As Filed with the Securities and Exchange Commission on November 12 , 1999.
Registration No. 333-81565
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
AMENDMENT NO. 1 ON FORM S-1 TO FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-------------------------
eVISION USA.COM, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 5510 45-0411501
---------------- ------------------------- -------------------
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code Number)
organization)
GARY L. COOK
1700 Lincoln Street, 32nd Floor 1700 Lincoln Street, 32nd Floor
Denver, Colorado 80203 Denver, Colorado 80203
(303) 860-1700 (303) 860-1700
------------------------------- --------------------------------
(Address, including zip code, and (Name, address, including zip code,
telephone number, including area code, and telephone number, including
of registrant's executive offices) area code, of agent for service)
With Copies to:
Thomas S. Smith, Esq.
Smith McCullough, P.C.
4643 South Ulster Street, Suite 900
Denver, Colorado 80237
(303) 221-6000
Approximate date of commencement of proposed sale to the public: As soon as
practicable following the date on which the Registration Statement becomes
effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If his Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=========================================================================================================================
Proposed maximum Proposed maximum Amount of
Title of each class of Amount to be offering price aggregate registration
securities to be registered registered(1) per share offering price fee(5)
- --------------------------- -------------- ---------------- ---------------- ------------
<S> <C> <C> <C> <C>
Common Stock Underlying Warrants ....... 6,554,523(2) $ .70 $ 4,588,166 $ 1,278
Common Stock Underlying Convertible
Debentures ............................. 15,913,487(3) $ .70 $11,139,440 $ 3,097
Common Stock ........................... 550,000(4) $ .62 $ 343,750 $ 96
=========================================================================================================================
Total ......................... 23,018,010 Shares XXX XXX $ 4,471(6)
=========================================================================================================================
</TABLE>
(1) In accordance with Rule 416, there are hereby being registered an
indeterminate number of additional shares of common stock which may be
issued as a result of the anti-dilution provisions of the warrants and of
the convertible debentures.
(2) Registered for resale upon exercise of outstanding warrants.
(3) Registered for resale upon conversion of outstanding convertible
debentures.
(4) Registered for resale.
(5) The registration fee that is being paid herewith was calculated in
accordance with Rule 457(c) and is based on the average of the bid and
asked price of the registrants' common stock, as reported on the OTC
Bulletin Board on November 10, 1999.
(6) $4,373 of the registration fee was paid as a part of registrant's previous
filing on Form S-3, was calculated in accordance with Rule 457 (c) and is
based on the average of the bid and asked prices of registrant's common
stock, as reported on the OTC Bulletin Board on June 24, 1999.
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
PROSPECTUS
eVISION USA.COM, INC.
23,018,010 shares of common stock
This prospectus describes the offer for resale by the selling
securityholders of up to 6,554,523 shares of common stock issuable upon the
exercise of outstanding warrants, 15,913,487 shares of common stock issuable
upon conversion of outstanding convertible debentures and 550,000 shares of
common stock that are currently outstanding. eVision USA.Com, Inc. will be
issuing, in private transactions, the shares of common stock issuable upon
exercise of the warrants and conversion of the convertible debentures.
eVision will not receive any proceeds from the sale of the common stock
issuable upon exercise of outstanding warrants or issuable upon conversion of
outstanding convertible debentures. If all of the warrants are exercised,
eVision will receive proceeds of approximately $9,831,785. If all of the
debentures are converted, $8,000,000 of debt will be converted to equity.
eVision does not know if any or all of the warrants will be exercised or if any
or all of the debentures will be converted, but the selling securityholders will
have to exercise the warrants or convert the debentures in order to publicly
sell the underlying shares of common stock that are offered for resale in this
prospectus.
The common stock is quoted for trading on the OTC Bulletin Board under the
symbol "EVIS."
Investing in the common stock involves certain risks. See "Risk Factors"
commencing on page 4 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is November , 1999.
<PAGE>
TABLE OF CONTENTS
Page
Prospectus Summary.............................................................3
Risk Factors...................................................................4
Forward Looking Statements.....................................................7
Use of Proceeds................................................................8
Dividend Policy................................................................8
Selected Consolidated Financial Data...........................................8
Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................11
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure................................................18
Business......................................................................18
Quantitative and Qualitative Disclosures About Market Risk....................30
Management....................................................................31
Security Ownership of Certain Beneficial Owners and Management................40
Market For the Registrant's Common Stock and Related Stockholder
Matters............................................................43
Selling Securityholders.......................................................45
Plan of Distribution..........................................................52
Description of Securities.....................................................54
Shares Eligible For Future Sale...............................................56
Legal Matters.................................................................56
Experts.......................................................................56
Index to Financial Statements................................................F-1
<PAGE>
PROSPECTUS SUMMARY
This entire summary is qualified by the more detailed information and
financial statements and related notes incorporated by reference into, or
appearing elsewhere in, this prospectus.
eVision USA.Com, Inc., is a holding company that was incorporated under the
laws of the state of Colorado on September 14, 1988. eVision's consolidated
subsidiaries include companies that:
o operate as a fully disclosed securities broker/dealer;
o intend to provide transaction processing, networking and internet
based services;
o design, develop, install, market and support software systems for the
securities brokerage industry;
o sell computer hardware and software products; and
o provide leveraged financing, including proposed financing over the
internet.
The address of the principal executive offices of eVision is 1700 Lincoln
Street, 32nd Floor, Denver, Colorado 80203 and its telephone number is (303)
860-1700.
The Offering
<TABLE>
<CAPTION>
<S> <C>
Common stock outstanding before the offering..................... 19,838,299 shares.
Total possible shares of common stock
outstanding after the offering................................... 42,306,309 shares which include
22,468,010 shares issuable upon the
exercise of various outstanding warrants
and conversion of convertible
debentures. The 42,306,309 shares do not
include any shares issuable upon the
exercise of outstanding options.
Securities being offered for resale by selling
securityholders.................................................. 22,468,010 shares of common stock
issuable upon the exercise of
outstanding warrants and conversion of
outstanding debentures and 550,000
shares of common stock that are
currently outstanding.
</TABLE>
The securities offered in this prospectus involve a high degree of risk and
you should consider buying them only if you can afford to lose your entire
investment. See "Risk Factors."
3
<PAGE>
RISK FACTORS
An investment in eVision's common stock is speculative and involves a high
degree of risk. You should purchase the common stock only if you are
sophisticated in financial matters and business investments. You should
carefully consider the following factors before purchasing eVision's common
stock.
eVision has incurred losses in prior operations and may never operate profitably
As of June 30, 1999, eVision had an accumulated deficit of $2,504,434.
eVision incurred $1,049,843 in net losses for the nine months ended June 30,
1999; $6,473,335 for the fiscal year ended September 30, 1998; $3,455,872 for
the fiscal year ended September 30, 1997; and $2,417,742 for the fiscal year
ended September 30, 1996. There can be no assurance when or if eVision will
operate profitably.
Lack of trading market may make it difficult to sell eVision's common stock
The only trading in eVision's common stock is conducted on the OTC Bulletin
Board. A holder of the common stock may find it more difficult to dispose of or
to obtain accurate quotations as to the market value of the common stock.
eVision's common stock is defined as a "penny stock" by rules adopted by the
Commission. Brokers and dealers effecting transactions in the common stock must
obtain the written consent of a customer prior to purchasing the common stock,
must obtain information from the customer and must provide disclosures to the
customer. These requirements may have the effect of reducing the level of
trading of the common stock and reduce the liquidity of the common stock.
Volatile nature of eVision's securities brokerage business may cause a decrease
in revenues
eVision's securities brokerage revenues may decrease in the event of a
decline in stock market volume, prices or liquidity. The stock market has
historically experienced significant volatility. Declines in the volume of
securities transactions and in market liquidity generally result in lower
revenues from commissions and trading. Lower price levels of securities may also
result in a reduced volume of underwriting and syndicate transactions and could
cause a reduction in eVision's revenue from corporate finance fees and losses
from declines in the market value of securities held in trading. Sudden sharp
declines in market values of securities can result in illiquid markets, the
failure of issuers and counterparties to perform their obligations and increases
in claims and litigation. In these markets, eVision may incur reduced revenues
or losses in its market-making activities.
Competition for retaining and recruiting personnel could make it difficult for
American Fronteer to employ additional persons adversely affecting eVision's
revenues
American Fronteer's business is dependent on the highly skilled, and often
highly specialized, individuals it employs. Retention of research, investment
banking, sales, trading, management and administrative professionals is highly
competitive and particularly important to American Fronteer's business. The loss
of, or inability to hire additional, investment banking, research, sales or
trading professionals, particularly a senior professional, could materially and
adversely affect American Fronteer's revenues.
4
<PAGE>
eVision's underwriting and trading strategies are risky and might result in
higher trading losses
eVision's underwriting, securities trading and market-making activities are
often conducted by eVision as principal and subject eVision's capital to
significant risks, including market, credit, counterparty and liquidity risks.
These activities often involve the purchase, sale or short sale of securities as
principal in markets that may be characterized by relative illiquidity or that
may be particularly susceptible to rapid fluctuations in liquidity. These
activities might result in higher trading losses than would occur if eVision's
positions and activities were less concentrated.
eVision's securities brokerage business is involved in litigation which may
adversely affect its cash liquidity
Many aspects of eVision's securities brokerage business involve substantial
risks of liability. eVision's securities brokerage business is currently a
defendant or respondent in numerous lawsuits and arbitrations. A judgment
against eVision's securities brokerage business could result in a reduction in
eVision's cash liquidity.
American Fronteer's securities brokerage business is subject to extensive
regulation which, if not complied with, could cause American Fronteer to have to
discontinue its business resulting in a loss of most of eVision's revenues
American Fronteer's business is subject to extensive regulation by federal,
state and self-regulatory authorities. The failure by American Fronteer or any
of its employees to comply with such regulations or with any of the laws, rules
or regulations of federal, state or self-regulatory organizations could result
in censure, imposition or fines or other sanctions, including revocation of the
right to do business or suspension or expulsion of American Fronteer from
membership in the National Association of Securities Dealers, Inc. In 1999,
American Fronteer consented to a censure and immaterial fine by the NASD to
settle various claims that American Fronteer had violated various NASD rules,
including the net capital rule. One of American Fronteer's officers also
consented to an immaterial fine in connection with the same matters. Any
additional censure, fine or other sanction against American Fronteer could have
a material adverse effect upon American Fronteer and eVision.
eVision will be forced to suspend its securities brokerage activities if it is
in violation of the net capital rule which would result in reduced revenues
eVision's securities brokerage business is subject to the net capital rule
of the Commission. Under this rule, eVision's securities brokerage business is
required to maintain a certain minimum amount of net capital in order to
continue to conduct business as a registered securities broker dealer. If
eVision's securities brokerage business net capital falls below the minimum net
capital required under the rule, it would be forced to suspend activities until
5
<PAGE>
it is again in compliance with the net capital rule. If eVision's securities
brokerage business is forced to suspend activities, revenues from eVision's
securities brokerage business would be reduced.
