FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 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 0-17637
eVision USA.Com, Inc.
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(Exact name of registrant as specified in its charter)
Colorado 45-0411501
------------------------------ -------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1700 Lincoln Street, Suite 3200, Denver, CO 80203
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(Address of principal executive offices)
(303) 860-1700
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
The registrant had 19,193,631 shares of its $.01 par value common stock
outstanding as of July 30, 1999.
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eVISION USA.COM, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements Page No.
a. Consolidated Balance Sheets as of June 30, 1999 (Unaudited)
and September 30, 1998......................................... 3
b. Unaudited Consolidated Statements of Operations for the three
months and nine months ended June 30, 1999 and 1998............ 5
c. Unaudited Consolidated Statements of Comprehensive Income (Loss)
for the three months and nine months ended June 30, 1999
and 1998....................................................... 6
d Unaudited Consolidated Statement of Stockholders' Deficit........ 7
e. Unaudited Consolidated Statements of Cash Flows for the nine
months ended June 30, 1999 and 1998............................ 8
f. Notes to Unaudited Consolidated Financial Statements............ 11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 20
Item 3. Quantitative and Qualitative Disclosures about Market Risk.......... 24
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................... 24
Item 2. Changes in Securities............................................... 24
Item 4. Submission of Matters to a Vote of Security Holders................. 26
Item 5. Other Information................................................... 26
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits....................................................... 26
b. Reports on Form 8-K............................................ 26
Signatures................................................................... 27
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS June 30, September 30
- ------ 1999 1998
--------- ----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents .......................... $ 5,354,438 9,112,652
Receivable from clearing organization .............. 130,222 410,069
Trade receivables .................................. 2,148,541 1,157,841
Other receivables .................................. 358,646 667,425
Securities owned, at market value .................. 3,288,690 1,688,085
Notes receivable ................................... 2,700,000 --
Investments in debt securities, at fair value ...... 5,769,282 --
Other assets ....................................... 465,837 261,606
----------- -----------
Total current assets .......................... 20,215,656 13,297,678
PROPERTY, FURNITURE AND EQUIPMENT, net of
accumulated depreciation ........................ 1,538,477 1,541,131
FINANCING COSTS, net of accumulated amortization
of $73,850 ...................................... 864,524 --
OTHER LONG-TERM ASSETS ............................. 635,744 532,103
----------- -----------
Total assets .................................. $23,254,401 15,370,912
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
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<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, CONTINUED
June 30, September 30,
LIABILITIES AND STOCKHOLDERS' DEFICIT: 1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
LIABILITIES:
Accounts payable and accrued expenses .............................. $ 4,958,274 2,514,860
Accrued interest payable to related party .......................... 209,806 157,111
Current portion of long-term debt .................................. 136,367 124,007
Current portion of convertible debentures to related party ......... 500,000 500,000
Deferred revenue ................................................... 9,130 118,800
Other current liabilities .......................................... 150,097 306,574
------------ ------------
Total current liabilities ..................................... 5,963,674 3,721,352
LONG-TERM DEBT, net of current portion ............................. 222,193 107,532
CONVERTIBLE DEBENTURES ............................................. 6,723,883 6,101,448
CONVERTIBLE DEBENTURES TO RELATED PARTY ............................ 7,500,000 6,500,000
DEFERRED RENT CONCESSIONS .......................................... 1,569,231 1,654,766
------------ ------------
Total liabilities ............................................. 21,978,981 18,085,098
------------ ------------
MINORITY INTEREST .................................................. 3,779,854 328,991
------------ ------------
STOCKHOLDERS' DEFICIT:
Preferred stock, authorized 21,700,000 shares, $.10 par
value, no shares outstanding .................................... -- --
Convertible Series B preferred stock, authorized 3,000,000
shares, $0.10 par value, 100,000 shares issued and
outstanding, redemption value $1,250,000 ........................ 10,000 --
Common stock; authorized 100,000,000 shares, $0.01 par
value; 18,649,449 and 17,140,857 shares issued and
outstanding as of June 30, 1999 and September 30,
1998, respectively .............................................. 186,494 171,408
Additional paid-in capital ......................................... 12,453,631 11,042,464
Accumulated deficit ................................................ (14,956,892) (13,907,049)
Unrealized gain on available-for-sale securities ................... 152,333 --
Unearned ESOP shares ............................................... (350,000) (350,000)
------------ ------------
Total stockholders' deficit ................................... (2,504,434) (3,043,177)
------------ ------------
Total liabilities and stockholders' deficit ................... $ 23,254,401 15,370,912
============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
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<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended June 30, Nine months ended June 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUE:
Brokerage commissions ................................... $ 4,417,153 4,464,931 14,088,695 11,313,545
Investment banking ...................................... 378,985 256,313 915,229 1,814,287
Trading profits, net .................................... 265,891 153,349 1,136,397 328,077
Other broker/dealer ..................................... 538,007 392,838 1,563,984 855,644
Computer hardware and software operations ............... 3,078,874 1,468,540 8,025,538 6,556,362
Interest income on investments and loans ................ 440,707 -- 1,201,051 --
Unrealized gain (loss) on securities .................... 856,824 (1,136,638) 1,190,740 (1,027,603)
Other ................................................... 29,023 -- 63,895 --
------------ ------------ ------------ ------------
10,005,464 5,599,333 28,185,529 19,840,312
------------ ------------ ------------ ------------
COST OF SALES AND OPERATING EXPENSES:
Broker/dealer commissions ............................... 2,666,735 2,887,263 8,622,462 8,103,752
Computer cost of sales .................................. 2,810,516 1,478,326 7,314,711 5,862,072
Interest expense on convertible debentures .............. 252,461 -- 762,001 --
General and administrative .............................. 4,065,884 3,509,560 11,347,328 9,743,202
Depreciation and amortization ........................... 107,303 148,210 316,144 326,968
------------ ------------ ------------ ------------
9,902,899 8,023,359 28,362,646 24,035,994
------------ ------------ ------------ ------------
Operating income (loss) ............................... 102,565 (2,424,026) (177,117) (4,195,682)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income ....................................... 16,725 235,772 57,110 376,493
Interest expense ...................................... (9,505) (96,178) (27,612) (215,911)
Interest expense to related party ..................... (209,806) (254,166) (615,416) (254,166)
Other ................................................. (558) 29,331 (65,505) (2,843)
------------ ------------ ------------ ------------
(203,144) (85,241) (651,423) (96,427)
Loss before minority interest and income taxes ............. (100,579) (2,509,267) (828,540) (4,292,109)
Minority interest in (earnings) loss ....................... 23,384 91,426 (105,764) 78,880
------------ ------------ ------------ ------------
Loss from continuing operations before income taxes ........ (77,195) (2,417,841) (934,304) (4,213,229)
Income tax (expense) benefit ............................... (36,370) 54,522 (115,539) 606,651
------------ ------------ ------------ ------------
Loss from continuing operations ............................ (113,565) (2,363,319) (1,049,843) (3,606,578)
Discontinued operations:
Loss from discontinued operations, net .................. -- -- -- (180,842)
Loss on sale of discontinued operations, net ............ -- -- -- (317,905)
------------ ------------ ------------ ------------
Net loss before extraordinary item ......................... (113,565) (2,363,319) (1,049,843) (4,105,325)
Extraordinary item, net of income taxes of $585,000 ........ -- -- -- 915,000
------------ ------------ ------------ ------------
NET LOSS ................................................... $ (113,565) (2,363,319) (1,049,843) (3,190,325)
============ ============ ============ ============
Weighted average number of common shares outstanding ....... 18,587,843 16,717,813 18,122,941 16,805,848
============ ============ ============ ============
Basic and diluted loss per common share:
Continuing operations ................................... $ (.01) (.14) (.06) (.21)
Discontinued operations:
Loss from discontinued operations .................... -- -- -- (.01)
Loss on sale of discontinued operations .............. -- -- -- (.02)
------------ ------------ ------------ ------------
(.01) (.14) (.06) (.24)
Extraordinary item ...................................... -- -- -- .05
------------ ------------ ------------ ------------
Total ...................................................... $ (.01) (.14) (.06) (.19)
============ ============ ============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
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<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Three months ended June 30, Nine months ended June 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET LOSS ....................................................... $ (113,565) (2,363,319) (1,049,843) (3,190,325)
OTHER COMPREHENSIVE INCOME:
Unrealized gain on available-for-sale securities,
net of tax of $97,393 .................................... 152,333 -- 152,333 --
---------- ---------- ---------- ----------
COMPREHENSIVE INCOME (LOSS) .................................... $ 38,768 (2,363,319) (897,510) (3,190,325)
========== ========== ========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
(Unaudited)
Convertible Accumulated
series B Additional other Unearned
preferred Common paid-in Accumulated comprehensive ESOP
stock stock capital deficit income stock Total
--------- -------- ---------- ----------- ------------ --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balances as of
September 30, 1998 ............. $ -- 171,408 11,042,464 (13,907,049) -- (350,000) (3,043,177)
Issuance of common shares
on exercise of stock options ... -- 1,131 21,488 -- -- -- 22,619
Issuance of common shares
for accrued interest ........... -- 11,455 551,267 -- -- -- 562,722
Issuance of common shares
for guarantee .................. -- 2,500 60,000 -- -- -- 62,500
Issuance of Convertible Series B
preferred stock, net of
issuance costs of $211,588 ..... 10,000 -- 778,412 -- -- -- 788,412
Other comprehensive income:
Unrealized gain on
available-for-sale securities .. -- -- -- -- 152,333 -- 152,333
Net loss .......................... -- -- -- (1,049,843) -- -- (1,049,843)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances as of
June 30, 1999 ................. $ 10,000 186,494 12,453,631 (14,956,892) 152,333 (350,000) (2,504,434)
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
7
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<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended June 30,
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,049,843) (3,190,325)
Adjustments to reconcile net loss to net cash used in
continuing operations:
Depreciation and amortization ................................... 316,144 326,968
Amortization of financing costs ................................. 73,850 --
Amortization of deferred rent ................................... (85,535) (61,763)
Loss from discontinued operations ............................... -- 498,747
Extraordinary item, net of income taxes of $585,000 ............. -- (915,000)
Accretion of discount on investments in debt securities ......... (782,945) --
Accretion of original issue discount on convertible
debentures ................................................ 91,101 --
Unrealized (gain) loss on securities ............................ (1,190,740) 1,027,603
Minority interests in earnings (loss) ........................... 105,764 (78,880)
Changes in operating assets and liabilities:
Decrease in receivables from brokers or
dealers and clearing organizations ...................... 279,847 2,040,165
Increase in trade receivables ................................. (990,700) (267,384)
Decrease in other receivables ................................. 308,779 15,698
Increase in securities owned .................................. (409,865) (5,525,529)
Decrease (increase) in other assets ........................... (141,731) 702,796
Increase (decrease) in accounts payable
and accrued expenses .................................... 2,177,313 (1,141,497)
Increase (decrease) in deferred revenue ....................... (109,670) 191,500
Increase in other current liabilities ......................... 458,940 349,849
---------- ----------
Net cash used in continuing operations ................................ (949,291) (6,027,052)
Net cash provided by discontinued operations .......................... -- 769,539
---------- ----------
Net cash used in operating activities ................................. (949,291) (5,257,513)
---------- ----------
(Continued)
See accompanying notes to unaudited consolidated financial statements.
