,000 that was paid in the form of $150,000 cash and a
$2,850,000 promissory note with interest at 14% per annum which matures in one
year. Proforma financial information and exhibits were filed under Item 7.
A Current Report on Form 8-K dated September 3, 1999, was filed on September 3,
1999. The Current Report contained information under Item 4 relating to Changes
in Registrant's Independent Accountants. The Current Report contained
information regarding the dismissal of KPMG LLP as the independent accountants
for eVision. A letter from KPMG was filed as an exhibit under Item 7.
A Current Report on Form 8-K dated September 13, 1999, was filed on September
14, 1999. The Current Report contained information under Item 4 relating to
Changes in Registrant's Independent Accountants. The Current Report contained
information regarding the appointment of Deloitte & Touche LLP as the
independent accountants for eVision for the year ending September 30, 1999.
A Current Report on Form 8-K dated September 18, 1999, was filed on September
27, 1999. The Current Report contained information under Item 5, Other Events.
The Current Report contained information regarding Secutron and the other named
defendants entering into an agreement to settle the lawsuit by Anthony R. Kay
and ARK Consulting Services, Inc. that was filed on July 30, 1998, in the
District Court for the City and County of Denver, Colorado. The settlement
agreement was filed as an exhibit under Item 7.
(c) Exhibits: Included as exhibits are the items in the Exhibit Index.
42
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
eVision USA.Com, Inc.:
We have audited the accompanying consolidated balance sheet of eVision USA.Com,
Inc. and Subsidiaries as of September 30, 1999, and the related consolidated
statements of operations, comprehensive income (loss), stockholders' equity
(deficit), and cash flows for the year ended September 30, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of eVision USA.Com,
Inc. and Subsidiaries as of September 30, 1999, and the results of their
operations and their cash flows for the year ended September 30, 1999 in
conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
December 21, 1999
F-1
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
eVision USA.Com, Inc.:
We have audited the accompanying consolidated balance sheet of eVision USA.Com,
Inc. (formerly Fronteer Financial Holdings Ltd.) and Subsidiaries as of
September 30, 1998, and the related consolidated statements of operations,
comprehensive income (loss), stockholders' equity (deficit), and cash flows for
each of the years in the two-year period ended September 30, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of eVision USA.Com,
Inc. and Subsidiaries as of September 30, 1998, and the results of their
operations and their cash flows for each of the years in the two-year period
ended September 30, 1998, in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
KPMG LLP
Denver, Colorado
December 30, 1998
F-2
<PAGE>
<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30,
----------------------
ASSETS 1999 1998
- ------ ---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 1) ..................................................... $ 7,593,772 9,112,652
Certificate of deposit, restricted (Note 13) ........................................... 575,000 --
Receivables from brokers or dealers and clearing organizations ......................... -- 410,069
Trade receivables ...................................................................... 1,009,918 1,157,841
Other receivables ...................................................................... 542,209 667,425
Securities owned, at market value (Note 2) ............................................. 1,495,701 1,688,085
Notes receivable (Note 3) .............................................................. 3,150,000 --
Notes receivable, related party (Note 4) ............................................... 3,400,000 --
Investments in debt securities, available-for-sale, at market value (Note 5) ........... 1,991,258 --
Other assets ........................................................................... 271,026 261,606
----------- -----------
Total current assets ................................................................ 20,028,884 13,297,678
PROPERTY, FURNITURE AND EQUIPMENT, net (Note 6) ........................................... 1,233,360 1,541,131
FINANCING COSTS, net of accumulated amortization
of $108,062 (Notes 7 and 10) .......................................................... 917,812 --
OTHER LONG-TERM ASSETS .................................................................... 559,995 532,103
----------- -----------
Total assets ........................................................................ $22,740,051 15,370,912
=========== ===========
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
September 30,
----------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) 1999 1998
- ---------------------------------------------- ---- ----
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued expenses (Note 8) ......................................... $ 3,417,849 2,514,860
Payable to clearing organization ....................................................... 128,040 --
Current portion of long-term debt and capital lease obligations (Note 9) ............... 70,812 124,007
Accrued interest payable to related party (Note 11) .................................... 212,111 157,111
Current portion of convertible debentures to related party (Notes 11 and 13) ........... 500,000 --
Deferred revenue ....................................................................... 7,930 118,800
Other current liabilities .............................................................. 265,099 306,574
------------ ------------
Total current liabilities ........................................................... 4,601,841 3,221,352
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS,
net of current portion (Note 9) ....................................................... 89,351 107,532
CONVERTIBLE DEBENTURES (Note 10) .......................................................... 6,747,383 6,101,448
CONVERTIBLE DEBENTURES TO RELATED PARTY
(Notes 11, 13 and 14) ................................................................. 7,500,000 7,000,000
DEFERRED RENT CONCESSIONS ................................................................. 1,540,715 1,654,766
------------ ------------
Total liabilities ................................................................... 20,479,290 18,085,098
------------
MINORITY INTEREST IN SUBSIDIARIES ......................................................... 6,191,241 328,991
------------ ------------
COMMITMENTS AND CONTINGENCIES
(Notes 1, 9, 10, 11, 13, 14, 16 and 17)
STOCKHOLDERS' EQUITY (DEFICIT) (NOTES 14 and 15):
Preferred Stock, 25,000,000 shares authorized, $0.10 par value;
110,500 shares of Convertible Series B issued and outstanding ....................... 11,050 --
Common Stock; 100,000,000 shares authorized,
$0.01 par value; 19,838,299 and 17,140,857 shares
issued and outstanding .............................................................. 198,383 171,408
Additional paid-in capital ............................................................. 13,106,401 11,042,464
Accumulated deficit .................................................................... (17,144,251) (13,907,049)
Accumulated other comprehensive income ................................................. 247,937 --
Unearned ESOP shares (Note 16) ......................................................... (350,000) (350,000)
------------ ------------
Total stockholders' equity (deficit) ............................................. (3,930,480) (3,043,177)
------------ ------------
Total liabilities and stockholders' equity (deficit) ............................. $ 22,740,051 15,370,912
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended September 30,
----------------------------------------------
1999 1998 1997
---- ---- ----
REVENUE:
<S> <C> <C> <C>
Brokerage commissions ............................................... $ 17,193,481 14,763,287 13,779,477
Investment banking .................................................. 1,299,209 2,227,289 3,003,794
Trading profits, net ................................................ 1,085,189 405,962 274,563
Other broker/dealer ................................................. 1,323,578 1,489,853 774,329
Computer hardware and software operations ........................... 9,705,227 8,454,279 6,982,143
Interest income on investments and loans ............................ 1,411,992 -- --
Gain on sale of assets (Notes 1 and 3) .............................. 2,129,864 -- --
Other ............................................................... 44,722 46,634 286,108
------------ ------------ ------------
Total revenue ................................................ 34,193,262 27,387,304 25,100,414
------------ ------------ ------------
COST OF SALES AND OPERATING EXPENSES:
Broker/dealer commissions ........................................... 10,612,894 10,521,902 10,268,764
Computer cost of sales ............................................. 8,752,669 7,979,162 5,767,136
Unrealized loss on securities (Note 17) ............................. 65,315 1,751,792 --
Interest expense on convertible debentures (Note 10) ................ 1,012,956 84,031 --
General and administrative .......................................... 15,435,464 13,359,245 11,252,747
Depreciation and amortization ....................................... 427,816 389,234 338,945
------------ ------------ ------------
Total cost of sales and operating expenses .................. 36,307,114 34,085,366 27,627,592
------------ ------------ ------------
Operating loss ...................................................... (2,113,852) (6,698,062) (2,527,178)
OTHER INCOME (EXPENSE):
Interest income ..................................................... 114,754 300,705 150,203
Interest expense .................................................... (31,178) (17,390) (27,940)
Interest expense to related party (Note 11) ......................... (827,527) (388,129) --
Other ............................................................... 29,422 (15,434) (22,580)
------------ ------------ ------------
Total other income (expense) ................................. (714,529) (120,248) 99,683
Loss before minority interest and income taxes ...................... (2,828,381) (6,818,310) (2,427,495)
Minority interest in (earnings) loss ................................ (224,036) 129,363 (11,331)
------------ ------------ ------------
Loss from continuing operations before income taxes ................. (3,052,417) (6,688,947) (2,438,826)
Income tax (expense) benefit ........................................ (136,631) (290,320) 448,524
------------ ------------ ------------
Loss from continuing operations ..................................... (3,189,048) (6,979,267) (1,990,302)
------------ ------------ ------------
(Continued)
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
Year Ended September 30,
----------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Loss from continuing operations ..................................... $ (3,189,048) (6,979,267) (1,990,302)
Loss on sale of discontinued operations, net of
income tax benefit of $159,748 and $409,692
in 1998 and 1997, respectively (Note 19) ........................ -- (249,861) (666,522)
Loss from discontinued operations, net of income tax
benefit of $101,788 and $411,631 in 1998 and
1997, respectively (Note 19) .................................... -- (159,207) (799,048)
------------ ------------ ------------
Loss from discontinued operations ................................... -- (409,068) (1,465,570)
------------ ------------ ------------
Loss before extraordinary item ...................................... (3,189,048) (7,388,335) (3,455,872)
Extraordinary item-forgiveness of debt, net of income
tax expense of $585,000 (Note 19) ................................ -- 915,000 --
------------ ------------ ------------
Net loss ............................................................ (3,189,048) (6,473,335) (3,455,872)
Preferred stock dividends ........................................... (48,154) -- --
------------ ------------ ------------
Net loss applicable to common shareholders .......................... $ (3,237,202) (6,473,335) (3,455,872)
============ ============ ============
Weighted average number of common shares
outstanding ...................................................... 18,411,886 16,459,515 16,760,597
============ ============ ============
Basic earnings (loss) per common share:
Continuing operations ............................................ $ (0.18) (0.42) (0.12)
Discontinued operations:
Sale of discontinued operations ............................ -- (0.02) (0.04)
Discontinued operations .................................... -- (0.01) (0.05)
Extraordinary item ............................................... -- 0.06 --
------------ ------------ ------------
Total ...................................................... $ (0.18) (0.39) (0.21)
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the Year Ended September 30,
----------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net loss ............................................................ $(3,189,048) (6,473,335) (3,455,872)
Other comprehensive income:
Unrealized gain on available-for-sale securities,
net of tax of $158,517 (Notes 1 and 5) ........................ 247,937 -- --
----------- ----------- -----------
Comprehensive income (loss) ......................................... $(2,941,111) (6,473,335) (3,455,872)
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Convertible
Series B Additional
Preferred Common Paid-in
Stock Stock Capital
----------- ------- ----------
<S> <C> <C> <C>
Balances at September 30, 1996 ..... $ -- 161,419 10,251,969
Proceeds from shares issued
through private placement, net
of issuance costs of $80,257 ..... -- 7,296 715,021
Net loss ............................ -- -- --
----------- ----------- -----------
Balances at September 30, 1997 ...... -- 168,715 10,966,990
Issuance of common shares for
interest (Note 10) ............... -- 4,128 217,539
Common stock received and
canceled in disposition of net
assets of discontinued operations
(Note 19) ........................ -- (4,935) (488,565)
Issuance of common shares for
branch office .................... -- 3,500 346,500
Net loss ............................ -- -- --
----------- ----------- -----------
Balances at September 30, 1998 ...... -- 171,408 11,042,464
Issuance of common shares on
exercise of stock options ........ -- 2,840 53,947
Issuance of common shares for
interest (Note 11) ............... -- 15,694 756,834
Issuance of common shares for
guarantee (Note 14) .............. -- 2,500 60,000
Issuance of Convertible Series B
Preferred stock, net of issuance
costs of $244,853 (Note 14) ...... 11,050 -- 849,097
Issuance of common shares in
settlement (Note 13) ............. -- 5,500 319,500
Issuance of common shares for
extension of debt (Note 11) ...... -- 441 24,559
Preferred stock dividends (Note 14).. -- -- --
Other comprehensive income:
Unrealized gain on
available-for-sale securities .... -- -- --
Net loss ............................ -- -- --
----------- ----------- -----------
Balances at September 30, 1999 ...... $ 11,050 198,383 13,106,401
=========== =========== ===========
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
<CAPTION>
Accumulated
other
Accumulated comprehensive Unearned
Deficit Income ESOP stock Total
----------- ------------- ---------- -----
<S> <C> <C> <C> <C>
Balances at September 30, 1996 ..... (3,977,842) -- (350,000) 6,085,546
Proceeds from shares issued
through private placement, net
of issuance costs of $80,257 ..... -- -- -- 722,317
Net loss ............................ (3,455,872) -- -- (3,455,872)
----------- ----------- ----------- -----------
Balances at September 30, 1997 ...... (7,433,714) -- (350,000) 3,351,991
Issuance of common shares for
interest (Note 10) ............... -- -- -- 221,667
Common stock received and
canceled in disposition of net
assets of discontinued operations
(Note 19) ........................ -- -- -- (493,500)
Issuance of common shares for
branch office .................... -- -- -- 350,000
Net loss ............................ (6,473,335) -- -- (6,473,335)
----------- ----------- ----------- -----------
Balances at September 30, 1998 ...... (13,907,049) -- (350,000) (3,043,177)
Issuance of common shares on
exercise of stock options ........ -- -- -- 56,787
Issuance of common shares for
interest (Note 11) ............... -- -- -- 772,528
Issuance of common shares for
guarantee (Note 14) .............. -- -- -- 62,500
Issuance of Convertible Series B
Preferred stock, net of issuance
costs of $244,853 (Note 14) ...... -- -- -- 860,147
Issuance of common shares in
settlement (Note 13) ............. -- -- -- 325,000
Issuance of common shares for
extension of debt (Note 11) ...... -- -- -- 25,000
Preferred stock dividends (Note 14).. (48,154) -- -- (48,154)
Other comprehensive income:
Unrealized gain on
available-for-sale securities .... -- 247,937 -- 247,937
Net loss ............................ (3,189,048) -- -- (3,189,048)
----------- ----------- ----------- -----------
Balances at September 30, 1999 ...... (17,144,251) 247,937 (350,000) (3,930,480)
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-8(a)
<PAGE>
<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended September 30,
------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net loss ........................................................................... $(3,189,048) (6,473,335) (3,455,872)
Adjustments to reconcile net loss to net cash used by continuing operations:
Issuance of common shares in exchange for services, ........................... 1,097,528 555,761 --
interest expense and settlement agreement
Gain on sale of assets ........................................................ (2,129,864) -- --
Loss from discontinued operations ............................................. -- 409,068 1,465,570
Depreciation and amortization ................................................. 427,816 389,234 338,945
Amortization of financing costs ............................................... 108,062 -- --
Accretion of discount on investment in debt securities ........................ (808,270) -- --
Extraordinary item, net of income tax of $585,000 ............................. -- (915,000) --
Amortization of deferred rent ................................................. (114,051) (61,763) (52,298)
Accretion on convertible bonds ................................................ 114,601 6,576 --
Minority interest in earnings (loss) .......................................... 224,036 (129,363) 11,331
Unrealized loss on trading securities ......................................... 65,315 1,751,792 --
Other ......................................................................... (14,883) 290,320 352,332
Changes in operating assets and liabilities
Decrease (increase) in receivables from clearing
organization ............................................................. 538,109 1,635,065 (434,696)
Decrease (increase) in trade receivables ...................................... 147,923 (370,870) 218,109
Decrease (increase) in other receivables ...................................... 125,216 (285,217) (375,083)
Decrease (increase) in securities owned, net .................................. (1,190,931) (2,568,555) 837,238
Decrease (increase) in other assets ........................................... 5,464 562,450 (683,850)
Increase (decrease) in accounts payable and
accrued expenses ......................................................... 681,879 (701,701) 770,035
Increase (decrease) in deferred revenue ....................................... (110,870) 118,800 (24,400)
Increase (decrease) in other current liabilities .............................. (41,475) 57,019 (7,960)
----------- ----------- -----------
Net cash used by continuing operations ............................................. (4,063,443) (5,729,719) (1,040,599)
Net cash provided (used) by discontinued operations ................................ -- 597,682 (1,222,461)
----------- ----------- -----------
Net cash used by operating activities .................................. (4,063,443) (5,132,037) (2,263,060)
----------- ----------- -----------
(Continued)
See accompanying notes to consolidated financial statements.