Revenue derived from eVision's underwriting activities will be reduced during
periods of decreased demand for securities in the new issue market
A portion of eVision's revenues has been derived from participating in the
underwriting of new issues of securities. The new issue market is characterized
by a high degree of instability and volatility and is directly affected by
regional, national and international economic and political conditions and by
broad trends in business and finance. During periods of decreased demand for
securities in the new issue market, the revenues of eVision will be reduced.
eBanker USA.com, Inc., a consolidated subsidiary of eVision, has a limited
history of operations and there are no assurances that it will be able to
operate profitably which could diminish the value of eVision's common stock
eBanker, a consolidated subsidiary of eVision, has commenced operations
within the past two years. eBanker intends to expand its operations into new
areas of financing. It is not possible to predict whether or not the current or
proposed operations of eBanker will be successful and will result in a profit
for eVision. The possibility exists that the operations of eBanker will not
result in a profit. The results of operations of eVision could be negatively
impacted if eBanker is not profitable which could diminish the value of
eVision's common stock.
Q6 Technologies, Inc., a consolidated subsidiary of eVision, plans to acquire
and develop internet related technology businesses and there are no assurances
that it will be able to do so and realize a profit
Q6 Technologies, Inc., a consolidated subsidiary of eVision, plans to
acquire and develop internet related technology companies. Q6 Technologies has
no experience in this area of business. It is not possible to predict whether or
not the proposed operations of Q6 Technologies will be successful and will
result in a profit for eVision. The possibility exists that the operations of Q6
Technologies will not result in a profit. The results of operations of eVision
could be negatively impacted if Q6 Technologies is not profitable which could
diminish the value of eVision's common stock.
You will have no control over eVision
Heng Fung Holdings Company Limited, which is a public company traded on the
Hong Kong Stock Exchange, owns approximately 37% of the outstanding shares of
common stock of eVision. Heng Fung Holdings beneficially owns an additional
approximate 41% of the shares of common stock of eVision which Heng Fung
Holdings has the right to acquire upon conversion of outstanding convertible
debentures. Fai H. Chan, the Chairman of the Board and the President of eVision,
owns options to acquire 9,000,000 shares (options for 8,000,000 shares of which
are currently exercisable) of eVision's common stock which, if exercised, would
represent approximately 31% of eVision's outstanding common stock. Mr. Chan
beneficially owns approximately 10% of the common stock and is the Chairman and
6
<PAGE>
Managing Director of Heng Fung Holdings. Accordingly, Heng Fung Holdings and Fai
H. Chan control eVision and a purchaser of eVision common stock will have no
control over eVision.
eVision has numerous outstanding options, warrants and convertible debentures
which may adversely affect the price of eVision's common stock
eVision has issued and outstanding options, warrants and convertible
debentures to acquire up to approximately 40,528,176 shares of its common stock
at prices and conversion rates ranging from $.20 to $1.50 per share. For the
term of such options, warrants and debentures, the holders thereof will have an
opportunity to profit from a rise in the market price of eVision's common stock
without assuming the risks of ownership. This may have an adverse effect on the
price of eVision's common stock and on the terms upon which eVision could obtain
additional capital. It should be expected that the holders of such options,
warrants and debentures would exercise or convert them at a time when eVision
would be able to obtain equity capital on terms more favorable than those
provided by the options, warrants and debentures.
Issuance of additional authorized preferred stock may adversely affect the price
of eVision's common stock
eVision is authorized to issue 25,000,000 shares of preferred stock. 87,500
shares have been designated as Series A Preferred Stock and retired. 3,000,000
shares have been designated as Series B Preferred Stock, of which 25,500 shares
have been sold and were exchanged for Convertible Series B Preferred Stock.
2,000,000 shares have been designated as Convertible Series B Preferred Stock.
eVision issued 110,500 shares of Convertible Series B Preferred Stock. The
110,500 shares of Convertible Series B Preferred Stock included the 25,500
shares of Series B Preferred Stock that were exchanged. Subsequently, eVision
designated 2,000,000 shares of Convertible Series B-1 Preferred Stock. The
undesignated preferred stock may be issued in series from time to time with such
designations, rights, preferences and limitations as the board of directors of
eVision may determine by resolution. Other than the new Convertible Series B-1
Preferred Stock, the directors of eVision have no current intention to issue
preferred stock. However, the potential exists that additional preferred stock
might be issued which would grant dividend preferences and liquidation
preferences over the common stock, diminishing the value of the common stock.
FORWARD LOOKING STATEMENTS
Some of the statements contained in this prospectus under "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" are forward looking. They
include statements that involve risks and uncertainties that might materially
adversely affect eVision's operating results in the future. Most of these risks
are beyond eVision's control. Actual results may differ materially from those
suggested by the forward looking statements for various reasons, including those
discussed above.
7
<PAGE>
USE OF PROCEEDS
eVision will not receive any proceeds from the sale of the common stock or
the common stock issuable upon exercise of outstanding warrants or issuable upon
conversion of outstanding convertible debentures. eVision intends to use the net
proceeds, if any, from exercise of the warrants for working capital. It is
uncertain when, if ever, eVision will receive proceeds from exercise of the
warrants.
DIVIDEND POLICY
eVision has never declared nor paid any dividends on its common stock.
eVision currently anticipates that any earnings will be retained for use in
eVision's business and that no cash dividends will be paid to stockholders. Any
payment of cash dividends in the future on the common stock will depend on
eVision's:
o financial condition;
o results of operations;
o current and anticipated cash requirements;
o plans for expansion;
o existing or future debt obligations and any restrictions imposed
by such obligations; and
o other ftors deemed relevant by the board of directors.
eVision is required to pay, out of funds legally available, cumulative
dividends at the rate of 8% per annum in cash and 7% per annum in shares of
preferred stock for all issued shares of Series B Convertible Preferred Stock
and Series B-1 Convertible Preferred Stock.
SELECTED CONSOLIDATED FINANCIAL DATA
On February 25, 1997, McLeod USA Publishing Company purchased from eVision
the primary operating assets of a directory business for approximately
$2,800,000 including the application of a $500,000 non-recourse loan from McLeod
in accordance with an option agreement. On the same date, a third party
purchased another directory from eVision for approximately $202,000 in cash. On
September 15, 1997, a third party purchased all of the primary operating assets
of Fronteer Marketing Group, Inc. for approximately $421,000. On March 20, 1998,
eVision sold the remaining net assets which were not previously identified by
eVision as part of discontinued operations for the return of 493,500 shares of
eVision's common stock. As a result of these sales, the directory business and
Fronteer Marketing Group, Inc. have been accounted for as discontinued
operations in the consolidated financial statements.
On July 23, 1996, eVision sold its clearing operation to Multi-Source, Inc.
for $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 was forgiven and
recognized as an extraordinary item during the year ended September 30, 1998.
8
<PAGE>
On April 26, 1995, eVision acquired the assets of RAFCO, Ltd. As a result
of this transaction, the former shareholders of RAFCO, acquired a 55% interest
in eVision. Accordingly, the transaction was accounted for as a "reverse
acquisition" of eVision by RAFCO using the purchase method of accounting.
eVision's assets and liabilities prior to the transaction were adjusted to their
fair market value as of the date of the business combination. eVision's
operations are included in the consolidated financial statements beginning May
1, 1995, the effective date of the business combination. As a result of the
reverse acquisition accounting, historical financial statements presented for
periods prior to the business combination date include the consolidated assets,
liabilities, equity, revenues, and expenses of RAFCO only.
The following is selected consolidated financial data (in thousands, except
per share data) for eVision as of June 30, 1999 and 1998 and for the nine months
then ended, as of September 30, 1998, 1997 and 1996 and for the years then ended
and as of and for the nine months ended September 30, 1995, and for RAFCO as of
and for the year ended December 31, 1994. This information should be read in
conjunction with the consolidated financial statements.
<TABLE>
<CAPTION>
Nine months
ended Year ended
Nine months ended June 30, Year ended September 30, September 30, December 31,
------------------------- ------------------------------ ------------ -----------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
(In thousands, except per share information)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue ........................ $ 28,186 19,840 27,387 25,100 21,369 13,153 16,259
Loss from continuing
operations ..................... $ (1,050) (3,607) (6,979) (1,990) (990) (806) (353)
Loss on sale of
discontinued operations,
net of income tax benefits ..... -- (318) (250) (667) -- -- --
Loss from discontinued
operations, net of income
tax benefits .................. -- (181) (159) (799) (1,369) (1,086) --
Net loss applicable to
common shareholders ............ (1,050) (3,190) (6,473) (3,456) (2,418) (1,925) (353)
Basic loss per common share:
Continuing operations ........ $ (.06) (.21) (.42) (.12) (.07) (.09) **
Discontinued operations:
Loss on sale of
discontinued operations ... -- (.02) (.02) (.04) -- -- --
Loss from discontinued
operations ................ -- (.01) (.01) (.05) (.10) (.11) --
Extraordinary item ........... -- .05 .06 -- -- -- --
------- ------- ------- ------ ------- -------- -------
Total ................... $ (.06) (.19) (.39) (.21) (.17) (.20) **
======= ======= ======= ====== ======= ======== =======
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
September 30,
------------------------------------------- December 31,
June 30, 1999 1998 1997 1996 1995 1994
------------- ---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Working capital ................ $ 14,252 10,076 3,595 4,991 4,130 2,443
Total assets ................... $ 23,254 15,371 11,003 14,524 17,282 22,326
Total long term liabilities .... $ 16,015 14,864 2,732 3,492 3,269 3,164
Total stockholders' equity ..... $ (2,504) (3,043) 3,352 6,086 5,442 1,188
(deficit)
</TABLE>
**Due to the limited number of shares outstanding during 1994, presentation of
earnings per share is not meaningful.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
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 eVision'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 research recommendations that were acted
upon by customers as well as increases in positions in securities in which
eVision's securities broker dealer makes a market.
Computer hardware and software revenues for the nine months ended June 30,
1999 increased significantly due to a 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, a partially owned subsidiary of
the Company, eBanker USA.Com, Inc., 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, eBanker would receive a guaranteed premium
above the face value. The purchase discount and the premium for holding each
security to maturity were being accreted to interest income over the remaining
life of the security. Interest income on the investments in debt securities for
the 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.
11
<PAGE>
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. A majority of this activity related to the
Company's investment in Heng Fung Holdings consisting of common shares purchased
in the open market.
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.
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
Online Credit Limited (Online Credit formerly known as Heng Fung Finance Company
Limited) 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 Technologies, Inc. and eBanker.
The loss from discontinued operations in the prior period represents the
loss on sale and net loss from operating activity of eVision's directory and
telemarketing businesses of which all of the primary operating assets were sold
during 1998.
The extraordinary item in the prior period represents the recognition of
the forgivable loan with MultiSource 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 MultiSource. MultiSource
reached the target for the forgiveness of $750,000 and thus it was recognized as
income. The remaining $750,000 was recognized as income as MultiSource
discontinued operating as a clearing firm in the securities industry which
allowed eVision to recognize the remainder in accordance with the agreement.
Both of these amounts are shown net of taxes in the consolidated statement of
operations.
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Year ended September 30, 1998 compared to year ended September 30, 1997
Revenues for the year ended September 30, 1998 were $27,387,304 compared to
revenues for the year ended September 30, 1997 of $25,100,414. This represents
an increase of $2,286,890 or 9%.
The increase is primarily due to the increase in brokerage commissions of
$983,810 or 7%, an increase of $1,472,136 or 21% in computer hardware and
software sales offset by a decrease in investment banking activity of $776,505.
The increase in brokerage commissions is primarily the result of the
additional offices opened during the previous fiscal year being open for the
entire year ended September 30, 1998. The increase in computer hardware and
software revenues is primarily due to additional contracts for software
development and increased hardware sales. Certain of the software development
contracts were for the purposes of ensuring customers are Year 2000 compliant.