8
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<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(Unaudited)
Nine months ended June 30,
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, furniture and equipment ...................... $ (139,186) (255,218)
Purchases of debt securities ....................................... (4,635,275) --
Proceeds from sale of debt securities .............................. 331,250 --
Advances on long-term notes receivable ............................. (2,700,000) --
Other investing activities ......................................... (103,641) (1,158,015)
Net cash provided by discontinued operations ....................... -- 221,975
----------- -----------
Net cash used in investing activities .............................. (7,246,852) (1,191,258)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on debt ................................................. -- 260,113
Principal payments on borrowings ................................... (47,283) (345,422)
Net proceeds from issuance of convertible debentures,
net of offering costs ........................................ 531,334 --
Net proceeds from issuance of convertible debentures to
related party ................................................ 1,000,000 5,500,000
Net proceeds from issuance of Convertible Series B
preferred stock, net of offering costs ....................... 788,412 --
Net proceeds from exercise of stock options ........................ 22,619 --
Proceeds from sale of eBanker Second Private Placement
Units, net of offering costs ................................. 2,155,938 --
Proceeds from exercise of eBanker warrants ......................... 27,435 --
Other financing activities ......................................... (40,526) (42,720)
----------- -----------
Net cash provided by financing activities .......................... 4,437,929 5,371,971
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS ............................. (3,758,214) (1,076,800)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD ............................................................. 9,112,652 2,080,722
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD .............................. $ 5,354,438 1,003,922
=========== ===========
(Continued)
See accompanying notes to unaudited consolidated financial statements.
9
<PAGE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(Unaudited)
SUPPLEMENTAL DISCLOSURES RELATED TO STATEMENTS OF CASH FLOWS
Nine months ended June 30,
1999 1998
---- ----
<S> <C> <C>
Cash payments for:
Interest:
Continuing operations ............................................ $ 384,603 11,193
Discontinued operations .......................................... -- 9,350
----------- ----------
$ 384,603 20,543
=========== ==========
Income taxes:
Continuing operations ............................................ $ -- 7,047
=========== ==========
Other investing and financing activities:
Forgivable loan recognized as extraordinary item, net
of income taxes of $585,000 ...................................... $ -- 915,000
=========== ==========
Common stock received in disposition of net assets of
discontinued operations .......................................... $ -- 493,500
=========== ==========
Common stock issued for interest ................................... $ 562,722 --
=========== ==========
Common stock issued for guarantee .................................. $ 62,500 --
=========== ==========
Equipment financed under capital lease ............................. $ 180,867 --
=========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
10
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eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 1 - ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
eVision USA.Com, Inc. (eVision or the Company) is a corporation that was
organized under the laws of the state of Colorado in September 1988. In April
1999, the shareholders voted to change the name of the Company from Fronteer to
eVision. The Company currently has the following wholly owned operating
subsidiaries: American Fronteer Financial Corporation (AFFC), formerly known as
RAF Financial Corporation, a Colorado Corporation, which operates as a fully
disclosed securities broker/dealer; RAF Services, Inc. of Texas, RAF Services,
Inc. of Louisiana and RAF Services, Inc. (collectively, RAF Services), which
were established in order to participate in insurance brokerage activities in
certain states; Corporate Net Solutions, Inc., which was formed to invest in
computer and Internet related opportunities; and Fronteer Corporate Services,
Inc., a Colorado corporation, which was formed to provide corporate
administrative services to eVision subsidiaries and other companies. RAF
Services are Louisiana, Nevada and Texas corporations. During 1998, Fronteer
Asset Management Corporate, Inc., a wholly owned subsidiary of eVision, was
incorporated to provide asset management services. Corporate Net Solutions,
Inc., a wholly owned subsidiary of eVision, was incorporated in Delaware to
invest in computer and Internet-related opportunities. Corporate Net Solutions,
Inc. and Fronteer Asset Management Corporate, Inc., which were also incorporated
in Delaware in 1998, have not commenced operations. The Company also has a
subsidiary, Secutron Corp. (Secutron), which designs, develops, installs,
markets and supports software systems for the securities brokerage industry. The
Company owned 72.8% of Secutron until June 18, 1999, when the investment in
Secutron was transferred to Q6 Technologies, Inc. The Company now owns,
indirectly through Q6, approximately 65% of its original 72.8% interest.
Secutron has a wholly owned subsidiary, MidRange Solutions Corp., which is a
seller of hardware and software products.
eBanker USA.com, Inc. (eBanker), formerly Fronteer Development Finance Inc., a
Delaware corporation (Fronteer Development) was incorporated in the state of
Delaware, to operate as a finance company. eVision owns approximately 36.6% of
eBanker. In March 1999, Fronteer Development was merged into eBanker, a Colorado
corporation, primarily for the purpose of effectuating a name change to eBanker
and becoming a Colorado corporation. Fronteer Income Growth Inc. (FIGI), a
wholly owned subsidiary of eBanker, was incorporated in September 1998 under the
International Business Companies Ordinances of the Territory of the British
Virgin Islands. In January 1999, WWW.CREDITCARDWEB.COM CORPORATION, a wholly
owned subsidiary of eBanker, was incorporated in Colorado primarily to conduct
business as an Internet-based credit card company, but has not yet commenced
operations.
The Company formed a subsidiary, eBroker USA.Com, Inc. (eBroker) in March 1999.
eBroker is incorporated in Colorado and is expected to be operational in the
on-line brokerage business subject to regulatory approval.
Q6 TECHNOLOGIES, INC.
In March 1999, eVision formed a corporation that will focus on the development
of business opportunities in technology-based virtual processing arenas. The new
business venture, named Q6 Technologies, Inc., (Q6 or Q6 Technologies) a
Colorado corporation, will focus initially on value-added transactions
processing for selected e-commerce applications, as well as the development of
commercial opportunities in digital geographic information services and in
satellite internet protocol multicasting.
11
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eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
The Company made an initial investment of $18,888 in Class A common stock of Q6
Technologies in March 1999.
In June 1999, the Company entered into an exchange and sale of stock agreement
with Q6 Technologies. The Company agreed to exchange its 130,494,385 shares of
common stock in Secutron, which represented 72.80% of the total outstanding
common shares of Secutron, and $100,000 cash for 5,555,556 shares of Class B
Common Stock of Q6 Technologies.
Q6 has issued and outstanding approximately 4,444,444 shares of Class A Common
Stock of which the Company owns 944,444 shares. Q6 also has 5,555,556 shares of
Class B Common Stock outstanding of which the Company owns 100%. The Class A
Common Stock has ten votes per share and the Class B Common Stock has one vote
per share. Consequently, the Company controls approximately 30% of the votes of
Q6 and owns 65% of the total outstanding stock.