F-9
<PAGE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Year Ended September 30,
------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES: 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Purchase of property, furniture and equipment ................................... (238,263) (746,576) (417,476)
Disposal of property ............................................................ 144,849 -- --
Investment in certificate of deposit ............................................ (575,000) -- --
Purchase of debt securities ..................................................... (4,635,275) -- --
Proceeds from sale of debt securities ........................................... 4,306,603 -- --
Advances on notes receivable .................................................... (3,700,000) -- --
Proceeds from sale of Clearing Operation ........................................ -- -- 1,048,075
Other investing activities ...................................................... 5,463 (284,862) (214,393)
Proceeds from sale of Fronteer Capital .......................................... 150,000 -- --
Net cash provided by discontinued operations .................................... -- 221,975 2,498,472
----------- ----------- -----------
Net cash provided (used) by investing activities ................................... (4,541,623) (809,463) 2,914,678
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Fronteer Development Private Placement
Units net of offering costs ................................................ 534,953 6,297,898 --
Proceeds from issuance of convertible debentures
to related party ........................................................... 1,000,000 7,000,000 --
Proceeds from sale of eBanker March 1999 units, net of offering costs ............ 4,678,754 -- --
Proceeds from issuance of Convertible Series B Preferred
Stock, net of offering costs ............................................... 860,147 -- --
Net payments on borrowings from related parties .................................. -- (150,102) (190,900)
Principal payments on borrowings ................................................. (61,922) (86,366) (1,207,802)
Net proceeds from issuance of common stock ....................................... -- -- 722,317
Net proceeds from exercise of stock options ...................................... 56,787 -- 56,787
Proceeds from exercise of eBanker warrants ....................................... 27,435 -- 27,435
Other financing activities ....................................................... (9,968) (88,000) 88,000
----------- ----------- -----------
Net cash provided (used) by financing activities ................................... 7,086,186 12,973,430 (588,385)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ............................................................... (1,518,880) 7,031,930 63,233
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ....................................... 9,112,652 2,080,722 2,017,489
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR ............................................. $ 7,593,772 9,112,652 2,080,722
=========== =========== ===========
(Continued)
See accompanying notes to consolidated financial statements.
F-10
<PAGE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
SUPPLEMENTAL DISCLOSURES RELATED TO STATEMENTS OF CASH FLOWS :
Year Ended September 30,
---------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash payments for:
Interest:
Continuing operations ........................................................ $ 31,178 22,425 27,940
Discontinued operations ...................................................... -- 9,350 142,508
------------ ------- --------
Total cash paid for interest ............................... $ 31,178 31,775 170,448
============ ======= ========
Income taxes: ................................................................... $ 160,780 7,047 129,831
============ ======= ========
OTHER NONCASH INVESTING AND FINANCING ACTIVITIES:
McLeod note payable applied against purchase
price of directories (Note 19) ............................................... $ -- -- 500,000
============ ======= ========
Common stock received for sale of discontinued
operations (Note 19) ......................................................... $ -- 493,500 --
============ ======= ========
Interest paid to related party by issuance of
common stock (Note 11) ....................................................... $ 772,528 221,667 --
============ ======= ========
Acquisition of furniture and equipment by issuance
of common stock .............................................................. $ -- 15,906 --
============ ======= ========
Note receivable exchanged for stock of Fronteer Capital ........................... $ 2,850,000 -- --
============ ======= ========
Shares issued for guaranty of dividends on
Convertible Series B-1 Preferred Stock (Note14) .............................. $ 62,500 -- --
============ ======= ========
Shares issued for financing costs (Note 14) ...................................... $ 25,000 -- --
============ ======= ========
Shares issued in settlement of litigation ........................................ $ 325,000 -- --
============ ======= ========
Equipment purchased under capital lease .......................................... $ 146,653 -- --
============ ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-11
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
eVision USA.Com, Inc., (eVision or the Company) is a holding company that was
incorporated under the laws of the state of Colorado on September 14, 1988.
eVision's consolidated subsidiaries include companies that:
o operate as a fully disclosed securities broker/dealer;
o intend to provide transaction processing, networking and internet
based services;
o design, develop, install, market and support software systems for the
securities brokerage industry; and
o provide leveraged financing, including proposed financing over the
Internet.
The consolidated subsidiaries include all of the following identified majority
owned or controlled companies. All significant intercompany transactions have
been eliminated.
In December 1997, Heng Fung Capital [S] Private Limited (Heng Fung Private), a
subsidiary of Online Credit International Ltd., formerly Heng Fung Holdings
Company Limited (Online International), purchased 1,136,364 shares of the
Company's outstanding common stock from Robert A. Fitzner, Jr. and Robert L.
Long, former officers and directors of the Company, and from two other employees
of American Fronteer Financial Corporation (American Fronteer or AFFC). In
December 1997, Robert A. Fitzner, Jr. and Heng Fung Private agreed that, upon
the regulatory approval of the National Association of Securities Dealers, Inc.
(NASD) of a change in the beneficial ownership of 25% or more of AFFC, Heng Fung
Private would purchase an additional 3,556,777 shares of the Company's
outstanding common stock from Mr. Fitzner which were purchased in February 1998.
American Fronteer Financial Corporation
American Fronteer, a wholly owned subsidiary of eVision, was incorporated in
1974 to engage in the retail stock brokerage business in the Rocky Mountain
Region of the United States. American Fronteer is registered as a broker/dealer
with the Securities and Exchange Commission (Commission), is a member of the
NASD and the Boston Stock Exchange, is an associate member of the American Stock
Exchange, and is registered as a securities broker/dealer in all 50 states.
American Fronteer is a member of the Securities Investor Protection Corporation
(SIPC) and other regulatory and trade organizations. American Fronteer is also
licensed to sell insurance products in certain states. American Fronteer's
business consists of providing retail securities brokerage and investment
services, trading fixed income and equity securities, providing investment
banking services to corporate and municipal clients, managing and participating
in underwriting corporate and municipal securities, and selling a range of
professionally managed mutual funds and insurance products.
F-12
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
American Fronteer's principal executive office and Denver, Colorado branch
office are located at One Norwest Center, 1700 Lincoln Street, 32nd Floor,
Denver, Colorado 80203. American Fronteer also has branch offices located in San
Francisco, California; Colorado Springs, Colorado; West Palm Beach, Florida;
Atlanta, Georgia; Chicago, Illinois; Metairie, Louisiana; Las Vegas, Nevada;
Albany, New York; New York, New York; Dallas, Texas; and Reston, Virginia.
eBanker USA.com, Inc.
Fronteer Development Finance Inc., a Delaware corporation (Fronteer
Development), was incorporated in the state of Delaware in March 1998 to operate
as a finance company. Fronteer Income Growth Inc. (FIGI), a wholly owned
subsidiary of Fronteer Development, was incorporated in September 1998 under the
International Business Companies Ordinances of the Territory of the British
Virgin Islands. In March 1999, Fronteer Development was merged into eBanker
USA.com, Inc. (eBanker), a Colorado corporation, primarily for the purpose of
effectuating a name change to eBanker and becoming a Colorado corporation.
eBanker USA.com, Inc. is a 29% owned consolidated subsidiary of eVision. In
addition to its 29% equity interest, eVision also has the right to cast 50% of
the vote in the election of eBanker's directors due to its ownership of the
preferred stock of eBanker. eBanker has entered into a management agreement with
eVision to assist in the management of eBanker's business including providing
assistance in the (i) identification of lending opportunities, (ii) credit
analysis of potential borrowers, (iii) structure of loans, including
yield-enhancing equity participation and collateral arrangements and (iv)
administration of loans. In exchange for such services, eVision is entitled to
an annual fee equal to 10% of eBanker's pretax profits as determined from
eBanker's annual audited financial statements.
eBanker was created with the purpose of providing a wide range of on-line
financial lending products and services. eBanker intends to identify, target and
serve high-margin, global financial market segments, through its interactive and
multimedia website. eBanker's website first became operational in September
1999. The website is still in its initial phase of development and will
continually be expanded. eBanker has been designed as a non-deposit taking,
broad financial services entity, so that it is not subject to the regulations
facing traditional financial institutions. To date, eBanker's activities have
consisted of raising approximately $13,000,000 from outside sources in private
placements of securities, and making loans to affiliated and unaffiliated
entities.
F-13
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Q6 Technologies, Inc.
Q6 Technologies, Inc. (Q6 Technologies), is a Colorado corporation formed in
March 1999 by Q6 Group, LLC, a Pennsylvania limited liability company, and
eVision. Q6 Technologies is currently a development stage company with no
continuing operations. On June 18, 1999, Q6 Technologies acquired from eVision
72.8% of the outstanding common stock of Secutron Corp., a Colorado corporation
that designs, develops, installs, markets and supports software systems for the
securities brokerage industry (Secutron). Secutron has one wholly owned
subsidiary, MidRange Solutions Corp., a Colorado corporation that is a
distributor and systems integrator of computer products to the Rocky Mountain
region (MidRange). Q6 Technologies' interests in Secutron were acquired in the
early formation and capitalization of Q6 Technologies with eVision. Q6
Technologies subsequently increased its ownership of Secutron to approximately
78% in September 1999 and 95% in December 1999 in connection with the settlement
of a lawsuit by eVision and Secutron. Q6 Technologies determined that the
Secutron and MidRange businesses were not an appropriate part of Q6
Technologies' long-term business strategy. Effective December 17, 1999, Q6
Technologies transferred its ownership interests in Secutron and its wholly
owned subsidiary, MidRange, back to eVision in return for the cancellation of
5,000,000 shares of Class B Common Stock of Q6 Technologies previously held by
eVision and certain contractual concessions. eVision continues to hold 944,444
shares of Class A Common Stock and 555,556 shares of Class B Common Stock of Q6
Technologies.
Secutron Corporation
Secutron was incorporated in Colorado in May 1979. Secutron's business consists
of designing, developing, installing, marketing, and supporting software systems
for the securities brokerage industry. Secutron markets hardware and software to
securities brokerage firms. Secutron is also an Internet service provider
providing Internet services ranging from access to the Internet to development
and maintenance of Web sites. Secutron's wholly owned subsidiary, MidRange, is a
Colorado corporation formed on January 1, 1993. MidRange is an IBM business
partner selling IBM hardware and hardware manufactured by competitors of IBM,
and acts as a distributor for software products which are proprietary to third
parties. MidRange sells hardware and software to businesses in several different
industries, including manufacturers, distributors and healthcare providers.
Subsequent to September 30, 1999, eVision entered into an agreement to sell the
assets of MidRange. MidRange is included in the Q6 Technologies and Secutron
business segment, which includes computer hardware, software and related
technology investments of eVision.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents. Cash on deposit in excess of Federal Deposit Insurance
Corporation limits was $4,262,993 and $3,108,678, as of September 30, 1999 and
1998, respectively. Included in cash and cash equivalents as of September 30,
1999 and 1998 were $447,379 and $5,705,696, respectively, which were invested in
a U.S. Government obligation mutual fund. The U.S. Government obligation mutual
fund invests in U.S. Treasury and agency obligations and in repurchase
agreements, which have these securities as collateral.
F-14
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
TRADE RECEIVABLES AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts is maintained at a level adequate to absorb
probable losses and credit losses inherent in the business based upon specific
identification of probable losses and the Company's prior history of credit
losses. Management determines the adequacy of the allowance based upon reviews
of individual accounts, recent loss experience, current economic conditions, the
risk characteristics of the various categories of accounts and other pertinent
factors.
OTHER RECEIVABLES
Other receivables include receivables from employees, for forgivable loans made
to retail brokers. Such loans bear interest at 8% to 10% and generally are due
within two to five years from the date the broker joins the Company. The loans
and interest are forgiven over the term of the loans and are amortized on a
straight-line basis through a charge to commissions expense. In the event a
broker leaves the Company prior to the end of the loan term, the unforgiven loan
balance and related interest are collectible from the broker.
SECURITIES
Securities transactions and related revenue and expense associated with the
Company's broker/dealer operations are recorded on a settlement date basis,
usually the third business day following the trade date. The effect of using
settlement date rather than trade date for the recording of securities
transactions is not significant. In accordance with financial reporting
requirements for broker/dealers, AFFC's financial instruments, including
securities, are all carried at market value. Securities without a readily
available market value are recorded at estimated fair value. Unrealized
appreciation or depreciation is included in operations as trading profit or
loss. Realized gains and losses are determined using the average cost method.
Marketable equity securities held by other subsidiaries are identified as being
available-for-sale or trading securities and carried at estimated market value.
Unrealized gains and losses are reported as other comprehensive income in the
case of available-for-sale securities.
Statement of Financial Accounting Standards (SFAS) No. 119, Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments,
prescribes disclosure requirements for transactions in certain derivative
financial instruments including futures, forward, swap, and option contracts,
and other financial instruments with similar characteristics. Although the
Company is authorized to enter into such transactions in the ordinary course of
business, and may do so in the future, no such transactions have been
consummated.