Broker/dealer commissions expense for the year ended September 30, 1998
were $10,521,902, an increase of $253,138 or 2% over expenses of $10,268,764 for
the year ended September 30, 1997. This increase correlates to the increase in
broker commissions. The 2% increase in commission expense versus the 7% increase
in commission revenue partly reflects adjustments made to branch manager
overrides and broker payouts to correlate closer to actual production results.
Computer costs of sales for the year ended September 30, 1998 were
$7,979,162 compared to $5,767,136 for the prior year. This increase of
$2,212,026 or 38% relates to increased sales and costs associated with assuring
that proprietary software is Year 2000 compliant.
General and administrative expenses were $13,359,245 for the year ended
September 30, 1998 or $2,106,498 greater than for the year ended September 30,
1997. This increase of 19% over the year ended September 30, 1997 of $11,252,747
is primarily attributable to the prior year branch openings being in operation
for the entire year ended September 30, 1998, and the new branches opened during
the current year. During the year, the Kansas City, San Francisco and New York
City branches were opened. The increase in general and administrative expenses
is partially offset by a decrease in legal fee expense and arbitration
settlements of $974,872 in 1998.
A portion of the proceeds of the $4,000,000 convertible debenture purchased
by Heng Fung Private in December 1997 was used to purchase approximately
116,430,000 shares of the common stock of Heng Fung Holdings in open market
transactions on the Hong Kong Stock Exchange at an average price of
approximately $0.02 per share. For the year ended September 30, 1998, eVision
had recognized an unrealized loss of $1,573,793 on the investment in Heng Fung
Holdings.
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Depreciation and amortization expense for the year ended September 30, 1998
of $389,234 represents an increase of $50,289 or 15% over the amount for the
prior year of $338,945. The increase is primarily due to the addition of the new
branch offices.
Interest income increased $150,502 or 100% from $150,203 for the year ended
September 30, 1997 to $300,705 for the year ended September 30, 1998. This is
due to increased cash balances resulting from the convertible debenture issues
during the current year. Interest expense to a related party relates to the
convertible debentures payable to Heng Fung related entities.
The loss from discontinued operations and loss on sale of discontinued
operations represents activity for the remaining assets of the directory and
telemarketing business and the final sale of the assets of these businesses
which were not previously identified by eVision as part of discontinued
operations.
The minority interest in (earnings) loss of $129,363 for the year ended
September 30, 1998 represents the minority shareholders' interest in Secutron's
loss for the year.
Year ended September 30, 1997 compared to the year ended September 30, 1996
Revenues for the year ended September 30, 1997 were $25,100,414 compared to
revenues for the year ended September 30, 1996 of $21,369,021. This represents
an increase of $3,731,393 or 18%. The increase is primarily due to the increase
in brokerage commissions and investment banking activity, which increased, to
$16,783,271 from $13,101,204, an increase of $3,682,067 or 28%. Brokerage
commission increases are due to new branch office openings. During the fiscal
year three new branches in Dallas, Texas; Las Vegas, Nevada; and West Palm
Beach, Florida were opened. In addition, two branches that were opened during
the year ended September 30, 1996 in Chicago, Illinois and Metairie, Louisiana
were open for the full year.
Computer hardware and software revenues were $6,982,143 for the year ended
September 30, 1997 compared to $6,538,540 for the prior year. This represents an
increase of $443,603 or 7%. The increase primarily is due to the increased
efforts from management of Secutron to generate new business, including efforts
in providing internet services as an internet service provider.
Broker/dealer commissions expense for the year ended September 30, 1997
were $10,268,764 compared to $8,171,445 for the prior year. The increase
represents $2,097,319 or 26%, which correlates to the increase in brokerage
commissions and investment banking revenues.
Computer cost of sales for the year ended September 30, 1997 were
$5,767,136 compared to $5,381,097 for the year ended September 30, 1996. This is
an increase of $386,039 or 7%, which correlates to the increase in computer
hardware and software revenues.
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General and administrative expenses were $11,252,747 for the year ended
September 30, 1997 compared to $9,997,828 for the prior year. The increase,
$1,254,919 or 13%, is primarily due to the increased expenses in opening and
operating new American Fronteer branch offices.
Depreciation and amortization for the year ended September 30, 1997 was
$338,945 compared to $396,203 for the prior year. The decrease reflects certain
assets being fully depreciated in the prior and current years.
Interest income for the year ended September 30, 1997 was $150,203 compared
to $642,274 for the prior year. The decrease reflects the sale of the clearing
operation in July 1996. Interest expense was $27,940 for the year ended
September 30, 1997 compared to $225,089 for the prior year. This decrease is
also partially attributable to the sale of the clearing operation as well as
decreased debt balances.
The minority interest in earnings of $11,331 represents the minority
shareholders' interest in earnings of Secutron for the year ended September 30,
1997. The loss on sale of discontinued operations resulted from the loss on the
sale of the primary operating assets of the directory business net of an income
tax benefit.
The loss from discontinued operations represents the operating results for
the year for the directory business, Fronteer Marketing Group, Inc. and Fronteer
Personnel Services, Inc.
Liquidity and Capital Resources
eVision, 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
for investing activities during the nine-month period were $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 securities of $2,155,938; the issuance of the convertible debentures to
a related party of $1,000,000; and $788,412 of net proceeds from a private
placement of eVision's preferred stock.
In May 1999, eVision commenced a private placement of 1,500,000 shares of
its Convertible Series B Preferred Stock at a price of $10.00 per share. The net
proceeds were intended to be used to fund working capital and acquire other
securities broker/dealers. Through September 30, 1999, eVision sold 110,500
shares of Convertible Series B Preferred Stock. Subsequently, eVision
discontinued its private placement of the Convertible Series B Preferred Stock
and, on September 27, 1999, commenced a second private placement of 1,500,000
shares of its newly designated Convertible Series B-1 Preferred Stock. eVision
has offered to exchange the 110,500 shares of Convertible Series B Preferred
Stock sold in the second offering for an equal amount of shares of Convertible
Series B-1 Preferred Stock.
In April 1998, Fronteer Capital, Inc., a formerly wholly owned subsidiary
of eVision, and Online Credit Limited committed to provide to Global Med
Technologies, Inc. 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
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following twelve months. Fronteer Capital subsequently assigned its commitment
to eBanker. During fiscal 1999, eBanker purchased $1,000,000 of Online Credit's
commitment. The loans bear interest calculated at a rate of 12% per annum and
will mature April 15, 2000. As of June 30, 1999, Global Med had drawn $2,650,000
on these lines of credit.
In May 1999, eBanker extended Global Med a $750,000 bridge loan commitment
of which $750,000 was drawn as of September 30, 1999. Outstanding principal
amounts under the loan are due December 31, 1999 and accrue at an interest rate
of 12%. On October 4, 1999, eBanker extended to Global Med a $2,000,000 bridge
loan commitment, of which $300,000 has been drawn. Outstanding principal amounts
under the loan are due April 12, 2000 and accrue at an interest rate of 12%.
eVision previously sold Online Credit a ten year $4,000,000 10% Convertible
Debenture that is convertible into shares of common stock of eVision and an
option to purchase an $11,000,000 12% Convertible Debenture that is convertible
into shares of common stock of eVision. As of October 31, 1999, Online Credit
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 March 1999. The installment due date
was extended to March 2000. eVision paid Online Credit a fee of 5%, or $25,000,
paid in 44,092 common shares of eVision for the extension as determined by the
average closing bid price for 15 business days prior to March 23, 1999, or
$0.567 per share.
In July 1999, eVision sold the stock of Fronteer Capital for $3,000,000
which was received in the form of $150,000 cash at closing and a promissory note
in the amount of $2,850,000, due in one year and bearing interest at 14% per
annum.
Subsequent to June 30, 1999, eBanker sold additional shares of common stock
related to a second eBanker private placement for proceeds of $2,866,625, net of
offering costs of $372,661.
A good portion of eVision's assets are highly liquid, consisting mainly of
assets that are readily convertible into cash. These assets are financed by
eVision's equity capital, convertible debentures and accounts payable. Changes
in the amount of securities owned by eVision and receivables from brokers or
dealers and clearing organizations directly affect the amount of eVision's
financing requirements.
Management believes that eVision's cash flows from operations, the
possibility of additional purchases of convertible debentures by Online Credit,
proceeds expected to be received from the sale of Convertible Series B-1
Preferred Stock and cash on hand will be sufficient to fund its debt service,
expected capital costs and other liquidity requirements for the foreseeable
future.
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Year 2000
To address the Year 2000 issue, eVision has continued with the
implementation of its corporate plan as reported in eVision's Annual Report on
Form 10-K for the fiscal year ended September 30, 1998. eVision has continued
working with third-party suppliers of software and related services in resolving
Year 2000 issues and testing was completed by August 31, 1999. As vendors and
suppliers conduct further testing, additional results and information are being
obtained by eVision. 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 eVision 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 eVision. eVision completed its contingency plan by September
30, 1999.
eVision's contingency plan is focused on American Fronteer. It includes the
use of cellular phones in the event of local telephone system line failures,
manual tracking of trading and inventory positions, direct calls to the clearing
organizations in the event of online system failures and use of the internet for
delayed quotations in the event of real-time quotations system failures.
eVision's payroll and accounting software have been obtained from national
vendors who have certified their products as Year 2000 compliant.
Inflation
The effect of inflation on eVision's operations is not material and is not
anticipated to have any material effect in the future.
Recently Issued Financial Accounting Standards
In June 1997, the Financial Accounting Standards Board issued Statement No.
131, Disclosures about Segments of an Enterprise and Related Information, which
is effective for periods beginning after December 15, 1997. This statement
established standards for the method that public entities use to report selected
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to stockholders. It also establishes standards
for related disclosures about products and services, geographical areas and
major customers. The Company does not believe that the adoption of the statement
will have a significant effect on the disclosures in its consolidated financial
statements and has adopted it for the fiscal year ended September 30, 1999.
In June 1998, the FASB issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement was effective for all fiscal
quarters beginning after June 15, 1999. In July 1999, the FASB issued Statement
No. 137, Accounting for Derivative Instruments and Hedging Activities -Deferral
of the Effective Date of FASB Statement No. 133. The Statement defers the
effective date of Statement No. 133 to all fiscal quarters of all fiscal years
beginning after June 15, 2000. The Company does not currently participate in
these activities and consequently does not believe adoption will have a
significant effect on the consolidated financial statements.
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
On September 3, 1999, KPMG LLP was dismissed as the independent accountants
of eVision. KPMG LLP acted as the independent accountants for eVision for the
years ended September 30, 1998 and 1997. KPMG LLP's reports on eVision's
financial statements for the past two years ended September 30, 1998 and 1997
did not contain an adverse opinion or disclaimer of opinion and were not
modified as to uncertainty, audit scope or accounting principles.
The decision to change accountants was approved by the Company's board of
directors.
During the Company's two most recent fiscal years and subsequent interim
period up to the date of the change in independent accountants, there were no
disagreements with KPMG LLP on any matter of accounting principle or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreement(s), if any, not resolved to the satisfaction of KPMG LLP, would
have caused KPMG LLP to make a reference to the subject matter of the
disagreement(s) in connection with its reports.