SALE OF FRONTEER CAPITAL
On July 30, 1999, eVision entered into a Stock Purchase Agreement with Ladsleigh
Investments Limited, BVI (Ladsleigh) whereby eVision agreed to sell and
Ladsleigh agreed to purchase 100% of the stock of a wholly owned subsidiary of
eVision, Fronteer Capital, Inc. (Fronteer Capital) for $3,000,000, excluding
cash and warrants to purchase equity in a publicly traded company. The purchase
price was based on an independent market valuation of the primary assets held by
Fronteer Capital as of July 30, 1999, and will result in a gain on disposition
of approximately $150,000. The purchase price will be 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. To effect the financing of the
sale to Ladsleigh, the Company also entered into a Pledge and Escrow Agreement
and Promissory Note Agreement on July 30, 1999. Prior to the transaction, there
was no material relationship between Ladsleigh and the Company or any of its
affiliates, any director or officer of the Company or any associate of any such
director or officer. For the period July 1, 1999 through July 30, 1999, the
Company recognized approximately $485,000 of unrealized gains on the investments
in marketable securities held by Fronteer Capital.
INVESTMENT IN MUTUAL FUND SPONSOR
In July 1999, the Company executed a letter of intent with Quaker Funds, Inc.
(Quaker) wherein the Company would acquire 60% of the outstanding common stock
of Quaker for $3,500,000 payable in 4,666,667 shares of common stock of eVision
priced at $0.75 per share. Quaker sponsors six mutual funds, with total assets
of approximately $70,000,000.
The letter of intent includes the option of the sellers to put the shares of
common stock of eVision to eVision at the initial closing price for cash if the
price of eVision shares does not trade at an average of $3.00 per share or
higher for a 60-day period at any time between the first and second anniversary
of the closing of the transaction. There are additional provisions in the
agreement for the sellers to sell their remaining 40% interest in Quaker in two
years, four years or six years from closing of the agreement.
12
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements of eVision USA.Com,
Inc. and subsidiaries (eVision or the Company) formerly known as Fronteer
Financial Holdings, Ltd. (Fronteer), have been prepared in accordance with the
instructions to Form 10-Q and, therefore, do not include all information and
disclosures necessary for a fair presentation of financial position, results of
operations, and cash flows in conformity with generally accepted accounting
principles. In the opinion of management, these financial statements reflect all
adjustments (which include only normal recurring adjustments) necessary for a
fair presentation of the results of operations and financial position for the
interim periods presented.
The preparation of interim financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
These interim financial statements should be read in conjunction with the Annual
Report on Form 10-K for the year ended September 30, 1998. Operating results for
the nine or three months ended June 30, 1999, are not necessarily indicative of
the results that may be expected for the year ended September 30, 1999.
CONCENTRATIONS OF RISK
The Company's subsidiary eBanker, has invested approximately $4,300,000 in debt
securities in Asian corporations, which are traded on the Hong Kong Stock
Exchange, and have a recorded market value as of June 30, 1999 of approximately
$5,800,000.
The Company has investments in equity securities subject to equity price risk of
approximately $3,289,000 of which approximately $2,320,000 are also subject to
foreign exchange rate risk at June 30, 1999.
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 it investment strategy with respect to
the bond investments to systematically sell the bond investments. Consequently,
the investments in debt securities have been transferred from the
held-to-maturity category to the available-for-sale category 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 income.
13
<PAGE>
eVISION USA.COM,
INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 3 - STOCKHOLDERS' DEFICIT
Between February 1, 1999 and June 30, 1999, the Board of Directors granted
options under the Company's stock option plans to purchase approximately 2.3
million shares of the common stock of eVision at market values ranging from
$0.40 to $1.00 per share. The options vest over periods ranging from three to
five years and are exercisable for a period of ten years. Also during the same
period, options to purchase approximately 1.5 million common shares of eVision
were cancelled due to terminations.
In January 1999, Mr. 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.
During the nine months ended June 30, 1999, a total of 1,145,493 shares of
common stock were issued in payment of accrued interest to Heng Fung Finance
Company Limited (Heng Fung Finance). As of June 30, 1999, the Company had
$209,806 of accrued interest payable, which was subsequently paid through the
issuance of 423,924 shares of common stock of the Company.
In October 1998, the Company commenced a private placement of 1,500,000 shares
of its Convertible Series B Preferred Stock at a price of $10.00 per share (1998
Private Offering). The net proceeds are intended to be used to fund working
capital and acquire other securities broker/dealers. Through June 30, 1999, the
Company received proceeds of $1,000,000, net of offering costs of $211,588, or
$788,412 from the sale of 100,000 shares of Convertible Series B Preferred
Stock. Subsequent to June 30, 1999, the Company received net proceeds of $47,850
from the sale of 5,500 shares of Convertible Series B Preferred Stock.
With respect to the 1998 Private Offering, Heng Fung Holdings Company Limited,
an affiliate of the Company, (Heng Fung Holdings) has guaranteed through October
2003 the payment of each annual 8% cash dividend on the Convertible Series B
Preferred Stock sold by the Company if such dividend is not paid by the Company.
In consideration for making such guaranty, the Company issued Heng Fung Holdings
250,000 shares of the Company's common stock during the nine months ended June
30, 1999. If Heng Fung Holdings is required to make payment as a result of its
guaranty, Heng Fung Holdings or its designee will receive a 12% convertible
debenture equivalent to the amount that Heng Fung Holdings is required to pay on
the guaranty unless the act of the Company in giving Heng Fung Holdings or its
designee the 12% convertible debenture would be deemed to be an illegal
distribution under the Colorado Business Corporation Act. Heng Fung Holdings or
its designee would receive such number of shares of the Company's common stock
as is equal to 90% of the market price of the common stock as of the close of
business on October 31 or the next business day, if October 31 is not a business
day, on which the dividend is payable divided into the amount of the dividend.
14
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
The Convertible Series B Preferred Stock has a cumulative annual dividend rate
of 8% in cash and 7% in shares of the Convertible Series B Preferred Stock. The
dividend is payable annually beginning October 31, 1999, when and if declared by
the Board of Directors. The Convertible Series B Preferred Stock is immediately
convertible by the holder into the common stock of the Company at a price of
$2.00 per share of common stock. In addition, the Convertible Series B Preferred
Stock is automatically convertible into common stock at $2.00 per share at such
time as the closing market price of the common stock is at least $4.00 per share
for 30 consecutive trading days. The Convertible Series B Preferred Stock is
redeemable by the Company on and after October 1, 2003, at a price of $12.50 per
share plus any accrued and unpaid dividends.
NOTE 4 - INVESTMENTS IN DEBT SECURITIES
As of June 30, 1999, investments in debt securities of Asian corporations traded
on the Hong Kong Stock Exchange are as follows:
<TABLE>
<CAPTION>
Carrying Interest Maturity
Corporation Cost Value Rate Date
- ------------------------------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Paul Y-ITC $ 686,600 1,163,400 5.00% 02/03/01
China Resources 842,375 1,190,882 2.00% 04/30/04
Shanghai Industrial 380,000 450,850 1.00% 02/24/03
Kerry Properties 690,000 785,400 2.00% 06/15/07
Shum Yip 157,500 231,400 1.20% 08/08/02
First Pacific 588,750 749,550 2.00% 03/27/02
New World China Finance 204,000 218,820 4.00% 12/31/99
New World Infrastructure, Ltd. 284,000 382,680 1.00% 04/15/03
Hon Kwok Land Capital 466,300 596,300 5.30% 07/05/01
---------- ----------
$ 4,299,525 5,769,282
</TABLE>
========== ==========
As of June 30, 1999, the securities are classified as available-for-sale and are
carried at fair value. On July 14, 1999, the Company received a notice of
mandatory call on the above investment in New World China Finance. The call was
at a price such that the Company recognized a modest gain on the redemption in
July 1999.
NOTE 5 - eBANKER PRIVATE PLACEMENTS
In May 1998, Fronteer Development commenced a private placement of 30,000 units
(Units) each consisting of (i) one $1,000 convertible debenture, due August 1,
2008, paying 10% per annum; (ii) 100 Class A shares of common stock and (iii)
warrants exercisable at $3.00 per share for 500 Class A shares of common stock
(Private Placement). Each Unit sold for $1,000. The convertible debentures are
convertible into Class A shares of common stock at a conversion price of $5.00
per share. The Private Placement terminated November 30, 1998. Prior to
termination, 7,958 Units, comprising 795,800 shares of Class A common stock;
7,958 convertible debentures and warrants to purchase 3,979,000 shares of Class
A common stock at $3.00 per share were issued in the Private Placement for
proceeds of $6,832,851 net of issuance costs of $1,125,149. The Offering
Memorandum for the Private Placement included 3,000,000 shares of authorized
Class B common stock, and required eVision to purchase Class B common stock in
the amount of no less than 26.67% of the dollar amount of Units purchased by
outside investors. eVision fulfilled its commitment. There are no commissions or
expenses associated with the Class B common stock issuance.