F-15
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
CONCENTRATIONS OF RISK
eBanker had originally invested approximately $4,700,000 in debt securities of
Asian corporations, which were traded on the Hong Kong Stock Exchange. Beginning
in the fourth quarter of the year ended September 30, 1999, management began
selling these investments. The proceeds are on deposit in a brokerage account in
the Commerzbank in Singapore. As of September 30, 1999, the Company had
investments in debt securities of $1,991,258.
INVESTMENTS IN DEBT SECURITIES AND COMPREHENSIVE INCOME
eBanker has invested in debt securities of various corporations that are traded
on the Hong Kong Stock Exchange. The Company had classified these debt
securities as held-to-maturity securities. Consequently, the investments were
reported at amortized cost. 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 were being
accreted to interest income over the remaining life of the security using the
effective interest rate method.
As of June 30, 1999, management changed its investment strategy with respect to
the debt securities to systematically sell the debt securities. Consequently,
the investments in debt securities have been transferred from the
held-to-maturity category to the available-for-sale category, are carried at
fair value based on quoted market prices and all unrealized gains, net of
applicable income tax expense, have been reported as other comprehensive income
in the accompanying financial statements. When an investment is sold and the
gain or loss is realized, the gain or loss will be reclassified from other
comprehensive income and be recognized as a component of net loss.
FINANCIAL INSTRUMENTS
The fair value of a financial instrument represents the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced sale or liquidation. Significant differences can arise
between the fair value and carrying amount of financial instruments that are
recognized at historical cost amounts.
The fair values of the Company's short-term and long-term debt either
approximate fair value or are estimated using discounted cash flow analyses
based on the Company's current incremental borrowing rates for similar types of
borrowing arrangements.
The Company's off balance sheet financial instruments are primarily warrants to
purchase 10,000,000 shares of the common stock of Global Med Technologies, Inc.
(Global Med) at $0.25 per share. The warrants have not been valued due to the
significant ownership of Global Med it would represent if the warrants were
exercised and due to the limited market for sales of shares of Global Med common
stock.
F-16
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
REVENUE AND COST RECOGNITION
Revenue from the sale of computer equipment and installation of software is
generally recognized when the equipment and related software is installed and
accepted by the customer. Revenue from hardware and software sales is primarily
generated by MidRange which is an IBM business partner selling IBM hardware and
hardware manufactured by competitors of IBM, and acts as a distributor for
software products which are proprietary to third parties.
Costs incurred in researching, designing, and planning for the development of
new software are included in computer hardware and software operations in the
accompanying consolidated financial statements. All amounts are charged to
operations as incurred until such time as the costs meet the criteria for
capitalization. Such costs have not been significant. General and administrative
costs are charged to expenses as incurred.
Underwriting revenues are recorded when services for the transactions are
substantially complete. Transaction related expenses are deferred and later
expensed to match revenue recognition.
PROPERTY, FURNITURE AND EQUIPMENT
Property, furniture and equipment are recorded at cost. Depreciation of
property, furniture and equipment is computed using the accelerated and
straight-line methods based on the estimated useful lives of the assets. Real
property had an estimated useful life of forty years; furniture and vehicles of
three to five years; and equipment has estimated lives ranging from five to ten
years. Equipment under capital leases and leasehold improvements are amortized
straight line over shorter of the lease term or estimated useful life of the
asset.
INCOME TAXES
Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax basis and operating
loss and tax credit carryforwards. If deferred tax asset realizability is not
considered to be more likely than not, a valuation allowance is provided.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
F-17
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company has adopted the disclosure provisions of Statement of Financial
Accounting Standards No. 123 (SFAS No. 123), Accounting for Stock-Based
Compensation. As permitted under SFAS No. 123, the Company continues to
recognize stock-based compensation costs under the intrinsic value based method
of accounting as prescribed by Accounting Principles Board Opinion No. 25 (APB
No. 25), Accounting for Stock Issued to Employees.
ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
As a securities broker/dealer, AFFC is engaged in various securities trading and
brokerage activities. A portion of AFFC's transactions are collateralized and
are executed with and on behalf of institutional investors including other
broker/dealers. AFFC's exposure to credit risk associated with the
nonperformance of these customers in fulfilling their contractual obligations
pursuant to securities transactions can be directly impacted by volatile trading
markets which may impair the customers' abilities to satisfy their obligations
to AFFC. AFFC's principal activities are also subject to the risk of
counterparty nonperformance.
eVision is a party to various financial instruments with off-balance-sheet risk
as part of its normal course of business, including contractual commitments to
extend credit and other assistance to third parties. These financial instruments
involve, to varying degrees, elements of credit risk, which are not recognized
in eVision's consolidated balance sheets.
RECLASSIFICATIONS
Certain reclassifications have been made to prior years' consolidated financial
statements to conform to current year's presentation.
F-18
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In June 1998, the FASB issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement was effective for all fiscal
quarters beginning after June 15, 1999. In July 1999, the FASB issued Statement
No. 137, Accounting for Derivative Instruments and Hedging Activities -Deferral
of the Effective Date of FASB Statement No. 133. The Statement defers the
effective date of Statement No. 133 to all fiscal quarters of all fiscal years
beginning after June 15, 2000. The Company has not completed its evaluation of
the impact of this Statement. .
NOTE 2. SECURITIES OWNED
Securities owned consisted of the following:
September 30,
-------------------
1999 1998
---- ----
Corporate securities $ 1,337,324 1,401,672
U.S. government obligations 1,644 3,978
Municipal obligations 156,733 282,435
---------- ----------
$ 1,495,701 1,688,085
========== ==========
At September 30, 1998, corporate securities included $1,066,972 invested in
Online Credit International Ltd. (Online International), formerly Heng Fung
Holdings Company Limited, affiliated entities.
NOTE 3. NOTES RECEIVABLE
Notes receivable at September 30, 1999 consists of the following:
Note receivable from unaffiliated entity, interest at 14%,
principal and interest due July 2000, secured by equity securities $2,850,000
Note receivable from unaffiliated entity, interest at 12%,
principal and interest due December 31, 1999, unsecured 50,000
Note receivable from unaffiliated entity, interest at 12%,
interest payable quarterly, matures July 1, 2000, unsecured 250,000
----------
$3,150,000
==========
F-19
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 3. NOTES RECEIVABLE (Continued)
Sale of Fronteer Capital
On July 30, 1999, eVision entered into a Stock Purchase Agreement with Ladsleigh
Investments Limited, BVI whereby eVision agreed to sell and Ladsleigh agreed to
purchase 100% of the stock of a wholly owned subsidiary of eVision, Fronteer
Capital, Inc., for $3,000,000, excluding cash and warrants to purchase equity in
a publicly traded company. The primary assets were approximately 122,084,000
shares of the common stock of Online International, originally purchased in open
market transactions on the Hong Kong Stock Exchange. The purchase price of
Fronteer Capital was based on the fair value of the primary assets held by
Fronteer Capital as of July 30, 1999 based on a third party quotation service.
Unrealized gains on these trading securities held by Fronteer Capital through
July 30, 1999 of approximately $1,682,000 have been realized. The purchase price
was paid in cash of $150,000 and in the form of a promissory note for
$2,850,000, which bears interest at 14% and is due July 30, 2000. To secure the
promissory note, eVision will hold all the primary assets of Fronteer Capital in
escrow.
Other
During the year ended September 30, 1999, eBanker advanced $300,000 to two
unaffiliated entities, for the purpose of funding temporary working capital
needs. The loans are expected to be repaid from proceeds of private placements
for which AFFC is acting as the selling agent. eBanker received a warrant to
purchase 10% of the outstanding shares of common stock at the time of the
private placement offering as a loan origination fee for the $50,000 note
receivable. For the $250,000 note receivable, eBanker received a loan
origination fee of warrants to purchase 200,000 shares of common stock of the
entity at $1.25 per share in addition to a fee of 1% of the loan amount.
Subsequent to year end, eBanker advanced an additional $100,000 to this entity
for which it received warrants to purchase 80,000 shares of common stock at
$1.25 per share plus a fee of 1% of $100,000 or $1,000.
NOTE 4. NOTES RECEIVABLE, RELATED PARTY
Notes receivable, related party at September 30, 1999 consists of the following:
Note receivable from affiliated company, interest at 12% payable
monthly, matures April 2000 $2,650,000
Note receivable from affiliated company, interest at 12% payable
monthly, matures December 31, 1999 750,000
----------
$3,400,000
==========
F-20
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4. NOTES RECEIVABLE, RELATED PARTY (Continued)
Global Med Technologies, Inc.
As of September 30, 1999, notes receivable, related party consists of notes
receivable of eBanker from Global Med which total $3,400,000. Global Med is an
affiliated company due to common control. Fronteer Capital had committed to lend
Global Med $1,650,000 primarily for working capital, with interest at 12% per
annum. In exchange for the commitment, Fronteer Capital earned a warrant to
purchase 1,000,000 common shares of Global Med at $0.25 per share. During
October 1998, eBanker agreed to an assignment of the loan commitment from
Fronteer Capital to Global Med, excluding any warrants. As of September 30,
1999, eBanker had advanced $1,650,000 to Global Med on this line of credit. In
return for the loan, eBanker received a warrant to purchase 5,000,000 common
shares of Global Med at $0.25 per share.
In October 1998, eBanker purchased a portion of notes receivable from Global Med
to Online Credit Limited, formerly known as Heng Fung Finance Company Limited
(Online Credit). The total note receivable from Global Med was $1,500,000. Of
this amount, eBanker purchased $1,000,000 and a warrant to purchase 4,000,000
common shares of Global Med at $0.25 per share from Online Credit for
$1,100,000.
The total amount owed eBanker as of September 30, 1999 under these lines of
credit from Global Med was $2,650,000. The common stock purchase warrants held
by eBanker total 9,000,000 shares of common stock of Global Med for $0.25 per
share. 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 expired April 15, 1999.
In March 1999, eBanker granted an extension of the loan due date until April 15,
2000. In addition, the default conversion price described below was increased to
$0.25 per share from $0.05 per share. In consideration for the change in terms,
Global Med agreed to pay eBanker a 2% fee of $53,000, payable in 42,400 shares
of restricted Global Med common stock.
If Global Med defaults on the repayment of any amount borrowed pursuant to the
notes originally issued to Online Credit, all existing members of the board of
directors of Global Med will have to resign and Online Credit will have the
right to appoint all new members. If there is default and Online Credit 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 Online Credit as are specified above. In addition, if Global Med
defaults on the repayment of amounts owed to eBanker, the loans may be converted
to common stock of Global Med at a default conversion price of $0.25 per share.
F-21
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4. NOTES RECEIVABLE, RELATED PARTY (Continued)
In March 1999, eBanker entered into a bridge loan agreement with Global Med for
$750,000. The promissory note is convertible into common stock of Global Med at
a price based upon the average bid price of Global Med's common stock for a
period of 15 business days prior to April 15, 1999. As of September 30, 1999,
Global Med had an outstanding balance due on the loan of $750,000. Outstanding
principal amounts under the loan are due December 31, 1999 and accrue at an
interest rate of 12%. Interest is payable monthly. eBanker received a loan
commitment fee of 2% or $15,000, which was paid in 13,275 shares of Global Med
common stock.
NOTE 5. INVESTMENTS IN DEBT SECURITIES
As of September 30, 1999, investments in debt securities of Asian corporations
traded on the Hong Kong Stock Exchange are as follows:
Carrying Interest Maturity
Corporation Value Rate Date
- ----------------------------- -------- -------- ---------
China Resources $ 1,199,558 2.00% 04/30/04
Paul Y-ITC 791,700 5.00% 02/03/01
----------
$ 1,991,258
==========
As of September 30, 1999, the debt securities are classified as
available-for-sale and carried at fair value. At September 30, 1999, gross
unrealized gains on the securities were $406,454, with the net of tax unrealized
gain of $247,937 recorded in accumulated other comprehensive income.
During the year ended September 30, 1999, proceeds from the sale of
available-for-sale securities were $4,306,603 with gross realized gains of
$447,863. For the purpose of determining gross realized gains, the cost of the
securities sold is based on specific identification.
F-22
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 6. PROPERTY, FURNITURE AND EQUIPMENT
Property, furniture and equipment consisted of the following:
September 30,
--------------------
1999 1998
Furniture and equipment $ 2,901,228 2,923,665
Leasehold improvements 599,107 558,520
Real property -- 245,100
---------- ----------
3,500,335 3,727,285
Less accumulated depreciation and amortization (2,266,975) (2,186,154)
---------- ----------
$ 1,233,360 1,541,131
========== ==========
NOTE 7. FINANCING COSTS
As of September 30, 1999, financing costs, amortized over the life of the debt
instruments using the effective interest rate method, consisted of the
following:
<TABLE>
<CAPTION>
Financing Accumulated
costs amortization Net
--------- ------------ ---
<S> <C> <C> <C>
Offering costs of the eBanker private placement
units allocated to the convertible debentures
(Note 10) ...............................................$ 938,374 (97,644) 840,730
Financing costs for guarantee of dividends by
related party (Note 14) .................................. 62,500 (4,168) 58,332
Financing fee for extension of due date for the
convertible debenture to related party (Note 11) ........ 25,000 (6,250) 18,750
---------- --------- ---------
$ 1,025,874 (108,062) 917,812
</TABLE>
F-23
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following:
September 30,
-----------------------
1999 1998
---- ----
Trade accounts payable $ 1,324,594 1,313,225
Accrued legal reserves 819,001 500,000
Payroll related accounts 582,409 553,197
Other accrued expenses 691,845 148,438
---------- ----------
$ 3,417,849 2,514,860
========== ==========
NOTE 9. LEASES AND LONG-TERM DEBT
Leases
The Company and its subsidiaries lease office space under long-term
noncancelable operating leases. The leases provide for annual escalations for
utilities, taxes, and service costs, as well as escalating rental rates over the
term of the leases. The Company has two capital leases. One is for communication
equipment with a balance of $30,876 as of September 30, 1999. The Company pays
$1,030 per month through October 2002, which results in an effective interest
rate of approximately 12%. The other capital lease, for computer hardware and
software, has a balance of $129,287 as of September 30, 1999, with payments of
$4,871 per month through April 2002, which results in an effective interest rate
of approximately 12%.
Rent expense included in the consolidated statements of operations was
$1,983,102, $1,809,255 and $1,387,125 for the years ended September 30, 1999,
1998 and 1997, respectively.