On September 13, 1999, eVision engaged the accounting firm of Deloitte &
Touche LLP as eVision's independent accountants for the year ended September 30,
1999. Deloitte & Touche LLP also are certifying accountants for Heng Fung
Holdings. During eVision's two most recent fiscal years and subsequent fiscal
interim period up to the date of the engagement of Deloitte & Touche LLP,
eVision did not consult with Deloitte & Touche LLP with regard to any matter
concerning the application of accounting principles to any specific
transactions, either pleaded or proposed, or the type of audit opinion that
might be rendered with respect to eVision's financial statements.
BUSINESS
eVision USA.Com, Inc., is a holding company that was incorporated under the
laws of the state of Colorado on September 14, 1988. eVision's consolidated
subsidiaries include companies that:
o operate as a fully disclosed securities broker/dealer;
o intend to provide transaction processing, networking and internet
based services.
o design, develop, install, market and support software systems for
the securities brokerage industry;
o sell computer hardware and software products; and
o provide leveraged financing, including proposed financing over
the internet.
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American Fronteer Financial Corporation
General
American Fronteer Financial Corporation was incorporated in 1974 to engage
in the retail stock brokerage business in the Rocky Mountain Region of the
United States. American Fronteer is registered as a broker/dealer with the
Commission, is a member of the National Association of Securities Dealers, Inc.
and the Boston Stock Exchange, is an associate member of the American Stock
Exchange, and is registered as a securities broker/dealer in all 50 states.
American Fronteer is a member of the Securities Investor Protection Corporation
and other regulatory and trade organizations. American Fronteer is also licensed
to sell insurance products in certain states. American Fronteer's business
consists of providing retail securities brokerage and investment services,
trading fixed income and equity securities, providing investment banking
services to corporate and municipal clients, managing and participating in
underwriting corporate and municipal securities, and selling a range of
professionally managed mutual funds and insurance products.
American Fronteer conducts its business in four operating divisions as
described below. American Fronteer's principal executive office is located at
One Norwest Center, 1700 Lincoln Street, 32nd Floor, Denver, Colorado 80203.
American Fronteer has branch offices located in Colorado Springs, Colorado;
Atlanta, Georgia; Albany, New York; Reston, Virginia; Chicago, Illinois;
Metairie, Louisiana; Las Vegas, Nevada; Dallas, Texas; West Palm Beach, Florida;
New York, New York and San Francisco, California.
Retail Securities Brokerage Division
American Fronteer conducts its retail securities brokerage business through
its retail securities brokerage division. As of September 30, 1999, American
Fronteer has approximately 101 account executives and approximately 22,000
customer accounts. American Fronteer generates commission revenue when it acts
as a broker on an agency basis, or as a dealer on a principal basis, to effect
securities transactions for individual and institutional investors. American
Fronteer executes both listed and over the counter agency transactions for
customers, executes transactions and puts and calls on options exchanges as
agent for its customers, and sells a number of professionally managed mutual
funds and insurance products, primarily variable annuities. American Fronteer's
revenues from its sales of insurance products were approximately $30,000 for the
nine months ended June 30, 1999.
Corporate Finance Division
The corporate finance division provides financial advisory and capital
raising services to corporate clients. Financial advisory services involve
advising clients in mergers and acquisitions and in various types of corporate
valuations. American Fronteer acts as a dealer, underwriter and selling group
member in public and private offerings of equity securities. During the nine
months ended June 30, 1999, American Fronteer earned revenues of approximately
$679,000 from its investment banking activities.
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Trading Division
Trading securities involves the purchase and sale of securities by American
Fronteer for its own account. Profits and losses are derived from the spread
between bid and ask prices and market increases or decreases for the individual
security during the holding period. American Fronteer makes markets in corporate
equities and trades in municipal and corporate bonds and government securities.
As of September 30, 1999, American Fronteer made markets in 32 stocks.
Public Finance Division
The public finance division of American Fronteer provides professional
financial advisory services to public entities, participates in underwriting and
selling both negotiated and competitive bid municipal bond offerings, and
structures and participates in municipal bond refinancings. During the nine
months ended June 30, 1999, American Fronteer's participation in offerings of
municipal securities was approximately $620,000 as manager of underwritings and
private placements.
Financial Information
For the nine months ended June 30, 1999, American Fronteer's revenues of
$17,704,305 accounted for 63% of eVision's total operating revenues from
continuing operations of $28,185,529. American Fronteer's revenues for the years
ended September 30, 1998, 1997 and 1996 were $18,886,391, $18,118,271 and
$14,830,681, respectively. For the nine months ended June 30, 1999 and for the
years ended September 30, 1998, 1997 and 1996, American Fronteer incurred
operating losses of $1,049,843, $3,910,741, $2,160,897 and $2,647,327,
respectively.
American Fronteer Regulatory Net Capital
American Fronteer, as a registered securities broker/dealer, is subject to
the Commission's Uniform Net Capital Rule (Rule 15c3-1). American Fronteer has
elected to operate pursuant to the alternative standard provided by the Rule.
Under the alternative standard, American Fronteer is required to maintain "net
capital" of not less than $250,000. As of September 30, 1999, American Fronteer
had "net capital" of $419,273.
American Fronteer Proposed On-Line Broker/Dealer Division
American Fronteer is developing an on-line broker/dealer division that
American Fronteer believes will provide American Fronteer with the ability to
expand its broker/dealer business into Asian markets and will provide American
Fronteer's existing clients with the benefits of on-line trading. American
Fronteer plans to provide on-line broker/dealer services under the name of OL
Broker.Com, Inc. An agreement has been signed by American Fronteer pursuant to
which an unaffiliated company has agreed to provide American Fronteer with the
technology, infrastructure and support necessary to provide on-line
broker/dealer services. Further, a letter of intent has been entered into by a
wholly owned subsidiary of eVision on behalf of American Fronteer pursuant to
which an unaffiliated party plans to develop a platform to facilitate American
Fronteer's on-line trading of United
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States securities in Hong Kong. A separate broker/dealer license for the on-line
business of American Fronteer may be applied for and the on-line broker/dealer
division of American Fronteer may become a separate consolidated subsidiary of
eVision.
Q6 Technologies, Inc.
Q6 Technologies, Inc. was formed as a Colorado corporation in March 1999 to
focus on the development of business opportunities in technology-based virtual
processing arenas. Q6 Technologies, Inc. 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. eVision currently owns
approximately 65% of Q6 Technologies. Q6 Technologies owns approximately 78% of
Secutron Corporation that Q6 Technologies acquired from eVision. As a result of
a settlement agreement between eVision, Secutron and a shareholder of Secutron,
the board of directors of Secutron has approved the issuance of additional
shares of Secutron to eVision who intends to assign them to Q6 Technologies,
subject to shareholder approval of an increase of authorized shares. Q6
Technologies then will own approximately 95% of Secutron.
Q6 Technologies has entered into a letter of agreement to purchase a 50%
interest in Do Not Disturb, Inc., a company that engages in web based consumer
privacy technologies and has entered into a letter of intent with International
Broadcasting Technology to secure a 50% interest in International Broadcasting's
proprietary platform for high bandwidth Internet multicasting.
Secutron Corporation
General
Secutron was incorporated in Colorado on May 11, 1979. Secutron's business
consists of designing, developing, installing, marketing, and supporting
software systems for the securities brokerage industry. Secutron markets
hardware and software to securities brokerage firms. Secutron is also an
Internet service provider providing Internet services ranging from access to the
Internet to development and maintenance of Web sites. Secutron's wholly owned
subsidiary, MidRange Solutions Corp., is a Colorado corporation formed on
January 1, 1993. MidRange is an IBM business partner selling IBM hardware and
hardware manufactured by competitors of IBM, and acts as a distributor for
software products which are proprietary to third parties. MidRange sells
hardware and software to businesses in several different industries, including
manufacturers, distributors and health care providers.
Secutron offers the following software products to the securities brokerage
industry. The STARS software system is offered to broker/dealers who clear their
own transactions, and is a totally integrated software system, which performs
all of the functions, required by self-clearing broker/dealers. The BCATS
software system is offered to broker/dealers who clear their securities
transactions on a fully disclosed basis through a clearing broker/dealer, and is
also a fully integrated software system which performs all of the accounting
functions required by a fully disclosed broker/dealer. The BCATS-MF software
system is designed for use by broker/dealers engaging in transactions in mutual
funds. All such software systems are designed to run on IBM computers. Both
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Secutron and MidRange provide consulting, programming and facilities management
services to their respective clients to support the software and hardware sold
by them. As a result of internal testing results, Secutron has determined the
STARS and BCATS applications are Year 2000 compliant. Secutron is in the process
of converting existing customers to ensure their compliance.
Q6 is considering selling the assets of Midrange and selling or
discontinuing the operations of Secutron. There are no assurances Q6 will decide
to sell the assets of Midrange or sell or discontinue the operations of Secutron
or that Q6 will be successful in accomplishing either.
Financial Information
Secutron's revenues for the nine months ended June 30, 1999 and for the
years ended September 30, 1998, 1997 and 1996 were $7,747,768, $8,866,606,
$7,436,143 and $6,975,591, respectively. Operating (loss) profits for the nine
months ended June 30, 1999 and for the years ended September 30, 1998, 1997 and
1996 were $339,369, $(281,785), $129,215 and $281,775, respectively.
eBanker USA.com, Inc.
General
eBanker USA.com, Inc. is a 29% owned consolidated subsidiary of eVision
that was incorporated as a Delaware corporation in March 1998 and became a
Colorado corporation in March 1999. eVision also has the right to cast 50% of
the vote in the election of eBanker's directors. eBanker has entered into a
management agreement with eVision to assist in the management of eBanker's
business including the assistance in (i) the identification of lending
opportunities, (ii) credit analysis of potential borrowers, (iii) structure of
loans, including yield-enhancing equity participation and collateral
arrangements and (iv) administration of loans. In exchange for such services,
eVision is entitled to an annual fee equal to 10% of eBanker's pretax profits as
determined from the Company's annual audited financial statements.
eBanker was created with the purpose of providing a wide range of on-line
financial lending products and services. eBanker intends to identify, target and
serve high-margin, global financial market segments, through its interactive and
multimedia website. eBanker's website first became operational in September
1999. The website is still in its initial phase of development and will
continually be expanded. eBanker has been designed as a non-deposit taking,
broad financial services entity, so that it is not subject to the regulations
facing traditional financial institutions. eBanker believes that it has the
flexibility to serve many overlooked market niches with innovative financial
products and services. Over the next twelve months, eBanker intends to introduce
a number of financial products and services including but not limited to,
secured consumer credit cards, corporate credit cards and customized corporate
financing. Customized corporate financing refers to individualized corporate
lending agreements whereby eBanker would receive both a fixed or floating rate
of interest combined with some form of participation. The participation may take
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the form of revenue or profit sharing, common stock, warrants, stock options,
fixed assets or any other additional compensation mutually agreed upon between
eBanker and its client.
eBanker also intends to provide a number of business services in
conjunction with customized corporate financing. The services may include
managerial advice, accounting and administrative support, human resource
services or any other service where eBanker can cost-effectively assist its
clients.
eBanker also plans to provide numerous informational and match-making
services. These services are designed to attract users to the eBanker website,
with the intent of generating traffic, revenues and brand recognition. eBanker
plans to offer both free and premium financial information. This information may
range from stock quotes to market commentary to current mortgage rates. eBanker
also plans to provide numerous links to external products and services with the
intention of receiving royalties in the process. eBanker also plans to track
individual user preferences and to solicit input from its customers, customizing
websites to meet individual needs and preferences.