15
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
The offering costs of $1,125,149 have been allocated to the shares of Class A
common stock of Fronteer Development and to the convertible debentures in
accordance with the allocation of proceeds per the Private Placement. Offering
costs of $186,775 were allocated to the Class A common stock of Fronteer
Development. Financing costs of $938,374 are being amortized to interest expense
over the term of the convertible debentures, ten years. Accumulated amortization
at June 30, 1999 was $73,850.
Each share of Class A common stock of Fronteer Development was entitled to one
vote. The Class B common stock was owned 100% by eVision. Each share of Class B
common stock of Fronteer Development was entitled to 30 votes per share.
In February 1999, the Board of Directors of Fronteer Development and eBanker
voted to approve the merger of Fronteer Development into eBanker USA.com, Inc.,
subject to the approval by the shareholders. The Class A and Class B common
stock of Fronteer Development was exchanged for an equivalent number of shares
of eBanker common stock. As a result, all shares of the common stock have the
identical rights, powers, preferences, privileges and restrictions. The merger
of Fronteer Development into eBanker was effective in March 1999 and resulted in
the issuance of 1,463,261 shares of eBanker common stock in exchange for all of
the Class A and Class B common stock of Fronteer Development. eBanker also
authorized the issuance of preferred stock. The preferred stock may be issued
from time to time in one or more series as the Board of Directors may determine,
without shareholder approval. The Board of Directors is empowered to fix and
determine the designations, preferences, rights, qualifications, limitations and
restrictions of the series.
In March 1999, the Board of Directors of eBanker, with the consent of the Board
of Directors of eVision, voted to designate one share of Series A Preferred
Stock. The owner of the share is entitled to 50% of all votes entitled to be
cast in the election of directors of eBanker. Other than in the election of
directors, the share of Series A Preferred Stock has no voting rights. The share
was purchased by eVision for $1,000 in May 1999. Accordingly, eVision will be
entitled to 68.3% of the votes entitled to be cast in the election of directors
and 36.6% of the votes entitled to be cast in other matters.
The Private Placement contained a provision for warrants to be issued to the
placement agent. AFFC, as placement agent, received warrants to purchase 79,580
shares of Class A common stock at an exercise price of $3.00 per share. Under
the terms of the warrant agreement relating to these warrants, AFFC or its
assigns could exercise up to 25% of the warrants through March 30, 1999, as
amended by the Board of Directors, and the remaining 75% may be exercised
between November 30, 1999 and November 30, 2000. AFFC assigned the first 25% of
warrants to certain registered representatives who exercised 9,145 warrants in
March 1999 for which eBanker received $27,435.
In March 1999, eBanker commenced a second private placement (Second Private
Placement) of 3,000,000 units (Second Private Placement Units) each consisting
of one share of common stock and one detachable warrant to purchase one share of
common stock. Each unit is being offered at a price of $6.00.
16
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
The detachable warrants will be exercisable to purchase one share of common
stock at an exercise price of $6.00 per share after the earlier of 120 days
after an initial public offering of the Company's securities or one year after
the date of the Second Private Placement until August 31, 2000. As of June 30,
1999, eBanker sold 421,673 Second Private Placement Units for proceeds of
$2,155,938, net of issuance costs of $374,102. Subsequent to June 30, 1999, an
additional 343,871 Second Private Placement Units were sold for proceeds of
$1,795,007, net of offering costs of $268,219. The offering terminated on July
31, 1999.
NOTE 6 -NOTES RECEIVABLE
Included in notes receivable at June 30, 1999 are notes receivable from Global
Med Technologies, Inc. (Global) which total $2,650,000. During the nine months
ended June 30, 1999, the Company earned interest income of $173,623, which is
included in interest income on investments and loans.
In September 1998, eBanker agreed to an assignment of a loan commitment from
Fronteer Capital to Global. Fronteer Capital had originally committed to lend
Global $1,650,000 in April 1998 primarily for working capital. In consideration
for the commitment, Fronteer Capital earned warrants to purchase 1,000,000
shares of Global common stock at $0.25 per share. The loan commitment provided
for additional warrants to purchase 5,000,000 shares of Global common stock when
any amount was drawn on the loan. Th initial draw on the loan was during October
1998. Therefore, eBanker received the 5,000,000 warrants to purchase common
shares of Global at $0.25 per share. As of June 30, 1999, Global had drawn the
full $1,650,000 loan amount.
Also in 1998, eBanker purchased a portion of notes receivable from Global to
Heng Fung Finance. The total note receivable from Global was $1,500,000. Of this
amount, eBanker purchased $1,000,000 from Heng Fung Finance for $1,100,000 and a
warrant to purchase 4,000,000 common shares of Global at $0.25 per share.
The total amount owed eBanker as of June 30, 1999 from Global was $2,650,000.
The total warrants held by eBanker and Fronteer Capital to purchase shares of
common stock of Global for $0.25 per share is 9,000,000 by eBanker and 1,000,000
by Fronteer Capital, or 10,000,000. The warrants are carried at a cost of
$100,000, and are included in other assets. Interest on the loans is 12% per
annum. The loans were originally due and the commitment was to expire on April
15, 1999.
If Global defaults on the repayment of any amount borrowed by Global pursuant to
the notes originally issued to Heng Fung Finance, all existing members of the
board of directors of Global will have to resign and Heng Fung Finance will have
the right to appoint all new members to the board of directors. If there is no
default on the repayment to Heng Fung Finance, or if there is a default and Heng
Fung Finance does not exercise its rights on default, eBanker will have the same
rights on default on the repayment of any amounts borrowed pursuant to the
Fronteer Capital commitment as Heng Fung Finance as are specified above. In
addition, if Global defaulted on the repayment of amounts owed to eBanker and
Heng Fung Finance, the loans originally provided that they could be converted to
common stock of Global at a default conversion price of $0.05 per share.
17
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
In March 1999, eBanker granted an extension of the loan due date until April 15,
2000. In addition, the default conversion price was increased to $0.25 per share
from $0.05 per share. In consideration for the extension, Global agreed to pay
eBanker a 2% fee of $53,000, payable in shares of Global common stock.
In May 1999, eBanker extended Global a $750,000 bridge loan commitment to be
drawn on or before October 15, 1999. Amounts drawn will bear interest at 12% per
annum with interest payable monthly and principal due December 31, 1999. Amounts
drawn may be converted, at the option of eBanker, into common stock of Global.
eBanker received a fee of 2% or $15,000 from Global for the loan, payable in
13,275 shares of Global common stock. During August 1999, $500,000 was drawn on
the commitment.
NOTE 7 - DISCONTINUED OPERATIONS
In March 1998, the Company entered into an agreement with North Country Yellow
Pages, Inc. (North Country) to sell the remaining net assets used in the
directory and telemarketing operations for 493,500 shares of the Company's
common stock held by the principals of North Country, Dennis Olson and Lance
Olson, former employees of the Company. Mr. Dennis Olson is the former president
and director of the Company. The purchase price was based on third party
appraisals and management's estimates relating to specific assets and
liabilities. The Board of Directors approved the sale and closing occurred in
May 1998. The Company has included in its consolidated financial statements as
of and for the nine and three months ended June 30, 1998, the loss on
disposition related to the sale of the net assets to North Country.
NOTE 8 - CONVERTIBLE DEBENTURES TO RELATED PARTY
The Company previously sold Heng Fung Finance a ten year $4,000,000 10%
Convertible Debenture that is convertible into shares of common stock of the
Company and an option to purchase an $11,000,000 12% Convertible Debenture that
is convertible into shares of common stock of the Company. As of June 30, 1999,
Heng Fung Finance had purchased a total of $8,000,000 of convertible debentures,
of which $1,000,000 had been purchased during the nine months ended June 30,
1999. The option to purchase the $11,000,000 12% Convertible Debenture has
$7,000,000 available under option. The principal is due in ten years except for
one installment of $500,000 which was due in March 1999, for which the
installment due date was extended to March 2000. The Company paid Heng Fung
Finance a fee of 5% or $25,000, payable in 44,092 common shares of the Company
for the extension, as determined by the average closing bid price for 15
business days prior to March 23, 1999, or $0.567 per share.
NOTE 9 - EXTRAORDINARY ITEM
In July 1996, the Company sold AFFC's securities brokerage clearing division
(Clearing Operation) to MultiSource Services, Inc. (MSI), a new broker/dealer,
for a purchase price of $3,000,000, including a $1,500,000 contingency in the
form of a forgivable loan, plus the net assets of the Clearing Operation. The
loan of $1,500,000 was recorded as a loan payable to MSI and was forgivable
based on MSI's revenues during the 28 months following the closing date. MSI
reached its revenue targets for the first portion of the forgivable loan by
October 1997. As a result, the first $750,000 of the $1,500,000 forgivable loan
was recognized as income during the nine months ended June 30, 1998. The second
and final portion of the loan plus accrued interest payable was canceled in
accordance with provisions in the forgivable loan agreement relating to MSI's
decision to cease being engaged in the clearing business. The remaining $750,000
was also recognized as income during the nine months ended June 30, 1998. Bot
amounts are shown net of taxes in the consolidated statements of operations.