Included in equipment and fixtures in the accompanying balance sheets are the
following assets held under capital leases:
September 30,
----------------------
1999 1998
---- ----
Communication equipment $ 46,807 46,807
Computer hardware and software 146,653 --
Assets under capital lease 193,460 46,807
Less accumulated amortization (40,651) (10,921)
--------- --------
Assets under capital lease, net $ 152,809 35,886
========= ========
F-24
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 9. LEASES AND LONG-TERM DEBT (Continued)
The following represents the minimum lease payments remaining under capital
leases and the future minimum lease payments for all noncancelable operating
leases included in continuing operations at September 30, 1999:
Capital Operating
Leases Leases
------- ---------
2000 $ 70,812 2,049,056
2001 70,812 1,915,919
2002 46,457 1,638,905
2003 -- 1,347,421
2004 -- 1,160,595
Thereafter -- 2,901,767
---------- ----------
Total minimum lease payments 188,081 11,013,663
Less amount representing interest (27,918) ==========
----------
Present value of minimum lease payments $ 160,163
==========
Long-Term Debt
Long-term debt as of September 30, 1998 was comprised of a capital lease
described above and a note payable to a bank, secured by real property, with
monthly payments of $3,333 plus accrued interest. Interest was at 8.50% and the
loan matured March 1, 2001. During the year ended September 30, 1999, the
Company sold the real property and paid the note in full. The balances as of
September 30 were as follows:
1999 1998
---- ----
Capital leases $ 160,163 114,872
Long-term debt -- 116,667
-------- --------
160,163 231,539
Less current portion (70,812) (124,007)
-------- --------
$ 89,351 107,532
======== ========
F-25
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 10. CONVERTIBLE DEBENTURES
Fronteer Development May 1998 Private Placement
On May 26, 1998, Fronteer Development Finance Inc. (which was later merged into
eBanker) commenced a private placement of 30,000 units (Unit) each consisting of
(i) one $1,000 convertible debenture, due August 1, 2008, paying 10% per annum;
(ii) 100 Class A common shares; and (iii) warrants exercisable at $3.00 per
share for 500 Class A common shares (Fronteer Development Private Placement).
The convertible debentures are convertible into Class A common shares at a
conversion price of $5.00 per share.
Per the terms of the Fronteer Development Private Placement, the portion of the
cost per Unit allocable to the convertible debentures is 83.4%. As of September
30, 1999, a total of 7,958 units were issued through the eBanker Private
Placement for proceeds of $6,832,851, net of issuance costs of $1,125,149.
Therefore, the convertible debentures were recorded at 83.4% of the $7,958,000
face amount of the convertible debentures. The discount on the convertible
debentures is being amortized as an adjustment to the stated interest rate of
10% using the interest method. Original issue discount amortization of $114,601
and $6,576 has been recognized through September 30, 1999 and 1998,
respectively.
The convertible debentures are scheduled to mature on August 1, 2008 and
generally are not callable by eBanker prior to maturity. Interest is at 10% per
annum, payable each January 31st and July 31st. These debentures are convertible
into shares of common stock of eBanker at a conversion price of $5.00 per share.
Accrued interest expense on the convertible debentures at September 30, 1999 and
1998 was $132,633 and $77,454, respectively.
The offering memorandum for the Fronteer Development 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 amount
of Units purchased by outside investors. eVision has fulfilled its commitment.
This investment is eliminated in the accompanying consolidated balance sheet.
There were no commissions or expenses associated with the Class B common stock
issuance.
In March 1999, Fronteer Development was merged into eBanker USA.com, Inc.
(eBanker), a Colorado corporation, primarily for the purpose of effectuating a
name change to eBanker and becoming a Colorado corporation. As a result of the
merger, the Fronteer Development Class B Common Stock, which had a 30 to 1
voting preference and was owned by eVision (giving eVision 96% of the voting
power and 46% of the equity interest), was exchanged for an equivalent number of
shares of eBanker common stock. The eBanker common stock has one vote per share.
After the merger, eVision held 46% of the voting and equity interest in eBanker.
In addition, the articles of incorporation of eBanker designated a share of
Series A Preferred Stock. The Series A Preferred Stock gives the holder 50% of
the vote in the election of Directors of eBanker. eBanker sold the Series A
Preferred Stock for $1,000 to eVision.
F-26
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 10. CONVERTIBLE DEBENTURES (Continued)
eBanker March 1999 Private Placement
In March 1999, eBanker commenced the March 1999 Private Placement of 3,000,000
units. Each unit consisted of one share of common stock and one detachable
warrant to purchase one share of common stock. Each March 1999 Private Placement
Unit was sold for $6.00. The detachable warrants will be exercisable to purchase
one share of common stock at an exercise price of $8.00 per share from the
earlier of 120 days after an initial public offering of eBanker securities or
one year after the date of the March 1999 Private Placement until August 31,
2000. A total of 899,444 March 1999 Private Placement Units were issued for
proceeds of $4,678,754, net of issuance costs of $717,912.
NOTE 11. CONVERTIBLE DEBENTURES TO RELATED PARTY
In December 1997, the Company sold Online Credit a ten year $4,000,000 10%
Convertible Debenture that is convertible into shares of common stock of the
Company at a price of $0.53125 per share until December 15, 2007, unless sooner
paid, and an option to purchase a $11,000,000 10% Convertible Debenture that is
convertible into shares of common stock of the Company at a price of $0.61 per
share until ten years from the date of issue unless sooner paid. With the
exception of a convertible debenture for $500,000, the convertible debentures
mature in ten years. Online Credit partially exercised the option and purchased
additional 10% Convertible Debentures totaling $2,500,000. On September 23,
1998, Online Credit and the Company agreed to amend the terms of the remaining
$8,500,000 of the $11,000,000 10% Convertible Debenture by increasing the
interest rate to 12%, changing the conversion price to the lower of $0.35 or the
fair market value per share, and changing the default conversion price to $0.10
per share. On September 25, 1998, Online Credit partially exercised its option
to purchase $8,500,000 of 12% Convertible Debentures by purchasing a $500,000
12% Convertible Debenture from the Company. During the year ended September 30,
1999, Online Credit purchased an additional $1,000,000 convertible debenture.
Therefore, as of September 30, 1999 and 1998, Online Credit had purchased a
total of $8,000,000 and $7,000,000, respectively, in convertible debentures. At
September 30, 1999, the current portion of the convertible debentures, due March
2000, was $500,000, which was originally due March 1999. In consideration of the
extension of the due date to March 2000, eVision paid Online Credit a financing
fee equal to 5% or $25,000 which was paid in 44,092 shares of common stock of
the Company.
The quarterly interest payments on the convertible debentures purchased pursuant
to the Convertible Debenture agreement are currently being made in shares of the
Company's common stock and resulted in 412,800 shares being issued through
September 30, 1998 to Online Credit. During the year ended September 30, 1999,
1,569,417 common shares of the Company were issued to pay the accrued interest
through June 30, 1999. Subsequent to September 30, 1999, 428,583 common shares
of the Company were issued to pay the accrued interest of $212,111 through
September 30, 1999.
F-27
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 12. INCOME TAXES
Income tax expense (benefit) relating to the loss from continuing operations for
the three years in the period ended September 30, consisted of the following:
1999 1998 1997
---- ---- ----
Current $ 136,631 -- 99,956
Deferred -- 290,320 (548,480)
-------- -------- --------
$ 136,631 290,320 (448,524)
======== ======== ========
Income tax expense (benefit) for the years ended September 30, 1999, 1998 and
1997, differs from the amounts computed by applying the U.S. Federal income tax
rate of 34% to loss from continuing operations before income taxes as a result
of the following:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Computed "expected" income tax benefit ............ $(1,037,821) (2,274,242) (829,201)
(Increase) decrease in income tax benefit resulting
from:
Nondeductible expenses ......................... 19,487 159,948 10,158
State taxes, net of Federal benefit ............ (166,527) (150,268) (82,000)
Unconsolidated subsidiaries for tax purposes ... 162,031 (111,476) 99,956
Change in valuation allowance for deferred tax
assets ....................................... 1,166,000 2,504,784 505,000
Other .......................................... (6,539) 161,574 (152,437)
----------- ----------- -----------
Income tax expense (benefit) ................... $ 136,631 290,320 (448,524)
=========== =========== ===========
</TABLE>
F-28
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 12. INCOME TAXES (Continued)
Temporary differences between financial statement carrying amounts and the tax
bases of assets and liabilities that result in significant deferred tax assets
and liabilities are as follows:
September 30,
-------------------
1999 1998
---- ----
Deferred tax assets:
Deferred rent concessions $ 601,000 645,000
Accrued expenses 376,000 459,000
Allowance for doubtful accounts 151,000 136,000
Unamortized employee loans (13,000) 135,000
Unrealized loss on investments -- 683,000
Investments in subsidiaries and affiliates 29,000 97,000
Contribution and operating loss carryforwards 4,209,000 1,992,000
----------- -----------
Gross deferred tax assets 5,353,000 4,147,000
Valuation allowance (5,262,000) (4,096,000)
----------- -----------
Deferred tax assets after valuation allowance 91,000 51,000
Deferred tax liabilities:
Property and equipment (91,000) (51,000)
----------- -----------
Gross deferred tax liabilities (91,000) (51,000)
----------- -----------
Net deferred tax asset $ -- $ --
=========== ===========
Net operating losses of approximately $10,500,000 expire during the years from
2011 to 2014.
In assessing the realizability of deferred tax assets, management considered
whether it is more likely than not that the deferred tax asset would be
realized. The ultimate realization of the deferred tax asset is dependent on the
generation of future taxable income in the period in which the temporary
differences become deductible. The Company has established a valuation allowance
for deferred taxes due to the uncertainty that the full amount of the deferred
tax asset will be utilized. In determining the valuation allowance, management
considered factors including the reversal of existing temporary differences and
estimates of future taxable income.
F-29
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 13. COMMITMENTS AND CONTINGENCIES
Secutron-Anthony R. Kay Settlement
Secutron Corp. has entered into an agreement to settle the lawsuit by Anthony R.
Kay and ARK Consulting Services, Inc. (jointly hereinafter referred to as "Mr.
Kay") that was filed on July 30, 1998, in the District Court for the City and
County of Denver, Colorado. Pursuant to the terms of the settlement, eVision
agreed to issue Mr. Kay 550,000 shares of eVision common stock. In addition, the
Company has agreed to register Mr. Kay's shares of eVision's common stock for
resale. The Company has also agreed that if Mr. Kay does not receive a net
amount of at least $325,000 from the sale of the common stock, Secutron and the
other defendants will pay Mr. Kay the difference between what Mr. Kay does
receive and $325,000 or provide Mr. Kay with additional shares of eVision's
common stock to make up the deficiency based upon the then current trading
prices of the common stock. If Mr. Kay does not realize $325,000 from the sale
of all of the common stock by April 1, 2000, Mr. Kay is entitled to receive the
deficiency in cash.
Other Contingencies
The Company is a defendant in certain arbitration and litigation matters arising
from its activities as a broker/dealer. In the opinion of management, with the
advice of counsel, 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.
On December 23, 1996, AFFC received notification of an arbitration award in NASD
Arbitration No. 95- 05062, Chang, et al. v. AFFC that was originally filed on
October 21, 1995. The allegations in the case relate to a private placement sold
by a former broker at AFFC, all of which sales occurred prior to his employment
by AFFC. AFFC provided for damages that were awarded in the amount of $424,824
against AFFC, which AFFC appealed. During the year ended September 30, 1999, the
Company lost the first appeal and the court ordered AFFC to place on deposit, in
a restricted cash account, the amount of $575,000. The deposit will remain in
the restricted account pending the outcome of the next level of appeal.
Convertible Debentures
eVision previously sold Online Credit a ten year $4,000,000 10% Convertible
Debenture that is convertible into shares of common stock of eVision and an
option to purchase an $11,000,000 12% Convertible Debenture that is convertible
into shares of common stock of eVision. As of September 30, 1999, Online Credit
had purchased a total of $8,000,000 of convertible debentures, of which
$1,000,000 had been purchased during the year ended September 30, 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 that was due March 1999. The installment due date
was extended to March 2000. (See Note 11.)
F-30
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 13. COMMITMENTS AND CONTINGENCIES (Continued)
Loan Commitment
On October 4, 1999, eBanker extended to Global Med a $2,000,000 bridge loan
commitment, of which a total of $600,000 was drawn in October and November 1999.
Outstanding principal amounts under the loan are due April 12, 2000 and accrue
interest at 12%. In return for issuing the loan commitment, Global Med issued
86,957 shares of common stock of Global Med to eBanker in payment of a 5%
commitment fee.
NOTE 14. STOCKHOLDERS' EQUITY
Stock Issuances
During the year ended September 30, 1999, a total of 1,569,417 shares of common
stock were issued in payment of accrued interest to Online Credit. As of
September 30, 1999, the Company had $212,111 of accrued interest payable, which
was subsequently paid through the issuance of 428,583 shares of common stock of
the Company. In addition, Online Credit agreed to extend the maturity date of
the $500,000 convertible debenture due in March 1999 until March 2000 in
exchange for a 5% fee of $25,000 payable in 44,092 shares of common stock of
eVision. (See Note 11.)
Online International has guaranteed through October 31, 2002, the payment of
each annual 8% cash dividend on the Convertible Series B-1 Preferred Stock that
is being offered by eVision in a private offering if such dividend is not paid
by eVision. In consideration for making such guaranty, eVision issued an
affiliate of Online International 250,000 shares of eVision's common stock which
had a value of $62,500 based on the closing price of $0.25 per share of the
common stock on the date of the agreement.
On April 25, 1998, the Board of Directors approved a resolution to compensate
Online Credit for its time, efforts, capital costs and expenses in setting up
and operating a New York City office which was transferred to eVision to be
operated as an AFFC institutional sales location upon final NASD approval.
Compensation, as agreed to by the Board of Directors and determined based upon
actual capital costs and expenses incurred, as well as certain estimates, was
$350,000 paid in 350,000 shares of common stock of eVision.
F-31
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 14. STOCKHOLDERS' EQUITY (Continued)
Preferred Stock Private Placements
eVision is authorized to issue 25,000,000 shares of preferred stock. Of the
authorized shares, 87,500 shares have been designated as Series A Preferred
Stock and retired; 3,000,000 shares have been designated as Series B Preferred
Stock, of which 25,500 shares have been sold and were exchanged for Convertible
Series B Preferred Stock. An additional 2,000,000 shares have been designated as
Convertible Series B Preferred Stock. eVision issued 110,500 shares of
Convertible Series B Preferred Stock. The 110,500 shares of Convertible Series B
Preferred Stock included the 25,500 shares of Series B Preferred Stock that were
exchanged. Subsequently, eVision designated 2,000,000 shares of Convertible
Series B-1 Preferred Stock. The undesignated preferred stock may be issued in
series from time to time with such designations, rights, preferences and
limitations as the board of directors of eVision may determine by resolution.