To date, eBanker's activities have consisted of raising approximately
$15,000,000 in private placements of securities, investing in debt securities in
Asian corporations and making loans to affiliated and unaffiliated entities.
Financial Information
eBanker's revenues for the nine months ended June 30, 1999 and for the year
ended September 30, 1998 were $1,628,337 and $37,923, respectively. Operating
(loss) profits for the nine months ended June 30, 1999 and for the year ended
September 30, 1998 were $288,580 and $(46,255), respectively.
Competition
American Fronteer
The securities industry has become considerably more concentrated and more
competitive in recent periods as numerous securities firms have either ceased
operations or have been acquired by or merged with other firms. In addition,
companies not engaged primarily in the securities business, but having
substantial financial resources, have acquired securities firms. The securities
industry is now dominated by relatively few very large securities firms offering
a wide variety of investment related services nationally and internationally. In
addition, numerous commercial banks have entered into a variety of new
securities activities.
Various legislative proposals permit commercial banks to engage in other
types of securities related activities. These developments or other developments
of a similar nature may lead to the creation of integrated financial service
firms that offer a broader range of financial services than those offered by
American Fronteer. These developments have created large, well capitalized,
integrated financial service firms with which American Fronteer must compete.
The securities industry has also experienced substantial commission discounting
by broker/dealers competing for institutional and individual brokerage business.
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An increasing number of specialized firms offer "discount" services to
individual customers. Many of these services are offered over the Internet for
little or no transaction fees. These firms generally effect transactions for
their customers on an "execution only" basis without offering other services
such as investment recommendations and research.
Such discounting and an increase in the number of new and existing firms
offering such discounts could adversely affect American Fronteer's retail
securities business.
Secutron Corp. and MidRange
Secutron competes with numerous software distribution firms, some of which
are larger than Secutron and have greater financial resources. Secutron also
competes with firms that specialize in industry specific software and those that
offer a variety of software products to businesses in various industries.
MidRange competes with hardware manufacturers and other licensed distributors of
IBM hardware and distributors of hardware manufactured by competitors of IBM.
Many of MidRange's competitors are larger than MidRange and have greater
financial resources.
eBanker
eBanker is engaged in a highly competitive business. eBanker competes for
lending opportunities with many companies, including numerous financial
institutions which have been in existence for longer periods of time. Many of
eBanker's competitors are significantly larger than eBanker, have established
operating histories and procedures, have access to significantly greater capital
and other resources, have management personnel with more experience than the
management of eBanker and have other advantages over eBanker in conducting
certain businesses and providing certain services.
Regulation
The securities industry in the United States is subject to extensive
regulation under federal and state laws. The Commission is a federal agency
charged with administration of the federal securities laws. Much of the
regulation of broker/dealers has been delegated to self regulatory
organizations, principally the NASD and the exchanges. These self regulatory
organizations adopt rules (which are subject to approval by the Commission) for
governing the industry and conduct periodic examinations of member
broker/dealers. Securities firms are also subject to regulation by state
securities commissions in the states in which they do business. Broker/dealers
are subject to regulations that cover all aspects of the securities business,
including sales methods, trading practices among broker/dealers, capital
structure of securities firms, record keeping, and the conduct of directors,
officers, and employees. Additional legislation, changes in rules promulgated by
the Commission and by self regulatory organizations, or changes in the
interpretation or enforcement of existing laws and rules often directly affect
the method of operation and profitability of broker/dealers. The Commission, the
self regulatory authorities, and the state securities commissions may conduct
proceedings which can result in censure, fine, suspension, or expulsion of a
broker/dealer, its officers, or employees.
24
<PAGE>
American Fronteer is required by federal law to belong to the SIPC. When
the SIPC fund falls below a certain minimum amount, members are required to pay
annual assessments. The SIPC fund provides protection for securities held in
customer accounts up to $500,000 per customer, with a limitation of $100,000 on
claims for cash balances.
American Fronteer is subject to the Commission's Uniform Net Capital Rule
which is designed to measure the financial integrity and liquidity of a
broker/dealer and the minimum net capital deemed necessary to meet its
commitments to its customers. American Fronteer is in compliance with the Rule.
Failure to maintain the required net capital may subject American Fronteer to
suspension by the Commission or other regulatory bodies and may ultimately
require its liquidation. eVision is not itself a registered broker/dealer and is
not subject to the Rule. However, under the Rule, eVision could be affected by
the requirement that a broker/dealer such as American Fronteer may be prohibited
or temporarily restricted by the Commission from the withdrawal of equity
capital by a stockholder such as eVision.
American Fronteer is also subject to regulation under federal and state
laws surrounding the insurance industry for the insurance products, primarily
variable annuities, which its insurance licensed registered representatives
sell.
Private Placements
On May 26, 1998, eBanker commenced a private placement of 30,000 units each
consisting of:
o one $1,000 convertible debenture, due August 1, 2008, paying 10%
per annum;
o 100 Class A common shares; and
o warrants exercisable at $3.00 per share for 500 Class A common
shares.
Prior to closing, 7,958 units were issued through 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 amount of units purchased by outside
investors. eVision purchased 707,466 shares of the Class B common stock for
$2,122,398. There were no commissions or expenses associated with the Class B
common issuance.
On March 3, 1999, eBanker commenced a second private placement of 3,000,000
units, each consisting of:
o one share of common stock; and
o one detachable warrant to purchase one share of common stock.
25
<PAGE>
The offering has since closed. In the offering 899,444 units were issued.
For participating in the offering American Fronteer received warrants to
purchase 89,944 shares of eBanker's common stock, received a commission of 10%
of the proceeds and received a non-accountable expense allowance of 3% the
proceeds.
On October 16, 1998, eVision commenced a private placement of 1,500,000
shares of its Series B Preferred Stock at a price of $10.00 per share. 25,500
shares were sold in this offering before it was terminated. On May 12, 1999,
eVision commenced a second private placement of 1,500,000 shares of its
Convertible Series B Preferred Stock. The 25,500 shares of Series B Preferred
Stock sold in eVision's first offering were exchanged for Convertible Series B
Preferred Stock. Including the shares exchanged from the first offering, 110,500
shares of Convertible Series B Preferred Stock were sold in the second offering
before it was terminated.
On September 27, 1999, eVision commenced a third private offering of
1,500,000 shares of its Convertible Series B-1 Preferred Stock. The Convertible
Series B-1 Preferred Stock is being offered at a cash price of $10.00 per share
and 110,500 shares are being offered in exchange for the Convertible Series B
Preferred Stock on a one-for-one basis. The Convertible Series B-1 Preferred
Stock is being offered by American Fronteer which will be issued between 150,000
and 200,000 warrants, depending on the proceeds of the offering, which allow the
holder to purchase shares of eVision's Convertible Series B-1 Convertible
Preferred Stock at a purchase price of $12.00 per share for five years. American
Fronteer also is to receive a commission of 10% and a non-accountable expense
allowance of 3% of the total amount sold in the offering. The offering of the
Convertible Series B-1 Preferred Stock will continue until all 1,500,000 shares
of Convertible Series B-1 Preferred Stock are sold or exchanged or until
November 30, 1999, whichever is earlier. eVision has reserved the right to
continue the offering beyond November 30, 1999.
The Convertible Series B-1 Preferred Stock has a cumulative annual dividend
rate payable semi-annually of 8% in cash and 7% in shares of the Convertible
Series B-1 Preferred Stock. Heng Fung Holdings has guaranteed the payment of any
cash dividends that accrue on the Convertible Series B-1 Preferred Stock through
October 31, 2003. The semi-annual dividend payable on shares of Convertible
Series B-1 Preferred Stock will be equivalent to three and one-half one
hundredths of a share of Convertible Series B-1 Preferred Stock for each
outstanding share of Convertible Series B-1 Preferred Stock. Any Convertible
Series B-1 Preferred Stock issued as a dividend on the Convertible Series B-1
Preferred Stock will have the same dividend and the same terms as the
Convertible Series B-1 Preferred Stock. The dividend on the Convertible Series
B-1 Preferred Stock is payable semi-annually beginning October 31, 1999, and
continuing each April 30 and October 31 thereafter, when and if declared by the
Board of Directors. The Convertible Series B-1 Preferred Stock is immediately
convertible by the holder into eVision's common stock at a price of $1.00 per
share of common stock. If the common stock does not have a closing bid price of
at least $1.15 per share for at least 20 trading days during the period
commencing on September 30, 1999, and ending on September 30, 2000, the
Convertible Series B-1 Preferred Stock will be convertible by the holder into
common stock at a price equal to the higher of the five day average closing bid
price of the common stock prior to September 30, 2000, or $0.50 per share. In
addition, the Convertible Series B-1 Preferred Stock is automatically
26
<PAGE>
convertible into common stock at $1.00 per share at such time as the closing bid
price of the common stock is at least $4.00 per share for 30 consecutive trading
days. The Convertible Series B-1 Preferred Stock is redeemable by eVision on or
after October 1, 2003, at a price of $12.50 per share plus any accrued and
unpaid dividends.
If Heng Fung Holdings is required to pay on its guaranty, eVision will
issue to Heng Fung Holdings or its designee a five year 12% convertible
debenture unless the act of eVision in issuing such a debenture would be deemed
to be an illegal distribution pursuant to the Colorado Business Corporation Act,
in which event, upon payment on the guaranty, Heng Fung Holdings or its designee
would receive, instead of a 12% convertible debenture, the number of shares of
common stock as is equal to the total amount of the dividend paid divided by 90%
of the conversion price of the common stock. In general, the conversion price of
the convertible debenture will be the market price of the common stock on the
date of conversion.
Sale of Fronteer Capital
On July 30, 1999, eVision entered into a Stock Purchase Agreement with
Ladsleigh Investments Limited, BVI whereby eVision agreed to sell and Ladsleigh
agreed to purchase 100% of the stock of a wholly owned subsidiary of eVision,
Fronteer Capital, Inc., for $3,000,000, excluding cash and warrants to purchase
equity in a publicly traded company. The purchase price was based on the fair
value of the primary assets held by Fronteer Capital as of July 30, 1999 based
on a third party quotation service, 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. Prior to the transaction, there
was no material relationship between Ladsleigh and eVision or any of its
affiliates, and director or officer. For the period July 1, 1999 through July
30, 1999, eVision recognized approximately $485,000 of unrealized gains on the
investments in marketable securities held by Fronteer Capital.
Proposed Investment in Mutual Fund Developer and Sponsor
eVision has entered into a letter of intent to acquire control of Quaker
Funds, Inc. which is the developer and sponsor of the Quaker Family of Funds, a
group of six mutual funds having approximately $70,000,000 in assets under
management. An independent institutional investment advisor manages each fund.
As proposed, the acquisition includes the issuance of 4,666,667 shares of
eVision's common stock for approximately 60% of the outstanding common stock of
Quaker Funds. The shareholders of Quaker Funds that receive eVision's common
stock will be able to sell their common stock back to eVision if eVision's
common stock does not trade at an average price of $3.00 per share for a period
of time between one and two years after the closing. There are also provisions
whereby the Quaker Funds shareholders may sell their remaining 40% ownership in
Quaker Funds to eVision or buy back their 60% interest in Quaker Funds. The
transaction is subject to the execution of a definitive agreement which is
currently being negotiated. There are no assurances that the transaction will be
consummated on the terms specified in the letter of intent or at all.