18
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 10 - COMMITMENTS AND 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, 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.
19
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
Revenues for the three months ended June 30, 1999 were $10,005,464, an increase
of $4,406,131 or 78.7% over the revenues of $5,599,333 for the three months
ended June 30, 1998. The increase primarily relates to increased computer
hardware and software operations revenue of $1,610,334; and interest income on
investments and loans of $440,707. In addition, the Company recognized an
unrealized gain on securities of $856,824 for the quarter ended June 30, 1999,
compared to an unrealized loss of $1,136,638 for the quarter ended June 30,
1998. This represents an increase of $1,993,462 for the current quarter.
The increase in brokerage commission revenue and investment banking was $74,894
for the three month period compared to a decrease in commission expense of
$220,528. Customer transactions increased approximately 32% for the three months
ended June 30, 1999 compared to the three months ended June 30, 1998. This was
partially offset by a decrease in the average commission per transaction ticket
of 23%. The primary reasons for the increased activity were general market
conditions and positive results from the Company's research recommendations that
were acted upon by customers. The decrease in expense compared to revenue
reflects adjustments to branch manager override payouts to correlate closer to
actual production results.
Computer hardware and software revenues for the three months ended June 30, 1999
increased significantly over the three months ended June 30, 1998. This increase
is primarily the result of a customer purchasing significant hardware system
upgrades during the 1999 quarter. The cost of computer hardware and software
sales increased correspondingly as a result of the customer's upgrades.
During the first quarter of the current fiscal year, eBanker invested in debt
securities of various corporations, which are traded on foreign stock exchanges.
The debt securities, which carry a premium redemption value over the face amount
of each security, were originally classified as held-to-maturity. If the
security is held-to-maturity, the Company 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 three months ended June 30, 1999 was $440,707. During the quarter ended
June 30, 1999, eBanker changed 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.
Interest expense on the convertible debentures of eBanker for the three months
ended June 30, 1999 was $252,461.
The increase in general and administrative expenses for the three months ended
June 30, 1999 of $556,324 or 15.9% over the comparable prior period reflects
increased expenses associated with new branch openings in San Francisco, and New
York City. Although the new offices were opened during 1998, they were not open
for the entire comparable three month period.
The minority interest in (earnings) losses represents the minority interest
investment in Secutron and eBanker.
20
<PAGE>
NINE MONTHS ENDED JUNE 30, 1999 COMPARED TO NINE MONTHS ENDED JUNE 30, 1998.
Revenues for the nine months ended June 30, 1999 were $28,185,529, an increase
of $8,345,217 or 42.1% over the revenues of $19,840,312 for the nine months
ended June 30, 1998. The increase primarily relates to increased brokerage
commissions of $2,775,150; an increase in trading profits of $808,320; increased
computer hardware and software operations revenues of $1,469,176; interest
income on investments of $1,201,051 and a $2,218,343 change in unrealized gains
on investments in equity securities, offset by a decrease in investment banking
activity of $899,058.
The increase in brokerage commissions of $2,775,150 is due primarily to an
increase in trading activity. Customer transactions increased approximately 69%
for the nine months ended June 30, 1999 compared to the nine months ended June
30, 1998. This was partially offset by a decrease in the average commission per
transaction ticket of 19%. The primary reasons for the increased activity were
general market conditions and positive results from the Company's research
recommendations that were acted upon by customers. In addition, branch offices
opened during the nine months ended June 30, 1998 were open for the entire nine
month period in the current year.
Trading profits increased $808,320 due primarily to general market conditions
and positive results from the Company's research recommendations that were acted
upon by customers as well as increases in the Company's positions in securities
in which the Company makes a market.
Computer hardware and software revenues for the nine months ended June 30, 1999
increased significantly due to a significant hardware system upgrade by a
customer in the quarter ended June 30, 1999, and significant sales during the
first quarter of the current fiscal year.
During the nine months ended June 30, 1999, eBanker invested in debt securities
of various corporations, which are traded on foreign stock exchanges. The debt
securities carry a premium redemption value over the face amount of each
security. If the security was held until maturity, the Company 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 nine months ended June 30, 1999 was $1,201,051. During
the quarter ended June 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.
The Company recognized an unrealized gain of $1,190,740 on certain foreign held
investments, compared to an unrealized loss of $1,027,603 for the comparable
1998 nine-month period.
Investment banking revenues of $915,299 for the nine months ended June 30, 1999
decreased $899,058 from the nine months ended June 30, 1998 due primarily to the
decreased participation in corporate finance underwritings.
21
<PAGE>
The increase in broker/dealer commissions expense of $518,710 or 6.4% for the
nine months ended June 30, 1999 over the prior period correlates to the increase
in brokerage commission and investment banking revenues combined of $1,876,092
or 14.3% over the nine months ended June 30, 1998. The lower expense percentage
increase reflects adjustments to branch manager override payouts to correlate
closer to actual production results.
Interest expense on the convertible debentures of eBanker for the nine months
ended June 30, 1999 was $762,001.
The increase in general and administrative expenses for the nine months ended
June 30, 1999 of $1,604,126 or 16.5% over the comparable prior period reflects
increased expenses associated with new branch openings in San Francisco, and New
York City. Although the new offices were opened during 1998, they were not open
for the entire comparable nine month period.
Interest expense to related party of $615,416 increased from the prior period
amount of $254,166 as a result of the convertible debentures issued to Heng Fung
Finance during 1998. These convertible debentures have been outstanding for the
full 1999 period.
The minority interest in (earnings) loss represents the minority interest
investment in Q6 and eBanker.
The loss from discontinued operations in the prior period represents the loss on
sale and net loss from operating activity of the Company's directory and
telemarketing businesses of which all of the primary operating assets were sold
during 1998.
The extraordinary item in the prior period represents the recognition of the
forgivable loan with MSI in accordance with the terms and conditions of the
forgivable loan agreement. These terms and conditions included the forgiveness
of the loan based on revenue targets for MSI. MSI reached the target for
forgiveness of $750,000 and thus it was recognized as income. The remaining
$750,000 was recognized as income as MSI discontinued operating as a clearing
firm in the securities industry which allowed th Company to recognize the
remainder in accordance with the agreement. Both of these amounts are shown net
of taxes in the consolidated statement of operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company, as of June 30, 1999, had $5,354,438 in cash and cash equivalents
and $14,251,982 in working capital. Cash flows used by operating activities
during the nine months ended June 30, 1999, totaled $949,291. Cash flows used by
investing activities during the nine-month period was $7,246,852 and consisted
primarily of purchases of debt securities of $4,635,275 and advances on notes
receivable of $2,700,000. Cash flows from financing activities during the
nine-month period of $4,437,929 consisted primarily of proceeds from the
issuance of convertible debentures of $531,334; proceeds from the sale of
eBanker Second Private Placement Units of $2,155,938, the issuance of the
convertible debentures to related party of $1,000,000; and $788,412 of net
proceeds from the Convertible Series B Preferred Stock private placement.
In October 1998, the Company commenced a private placement of 1,500,000 shares
of its Convertible Series B Preferred Stock at a price of $10.00 per share (1998
Private Offering). The net proceeds are intended to be used to fund working
capital and acquire other securities broker/dealers. Through June 30, 1999, the
22
<PAGE>
Company received proceeds of $1,000,000, net of offering costs of $211,588, or
$788,412 from the sale of 100,000 shares of Convertible Series B Preferred
Stock. Subsequent to June 30, 1999, the Company received proceeds of $47,850
from the sale of 5,500 shares of Convertible Series B Preferred Stock.
In April 1998, Fronteer Capital and Heng Fung Finance committed to provide to
Global Med Technologies, Inc. (Global) lines of credit for up to $1,650,000 and
$1,500,000, respectively, for a total combined loan commitment of $3,150,000
over the following twelve months. Fronteer Capital subsequently assigned its
commitment to eBanker. The loans bear interest calculated at a rate of 12% per
annum and will mature April 15, 2000. As of June 30, 1999, Global had drawn the
full amount of $1,650,000 on the eBanker line of credit.
The Company previously sold Heng Fung Finance a ten year $4,000,000 10%
Convertible Debenture that is convertible into shares of common stock of the
Company and an option to purchase an $11,000,000 12% Convertible Debenture that
is convertible into shares of common stock of the Company. As of June 30, 1999,
Heng Fung Finance had purchased a total of $8,000,000 of convertible debentures,
of which $1,000,000 had been purchased during the nine months ended June 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 which was due in March 1999, for which
the installment due date was extended to March 2000. The Company paid Heng Fung
Finance a fee of 5%, or $25,000, payable in 44,092 common shares of the Company
for the extension as determined by the average closing bid price for 15 business
days prior to March 23, 1999, or $0.567 per share.