On October 16, 1998, eVision commenced a private placement of 1,500,000 shares
of its Series B Preferred Stock at a price of $10.00 per share. Before the
offering was terminated, 25,500 shares were sold. On May 12, 1999, eVision
commenced a second private placement of 1,500,000 shares of its Convertible
Series B Preferred Stock. The 25,500 shares of Series B Preferred Stock sold in
eVision's first offering were exchanged for Convertible Series B Preferred
Stock. Including the shares exchanged from the first offering, 110,500 shares of
Convertible Series B Preferred Stock were sold in the second offering before it
was terminated. Proceeds as of September 30, 1999 were $860,147, net of issuance
costs of $244,853.
F-32
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 14. STOCKHOLDERS' EQUITY (Continued)
On September 27, 1999, eVision commenced a third private offering of 1,500,000
shares of its Convertible Series B-1 Preferred Stock at a price of $10.00 per
share and 110,500 shares were being offered in exchange for the Convertible
Series B Preferred Stock on a one-for-one basis. The Convertible Series B-1
Preferred Stock is being offered by American Fronteer, which will be issued a
maximum of 150,000 warrants, depending on the proceeds of the offering, that
allow the holder to purchase shares of eVision's Convertible Series B-1
Convertible Preferred Stock at a purchase price of $12.00 per share for five
years. American Fronteer also is to receive a commission of 10% and a
non-accountable expense allowance of 3% of the total amount sold in the
offering. The offering of the Convertible Series B-1 Preferred Stock will
continue until all 1,500,000 shares of Convertible Series B-1 Preferred Stock
are sold or exchanged or until December 31, 1999, whichever is earlier. eVision
has reserved the right to continue the offering beyond December 31, 1999.
Through December 24, 1999, approximately 350,000 shares of Convertible Series
B-1 Preferred Stock have been sold for gross proceeds of $3,500,000.
The Convertible Series B-1 Preferred Stock has a cumulative annual dividend rate
payable semi-annually of 8% in cash and 7% in additional shares of the
Convertible Series B-1 Preferred Stock. Online Credit International Ltd.,
formerly Heng Fung Holdings Company Limited (Online International), has
guaranteed the payment of any cash dividends that accrue on the Convertible
Series B-1 Preferred Stock through October 31, 2002. The semi-annual dividend
payable on shares of Convertible Series B-1 Preferred Stock will be equivalent
to three and one-half one hundredths of a share of Convertible Series B-1
Preferred Stock for each outstanding share of Convertible Series B-1 Preferred
Stock. Any Convertible Series B-1 Preferred Stock issued as a dividend on the
Convertible Series B-1 Preferred Stock will have the same dividend and the same
terms as the Convertible Series B-1 Preferred Stock. The dividend on the
Convertible Series B-1 Preferred Stock is payable semi-annually beginning
October 31, 1999, and continuing each April 30 and October 31 thereafter, when
and if declared by the Board of Directors. Each share of Convertible Series B-1
Preferred Stock is immediately convertible by the holder into 10 shares of
eVision's common stock which is equivalent to a price of $1.00 per share of
common stock. If the common stock does not have a closing bid price of at least
$1.15 per share for at least 20 trading days during the period commencing on
September 30, 1999, and ending on September 30, 2000, the Convertible Series B-1
Preferred Stock will be convertible by the holder into common stock determined
by dividing $10 by a price equal to the higher of the five day average closing
bid price of the common stock prior to September 30, 2000, or $0.50 per share.
In addition, each share of Convertible Series B-1 Preferred Stock is
automatically convertible into 10 shares of common stock at $1.00 per share at
such time as the closing bid price of the common stock is at least $4.00 per
share for 30 consecutive trading days. The Convertible Series B-1 Preferred
Stock is redeemable by eVision on or after October 1, 2003, at a price of $12.50
per share plus any accrued and unpaid dividends.
If Online International is required to pay on its guaranty, eVision will issue
to Online International or its designee a five year 12% convertible debenture
unless the act of eVision in issuing such a debenture would be deemed to be an
illegal distribution pursuant to the Colorado Business Corporation Act, in which
event, upon payment on the guaranty, Online International or its designee would
receive, instead of a 12% convertible debenture, the number of shares of common
stock as is equal to the total amount of the dividend paid divided by 90% of the
conversion price of the common stock as defined in the 12% convertible
debenture. In general, the conversion price of the convertible debenture will be
the market price of the common stock on the date of conversion.
F-33
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 14. STOCKHOLDERS' EQUITY (Continued)
Sales of Common Stock
In December 1997, Heng Fung Capital [S] Private Limited (Heng Fung Private), a
subsidiary of Online International, purchased 1,136,364 shares of the Company's
outstanding common stock from Robert A. Fitzner, Jr. and Robert L. Long, former
officers and directors of the Company, and from two other employees of AFFC. In
December 1997, Robert A. Fitzner, Jr. and Heng Fung Private agreed that, upon
the regulatory approval of the National Association of Securities Dealers, Inc.
(NASD) of a change in the beneficial ownership of 25% or more of AFFC, Heng Fung
Private would purchase an additional 3,556,777 shares of the Company's
outstanding common stock from Mr. Fitzner which were purchased in February 1998.
Warrants
On February 16, 1996, the Company commenced a private placement of 6,000,000
shares of its $.0l par value common stock at a price of $1.00 per share, and
6,000,000 Class A redeemable common stock purchase warrants at a price of $.10
per warrant (collectively, the Private Placement). The warrants entitle the
holder to purchase one share of common stock at $1.50 per share at any time
until May 1, 2000. Through the Private Placement, 5,958,658 shares of common
stock and warrants were issued for proceeds of $5,859,563, net of issuance costs
of $694,961. In addition, the Company issued 595,865 warrants to AFFC in
accordance with the Private Placement which allows the holder to purchase one
share of common stock at a price of $1.50 per warrant until May 1, 2000.
NOTE 15. STOCK OPTIONS
During the year ended September 30, 1999, the Board of Directors granted options
under the Company's September 1996 Plan to employees and officers of the
Company. As further described below, options to purchase a total of 18,955,500
shares were granted with exercise prices ranging from $0.20 to $1.00, and
vesting periods ranging from two to five years. All grants were made at the fair
market value of the stock on the date of the grant and have a term of ten years.
In January 1999, Fai H. Chan, Chairman of the Board of Directors and President
of the Company, was granted options under the Company's stock option plans to
purchase 8,000,000 shares of the Company's common stock at $.30 per share which
was the fair market value of the stock on the date of the grant. 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.
On November 25, 1998, the Board of Directors granted the holders of 2,930,000
incentive stock options new grants at $.20 per share which was equal to the
closing price of the common stock as reported on the OTC Bulletin Board on that
date. The new options vest one-third on January 30, 1999, one-third on November
25, 1999 and one-third on November 25, 2000.
F-34
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 15. STOCK OPTIONS (Continued)
Also, on November 25, 1998, the Company granted 2,800,000 nonqualified stock
options to purchase shares of common stock to members of the Board of Directors
at a price of $.20 per share which was equal to the closing price of the common
stock as reported on the OTC Bulletin Board on that date. The options vest at
the rate of 20% per year through November 25, 2003 and expire on the anniversary
date in 2008; provided, that no option will be exercisable until and unless
basic earnings per share for any fiscal year commencing with the fiscal year
ending September 30, 1999, are equal to or exceed $0.10 per share.
During the year ended September 30, 1999, the Board of Directors granted
nonqualified options totaling 39,333 shares to a director and a consultant with
exercise prices equal to the market value on the date of the grant ranging from
$0.70 to $1.00, vesting over a three year period and a term of 10 years.
During the year ended September 30, 1998, the Company granted 700,000
nonqualified stock options to certain employees at an exercise price of $1.00
per share. These options expire April 2, 2008 and are exercisable as to 50,000
shares per year beginning March 18, 1999, plus an additional 20,000 shares per
year if the branch where employees work meets projected profits each year for
five years. These options were canceled during the year when the related
employees resigned. In addition, options were granted to certain officers and
employees of the Company in accordance with the criteria of each individual plan
at exercise prices ranging from $0.625 to $1.00 per share.
The Company has granted options pursuant to three stock option plans, the
Incentive Stock Option Plan, (1988 Plan), the 1996 Incentive and Nonstatutory
Option Plan (1996 Plan), and the September 1996 Incentive and Nonstatutory
Option Plan (September 1996 Plan). As of September 30, 1999, approximately
9,040,000 options are exercisable. During the years ending September 30, 2000,
2001, 2002, 2003 and 2004, 2,090,011; 1,988,011; 1,930,011; 1,506,067;and
1,506,067 options become exercisable.
Subsequent to September 30, 1999, the Company granted options to employees to
purchase 1,311,000 shares of the Company's common stock at prices ranging from
$0.50 to $0.75 per share, vesting from two to four years and for a period of ten
years.
F-35
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 15. STOCK OPTIONS (Continued)
The following represents additional information relative to stock option
activity:
<TABLE>
<CAPTION>
September
Total 1988 Plan 1996 Plan 1996 Plan NonQualified
----- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Outstanding as of
September 30, 1997 3,265,000 457,000 1,240,000 1,228,000 340,000
Expired (340,000) -- -- -- (340,000)
Granted 2,070,000 -- -- 1,370,000 700,000
Canceled (165,000) -- (35,000) (130,000) --
----------- ----------- ----------- ----------- -----------
Outstanding as of
September 30, 1998 4,830,000 457,000 1,205,000 2,468,000 700,000
Exercised (283,600) -- -- (283,600) --
Granted 18,955,500 -- -- 8,116,167 10,839,333
Canceled (5,441,734) (328,500) (1,076,500) (3,336,734) (700,000)
----------- ----------- ----------- ----------- -----------
Outstanding as of
September 30, 1999 18,060,166 128,500 128,500 6,963,833 10,839,333
=========== =========== =========== =========== ===========
Expiration dates:
September 30, 2006 257,000 128,500 128,500 -- --
September 30, 2007 -- -- -- -- --
September 30, 2008 -- -- -- -- --
September 30, 2009 17,803,166 -- -- 6,963,833 10,839,333
----------- ----------- ----------- ----------- -----------
Outstanding as of
September 30, 1999 18,060,166 128,500 128,500 6,963,833 10,839,333
=========== =========== =========== =========== ===========
</TABLE>
During the year ended September 30, 1999, 283,600 options were exercised with an
exercise price of $0.20 per share, 18,955,500 options were granted with a
weighted average exercise price of $0.31 per share and 5,441,734 options were
canceled with a weighted average exercise price of $0.68 per share. As of
September 30, 1999, the outstanding options had a weighted average exercise
price of $0.31. At September 30, 1998, the weighted average exercise price of
the outstanding options was $0.75. As of September 30, 1999, 9,040,000 options
were exercisable with a weighted average exercise price of $0.34.
Pro forma disclosures
The fair value of options granted during 1999 was determined using the following
weighted average assumptions:
A risk-free rate of approximately 4.8% for the year ended September 30,
1999, an average expected life of 4.3 years, a dividend yield of 0%; and
volatility of 99%.
F-36
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 15. STOCK OPTIONS (Continued)
For the purposes of pro forma disclosures, the estimated fair value of the
employee options is amortized to expense over the options' vesting period. Pro
forma information is as follows:
1999
----
Pro forma net loss $ (4,799,000)
Pro forma net loss per share (0.26)
The estimated fair value of the options granted during the year ended September
30, 1999 was $3,221,612. The estimated compensation expense associated with this
fair value was $1,610,136 for the year ended September 30, 1999.
No compensation costs were charged to earnings for options granted under the
Company's plans for the years ended September 30, 1999, 1998 and 1997.
Management considers the difference between the pro forma net loss or loss per
share under the fair value method and that as calculated by the Company per the
consolidated statements of operations for 1998 and 1997 to be immaterial based
on the fair value of the underlying common stock and the activity related
thereto.
NOTE 16. EMPLOYEE STOCK OWNERSHIP AND EMPLOYEE BENEFIT PLANS
The Company has adopted an employee stock ownership plan (ESOP) for its
employees. Contributions to the plan are at the discretion of the Board of
Directors. All employees as of October 1, 1989, are eligible to participate in
the plan, and new employees after that date become eligible on April 1 or
October 1 which follows the completion of one year of employment. The plan
provides that more than half of the assets in the plan must consist of the
Company's common stock. The ESOP is administered by a board of trustees under
the supervision of an advisory committee, both of which are appointed by the
Company's Board of Directors. Employees vest at the rate of 20% per year in ESOP
contributions after two years, vesting an additional 20% each year up to 100%
after six years in the ESOP. The ESOP had a loan from the Company of $350,000
representing the payment during the year ended September 30, 1997 by the Company
of the ESOP's debt. The loan was secured by 436,840 shares of the Company's
common stock and is recorded in unearned ESOP shares in the consolidated
financial statements as of September 30, 1999. In December 1999, the ESOP repaid
$350,000 plus $212,007 of accrued interest to eVision by liquidating a portion
of its holdings in eVision common stock.
F-37
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 16. EMPLOYEE STOCK OWNERSHIP AND EMPLOYEE BENEFIT PLANS
(Continued)
The allocation of the remaining shares within the ESOP to employees is based on
employees' wages. For the year ended September 30, 1997, the Company contributed
$24,898 to the plan. The Company did not contribute to the plan nor did the
Board of Directors commit any shares to the ESOP during the years ended
September 30, 1999 and 1998. The ESOP owned 418,682 shares of the Company's
common stock as of September 30, 1999, and 81,682 subsequent to the loan
repayment.
The Company has two retirement saving plans covering all employees who are over
21 years of age and have completed one year of eligibility service. The plans
meet the qualifications of Section 401(k) of the Internal Revenue Code. Under
the plans, eligible employees can contribute through payroll deductions up to
15% of their base compensation. The Company makes a discretionary matching
contribution equal to a percentage of the employee's contribution. The Company
contributed $88,813, $83,894, and $82,890, for the years ended September 30,
1999, 1998 and 1997, respectively. The Company's savings plans owned 61,150 and
2,973 shares of the Company's common stock as of September 30, 1999 and 1998,
respectively.
The Company does not provide any post employment benefits to retired or
terminated employees.
NOTE 17. RELATED PARTY ACTIVITY
Fronteer Corporate Services Inc. is a wholly owned subsidiary of eVision that
provides management, accounting, and administrative services to unconsolidated
entities that are affiliated through common ownership or control. These entities
were charged $42,841, which approximates the cost, for these services for the
year ended September 30, 1999.