27
<PAGE>
Employees
As of September 30, 1999, eVision and its subsidiaries had 186 full time
employees. 156 were employed by American Fronteer; nine were employed by
Fronteer Corporate Services, Inc., a wholly owned subsidiary of eVision that
provides financial back office and administrative services to eVision; three
were employed by Corporate Net Solutions, a wholly owned subsidiary of eVision
that established American Fronteer's wide area network linking its twelve
offices via a high bandwidth intranet; one was employed by Q6 Technologies,
Inc.; and 17 were employed by Secutron and MidRange.
Properties
The offices for eVision, its wholly owned subsidiaries and eBanker are
located at One Norwest Center, 1700 Lincoln Street, 32nd Floor, Denver,
Colorado, 80203. The offices consist of approximately 47,071 square feet of
subleased space. The sublease expires on April 30, 2007. eVision currently pays
monthly rent of $63,800 for the space. eVision also leases space for its branch
offices pursuant to leases that have various rental rates and expire at various
dates.
The offices for Secutron and MidRange are located at 3773 Cherry Creek
North Drive, Suite 825, Denver, Colorado, 80209. The offices consist of
approximately 5,946 square feet of leased space. The lease expires on August 31,
2000 and requires the payment of monthly rentals of $6,784 for the space.
Legal Proceedings
eVision is a defendant in certain arbitration and litigation matters
arising from its activities as a broker/dealer. In the opinion of management,
these matters, including any damages awarded against eVision, have been
adequately provided for in the accompanying consolidated financial statements,
and the ultimate resolution of the other arbitration and litigation matters will
not have a significant adverse effect on the consolidated results of operations
or the consolidated financial position of eVision.
Anthony R. Kay, a former officer, director and shareholder of Secutron,
individually, and in conjunction with his consulting company, ARK Consulting
Services Inc., filed claims on July 30, 1998, in the District Court for the City
and County of Denver, Colorado against eVision, Secutron and Midrange and
against certain current and former officers, directors, shareholders and
affiliates of eVision. The claims assert that these entities and individuals
breached their fiduciary duties, breached contracts, approved an illegal
distribution and participated in a fraudulent conveyance. In total, there are
twelve asserted claims for relief, which seek actual, exemplary damages, costs
and attorneys' fees, an injunction and other similar relief. The material claims
are based upon a written settlement agreement between Secutron, the claimant and
his consulting company. The settlement agreement provides for Secutron to pay
$10,000 per month through January 2011 to ARK Consulting. Claimants assert that
the settlement agreement was breached and claim $1,500,000 for the breach.
28
<PAGE>
Secutron and the other named defendants have entered into an agreement to
settle the lawsuit. The estimated net effect to eVision of the settlement on
eVision's reported operating results for the period ended June 30, 1999, after
giving consideration to income taxes, accrued expenses and insurance
contributions is less than $200,000.
Pursuant to the terms of the settlement, Secutron has paid Mr. Kay $400,000
in cash and eVision has issued Mr. Kay 550,000 shares of common stock. In
addition, eVision has agreed to register Mr. Kay's shares of common stock for
resale. eVision and the other defendants have also agreed that if Mr. Kay does
not receive a net amount of at least $325,000 from the sale of the common stock,
Secutron and the other defendants will pay Mr. Kay the difference between what
Mr. Kay does receive and $325,000 or provide Mr. Kay with additional shares of
common stock to make up the deficiency based upon the then current trading
prices of the common stock. If Mr. Kay does not realize $325,000 from the sale
of all of the common stock by April 1, 2000, Mr. Kay is entitled to receive the
deficiency in cash. Any sales by Mr. Kay of the common stock must be made in a
commercially reasonable manner. As part of the agreement, all of the common
stock of Secutron held by Anthony R. Kay and his family, which approximated 5%
of the outstanding common stock of Secutron, were returned to Secutron and the
other defendants or their assigns. In addition, ARK Consulting agreed to cancel
the settlement agreement that required payments to ARK Consulting of $10,000 per
month through the year 2011.
29
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
As of September 30, 1998, eVision had investments in Asian equity
securities, which exposed eVision to foreign exchange risk and equity price
risk. During the nine months ended June 30, 1999, eVision purchased debt
securities of certain Asian corporations. These securities expose eVision to
exchange rate risk as well as credit risk. The following table summarizes the
market risks for eVision:
June 30, 1999 September 30, 1998
--------------------- --------------------
Carrying Carrying
Fair Value Value Fair Value Value
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 1,688,082 1,688,085
Credit Risk:
Debt Securities ............ 5,769,282 5,769,282 -- --
* Includes the equity securities of the Asian corporations.
30
<PAGE>
MANAGEMENT
Directors
The name, position with eVision, age of each director and the period during
which each director has served are as follows:
Name and Position Age Director Since
----------------- --- --------------
Fai H. Chan 54 1997
Chairman, President and Director
Robert H. Trapp 44 1997
Managing Director
Jeffrey M. Busch 41 1998
Director
Robert Jeffers, Jr. 51 1998
Director
Kwok Jen Fong 50 1998
Director
Tony T.W. Chan 24 1999
Director
- ---------------
Tony Chan is the son of Fai H. Chan.
The present term of office of each director normally would expire at the
next annual meeting of shareholders and when his successor has been elected and
qualified. In accordance with a convertible debenture agreement, and as
requested by Online Credit, the number of directors on eVision's Board of
Directors was increased from three to five and Fai H. Chan and Robert H. Trapp
were appointed to the Board of Directors of eVision. In addition, after
regulatory approval of a change in the beneficial ownership of 25% or more of
eVision and the Heng Fung Private purchase of 3,556,777 shares of the
outstanding common stock of eVision from a former director, three directors of
eVision that were not appointed at the request of Online Credit resigned and the
two remaining directors appointed at the request of Online Credit filled the
vacancies created by such resignations. The directors appointed were Jeffrey M.
Busch, Robert Jeffers, Jr. and Kwok Jen Fong. All of the directors appointed by
Online Credit were subsequently elected by the shareholders at eVision's Annual
Meeting on April 15, 1999.
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<PAGE>
Executive Officers
Each executive officer holds office until his successor is duly appointed
and qualified, until his death or resignation or until he shall be removed in
the manner provided by eVision's bylaws. eVision's current executive officers,
their ages, positions with eVision and periods during which they served are as
follows:
Name and Position Age Officer Since
- ----------------- --- -------------
Fai H. Chan
Chairman of the Board and President 54 1998
Robert H. Trapp
Managing Director 44 1998
Gary L. Cook
Chief Financial Officer, Secretary and Treasurer 41 1998
There was no arrangement or understanding between any executive officer and
any other person pursuant to which any person was selected as an executive
officer.
Background
The following is a brief account of the business experience during the past
five years of each director and executive officer of eVision:
<TABLE>
<CAPTION>
Name of Director Principal Occupation During
or Officer the Last Five Years
---------------- ----------------------------
<S> <C>
Fai H. Chan Director of eVision since December 26, 1997; Chairman
and President since February 1998. Mr. Chan is the
Chairman and Managing Director of Heng Fung Holdings
Company Limited and has been a Director of Heng Fung
Holdings Company Limited since September 2, 1992. Mr.
Chan was elected Managing Director of Heng Fung
Holdings Company Limited on May 1, 1995 and Chairman on
June 3, 1995. Heng Fung Holdings Company Limited's
primary business activities include real estate
investment and development, merchant banking, the
manufacturing of building material machinery,
pharmaceutical products and retail fashion. Mr. Chan
has been the President and a Director of Powersoft
Technologies Inc. (formerly Heng Fai China Industries
Inc.), which owns various industrial companies, since
June 1994 and Chief Executive Officer thereof since
32
<PAGE>
<CAPTION>
<S> <C>
June 1995; a Director of Intra- Asia Equities, Inc., a
merchant banking company, since June 1993; Executive
Director of Hua Jian International Finance Co., Ltd.
from December 1994 until December 1996; and Chairman of
the Board of Directors of American Pacific Bank since
March 1988 and Chief Executive Officer thereof between
April 1991 and April 1993. Mr. Chan is also a director
of Global Med Technologies, Inc.
Robert H. Trapp Director of eVision since December 26, 1997, and the
Managing Director and member of the audit committee of
eVision since February 1998, and the President of
American Fronteer Financial Corporation. Mr. Trapp has
been a director of Heng Fung Holdings Company Limited
since May 1995; a Director of Inter-Asia Equities,
Inc., a merchant banking company, since February 1995
and the Secretary thereof since April 1994; Director,
Secretary and Treasurer of Powersoft Technologies Inc.
(formerly Heng Fai China Industries Inc.), which owns
various industrial companies; and the Canadian
operational manager of Pacific Concord Holding (Canada)
Ltd. of Hong Kong, which operates in the consumer
products industry, from July 1991 until November 1997.
Mr. Trapp is also a director of Global Med
Technologies, Inc.
Jeffery M. Busch Director of eVision since February 1998. Mr. Busch is a
member of eVision's audit committee and has been a
practicing attorney for at least the last five years.
Mr. Busch is also a director of Global Med
Technologies, Inc.
Robert Jeffers, Jr. Director of eVision since February 1998. Mr. Jeffers is
a member of eVision's audit Committee and has been a
practicing attorney for at least the last five years.
Kwok Jen Fong Director of eVision since February 1998. Mr. Fong has
been a director of Heng Fung Holdings Company Limited
since 1995. Mr. Fong has been a practicing solicitor in
Singapore for at least the last five years. Mr. Fong is
also a director of Global Med Technologies, Inc.
Gary L. Cook Secretary and Treasurer of eVision since February 1998,
and Chief Financial Officer of eVision since September
1998. From 1994 to 1996, Mr. Cook was a principal of a
small venture in which he had majority ownership, and
from 1982 to 1994, was a Senior Manager for KPMG LLP
where he managed all auditing services for several
clients in various financial and other industries, and
developed and implemented accounting, financial
33
<PAGE>
<CAPTION>
<S> <C>
reporting and SEC reporting systems for growth
companies. Mr. Cook is a director of Global Med
Technologies, Inc.
Tony T.W. Chan On May 7, 1999, the Board of Directors of eVision
appointed Tong Wan Chan, otherwise known as Tony Chan,
to the Board of Directors of eVision. Since April 1999,
Mr. Chan has worked as an Investment Banker for
Fronteer Securities (H.K.) Limited, a Hong Kong Company
in which Heng Fung Holdings Company Limited indirectly
holds a minority interest. From 1998 to April 1999, Mr.
Chan worked as an Investment Banker for Commerzbank,
Global Equities, Hong Kong. From 1996 to 1998, Mr. Chan
worked in equity derivatives for Peregrine Derivatives.
Mr. Chan is a member representative, clearing
operations principal and registered options principal
of the Hong Kong Futures Exchange and received a
Bachelor of Commerce degree in Finance with honors from
the University of British Columbia. Mr. Chan is the son
of Fai H. Chan, the Chairman, President, Chief
Executive Officer and a Director of eVision.