In July 1999, the Company sold the stock of Fronteer Capital for $3,000,000 to
be 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.
In May 1999, eBanker extended Global a $750,000 bridge loan commitment of which
$500,000 was drawn in August 1999. Outstanding principal amounts under the loan
are due December 31, 1999.
Subsequent to June 30, 1999, the Company sold an additional 343,871 Second
Private Placement Units of eBanker for proceeds of $1,795,007, net of offering
costs of $268,219.
A good portion of the Company's assets are highly liquid, consisting mainly of
assets that are readily convertible into cash. These assets are financed by the
Company's equity capital, convertible debentures and accounts payable. Changes
in the amount of securities owned by the Company and receivables from brokers or
dealers and clearing organizations directly affect the amount of the Company's
financing requirements.
Management believes that the Company's cash flows from operations, the
possibility of additional purchases of convertible debentures by Heng Fung
Finance, proceeds expected to be received from the sale of Convertible Series B
Preferred Stock and cash on hand will be sufficient to fund its debt service,
expected capital costs and other liquidity requirements for the foreseeable
future.
Year 2000
To address the Year 2000 issue, the Company has continued with the
implementation of its corporate plan as reported in the Company's Annual Report
on Form 10-K for the fiscal year ended September 30, 1998. The Company has
continued working with third-party suppliers of software and related services in
resolving Year 2000 issues and anticipates testing will be completed by August
31, 1999. No matters have come to the attention of management of the Company
which would indicate that the estimated total cos of the program should be
revised. The cost had been estimated to be less than $50,000. No significant
amounts were expended on the program during the quarter ended June 30, 1999. If
the Company and the third parties on which it relies are unable to address the
Year 2000 issue in a timely manner, it could result in a material financial risk
to the Company. The contingency plan is expected to be completed by August 31,
1999.
23
<PAGE>
Inflation
The effect of inflation on the Company's operations is not material and is not
anticipated to have any material effect in the future.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of September 30, 1998, the Company had investments in Asian equity
securities, which exposed the Company to foreign exchange rate risk and equity
price risk. During the nine months ended June 30, 1999, the Company purchased
debt securities of certain Asian corporations. These securities expose the
Company to exchange rate risk as well as credit risk. The following table
summarizes the market risks for the Company:
<TABLE>
<CAPTION>
June 30, 1999 September 30, 1998
Fair Value Carrying Value Fair Value Carrying Value
---------- -------------- ---------- --------------
<S> <C> <C> <C> <C>
Foreign Exchange Rate Risk:
Equity Securities $ 2,320,299 2,320,299 1,066,972 1,066,972
Debt Securities 5,769,282 5,769,282 -- --
Equity Price Risk:
Equity Securities* 3,288,690 3,288,690 1,688,085 1,688,085
Credit Risk:
Debt Securities 5,769,282 5,769,282 -- --
</TABLE>
*Includes the equity securities of the Asian corporations.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a defendant in certain arbitration and litigation matters arising
from its activities as a broker/dealer. In the opinion of management, these
matters including any damages awarded against the Company have been adequately
provided for in the accompanying consolidated financial statements, and the
ultimate resolution of the other arbitration and litigation will not have a
significant adverse effect on the consolidated results of operations or the
consolidated financial position of the Company.
ITEM 2. CHANGES IN SECURITIES
(c) Recent Sales of Unregistered Securities
The Company previously sold Heng Fung Finance a ten year $4,000,000 10%
Convertible Debenture that is convertible into shares of common stock of the
Company and an option to purchase an $11,000,000 12% Convertible Debenture that
is convertible into shares of common stock of the Company. As of March 31, 1999,
Heng Fung Finance had purchased a total of $8,000,000 in convertible debentures.
24
<PAGE>
The accrued interest on the convertible debentures as of March 31, 1999 was paid
with 419,266 shares of common stock of the Company during the quarter ended June
30, 1999.
The sales of the convertible debentures and the 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 purchasers had
access to full information concerning the Company and represented that they
purchased the securities for the purchasers' own accounts and not for the
purpose of distribution. The convertible debentures, shares and option contain a
restrictive legend advising that such securities may not be offered for sale,
sold or otherwise transferred without having first been registered under the
1933 Act or pursuant to an exemption from registration under the 1933 Act. No
underwriters were involved in the transaction.
In October 1998, the Company commenced a private placement of 1,500,000 shares
of its Convertible Series B Preferred Stock at a price of $10.00 per share (1998
Private Offering). During the quarter ended June 30, 1999, the Company sold
7,950 shares of Convertible Series B Preferred Stock to 12 persons. Subsequent
to June 30, 1999, the Company sold an additional 5,500 shares of Convertible
Series B Preferred Stock to 2 persons.
The sales of the Convertible Series B Preferred Stock were made in reliance upon
the exemption from registration provided by Section 4(2) of the 1933 Act and
Regulation D promulgated thereunder. The purchasers had access to full
information concerning the Company and represented that they purchased the
Convertible Series B Preferred Stock for the purchasers' own accounts and not
for the purpose of distribution. The Convertible Series B Preferred Stock
contains a restrictive legend advising that the Convertible Series B Preferred
Stock may not be offered for sale, sold or otherwise transferred without having
first been registered under the 1933 Act or pursuant to an exemption from
registration under the 1933 Act. A Form D was filed in connection with the
sales. AFFC is the underwriter involved in the transaction and received
commissions of $79,500 during the quarter ended June 30, 1999.
25
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders held on April 15, 1999, the
following members were elected to the Board of Directors:
For Withheld
---------- --------
Fai H. Chan 12,981,984 3,838
Robert H. Trapp 12,981,484 4,338
Kwok Jen Fong 12,981,984 3,838
Jeffrey M. Busch, Esq. 12,981,484 4,338
Robert Jeffers, Jr. 12,981,984 3,838
The stockholders voted to adopt an amendment to the Articles of Incorporation of
the Company to change the name of the Company to "eVision USA.Com, Inc." There
were 12,799,509 votes in favor of the amendment; 168,313 votes against the
amendment; and 18,000 votes abstained.
The stockholders voted not to authorize a maximum one-for-twenty reverse split
of the Company's outstanding stock. There were 5,305,017 votes in favor of the
proposal; 7,545,305 votes against the proposal; and 135,500 votes abstained.
The stockholders voted to adopt an amendment to the September 1996 Incentive and
Nonstatutory Stock Option Plan to increase the number of shares of common stock
of the Company that are authorized to be optioned and sold under such plan from
2,500,000 to 7,500,000. There were 8,335,512 votes in favor of the amendment;
959,463 votes against the amendment; 4,250 votes abstained; and 3,686,597 were
not voted.
ITEM 5. OTHER INFORMATION
On June 11, 1999, a second Form 10-Q/A was inadvertently filed by a third party
filing service. The only difference between the Form 10-Q/A filed May 11, 1999
and the inadvertent filing was the date of execution on the signature page.
There were no other changes or corrections.
During the quarter ended June 30, 1999, Mr. Tony Chan was elected to the Board
of Directors of eVision.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits:
10.1 Stock Purchase Agreement by and between eVision and Ladsleigh
Investments Limited, BVI, made as of July 30, 1999, incorporated by
reference to the Current Reports on Form 8-K filed August 4, 1999.
10.2 Pledge and Escrow Agreement by and between eVision and Ladsleigh
Investments Limited, BVI, made as of July 30, 1999, incorporated by
reference to the Current Reports on Form 8-K filed August 4, 1999.
10.3 Promissory Note by Ladsleigh Investments Limited, BVI to eVision, made
as of July 30, 1999, incorporated by reference to the Current Reports
on Form 8-K filed August 4, 1999.
10.4 Exchange and Sale of Stock Agreement between the Company and Q6
Technologies, Inc. dated June 18, 1999.
27.0 Financial Data Schedule.
(b) Reports on Form 8-K:
On August 5, 1999, the Company filed a Current Report on Form 8-K 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, Inc. to an
unaffiliated third party for $3,000,000 to be 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.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 11, 1999 eVISION USA.COM, INC.,
a Colorado Corporation
By: /s/ Robert H. Trapp
---------------------------------
Robert H. Trapp
Managing Director
By: /s/ Gary L. Cook
---------------------------------
Gary L. Cook
Secretary/Treasurer
27
EXCHANGE AND SALE OF STOCK
AGREEMENT, made June 18, 1999, between Q6 Technologies, Inc., ("Q6 Tech.) a
Colorado Corporation; and Fronteer Financial Holdings, Ltd. ("Fronteer").
R E C I T A L S;
Fronteer Financial Holdings, Ltd., is the owner of 72.80% of the
outstanding shares of Secutron Corp. (the "Company").