During the years ended September 30, 1999 and 1998, Fronteer Capital purchased a
total of approximately 122,084,000 shares of the common stock of Online
International in open market transactions on the Hong Kong Stock Exchange. Two
officers and directors of the Company are directors of Online International. In
addition, one officer and director beneficially owns approximately 11% of the
outstanding common stock of Online International. As of September 30, 1998,
eVision had recorded unrealized losses on the investment in Online International
stock of approximately, $1,573,793. During the year ended September 30, 1999,
the stock of Fronteer Capital was sold at a gain to an unaffiliated entity as
described in Note 3. Therefore, as of September 30, 1999, the Company no longer
has an investment in Online International common stock.
During the year ended September 30, 1998, the Company paid an outside director
$50,000 for legal services.
eVision had previously been a 20% shareholder in MultiSource Services, Inc.,
(MSI). As a clearing correspondent of MSI ., the Company paid MSI clearing fees
of $111,512 and $1,096,690 for the years ended September 30, 1998 and 1997,
respectively. For the year ended September 30, 1997, Secutron recorded revenues
of $275,699 for services performed for MSI.
F-38
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 17. RELATED PARTY ACTIVITY (Continued)
During the year ended September 30, 1997, a then officer of the Company received
$334,000 in noncompetition compensation from the purchaser in conjunction with
the sale of the primary assets of the directory business as discussed in Note
19.
NOTE 18. MINIMUM NET CAPITAL REQUIREMENTS
AFFC, as a registered securities broker/dealer, is subject to the Securities and
Exchange Commission Uniform Net Capital Rule (Rule 15c3-1) (the Rule) and
membership agreement with NASD. In accordance with the membership agreement,
AFFC is required to maintain "net capital" of not less than $250,000. As of
September 30, 1999, AFFC had "net capital" of $ 419,273.
NOTE 19. DISCONTINUED OPERATIONS
On March 20, 1998, the Company sold the remaining net assets pertaining to the
directory business and Fronteer Marketing Group (FMG), which operations were
discontinued during the year ended September 30, 1997, as described below. The
net assets had not previously been identified as part of discontinued
operations. The net assets were sold for the return by former officers of the
Company of 493,500 shares of the Company's common stock. The net assets were
valued by the Board of Directors based on appraisals, existing financing
arrangements and estimates. The loss on the sale of the net assets was $249,861,
net of an income tax benefit of $159,748.
On February 25, 1997, McLeod USA Publishing Company (McLeod, formerly known as
Telecom* USA Publishing Company) purchased six yellow page directories located
in North Dakota from the Company for approximately $2,800,000. The purchase
price was pursuant to an existing option agreement (Option Agreement) between
McLeod and the Company and was based on related directory revenues. The purchase
price consisted of $2,300,000 in cash and $500,000 in the form of a nonrecourse
loan that was applied against the price of the six yellow page directories in
accordance with the Option Agreement.
On the same date, another third party purchased another directory from the
Company for approximately $202,000 in cash. The purchase price was based on
related directory revenues. These dispositions represented most all of the
Company's remaining directory business assets. As such, the Company had
discontinued its activities in the directory business.
On September 15, 1997, a third party purchased all of the primary operating
assets of FMG for approximately $421,000. The purchase price was based on
existing financing arrangements and the cost of anticipated fixed asset
upgrades. A portion of the purchase price was paid in the form of a promissory
note in the amount of $141,344 to be paid over 28 months at $5,048 per month.
The remainder of the purchase price was paid in the form of a promissory note in
the amount equal to FMG's cost of anticipated fixed asset upgrades installed in
existing telemarketing centers. Monthly payments of principal and interest at
10% of between $3,000 and $8,000 per month were to be made through December 2000
at which time the balance was due and payable to the Company. On March 20, 1998,
the promissory notes were sold as part of the sale of the remaining net assets
of discontinued operations as mentioned above. Accordingly, the Company has
discontinued its activities in the direct marketing business.
F-39
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 19. DISCONTINUED OPERATIONS (Continued)
Effective April 1, 1997, the Company sold all of the stock of Fronteer Personnel
Services (FPS.) One of the principals is a former employee of the Company. The
purchase price was determined by the Board of Directors of the Company and
represented an assumption of certain liabilities of FPS by the acquiring entity.
The assumed liabilities were reflected at their fair values on the books of FPS
and were less than $20,000. Accordingly, the Company has discontinued its
activities in the employee leasing business. Separate disclosures of FPS have
not been made due to the immateriality of its operations and associated assets
and liabilities in relation to the consolidated financial statements. The assets
and liabilities and results of operations for FPS are included in the amounts
disclosed for the directory business.
Information relating to the loss from discontinued operations is as follows:
<TABLE>
<CAPTION>
Year Ended September 30, 1998: Directory
- ----------------------------- Business FMG Total
--------- --- -----
<S> <C> <C> <C>
Revenue $ -- -- --
Cost of sales and operating expenses 236,502 24,493 260,995
--------- --------- ---------
(236,502) (24,493) (260,995)
--------- --------- ---------
Nonoperating costs -- -- --
--------- --------- ---------
Loss before income taxes (236,502) (24,493) (260,995)
Income tax benefit 92,236 9,552 101,788
--------- --------- ---------
Net loss from discontinued operations $(144,266) (14,941) (159,207)
========= ========= =========
Loss on sale of discontinued operations, net
of income tax benefit of $159,748 $(249,861) -- (249,861)
========= ========= =========
</TABLE>
F-40
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 19. DISCONTINUED OPERATIONS (Continued)
<TABLE>
<CAPTION>
Directory
Year Ended September 30, 1997: Business FMG Total
- ----------------------------- --------- --- -----
<S> <C> <C> <C>
Revenue $ 4,866,454 364,652 5,231,106
Cost of sales and operating expenses 4,733,860 1,580,934 6,314,794
----------- ----------- -----------
132,594 (1,216,282) (1,083,688)
----------- ----------- -----------
Nonoperating costs (28,848) (98,143) (126,991)
----------- ----------- -----------
Earnings (loss) before income taxes 103,746 (1,314,425) (1,210,679)
Income tax benefit (expense) (35,274) 446,905 411,631
----------- ----------- -----------
Net earnings (loss) from discontinued
operations $ 68,472 (867,520) (799,048)
=========== =========== ===========
Loss on sale of discontinued operations, net
of income tax benefit of $409,692 $ (458,181) (208,341) (666,522)
=========== =========== ===========
</TABLE>
Clearing Activities
On July 23, 1996, the Company sold AFFC's securities brokerage clearing division
(Clearing Operation) to 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
from AFFC to MSI, plus the net assets of the Clearing Operation. MSI was formed
by Oppenheimer Funds, Inc. (OFI) for the purpose of acquiring the Clearing
Operation, and OFI was to retain 80% of the outstanding common stock of MSI. The
Company received 20% of the outstanding common stock of MSI. As a result of this
transaction, AFFC became a fully disclosed clearing correspondent of MSI. 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.
During the year ended September 30, 1997, the Company and AFFC were notified by
OFI that a decision had been reached by OFI that MSI and its business were not
consistent with the long-term business plans of OFI. Subsequently, a new
clearing firm was selected for the customer business of AFFC, and the customer
business previously cleared by MSI was moved to the new clearing firm in October
1997. MSI reached its revenue targets for the first $750,000 of the loan, and as
a result of this and MSI's decision to no longer be in the clearing business,
the entire $1,500,000 loan was forgiven and was recognized as an extraordinary
item during the year ended September 30, 1998.
F-41
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 19. DISCONTINUED OPERATIONS (Continued)
Subsequent to September 30, 1998, the Company and AFFC entered into an agreement
with MSI and OFI pursuant to which MSI would withdraw as a registered
broker/dealer with the SEC, resign as a member of the NASD and pay the Company a
total of $430,000 to reimburse AFFC expenses associated with MSI discontinuing
their clearing operation. As a result of the agreement and closing which
occurred on December 16, 1998, OFI owns 100% of the outstanding common stock of
MSI. Both the Company and AFFC, and OFI and MSI released each other from any
claims as part of the agreement.
NOTE 20. SEGMENT REPORTING
<TABLE>
<CAPTION>
Year ended September 30, 1999
-----------------------------
Q6
Technologies
Discontinued* and
Operations AFFC Secutron eBanker Others Eliminations Total
Consolidated ------------- ---- ------------ ------- ------ ------------ -----
- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from
unaffiliated customers ......... $ -- 20,901,459 9,705,227 1,785,007 1,801,569 -- 34,193,262
Intersegment revenues ............. -- -- 124,362 135,372 622,689 (882,423) --
-------- ------------ ------------ ---------- ------------ ------------ ------------
Total revenues .................... -- 20,901,459 9,829,589 1,920,379 2,424,258 (882,423) 34,193,262
======== ============ ============ ========== ============ ============ ============
Operating loss .................... -- (2,521,508) (504,368) 429,138 482,886 -- (2,113,852)
Other income (expense), net ....... -- (2,046) (40,992) -- (671,491) -- (714,529)
-------- ------------ ------------ ---------- ------------ ------------ ------------
Income (loss) from operations
before minority interest and
income taxes ................... -- (2,523,554) (545,360) 429,138 (188,605) -- 2,828,381
======== ============ ============ ========== ============ ============ ============
Depreciation and
amortization ................... -- 386,157 35,523 -- 6,136 -- 427,816
======== ============ ============ ========== ============ ============ ============
Capital expenditures .............. $ -- 308,868 18,797 -- 57,251 -- 384,916
======== ============ ============ ========== ============ ============ ============
Identifiable assets as of
September 30, 1999 ............. $ -- 4,764,085 1,268,440 13,383,675 3,323,851 -- 22,740,051
======== ============ ============ ========== ============ ============ ============
F-42
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 20. SEGMENT REPORTING (Continued)
<CAPTION>
Year ended September 30, 1998
-----------------------------
Discontinued*
Operations AFFC Secutron eBanker Others Eliminations Total
Consolidated ------------- ---- ------------ ------- ------ ------------ -----
- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from
unaffiliated customers ......... $ -- 18,886,391 8,454,279 37,923 8,711 -- 27,387,304
Intersegment revenues ............. -- -- 412,327 -- 72,672 (484,999) --
-------- ------------ ------------ ---------- ------------ ------------ ------------
Total revenues .................... -- 18,886,391 8,866,606 37,923 81,383 (484,999) 27,387,304
======== ============ ============ ========== ============ ============ ============
Operating loss .................... (260,995) (3,910,741) (281,785) (46,255) (2,459,281) (6,959,057)
Other income (expense), net ....... -- 250,304 170 -- (370,722) -- (120,248)
-------- ------------ ------------ ---------- ------------ ------------ ------------
Loss from operations before
minority interest and
income taxes ................... (260,995) (3,660,437) (281,615) (46,255) (2,830,003) -- (7,079,305)
======== ============ ============ ========== ============ ============ ============
Loss on sale of discontinued
operations, net of income
tax benefit of $159,748 ....... (249,861) -- -- -- -- -- (249,861)
======== ============ ============ ========== ============ ============ ============
Depreciation and
amortization ................... 55,409 323,033 29,802 -- 36,399 -- 444,643
======== ============ ============ ========== ============ ============ ============
Capital expenditures .............. $ -- 722,887 34,392 -- 5,203 -- 762,482
======== ============ ============ ========== ============ ============ ============
Identifiable assets as of
September 30, 1998 ............. $ -- 5,274,716 1,408,056 7,174,173 6,523,283 (5,009,316) 15,370,912
======== ============ ============ ========== ============ ============ ============
<CAPTION>
Year ended September 30, 1997
-----------------------------
Discontinued*
Operations AFFC Secutron eBanker Others Eliminations Total
Consolidated ------------- ---- ------------ ------- ------ ------------ -----
- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from
unaffiliated customers .........$5,231,106 18,118,271 6,982,143 -- -- 30,331,520
Intersegment revenues ............. 28,253 -- 454,000 -- (482,253) --
--------- ------------ ------------ ---------- ------------ ------------ ------------
Total revenues .................... 5,259,359 18,118,271 7,436,143 -- (482,253) 30,331,520
========= ============ ============ ========== ============ ============ ============
Operating profit (loss) ...........(1,083,688) (2,160,897) 129,215 (495,496) -- (3,610,866)
Other income (expense), net ....... (126,991) 123,499 (931) (22,885) -- (27,308)
--------- ------------ ------------ ---------- ------------ ------------ ------------
Earnings (loss) from operations
before minority interest
and income taxes ...............(1,210,679) (2,037,398) 128,284 (518,381) -- (3,638,174)
========= ============ ============ ========== ============ ============ ============
Loss on sale of discontinued
operations, net of income tax
benefit of $409,692 ............ (666,522) -- -- -- -- (666,522)
========= ============ ============ ========== ============ ============ ============
Depreciation and amortization ..... 752,558 258,227 71,667 9,051 -- 1,091,503
========= ============ ============ ========== ============ ============ ============
Capital expenditures ..............$ 68,469 390,403 27,073 -- -- 485,945
========= ============ ============ ========== ============ ============ ============
Identifiable assets as of
September 30, 1997 .............$1,983,761 6,839,443 1,868,317 469,828 (158,267) 11,003,082
========= ============ ============ ========== ============ ============ ============
</TABLE>
F-43
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 20. SEGMENT REPORTING (Continued)
Identifiable assets by industry are those assets that are used in the Company's
operations in each segment. See Note 19 relating to discontinued operations.
*The information in this column is for both the directory business and FMG.
NOTE 21. SUBSEQUENT EVENTS
MidRange
Subsequent to September 30, 1999, the Company entered into an agreement to sell
the assets of MidRange. MidRange is included in the Secutron business segment,
which includes computer hardware, software and related technology investments of
eVision.
For the years ended September 30, 1999, 1998 and 1997, MidRange revenue was
$8,391,914, $7,117,007 and $4,666,588, respectively. Costs of goods sold and
general administrative expenses for the years ended September 30, 1999, 1998 and
1997, were $8,955,205, $7,130,613 and $4,784,780, respectively. The assets sold
included $21,164 of furniture and equipment including computer equipment, net of
accumulated depreciation of $66,292.
Lockup Agreement
On October 25, 1999, Global Med entered into a Lockup Agreement with eBanker and
a Lockup Agreement with eVision. The agreements provide that eBanker and eVision
will not, between October 25, 1999 and October 28, 2000, without Global Med's
prior written consent, publicly offer, sell, contract to sell, grant any option
for the sale of, or otherwise dispose of, directly or indirectly, (i) warrants
to purchase 9,000,000 shares of Global Med's common stock at $0.25 per share
held by eBanker or the warrants to purchase 1,000,000 shares of Global Med's
common stock at $0.25 per share held by eVision and (ii) any shares (the Shares,
and, together with the warrants, the Securities) of common stock issuable upon
the exercise of the warrants; provided, however, that eBanker or eVision may
offer, sell, contract to sell, grant an option for the sale of, or otherwise
dispose of all or any part of the Securities or other such security or
instrument of Global Med during such period if such transaction is private in
nature and the transferee of such Securities or other securities or instruments
agrees, prior to such transaction, to be bound by all of the provisions of the
lockup agreements. In exchange for entering into the agreements, eBanker and
eVision were issued 450,000 shares and 50,000 shares of common stock of Global
Med, respectively.