</TABLE>
Directorships
No director of eVision is a director of any other entity that has its
securities registered pursuant to Section 12 of the Securities Exchange Act of
1934, or subject to the requirements of Section 15(d) of the 1934 Act except
Messrs. Fai H. Chan, Trapp, Busch, Fong and Cook who are directors of Global Med
Technologies, Inc. and Messrs. Fai H. Chan and Trapp who are directors of
Powersoft Technologies Inc. It is planned that Powersoft Technologies soon will
change its name to Asia SuperNet Corporation through a merger into Asia SuperNet
Corporation. Asia SuperNet was formed for the merger.
Executive Compensation
The following table provides certain information pertaining to the
compensation paid by eVision and its subsidiaries during eVision's last three
fiscal years for services rendered by Fai H. Chan, the Chairman of the Board and
the President of eVision, and Gary L. Cook, the Chief Financial Officer,
Secretary and Treasurer of eVision. Also included is the former Chairman of the
Board, Robert A. Fitzner, Jr.
34
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Lont Term
Compensation
Annual Compensation Awards
Fiscal ----------------------------------------- -------------
Year Other
Ended Annual Securities All Other
Name and Septem- Compen- Underlying Compensa-
Principal Position ber 30, Salary($) Bonus($) sation($) Options(#) tion($)
- ------------------ ------- -------- ------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Fai H. Chan 1999 -- -- -- 9,000,000(a) --
Chairman of the Board 1998 -- -- -- -- --
and President 1997 -- -- -- -- --
Gary L. Cook 1999 131,937 600 -- 500,000(b) 5,960(c)
Chief Financial 1998 100,728 -- -- -- 4,092(c)
Officer, Secretary 1997 90,000 -- -- -- 3,344(c)
and Treasurer
Robert A. Fitzner, Jr. 1999 -- -- -- -- --
Chairman of the Board 1998 81,214 -- -- -- 609
(through February 10, 1997 172,124(d) 30,000 -- -- 1,291
1998)
</TABLE>
(a) On January 28, 1999, Mr. Chan was granted a ten year option to purchase
8,000,000 shares of common stock at an exercise price of $0.30, which is
currently exercisable. He was also granted on November 25, 1998 options to
purchase 1,000,000 shares subject to certain provisions.
(b) On November 25, 1998, Mr. Cook was granted a ten year option to purchase
shares of common stock at an exercise price of $0.20, subject to certain
conditions of which 33,333 are exercisable.
(c) Represents matching contributions to a 401(k) and, disability insurance
premiums and savings plan and health club dues for 1998 and 1997.
(d) Includes $30,000 paid as a director's fee to Mr. Fitzner by Secutron Corp.
Option Grants To Officers
The following table provides information with respect to Fai H. Chan and
Gary L. Cook concerning unexercised options to purchase eVision's common stock
held by them as of the end of the fiscal year ended September 30, 1999:
35
<PAGE>
Fiscal Year End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year End at Fiscal Year End
Name Exercisable/Unexercisable Exercisable/Unexercisable(1)
- ---- -------------------------- ---------------------------
Fai H. Chan 8,000,000 / 1,000,000 $960,000 / $220,000
Gary L. Cook 33,333 / 466,667 $7,333 / $102,667
(1) Calculated by multiplying the difference between the exercise price and
the closing bid price of $0.42 per share by the applicable shares. Does not give
consideration to commissions or other market conditions.
On September 30, 1999, Robert A. Fitzner, Jr. did not own any options to
purchase shares of eVision's common stock.
The following table sets forth the individual grants of stock options made
during the last completed fiscal year to each of the named executive officers:
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Number of Percent of Total
Securities Options Granted
Underlying to Employees in
Name Options Granted Fiscal Year Exercise Price Expiration Date
- ---- --------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
Fai H. Chan 8,000,000 42.2% $0.30 January 27, 2009
1,000,000 5.3% $0.20 November 24, 2008
Gary L. Cook 500,000 2.6% $0.20 November 24, 2008
</TABLE>
Compensation Committee Interlocks and Insider Participation
eVision has no compensation committee and no officer or employee or former
officer of eVision or any of its subsidiaries during the fiscal year ended
September 30, 1999 participated in deliberations with eVision's Board of
Directors concerning executive officer compensation.
36
<PAGE>
Stock Option Plans
Effective September 30, 1988, as amended September 10, 1996, eVision
adopted an Incentive Stock Option Plan ("Plan"). The Plan authorized the
granting of options to officers, directors, and employees of eVision to purchase
600,000 shares of eVision's common stock. No options were able to be granted
after September 30, 1998. As of September 30, 1999, options to purchase 128,500
shares of eVision's common stock at $.625 per share through September 8, 2006,
were outstanding and exercisable under the Plan.
On April 8, 1996, as amended on September 10, 1996, eVision adopted the
1996 Incentive and Nonstatutory Option Plan ("1996 Plan"). The 1996 Plan
authorizes the granting of options to officers, directors, employees and
consultants of eVision to purchase 1,250,000 shares of eVision's common stock.
No option may be granted after April 8, 2006. As of September 30, 1999, options
to purchase 128,500 shares of eVision's common stock at $.625 per share through
September 9, 2009 were outstanding, were exercisable under the 1996 Plan.
On April 8, 1996, as amended on February 19, 1997 and on November 25, 1998,
eVision adopted the September 1996 Incentive and Nonstatutory Option Plan
("September 1996 Plan"). The September 1996 Plan authorizes the granting of
options to purchase 7,500,000 shares of eVision's common stock. No options may
be granted after April 8, 2006. Under the September 1996 Plan as of September
30, 1999, options to purchase 6,420,833 shares of eVision's common stock at $.20
to $1.00 per share through December 31, 2010 were outstanding, of which options
to purchase 2,140,222 shares were exercisable provided that options totaling
700,000 issued to two officers of eVision will not be exercisable until and
unless basic earnings per share of eVision for any fiscal year commencing with
the fiscal year ending September 30, 1999, are equal to or exceed $0.10 per
share.
As of September 30, 1999, eVision had also granted nonqualified stock
options to purchase 10,839,333 shares of eVision's common stock to certain
directors, officers and consultants at an exercise price of between $0.20 and
$0.70 per share. These options expire in 2008 and 2009. 8,000,000 of these
options are exercisable as of September 30, 1999.
Employee Stock Ownership Plan
On September 22, 1989, eVision's Board of Directors adopted an employee
stock ownership plan ("ESOP") which provides in pertinent part that eVision may
annually contribute tax deductible funds to the ESOP, at its discretion, which
are then allocated to eVision's employees based upon the employees' wages in
relation to the total wages of all employees in the ESOP.
The ESOP provides that more than half of the assets in the ESOP must
consist of eVision's common stock. The ESOP is administered by a board of
trustees under the supervision of an advisory committee, both of which are
appointed by eVision's Board of Directors. As of September 30, 1999, the ESOP
owned 418,682 shares of eVision's common stock and no other marketable
securities. The shares are contributed at the discretion of the Board of
Directors. For the nine months ended September 30, 1999, no shares have been
37
<PAGE>
contributed. Employees become vested in the shares of eVision's common stock
after six years in the ESOP once the shares have been committed to be released.
Employees are 20% vested after two years, vesting an additional 20% each year up
to 100% after six years in the ESOP.
Savings Plan
eVision has two retirement saving plans covering all employees who are over
21 years of age and have completed one year of eligibility service. The plans
meet the qualifications of Section 401(k) of the Internal Revenue Code. Under
the plans, eligible employees can contribute through payroll deductions up to
15% of their base compensation. eVision makes a discretionary matching
contribution equal to a percentage of the employee's contribution. Officers
participate in the plans in the same manner as other employees.
eVision has no other bonus, profit sharing, pension, retirement, stock
purchase, deferred compensation, or other incentive plans.
Transactions with Management and Others and Certain Business Relationships
In May 1999, eBanker extended Global Med a $750,000 bridge loan commitment
of which $750,000 was drawn as of September 30, 1999. Outstanding principal
amounts under the loan are due December 31, 1999 and accrue at an interest rate
of 12%. On October 4, 1999, eBanker extended to Global Med a $2,000,000 bridge
loan commitment, of which $300,000 has been drawn. Outstanding principal amounts
under the loan are due April 12, 2000 and accrue at an interest rate of 12%.
eVision previously sold Online Credit a ten year $4,000,000 10% convertible
debenture that is convertible into shares of common stock of eVision at a price
of $0.53125 per share until December 15, 2007, unless sooner paid, and an option
to purchase an $11,000,000 12% convertible debenture that was convertible into
shares of common stock of eVision at a price of $0.61 per share until ten years
from the date of issue unless sooner paid. Subsequently, Online Credit partially
exercised the option and purchased additional 10% convertible debentures
totaling $2,500,000. On September 23, 1998, Online Credit and eVision agreed to
amend the terms of the remaining $8,500,000 of the $11,000,000 10% convertible
debenture by increasing the interest rate to 12%, changing the conversion price
to the lower of $0.35 or the fair market value per share and changing the
default conversion price to $0.10 per share. As of October 31, 1999, Online
Credit had purchased a total of $8,000,000 of convertible debentures, of which
$1,000,000 were purchased during the 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 March 1999. The installment due date was
extended to March 2000. eVision paid Online Credit a fee of 5%, or $25,000, paid
in 44,092 common shares of eVision for the extension as determined by the
average closing bid price for 15 business days prior to March 23, 1999, or
$0.567 per share.
Interest payments of $994,195 that were due through June 30, 1999, arising
out of convertible debentures acquired pursuant to the convertible debenture
agreement, were paid by the issuance of 1,982,217 shares of common stock. The
38
<PAGE>
values of the shares of common stock were determined in accordance with the
convertible debenture agreement. Accrued interest of $212,111 as of September
30, 1999 will be paid by the issuance of 428,583 shares of common stock.
Since January 1, 1998, Fronteer Capital, which received the proceeds of the
$4,000,000 convertible debenture purchased by Online Credit in December 1997
pursuant to the convertible debenture agreement, used a portion of the proceeds
to purchase approximately 122,084,000 shares of the common stock of Heng Fung
Holdings in open market transactions on the Hong Kong Stock Exchange at an
average price of approximately $0.02 per share. On the closing date, the price
per share of the shares of the common stock of Heng Fung Holdings was slightly
higher than $0.02. Fai H. Chan and Robert H. Trapp are the directors and
officers of Fronteer Capital and are directors of Heng Fung Holdings which owns
Online Credit. In addition, Mr. Chan beneficially owns approximately 11% of the
outstanding common stock of Heng Fung Holdings. Fronteer Capital was sold by
eVision in July 1999 for $3,000,000, which was received in the form of $150,000
cash at closing and a promissory note in the amount of $2,850,000, due in one
year and bearing interest at a rate of 14% per annum.
Heng Fung Holdings has guaranteed through October 31, 2002, the payment of
each annual 8% cash dividend on the Convertible Series B-1 Preferred Stock that
is being offered by eVision in a private offering if such dividend is not paid
by eVision. In consideration for making such guaranty, eVision issued an
affiliate of Heng Fung Holdings 250,000 shares of eVision's common stock which
had a value of $62,500 based on the closing price of $0.25 per share of the
common stock on the date of the agreement. If 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 eVision 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. In
such event, Heng Fung Holdings or its designee would receive such number of
shares of eVision'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.
Each 12% convertible debenture that Heng Fung Holdings or its designee
receives will bear interest at a rate of 12% per annum and interest only will be
payable quarterly with the final payment of the entire unpaid principal balance
and all accrued and unpaid interest, if not sooner paid, due and payable five
years after the date of issuance. Interest is payable in cash or in shares of
eVision's common stock at the election of Heng Fung Holdings or its designee.