Fronteer and Q6 Tech desire to effect an exchange of shares and cash, such
that Fronteer Holdings will deliver to Q6 Technologies, Inc., One Hundred Thirty
Million Four Hundred Ninety-Four Thousand Three Hundred Eighty-Five and 00/100
(130,494,385) shares of Secutron Corp. (the "Company"), a Colorado Corporation,
owned by Fronteer along with One Hundred Thousand and 00/100 ($100,000.00)
Dollars in cash, in return for the issuance by Q6 Tech to Fronteer of Five
Million Five Hundred Fifty-Five Thousand Five Hundred Fifty-Six (5,555,556)
shares of Class B stock in Q6 Technologies, Inc.
1. Subsequent to the sale of the shares by the Seller pursuant to this
Agreement, Purchasers will own 72.80% Percent of the issued and outstanding
stock of Secutron Corp.
2. Secutron is engaged in the business of integration and sale of
computing systems, networks and processing services.
3. The consideration for this transfer of stock from Fronteer to Q6 is
the transfer from Q6 Technologies, Inc., to Fronteer Financial Holdings, Ltd.,
of Five Million Five Hundred Fifty-Five Thousand Five Hundred Fifty-Six
(5,555,556) shares of newly issued Class B stock in Q6 Technologies, Inc.
4. The transfer from Fronteer Financial Holdings, Ltd., of One Hundred
Thirty Million Four Hundred Ninety-Four Thousand Three Hundred Eighty-Five and
00/100 (130,494,385.00) shares of Class A stock together with One Hundred
Thousand and 00/100 ($100,000.00) Dollars in cash constitutes Fronteer's
consideration for the Q6 Technologies, Inc., stock issued.
NOW, THEREFORE, in consideration of the Recitals and mutual covenants
herein contained, the parties herein agree as follows:
1. SALE OF SHARES:
(a) Fronteer Financial Holdings, Ltd., shall sell, transfer,
assign and set over to Q6 Tech., and Q6 Tech., shall purchase and acquire from
the Seller One Hundred Thirty Million Four Hundred Ninety-Four Thousand Three
Hundred Eighty-five and 00/100 (130,494,385.00) shares of Secutron Corp., free
and clear of all liens, security interests, restrictions and encumbrances
whatsoever which represents 72.80% Percent of all the shares of Secutron Corp.
(b) Fronteer Financial Holdings, Ltd., shall supply as additional
consideration at the closing One Hundred Thousand and 00/100 ($100,000.00)
Dollars in cash.
2. PURCHASE PRICE: The purchase price for said shares is as follows:
(a) Q6 Technologies, Inc., shall issue Five Million Five Hundred
Fifty-Five Thousand Five Hundred Fifty-Six (5,555,556) newly issued Class B
Shares for the purchase of such outstanding shares of Secutron Corp., in return
for the transfer of One Hundred Thirty Million Four Hundred Ninety-Four Thousand
Three Hundred Eighty-Five and 00/100 (130,494,385.00) Secutron shares together
with One Hundred Thousand and 00/100 ($100,000.00) Dollars in cash at closing.
<PAGE>
(b) The present outstanding shares of Secutron Corp., are
179,158,518 (One Hundred Seventy-Nine Million One Hundred Fifty-Eight Thousand
Five Hundred Eighteen).
3. Secutron Corp., has one wholly owned subsidiary, Mid-Range
Solutions, Inc.
4. CLOSING DATE: The closing shall take place on June 18, 1999 at the
offices of Fronteer Financial Holdings, Ltd., 1700 Lincoln St., Denver, CO. At
the closing, the Seller shall deliver to the Purchasers, free and clear of all
encumbrances, certificates for the Company's shares referred to in Paragraph 1,
in negotiable form. Upon such delivery, the Purchasers shall deliver to the
Seller a certified check as provided for in Paragraph 2.
5. STOCKHOLDER'S STOCK DISPOSITION AND WARRANTIES:
Q6 Group, LLC, and Fronteer Financial Holdings, Ltd., are entering
into this transaction predicated on the belief that the employment granted to
John J. Cusick pursuant to the Employment Agreement dated March 1, 1999 will be
fulfilled in its entirety.
(a) Q6 Group, LLC, warrants, represents and guarantees that John
J. Cusick shall perform his duties as set forth in the Employment Agreement
heretofore referred, subject to the conditions defined below.
(b) In the event that John J. Cusick resigns, or is fired for
cause, prior to fulfilling his three (3) year term of employment pursuant to
Section III of the Employment Agreement, then Q6 Technologies, Inc., shall have
the right to purchase at original cost that percentage of Class A shares held by
Q6 equivalent to the percentage of the three (3) year Cusick Employment Contract
which has not been fulfilled at the effective time of such resignation or
termination. Upon conclusion of the three (3) year term, this call provision
shall lapse and all subject stock shall be free and clear from this purchase
option.
(c) By way of illustration, if John J. Cusick is employed one (1)
year and then resigns, the number of Class A shares held by Q6 Group, LLC, which
Q6 Technologies, Inc., will have the right to repurchase is as follows:
(d) Two-thirds (2/3) of the Class A shares purchased by Q6 Group,
LLC shall be tendered to the Company at the original purchase price. The
remaining one-third (1/3) portion shall be held by Q6 Group, LLC, free and
clear.
(e) In the event Cusick is fired not for cause, then all of the
Class A stock owned by Q6 Group, LLC, shall be held free and clear. Q6
Technologies, Inc., shall have no right of repurchase of those shares.
6. DEFAULT BY SELLER: If the Seller shall fail or refuse to deliver
any of the shares to the Purchasers at the closing, the Purchasers, without
prejudice to their rights against the Seller, may refuse to consummate this
Agreement and terminate all their obligations hereunder.
2
<PAGE>
7. REPRESENTATIONS AND WARRANTIES: The Seller represents and warrants
to the Purchasers as follows:
(a) Corporate Status. The Company is, and will be on the closing
date, a corporation duly organized, validly existing and in good standing under
the Laws of the State of Delaware and is duly qualified and in good standing
under the Laws of any foreign jurisdiction where the failure to be so qualified
would have a material adverse effect on its ability to perform its obligations
under this Agreement and all agreements and instruments delivered pursuant
hereto.
(b) Subsidiaries. Secutron Corp., has one wholly owned
subsidiary, Mid-Range Solutions, Inc.
(c) Seller warrants that Secutron Corp., will have, upon closing,
not less than approximately Four Hundred Sixty-Two Thousand Seven Hundred
Forty-two and 08/100 ($462,742.08) Dollars of working capital.
(d) Capitalization. This aggregate number of shares that the
Company is authorized to issue is 800,000,000 (Eight Hundred Million) common
shares, without par value, all of which shares are issued and presently
outstanding. All such shares have been validly issued and are fully paid and
nonassessable. The Seller is the legal and beneficial owner of said shares and
free and clear of any liens, security interest, option or other charge or
encumbrance. The Company has no outstanding subscriptions, contracts, options,
warrants or other obligations to issue, sell or otherwise dispose of, or to
purchase, redeem or otherwise acquire any of its shares.
(e) Title to shares. The Seller is and will be on the closing
date the owner, free and clear of any encumbrances, of the number of the
Company's shares set forth in subparagraph (c) of this paragraph. Seller has
full power, authority and legal right and all necessary authorizations to
transfer, assign and sell the shares to Purchasers and there are no other shares
of the Company owned or claimed by any other person or entity.
(f) At the time of Closing, Purchasers' shares shall have been
duly authorized and validly issued and fully paid and non-assessable and
Purchasers shall be at the time of closing, the legal and beneficial owners of
the shares free and clear of any lien, security interest, option or other charge
or encumbrance.
(g) The Seller has delivered to the Purchasers the balance sheet
of the Company as of January 31, 1999, of income of the Company for the prior
years (collectively, the "Financial Statements").
(h) The Financial Statements are true and correct in all material
respects and have been prepared in accordance with generally accepted accounting
principles in effect during the periods involved, except as otherwise indicated
therein, and fully and fairly present the financial condition of the Company as
of the dates thereof and fully and fairly present the results of the operations
of the Company for the periods indicated.
(i) There has not been any material adverse change in the
condition, financial or otherwise, of the Company or in the results of its
operations subsequent to the preparation of said Financial Statements.
3
<PAGE>
(j) The Company has filed or caused to be filed all Federal,
State, local and other tax returns, reports and declarations required to be
filed in respect of the Company's business, and has paid or reserved for all
income, franchise, sales, unemployment, withholding, social security, workers'
compensation and all other federal, state and local taxes which have been or
shall become due with respect to all taxable periods ending on or prior to the
date of the closing or pursuant to any assessment received by it in connection
with said returns, which failure to file would have a materially adverse effect
on the business of the Company and the ability of Seller to perform his
obligations under this Agreement.
(k) All liabilities disclosed. Except to the extent reflected or
reserved against in the Company's balance sheet of January 31, 1999, Seller
represents and warrants that he does not know or have reasonable grounds to know
of any basis for a claim against the Company of any liability of any nature or
in any amount not fully reflected or reserved against in the Financial
Statements.
(1) The Company is not in default under any, and the Company has
complied with all statutes, ordinances, regulations, orders, judgments and
decrees of any Court or other governmental agency relating to the Company and
its business and properties, and the Seller has no knowledge of any basis for
any claim for compensation or damages or otherwise arising out of any violation
of the foregoing.