F-44
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 21. SUBSEQUENT EVENTS (Continued)
In addition, the agreements provide (i) eBanker and eVision will not be
restricted from disposing of the Securities in the event that an unaffiliated
third party commences a tender offer for the outstanding common stock, and (ii)
eBanker and eVision will not be restricted from disposing of 450,000 and 50,000
shares, respectively, of the Securities in the aggregate if the closing sale
price for the Global Med common stock on the principal market on which it then
trades equals or exceeds $5.00 per share for any ten consecutive trading day
period preceding the date of such sale, and (iii) that there will be no
restrictions upon the ability of eBanker or eVision to exercise the warrants.
F-45
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
eVISION USA.COM, INC.
Dated: December 29, 1999 /s/ Fai H. Chan
-------------------------------------
Fai H. Chan, Chairman and President
Dated: December 29, 1999 /s/ Gary L. Cook
-------------------------------------
Gary L. Cook, Secretary, Treasurer,
Chief Financial Officer and Principal
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates included.
Dated: December 29, 1999 /s/ Fai H. Chan
-------------------------------------
Fai H. Chan, Director
Dated: December 28, 1999 /s/ Robert H. Trapp
-------------------------------------
Robert H. Trapp, Director
Dated: December 29, 1999 /s/ Jeffrey M. Busch
-------------------------------------
Jeffrey M. Busch, Director
Dated: December 29, 1999 /s/ Kwok Jen Fong
-------------------------------------
Kwok Jen Fong, Director
Dated: December 29, 1999 /s/ Robert Jeffers, Jr.
-------------------------------------
Robert Jeffers, Jr., Director
Dated: December 27, 1999 /s/ Tony T. W. Chan
-------------------------------------
Tony T. W. Chan, Director
43
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM 10-K
eVISION USA.COM, INC.
44
<PAGE>
EXHIBIT INDEX
Exhibit No. Description and Method of Filing
- ---------- --------------------------------
Exhibit 2.1 Asset Purchase Agreement dated March 1, 1998, by and between
eVision and Fronteer Marketing Group, Inc. and North Country
Yellow Pages, Inc. and Dennis W. Olson (incorporated by
reference to Exhibit 2.1 to eVision's Current Report on Form
8-K dated June 22, 1998).
Exhibit 3.1 Articles of Incorporation of eVision (incorporated by
reference to Exhibit 3.0 to eVision's Annual Report on Form
10-K for the year ended September 30, 1995).
Exhibit 3.1(i) Articles of Amendment to eVision's Articles of Incorporation
dated April 28, 1995 (incorporated by reference to Exhibit
3.0(i) to eVision's Current Report on Form 8-K dated May 9,
1995).
Exhibit 3.1(ii) Articles of Amendment to eVision's Articles of Incorporation
dated June 27, 1996 (incorporated by reference to Exhibit
3.0(ii) to eVision's Annual Report on Form 10-K for the year
ended September 30, 1996).
Exhibit 3.1(iii) Articles of Amendment to eVision's Articles of Incorporation
dated October 15, 1998
Exhibit 3.1(iv) Articles of Amendment to eVision's Articles of Incorporation
dated November 17, 1998
Exhibit 3.1(v) Articles of Amendment to eVision's Articles of Incorporation
dated April 19, 1999 (incorporated by reference to Exhibit
3.1 to eVision's Quarterly Report on Form 10-Q/A for the
Quarter ended March 31, 1999).
Exhibit 3.1(vi) Articles of Amendment to eVision's Articles of Incorporation
dated May 5, 1999
Exhibit 3.1(vii) Articles of Amendment to eVision's Articles of Incorporation
dated September 25, 1999
Exhibit 3.2 Restated Bylaws of eVision adopted February 14, 1996
(incorporated by reference to Exhibit 3.2 to eVision's
Annual Report on Form 10-K for the year ended September 30,
1996).
Exhibit 10.1 Amended and Restated 1988 Incentive and Nonstatutory Stock
Option Plan as amended September 10, 1996 (incorporated by
reference to Exhibit 10.1 to eVision's Annual Report on Form
10-K for the year ended September 30, 1996).
Exhibit 10.2 Employee Stock Ownership Plan (incorporated by reference to
Exhibit 10.2 to eVision's Annual Report on Form 10-K for the
year ended September 30, 1996).
Exhibit 10.3 401(k) Plan and Amendment I thereto (incorporated by
reference to Exhibit 10.3 to eVision's Annual Report on Form
10-K for the year ended September 30, 1996).
Exhibit 10.4 Amended and Restated 1996 Incentive and Nonstatutory Stock
Option Plan, as amended September 10, 1996 (incorporated by
reference to Exhibit 10.6 to eVision's Annual Report on Form
10-K for the year ended September 30, 1996).
45
<PAGE>
Exhibit No. Description and Method of Filing
- ---------- --------------------------------
Exhibit 10.5 September 1996 Incentive and Nonstatutory Stock Option Plan
(incorporated by reference to Exhibit 10.7 to eVision's
Annual Report on Form 10-K for the year ended September 30,
1996).
Exhibit 10.6 $4,000,000 10% Convertible Debenture Purchase Agreement by
and between eVision and Heng Fung Finance Company Limited
dated December 17, 1997 (incorporated by reference to
Exhibit 10.7 to eVision's Annual Report on Form 10-K for the
year ended September 30, 1996).
Exhibit 10.7 Amendment No. 1 to $4,000,000 10% Convertible Debenture
Purchase Agreement by and between eVision and Heng Fung
Finance Company Limited dated September 23, 1998
(incorporated by reference to Exhibit 10.1 to eVision's
Current Report on Form 8-K dated September 11, 1998).
Exhibit 10.8 Amendment to the $4,000,000 10% Convertible Debenture
Purchase Agreement dated December 17, 1997 (incorporated by
reference to Exhibit 10.0 to eVision's Form 10-Q/A for the
quarter ended March 31, 1998).
Exhibit 10.9 Loan and Warrant Purchase Agreement by and between Heng Fung
Finance Company Limited, Fronteer Development Finance Inc.
and Global Med Technologies, Inc. dated October 7, 1998
(incorporated by reference to Exhibit 10.10 to eVision's
Annual Report on Form 10-K for the year ended September 30,
1998).
Exhibit 10.10 Assignment, Assumption and Consent Agreement by and between
Global Med Technologies, Inc., Dr. Michael F. Ruxin, M.D.,
Fronteer Capital Inc. and Fronteer Development Finance Inc.
dated September 11, 1998 (incorporated by reference to
Exhibit 10.11 to eVision's Annual Report on Form 10-K for
the year ended September 30, 1998).
Exhibit 10.11 First Amendment to Fronteer Financial Holdings, Ltd.
September 1996 Incentive and Nonstatutory Stock Option Plan
dated February 19, 1997 (incorporated by reference to
Exhibit 10.12 to eVision's Annual Report on Form 10-K for
the year ended September 30, 1998).
Exhibit 10.12 Amendment No. 1 to $500,000 12% Convertible Debenture dated
March 23, 1999 (incorporated by reference to Exhibit 10.1 to
eVision's Quarterly Report on Form 10-Q for the Quarter
ended March 31, 1999).
Exhibit 10.13 Guaranty Agreement between eVision and Heng Fung Holdings
Company Limited dated May 5, 1999 (incorporated by reference
to Exhibit 10.2 to eVision's Quarterly Report on Form 10-Q
for the Quarter ended March 31, 1999).
Exhibit 10.14 Second Amendment to the 1996 Incentive and Nonstatutory
Stock Option Plan of eVision dated November 25, 1998
(incorporated by reference to Exhibit 10.3 to eVision's
Quarterly Report on Form 10-Q for the Quarter ended March
31, 1999).
Exhibit 10.15 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 8,
1999 (incorporated by reference to Exhibit 10.4 to eVision's
Quarterly Report on Form 10-Q for the Quarter ended March
31, 1999).
46
<PAGE>
Exhibit No. Description and Method of Filing
- ---------- --------------------------------
Exhibit 10.16 Stock Purchase Agreement by and between eVision and
Ladsleigh Investments Limited, BVI, made as of July 30, 1999
(incorporated by reference to Exhibit 2.1 to eVision's
Current Report on Form 8-K dated August 5, 1999).
Exhibit 10.17 Pledge and Escrow Agreement by and between eVision and
Ladsleigh Investments, BVI, made as of July 30, 1999
(incorporated by reference to Exhibit 2.2 to eVision's
Current Report on Form 8-K dated August 5, 1999).
Exhibit 10.18 Promissory Note made by Ladsleigh Investments Limited, BVI
to eVision dated July 30, 1999 (incorporated by reference to
Exhibit 2.3 to eVision's Current Report on Form 8-K dated
August 5, 1999).
Exhibit 10.19 Exchange and Sale of Stock Agreement between eVision and Q6
Technologies, Inc. dated June 18, 1999 (incorporated by
reference to Exhibit 10.4 to eVision's Quarterly Report on
Form 10-Q for the Quarter ended June 30, 1999).
Exhibit 10.20 Management Agreement dated August 18, 1998 between Fronteer
Development Finance Inc. and Fronteer Financial Holdings,
Ltd.
Exhibit 16 Letter from KPMG LLP dated September 3, 1999 (incorporated
by reference to Exhibit 16 to eVision's Current Report on
Form 8-K dated September 3, 1999).
Exhibit 21 Subsidiaries of eVision.
Exhibit 23.1 Consent of Deloitte & Touche LLP
Exhibit 23.2 Consent of KPMG LLP
Exhibit 27 Financial Data Schedule
47
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
FRONTEER FINANCIAL HOLDINGS, LTD.
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 Fronteer Financial Holdings, Ltd.
SECOND: The following amendments to the Articles of Incorporation were duly
adopted by the board of directors on October 13, 1998, 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 7.4:
Section 7.4 Series B Preferred Stock. 3,000,000 shares of the Corporation's
preferred stock shall consist of Series B Preferred Stock ("Series B"). The
rights, preferences, privileges and restrictions imposed upon the Series B are
set forth in this Section 7.4 of this Article VII.
(a) Dividends. The 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 Series B, when and if declared by
the Board of Directors. The dividend payable in shares of Series B will be
equivalent to .07 share of Series B for each outstanding share of Series B. The
dividend on the Series B is payable annually beginning October 31, 1999, when
and if declared by the Board of Directors. Any dividends earned on the Series B
prior to October 31, 1999, shall be earned pro rata from the Original Issue
Date. The Series B is not convertible at any time. The 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 Series B are not paid for any reason,
the right of the holders of the 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 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 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 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.
1
<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 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 7.4(a) of this Article VII accrued and unpaid to the date
payment is made available to the Series B. After the full preferential
liquidation amount has been paid to, or determined and set apart for, 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 Series B, the Series
B shall receive such funds pro rata on a share for share basis until the full
liquidating preference on the 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 7.4(b) of this Article VII
and the Series B shall be entitled only to the rights provided in the plan of
reorganization.
(c) Voting. A holder of a share of 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) No Conversion Rights. The holders of Series B have no conversion
rights.
(e) Special Definitions. For purposes of this Section 7.4 of this
Article VII, the term "Original Issue Date" shall mean, the original date on
which a share of Series B was first issued.
(f) No Preemptive Rights. No holder of the 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.
(g) Optional Redemption of Series B.
(i) On and after October 1, 2003, the 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 Series B is to be redeemed, the redemption shall be carried out pro
rata subject to adjustment to avoid redemption of fractional shares. The
2
<PAGE>
redemption price shall be Ten Dollars ($10.00) per share plus cumulative
dividends as provided in Section 7.4(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 Series B effect a subdivision of the outstanding Series B, the
applicable 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 Series B combine the outstanding shares of Series B, the
applicable Series B redemption price then in effect immediately before the
combination shall be proportionately increased. Any adjustments under this
Section 7.4(g)(ii) of this Article VII shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(iii) 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 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:
(a) the number of shares of Series B held by the holder which
are to be redeemed by the Corporation, and the total number of shares of Series
B held by all holders to be so redeemed;
(b) the Redemption Date and the applicable Redemption Price;
and
(c) that the holder is to surrender to the Corporation, at
the place designated therein, the holder's certificate or certificates
representing the shares of Series B to be redeemed.
(iv) Each holder of shares of 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) 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 Series B thereupon subject to redemption shall be entitled to any further
accrual of any dividends.
(vi) The Corporation's deliverance of payment of the redemption
price shall be good and sufficient discharge to the Corporation of the holder's
investment in the Series B. If less than the full amount of the investment of
the holder in the Series B is redeemed, the Corporation shall deliver to the
3
<PAGE>
holder a new Series B certificate representing the balance of the investment by
the holder in the Series B which remains outstanding.
Dated: October 15, 1998
FRONTEER FINANCIAL HOLDINGS, LTD.,
a Colorado corporation
By: /s/Gary L. Cook
------------------------------------
Gary L. Cook, Secretary and Treasurer
4
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
FRONTEER FINANCIAL HOLDINGS, LTD.
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 Fronteer Financial Holdings, Ltd.
SECOND: The following amendments to the Articles of Incorporation were duly
adopted by the board of directors on November 13, 1998, in accordance with
Section 7-106-102 of the Colorado Business Corporation Act.
The last sentence of the first paragraph of Paragraph (a) of Section 7.4 of
Article VII of the Articles of Incorporation is hereby amended by replacing it
with a sentence that reads as follows:
"The Series B 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."
The last sentence of Paragraph (g)(i) of Section 7.4 of Article VII of the
Articles of Incorporation is hereby amended by replacing it with a sentence that
reads as follows:
"The redemption price shall be Twelve Dollars and Fifty
Cents ($12.50) per share plus cumulative dividends as provided in
Section 7.4(a) of this Article VII accrued and unpaid to the date
fixed for redemption."
Dated: November 17, 1998
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
<PAGE>
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.
(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").
2
<PAGE>
(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
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
3
<PAGE>
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) 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
4
<PAGE>
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
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
5
<PAGE>
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
6
<PAGE>
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
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.
7
<PAGE>
(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.
(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
8
<PAGE>
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.
(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;
9
<PAGE>
(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.
(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: May 5, 1999
eVISION USA.COM, INC.,
a Colorado corporation
By: /s/Gary L. Cook
-------------------------------------
Gary L. Cook, Secretary and Treasurer
10
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 September 22, 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 7.6:
Section 7.6 Convertible Series B-1 Preferred Stock. 2,000,000 shares
of the Corporation's preferred stock shall consist of Convertible Series
B-1 Preferred Stock ("Convertible Series B-1"). The rights, preferences,
privileges and restrictions imposed upon the Convertible Series B-1 are set
forth in this Section 7.6 of this Article VII.
(a) Dividends. The Convertible Series B-1 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-1, when and if declared by the Board of
Directors. The annual dividend payable in shares of Convertible Series
B-1 will be equivalent to .07 share of Convertible Series B-1 for each
outstanding share of Convertible Series B-1. The dividend on the
Convertible Series B-1 is payable semi-annually beginning October 31,
1999 and continuing each April 30 and October 31 thereafter, when and
if declared by the Board of Directors. Any dividends earned on the
Convertible Series B-1 prior to October 31, 1999, shall be earned pro
rata from the Original Issue Date. The Convertible Series B-1 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-1 are not
paid for any reason, the right of the holders of the Convertible
Series B-1 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-1,
when and if declared by the Board of Directors of the Corporation,
<PAGE>
before any sum or sums shall be set aside for or applied to the
purchase or redemption of the Convertible Series B-1 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-1 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.
(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-1 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 7.6(a) of this Article VII accrued and unpaid to the date
payment is made available to the Convertible Series B-1. After the
full preferential liquidation amount has been paid to, or determined
and set apart for, Convertible Series B-1, 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-1,
the Convertible Series B-1 shall receive such funds pro rata on a
share for share basis until the full liquidating preference on the
Convertible Series B-1 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 7.6(b) of
this Article VII and the Convertible Series B-1 shall be entitled only
to the rights provided in the plan of reorganization.
(c) Voting. A holder of a share of Convertible Series B-1 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-1 have
the following conversion rights (the "Conversion Rights"):
(i) Right to Convert. Subject to any prior redemption or
conversion by the Board of Directors of the Corporation, each
share of Convertible Series B-1 shall be convertible, at the
office of the Corporation or of any transfer agent for such
Convertible Series B-1, as the case may be, into fully paid and
nonassessable shares of Common Stock, at a price of $1.00 per
share of Common Stock subject to adjustment pursuant to paragraph
(d)(iv) below ("Conversion Price").
2
<PAGE>
(ii) Automatic Conversion. Each share of Convertible Series
B-1 shall be automatically converted into Common Stock at such
time as Market Price of the Common Stock is at least $4.00 per
share for 30 consecutive trading days. Upon the occurrence of
such event, each share of Convertible Series B-1 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-1 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-1, 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)(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-1 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-1 into
full shares of Common Stock pursuant to paragraph (d)(ii) above,
the holder of the Convertible Series B-1 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-1, 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
3
<PAGE>
consecutive trading day the Market Price of the Common Stock is
at least $4.00 per share. Each holder of the Convertible Series
B-1 whose Convertible Series B-1 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-1, to and
including the time of conversion. A holder of the Convertible
Series B-1 shall not be entitled to any remaining dividends with
respect to the Convertible Series B-1 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-1 so converted.
(iv) Adjustments to Conversion Price.
(1) Special Definitions. For purposes of this paragraph
(d)(iv), the "Original Issue Date" shall mean, the original
date on which a share of Convertible Series B-1 was first
issued to each preferred shareholder and "Market Price"
shall be determined as follows:
a) if the Common Stock is listed and registered on
any national securities exchange or traded on The
Nasdaq Stock Market ("Nasdaq"), the closing bid price;
b) if such Common Stock is not at the time listed
on any such exchange or traded on Nasdaq but is traded
on the OTC Bulletin Board, or if not, on the
over-the-counter market as reported by the National
Quotation Bureau or other comparable service, the
closing bid price for such stock; or
c) if clauses a) and b) above are not applicable,
the fair value per share of such Common Stock as
determined in good faith and on a reasonable basis by
the Board of Directors of the Corporation.
(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
4
<PAGE>
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) 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-1 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
5
<PAGE>
received had their Convertible Series B-1 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-1.
(5) Adjustment for Reclassification, Exchange, or
Substitution. If the Common Stock issuable upon the conversion of
the Convertible Series B-1 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 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-1 shall have the right thereafter to
convert each share of Convertible Series B-1 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-1 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, or in the twelve months following the
closing of the private placement in which the Convertible Series
B-1 is issued ("Closing Anniversary"), 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-1 shall thereafter be entitled to receive
6
<PAGE>
upon conversion of the Convertible Series B-1, 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.
(7) Adjustment for Stock Price. If at any time between
September 30, 1999, and September 30, 2000, the Market Price of
the Common Stock is not at least $1.15 per share for at least 20
trading days, the Conversion Price will be reduced to the greater
of the average of the Market Price of the Common Stock for the
five trading days prior to September 30, 2000, or $.50.
(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-1 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-1,
promptly compute such adjustment or readjustment in accordance with
the terms hereof and furnish to each holder of such Convertible Series
B-1 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-1, furnish or
cause to be furnished 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-1.
(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;
7
<PAGE>
(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-1, 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-1 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-1. 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.
8
<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-1, 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-1 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-1, the full number of shares of
Common Stock deliverable upon the conversion of all shares of
Convertible Series B-1 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-1 at the time outstanding.
(xii) Retirement of Convertible Series B-1 Converted. No shares
of Convertible Series B-1 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-1
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.
(f) Optional Redemption of Convertible Series B-1.
(i) Redemption. On and after October 1, 2003, the Convertible
Series B-1 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-1 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 7.6(a) of this Article VII
accrued and unpaid to the date fixed for redemption.
9
<PAGE>
(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-1 effect a subdivision
of the outstanding Convertible Series B-1, the applicable Convertible
Series B-1 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-1 combine the
outstanding shares of Convertible Series B-1, the applicable
Convertible Series B-1 redemption price then in effect immediately
before the combination shall be proportionately increased. Any
adjustments under this Section 7.6(f)(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-1 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-1 held by
the holder which are to be redeemed by the Corporation, and the
total number of shares of Convertible Series B-1 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-1 to
be redeemed.
(iv) Surrender. Each holder of shares of Convertible Series B-1
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.
10
<PAGE>
(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-1 thereupon subject to
redemption shall be entitled to any further accrual of any dividends.
(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-1 redeemed. If less than the
full number of a holder's shares of Convertible Series B-1 is
redeemed, the Corporation shall deliver to the holder a new
Convertible Series B-1 certificate representing the balance of the
holder's shares of Convertible Series B-1.
Dated: September 25, 1999
eVISION USA. COM, INC.,
a Colorado corporation
By: /s/Gary L. Cook
-------------------------------------
Gary L. Cook, Secretary and Treasurer
11
MANAGEMENT AGREEMENT
AGREEMENT made as of August 10, 1998 by and between FRONTEER DEVELOPMENT
FINANCE INC., a Delaware corporation (the "Corporation"), and FRONTEER FINANCIAL
HOLDINGS, LTD., a Colorado corporation ("Manager").
WHEREAS, the Corporation operates as a finance company, taking advantage of
high-yield and other lending opportunities; and
WHEREAS, the Corporation desires to retain Manager directly to render
management services to it, and its subsidiaries and affiliates (if any), with
regard to its operations as a finance company, and Manager is willing to provide
such services on the terms and conditions hereinafter set forth.
NOW THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged by the parties, it is hereby mutually agreed as follows:
1.(a) The Corporation hereby retains Manager to render Management
Services (as defined below) to the Corporation and its subsidiaries, and Manager
hereby agrees to render such services as requested from time to time by the
board of Directors of the Corporation, for the period commencing on the date
hereof and continuing until termination of this Agreement in accordance with the
terms hereof. Management Services shall include assistance to the management of
the Corporation with respect to the business and operations of the Corporation
or any of its subsidiaries (and affiliated companies), including, without
limitation, assistance in (i) the identification of lending opportunities, (ii)
credit analysis of potential borrowers, (iii) structure of loans, including
yield-enhancing equity participation and collateral arrangements, and (iv)
administration of loans.
(b) The Manager shall at all times be and conduct itself as an
independent contractor in respect of the Corporation, and shall not, under any
circumstances, create or purport to create any obligation on behalf of the
Corporation except as otherwise expressly directed by the Board of Directors of
the Corporation.
2.(a) As compensation for Management Services, the Corporation will
pay, so long as this Agreement continues in effect, an annual fee in an amount
equal to 10% of the Corporation's pre-tax profits (pro-rated for partial years)
as determined from the Company's annual audited financial statements for the
applicable year, which amount shall be paid for each year (or portion thereof)
during the term hereof, within 30 days after the receipt of the Corporation's
annual audited financial statements for such year.
1
<PAGE>
(b) In addition to the aforementioned fees, the Corporation shall
reimburse Manager for its reasonable out-of-pocket costs and expenses incurred
in connection with the performance of its advisory and consulting service
hereunder.
3. It is understood that the Manager may from time to time act as manager
to, or enter into similar agreements, or conduct any other business, or engage
in any other business transaction, with, any other person or entity whether or
not such person or entity competes with the Corporation, without the necessity
of obtaining approval from the Corporation.
4. The Manager shall and shall cause its employees, officers, directors,
agents and representatives to keep all information, material and data of any
kind (written and oral) with respect to the Corporation, its business and
affairs, including, but not limited to, the contents of this Agreement
(collectively, the "Information"), confidential. The Manager shall not disclose
and shall prohibit its employees, officers, directors, agents and
representatives from disclosing any Information to any party, other than the
Corporation or the Corporation's authorized representative without the
Corporation's prior written consent, except with respect to Information which is
publicly available (other than as a result of disclosure by the Manager, its
employees, officers, directors, agents or representatives) or as required by
law.
5. The Corporation agrees to indemnify the Manager, and all officers,
directors, shareholders, affiliates or controlling persons thereof ("Indemnified
Parties"), and to save and hold them harmless from and in respect of, any and
all (a) liabilities, fees, costs and expenses paid in connection with, resulting
from or relating to any claim, action or demand against any and all such
Indemnified Parties that arise out of or in any way relate to the Corporation,
its properties, business, or affairs and (b) such claims, actions and demands
and any losses or damages resulting from such claims, actions and demands,
including amounts paid in settlement or compromise of any such claim, action or
demand; provided however, that this indemnity shall not extend to conduct of
such Indemnified Party not undertaken in good faith to promote the best
interests of the Corporation, nor to any gross negligence or wilful misconduct
of an Indemnified Party. If an Indemnified Party seeks indemnification under
this Agreement and the Corporation challenges such party's right to
indemnification, the Corporation shall advance the amounts claimed hereunder to
the indemnified party until a court of competent jurisdiction determines that
the party receiving such advanced amounts shall return such amounts to the
Corporation to the extent specified in such judgment.
6. This Agreement may be terminated by either the Corporation or the
Manager for any reason on 30 days prior written notice of termination by the
terminating party delivered to the other party.
7. Any notice required to be given hereunder shall be in writing and shall
be deemed sufficient if delivered in person or mailed by certified mail as
follows: if to the Corporation, to it at its office at One Norwest Center, 1700
Lincoln Street, 32nd Floor, Denver, Colorado 80203, Attention: President, or
such address as the Corporation may hereafter designate for that purpose; and if
to Manager, to it at its office at One Norwest Center, 1700 Lincoln Street, 32nd
Floor, Denver, Colorado 80203, Attention: President, or such other address as
Manager may hereafter designate for that purpose.
2
<PAGE>
8. This Agreement constitutes the entire agreement between the parties and
supersedes all prior agreements and understandings, both written and oral, with
respect to the subject matter hereof. this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, including any corporation into which the Corporation shall consolidate
or merge or to which it shall transfer substantially all of its assets. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Colorado applicable to contracts made and to be performed entirely
within such state.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written.
FRONTEER DEVELOPMENT FINANCE, INC.
By: /s/Gary L. Cook
--------------------------------------
Name: Gary L. Cook
Title: Treasurer
FRONTEER FINANCIAL HOLDINGS, LTD.
By: /s/Robert H. Trapp
--------------------------------------
Name: Robert H. Trapp
Title: President
3
SUBSIDIARIES OF REGISTRANT
Name of Subsidiary Jurisdiction of Incorporation
- ------------------ -----------------------------
eBroker USA.Com, Inc. Colorado
American Fronteer Financial Corporation Colorado
RAF Services, Inc. of Texas Texas
RAF Services, Inc. of Louisiana Louisiana
RAF Services, Inc. Nevada
Q6 Technologies, Inc. Colorado
Secutron Corp. Colorado
MidRange Solutions Corp. Colorado
eBanker USA.com, Inc. Colorado
Fronteer Income Growth, Inc. British Virgin Islands
Corporate Net Solutions, Inc. Delaware
Fronteer Corporate Services, Inc. Colorado
Fronteer Asset Management Corporate, Inc. Delaware
eFunds Global.Com Inc. Colorado
Neuro Web, Inc. Colorado
Neuro Web Canada, Inc. Canada
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-82177 of eVision USA.Com, Inc. on Form S-8 of our report dated December 21,
1999, appearing in this Annual Report on Form 10-K of eVision USA.Com, Inc. for
the year ended September 30, 1999.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
December 21, 1999
Independent Auditors' Consent
The Board of Directors
eVision USA.Com, Inc.
We consent to the incorporation by reference in the Registration Statement on
Form S-8 of eVision USA.Com, Inc. (formerly Fronteer Financial Holdings, Ltd.)
of our report dated December 30, 1998, relating to the consolidated balance
sheet of eVision USA.Com, Inc. and Subsidiaries as of September 30, 1998, and
the related consolidated statements of operations, comprehensive income (loss),
stockholders' equity (deficit), and cash flows for each of the years in the
two-year period ended September 30, 1998, which report appears in the September
30, 1999, annual report on Form 10-K of eVision USA.Com, Inc.
/s/ KPMG LLP
KPMG LLP
Denver, Colorado
December 28, 1999
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 7,593,772
<SECURITIES> 2,486,959
<RECEIVABLES> 8,102,126
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,028,884
<PP&E> 3,500,335
<DEPRECIATION> (2,266,975)
<TOTAL-ASSETS> 22,740,051
<CURRENT-LIABILITIES> 4,601,841
<BONDS> 14,247,383
0
11,050
<COMMON> 198,383
<OTHER-SE> (4,139,913)
<TOTAL-LIABILITY-AND-EQUITY> 22,740,051
<SALES> 9,705,227
<TOTAL-REVENUES> 34,193,262
<CGS> 8,752,669
<TOTAL-COSTS> 36,307,114
<OTHER-EXPENSES> 714,529
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<INTEREST-EXPENSE> 31,178
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<INCOME-TAX> 136,631
<INCOME-CONTINUING> (3,189,048)
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<NET-INCOME> (3,189,048)
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