(m) Each representative and warranty of the Seller herein
contained shall survive the closing for a period of five (5) years from the date
hereof, except for tax matters which shall expire contemporaneously with the
expiration of the applicable limitation, and liability with respect thereto
shall not be affected by an investigation.
(n) Absence of certain changes. Since January 31, 1999, there has
not been (i) any change in the Company's financial condition, assets,
liabilities or business, other than changes in the ordinary course of business,
none of which has been materially adverse; (ii) any damage, destruction or loss,
whether or not covered by insurance, materially and adversely affecting the
Company's properties or business.
(o) Title to assets. The Company has good and marketable title to
all its properties and assets, real and personal, subject to no mortgage,
pledge, lien, encumbrance, security interest, or charge, except for liens shown
on the balance sheet as securing specified liabilities set forth therein.
(p) Employment laws. The Company has complied with all applicable
federal and state laws relating to the employment of labor, including the
provisions relating to wages, hours, collective bargaining and the payment of
social security taxes, and is not liable for any arrears of wages, or any tax or
penalties, for failure to comply with any of the foregoing.
(q) Litigation. There are no actions, suits, litigation or
proceedings pending, to the Seller's knowledge, except for a lawsuit against
Fronteer Financial Holdings, Ltd., by a shareholder of Secutron Corp. A copy of
the Complaint and/or other supporting documents shall be supplied to Q6
Technologies, Inc. on or before closing. Indemnification by Fronteer for
liabilities arising out of legal actions is addressed in Section 9 of this
Agreement.
4
<PAGE>
(r) Leases, contracts and licenses. Seller represents and
warrants that the transfer of its shares in accordance with the terms of this
Agreement will not constitute a prohibited assignment or transfer of any of its
licenses, leases or contracts, and that all of the foregoing will remain in full
force and effect without acceleration as a result of this transaction.
(s) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated herein will require the consent of
any governmental agency or authority or any other entity or person and neither
such execution and delivery nor such consummation will violate any provision of
the Company's Certificates of Incorporation or By-Laws, or any agreement or
Stockholders Agreement or any statute, ordinance, regulation, order, judgment of
decree of any court or governmental agency, or conflicts with or will result in
any breach of any of the terms of or constitute a default under or result in the
terminations of or the creation of any lien pursuant to the terms of any
agreement or instrument to which the Seller or the Company is a party or by
which the Seller or the Company or any of the Seller's or the Company's assets
are bound.
(t) Disclosure. No representation or warranty by the Seller in
this Agreement, nor any statement or certificate furnished or to be furnished to
the Purchasers pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
6. ACCESS AND INFORMATION: The Seller shall cause the Company to give
to the Purchasers and Purchasers' counsel, accountants, and other
representatives full access, during normal business hours throughout the period
prior to the closing, to all the Company's properties, books, contracts,
commitments, and records and shall furnish the Purchasers during such period
with such information concerning the Company's affairs as the Purchasers
reasonably may request.
7. CONDUCT OF BUSINESS PENDING CLOSING: The Seller covenants that,
pending the closing:
(a) The Company's business will be conducted only in the ordinary
course and in the manner heretofore operated by it.
(b) No change will be made in the Company's Certificates of
Incorporation or By-Laws, except as may be first approved in writing by the
Purchasers.
(c) No change will be made in the Company's authorized or issued
corporate shares,
(d) No dividend or other distribution or payment will be declared
or made in respect of the Company's corporate shares.
(e) No increase will be made in the compensation payable or to
become payable by the Company to any officer, employee or agent, nor will any
bonus payment or arrangement or other benefits be paid by the Company to or with
any officer, employee or agent.
(f) Except as otherwise requested by the Purchaser, the Seller
will cause the Company to use its best efforts (without making any commitment on
the Purchasers' behalf) to preserve the Company's business organization intact;
to keep available to the Company the services of its present officers and
employees; and to preserve for the Company the goodwill of its suppliers,
customers and others having business relations with the Company.
5
<PAGE>
(g) All debts will be paid as they become due.
(h) Seller shall refrain from making any purchase, sale or lease
or introducing any method of management or operation in respect of the business
except in a manner consistent with its prior practice.
(i) Seller shall refrain from entering into any contract which
would materially and adversely affect the financial condition of the Company and
from making any change adverse to it in the terms of any contract to which they
are presently a party or by which they or any of their assets is bound, and
comply with the terms and conditions of each such contract and perform all of
their obligations thereunder without default or the occurrence of an event
which, upon notice or passage of time or both, would result in a default.
(j) Seller shall maintain the books and records in accordance
with good business practice, on a basis consistent with prior practice.
(k) The Company will not consolidate or merge with any other
business.
(1) The Company will keep all of its inventory and other property
fully insured against any loss, either by fire, or casualty or theft. If prior
to the closing date such property is totally or substantially damaged by reason
of fire or other casualty or is lost by reason of theft, the Purchasers may, in
the exercise of their sole discretion, terminate this Agreement.
(m) Seller shall maintain and pay all premiums with respect to
all policies of insurance relating to its business as are presently held in its
name, or replace such policies of insurance with comparable policies issued by
reputable, national insurers.
(n) Seller shall comply with all statutes, ordinances,
regulations, orders, judgments and decrees of every Court and governmental
agency applicable to the company and to the conduct of the business and perform
all its obligations with respect thereto without default or without the
occurrence of an event which, upon notice or passage of time or both, would
result in a default.
8. ACTIONS NECESSARY TO COMPLETE TRANSACTION: Each party agrees to
execute and deliver all such other documents or instruments and to take any
action as may be reasonably required in order to effectuate the transactions
contemplated by this Agreement.
9. INDEMNIFICATION: Fronteer hereby agrees to indemnify and hold
harmless Q6 Technologies, Inc., from and against any and all losses, claims,
demands, damages, liabilities, obligations, costs and/or expenses, including,
without limitation, reasonable fees and disbursements of counsel (hereinafter
referred to collectively as "Damages"), sustained or incurred by Q6 Tech., by
reason of the breach of any of the obligations, covenants or provisions, or the
inaccuracy of any of the representations or warranties, made by the Seller
pursuant to this Agreement or any document or instrument delivered hereunder.
Fronteer Financial Holdings, Ltd., agrees to indemnify, defend and
hold harmless Q6 Technologies, Inc., with respect to any claims, losses,
demands, damages, costs and/or expenses, reasonable fees and disbursements of
counsel fees for litigation that is presently pending against Fronteer Financial
Holdings, Ltd., and Secutron and Mid-Range Solutions, Inc., as set forth in
Paragraph 5(p) above.
10. WAIVER: Any waiver by either party or any breach of any term or
condition of this Agreement shall not be deemed a waiver of any other breach of
such term or condition, nor shall the failure of either party to enforce such
provision constitute a waiver of such provision or of any other provision, nor
shall such action be deemed a waiver or release of any other party for any
claims arising out of or connected with this Agreement.
6
<PAGE>
11. NOTICES: All notices, requests, demands and other communications
hereunder shall be in writing, and shall be deemed to have been duly given if
delivered or mailed by registered or certified mail to the address of the
Purchasers or Seller or to such other address as each of the foregoing may
designate in writing.
12. EXPENSES: Each party shall pay the expenses incurred by him or it
under or in connection with this Agreement, including counsel fees and expenses
of his or its representatives, whether or not the transactions contemplated by
this Agreement are consummated.
13. SURVIVAL OF REPRESENTATIONS: The representations, warranties, and
agreements of Seller and Purchasers contained in this Agreement shall survive
the closing, and shall be unaffected by any investigation made by any party at
any time.
14. AMENDMENT: Neither this Agreement nor any term of provision hereof
may be changed, waived, discharged or terminated orally, or in any manner other
than by an instrument in writing signed by the party against which the
enforcement of the change, waiver, discharge or termination is sought.
15. BINDING EFFECT: This Agreement shall be binding upon and insure to
the benefit of the respective par-ties, and their successor and assigns, heirs
and personal representatives, except as otherwise expressly provided herein.
16. GOVERNING-LAW: This Agreement shall be deemed to be made under and
shall be construed in accordance with the Laws of the State of Colorado.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the day and year first above written.
WITNESS: Q6 Technologies, Inc.
/s/ By: John J. Cusick
- -------------------- --------------------------------------
eVision USA Communications, Inc., formerly
Fronteer Financial Holdings, Ltd.
/s/ By: /s/ Fai H. Chan
- ------------------- --------------------------------------
7
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<ARTICLE> 5
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<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 5,354,438
<SECURITIES> 9,057,972
<RECEIVABLES> 5,337,409
<ALLOWANCES> 0
<INVENTORY> 465,837
<CURRENT-ASSETS> 20,215,656
<PP&E> 4,023,952
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0
10,000
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<INCOME-TAX> (36,370)
<INCOME-CONTINUING> (113,569)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (113,569)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