Each 12% convertible debenture will be convertible into shares of eVision's
common stock at a price equal to the lower of $0.35 or the market price of
eVision's common stock at the time of conversion. In the case of default, the
conversion price will be $0.10 per share of eVision's common stock. Heng Fung
Holdings has advised eVision that Heng Fung Holdings would, at this time, have
sufficient liquid assets to pay on its guaranty if it were required to do so.
There are no assurances, however, that Heng Fung Holdings will have sufficient
asset to pay on its guaranty if it were required to do so in the future.
On April 25, 1998 the Board of Directors approved a resolution to issue
350,000 shares of its common stock to Online Credit for its time, efforts,
39
<PAGE>
capital costs and expenses in setting up and operating a New York City office
which was transferred to eVision to be operated as an American Fronteer
institutional sales location.
In April 1998, Fronteer Capital, Inc., a formerly wholly owned subsidiary
of eVision, and Online Credit Limited committed to provide to Global Med lines
of credit for up to $1,650,000 and $1,500,000, respectively, for a total
combined loan commitment of $3,150,000 over the following twelve months.
Fronteer Capital subsequently assigned its commitment to eBanker. The loans bear
interest calculated at a rate of 12% per annum and will mature April 15, 2000.
As of September 30, 1999, Global Med had drawn $2,650,000 on these lines of
credit.
On October 7, 1998, eBanker, Online Credit, and Global Med entered into an
agreement whereby eBanker purchased, Online Credit sold and Global consented to
the sale of $1,000,000 principal amount of loans made by Online Credit to Global
along with a warrant to purchase an aggregate of 4,000,000 shares of Global's
common stock. eBanker paid Online Credit $1,100,000 for the loans and warrants.
The loans and warrants purchased by eBanker were a portion of loans and warrants
given pursuant to a joint loan commitment made by Online Credit and Fronteer
Capital (subsequently transferred to eBanker) for the benefit of Global.
In March, 1999, the board of directors of Fronteer Development, with the
approval of eVision, agreed to cause Fronteer Development to merge into eBanker
USA.com, Inc., which was a Colorado corporation formed for the merger. The
merger was effective March 4, 1999. As a result of the merger, the Fronteer
Development Class B Common Stock, which had a 30 to 1 voting preference and was
owned by eVision (giving eVision 96% of the voting power and 46% of the equity
interest), was exchanged for an equivalent number of shares of eBanker common
stock. The eBanker common stock has one vote per share. After the merger,
eVision held 46% of the voting and equity interest in eBanker. In addition, the
articles of incorporation of eBanker designated a share of Series A Preferred
Stock. The Series A Preferred Stock gives the holder 50% of the vote in the
election of Directors of eBanker. eBanker sold the Series A Preferred Stock for
$1,000 to eVision.
In June 1999, eVision entered into an exchange and sale of stock agreement
with Q6 Technologies. Pursuant to the agreement eVision agreed to exchange its
130,494,385 shares of Secutron common stock, which represented 72.80% of the
outstanding common stock, and $100,000 for 5,555,556 shares of Class B common
stock of Q6 Technologies.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of September 30, 1999, the number of
shares of outstanding common stock beneficially owned by each of eVision's
current directors and executive officers, sets forth the number of shares of
common stock beneficially owned by all of eVision's current executive officers
and directors as a group, and sets forth the number of shares of common stock
owned by each person who owned of record, or was known to own beneficially, more
than 5% of the outstanding shares of common stock:
40
<PAGE>
Amount and Nature of
Name Beneficial Ownership(1) Percent of Class
---- ---------------------- ----------------
Fai H. Chan 51,432,937(2)(10) 80.7%
Robert H. Trapp 160,000(3)(4) **
Kwok Jen Fong 50,000(4)(5) **
Jeffrey M. Busch 200,000(6) **
Robert Jeffers, Jr. 50,000(7) **
Tony T.W. Chan(8) 0 **
Gary L. Cook 146,666(9) **
All executive officers and 52,039,603 81.6%
directors as a group (6 persons)
Heng Fung Holdings Company 937(5) 77.6%
Limited
- -------------------
** Less than 1%.
(1) Except as indicated below, each person has the sole voting and/or
investment power over the shares indicated.
(2) Consists of 8,200,000 shares underlying stock options, of which 200,000 are
exercisable on November 25, 1999 only if the basic earnings per share of
eVision for any fiscal year commencing with the fiscal year ended September
30, 1999, are equal to or exceed $0.10 per share. Also consists of
43,232,937 shares beneficially owned by Heng Fung Holdings Company Limited.
Mr. Chan is an executive officer, a director and a 11% stockholder of Heng
Fung Holdings Company Limited. Mr. Chan's address is Lippo Protective
Tower, 10th Floor, 231-235 Gloucester Road, Wanchai, Hong Kong 040.
(3) Consists of shares underlying stock options exercisable on November 25,
1999 only if the basic earnings per share of eVision for any fiscal year
commencing with the fiscal year ended September 30, 1999, are equal to or
exceed $0.10 per share. Mr. Trapp's address is 1700 Lincoln Street, 32nd
Floor, Denver, Colorado 80203.
(4) Messrs. Trapp and Fong are directors of Heng Fung Holdings Company Limited.
Messrs. Trapp and Fong disclaim beneficial ownership of the shares
beneficially owned by Heng Fung Holdings Company Limited.
(5) Consists of shares underlying stock options exercisable on November 25,
1999 only if the basic earnings per share of eVision for any fiscal year
commencing with the fiscal year ended September 30, 1999, are equal to or
exceed $0.10 per share. Mr. Fong's address is 7 Temasek Blvd., #43-03
Suntec Tower One, Singapore 038987.
41
<PAGE>
(6) Consists of shares underlying stock options exercisable on November 25,
1999 only if the basic earnings per share of eVision for any fiscal year
commencing with the fiscal year ended September 30, 1999, are equal to or
exceed $0.10 per share. Mr. Busch's address is Suite 204B, Oxford Building,
University Office Building, Newark, Delaware 19702.
(7) Consists of shares underlying stock options exercisable on November 25,
1999 only if the basic earnings per share of eVision for any fiscal year
commencing with the fiscal year ended September 30, 1999, are equal to or
exceed $0.10 per share. Mr. Jeffers' address is 6101 11th Street, S.W.,
Suite 511, Washington, D.C. 20011.
(8) Mr. Chan's address is 1700 Lincoln Street, 32nd Floor, Denver, Colorado
80203.
(9) Consists of shares underlying stock options 80,000 of which are exercisable
on November 25, 1999 only if the basic earnings per share of eVision for
any fiscal year commencing with the fiscal year ended September 30, 1999,
are equal to or exceed $0.10 per share. Mr. Cook's address is 1700 Lincoln
Street, 32nd Floor, Denver, Colorado 80203.
(10)Includes 35,913,487 shares underlying convertible debentures owned or that
may be acquired upon exercise of an option. Heng Fung Holdings Company
Limited ("Heng Fung Holdings") is the parent company of Heng Fung Capital
[S] Private Limited ("Heng Fung Private"). Heng Fung Private is the parent
company of Online Credit. 42,982,937 of the shares beneficially owned by
Heng Fung Holdings are beneficially owned by Heng Fung Private, of which
38,289,796 of the shares are beneficially owned by Online Credit. Of the
38,289,796 shares beneficially owned by Online Credit, 35,913,487 of the
shares are beneficially owned pursuant to a convertible debenture
agreement. The address of Heng Fung Holdings is 10th Floor, Lippo
Protective Tower, 231-235 Gloucester Road, Wanchai, Hong Kong 040.
Limitation of Liability and Indemnification
eVision's articles of incorporation state that the liability of a director
of eVision to eVision shall be eliminated to the fullest extent permitted under
applicable Colorado law, as well as by any statutory amendments that expand the
elimination or limitations of such liability. The articles further provide that
any repeal or modification of the applicable section by stockholders of eVision
shall not adversely affect any right or protection of a director of eVision
existing at the time of such repeal or modification.
eVision's articles of incorporation provide that pursuant to applicable
state law, each director, officer, employee, fiduciary or agent of eVision (and
his heirs, executors and administrator) shall be indemnified by eVision against
expenses reasonably incurred by or imposed upon him in connection with or
arising out of any action, suit or proceeding in which he may be involved or to
which he may be made a party by reason of his being or having been a director,
officer, employee, fiduciary or agent of eVision, or at its requests of any
other corporation of which it is a shareholder or creditor and from which he is
not entitled to be indemnified (whether or not he continues to be a director,
officer, employee, fiduciary or agent at the time of imposing or incurring such
expenses), except in respect of matters as to which he shall be finally adjudged
in such action, suit or proceeding to be liable for negligence or misconduct.
Subject to applicable state law, in the event of a settlement of any such
action, suit or proceeding, indemnification shall be provided only in connection
with such matters covered by the settlement as to which eVision is advised by
counsel that the person to be indemnified did not commit a breach of duty.
42
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and control persons of eVision
pursuant to the foregoing provisions, or otherwise, eVision has been advised
that in the opinion of the Commission, such indemnification is against public
policy as expressed in the Securities Act, and is, therefore, unenforceable.
MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
Market Information
eVision's common stock was traded on the Nasdaq SmallCap Market under the
symbol FDIR from March 27, 1989 to October 21, 1998, when it began trading on
the OTC Bulletin Board. eVision's common stock is now traded under the symbol
EVIS. The following table shows the range of high and low closing bid quotations
for the common stock, for each quarterly period since March 31, 1997. These
quotations represent prices between dealers and do not include retail markups,
markdowns, or commissions and may not necessarily represent actual transactions.
Fiscal Quarter Ended: High Low
-------------------- ---- ---
September 30, 1999 $ 0.910 $ 0.420
June 30, 1999 1.280 0.460
March 31, 1999 0.875 0.180
December 31, 1998 0.375 0.063
September 30, 1998 0.813 0.313
June 30, 1998 1.031 0.688
March 31, 1998 1.281 0.656
December 31, 1997 0.750 0.406
Trading in eVision's common stock is currently conducted in the non-Nasdaq
over-the-counter market in what are commonly referred to as the electronic
bulletin board or the "pink sheets." As a result, an investor may find it more
difficult to dispose of or to obtain accurate quotations as to the market value
of eVision's common stock. In addition, eVision is subject to a rule promulgated
by the Commission which provides that various sales practice requirements are
imposed on broker/dealers who sell eVision's common stock to persons other than
established customers and accredited investors. For these types of transactions,
the broker/dealer has to make a special suitability determination for the
purchaser and have received the purchaser's written consent to the transactions
prior to sale. Consequently, the rule may have an adverse effect on the ability
of broker/dealers to sell eVision's common stock, which may affect the ability
of purchasers to sell eVision's common stock in the market.
43
<PAGE>
Holders
As of September 30, 1999, eVision had approximately 900 holders of record
of its common stock.
Dividends
eVision has not declared cash dividends on its common stock since its
inception and eVision does not anticipate paying any dividends in the
foreseeable future. eVision is currently precluded from paying dividends on its
common stock by a convertible debenture agreement.
44
<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth certain information regarding the shares of
common stock owned as of October 31, 1999, by each selling securityholder as
adjusted to reflect the sale by all selling securityholders of the shares of
common stock offered in this prospectus. This list indicates:
o any position, office or other material relationship with eVision that
the selling securityholder had within the past three years;
o eVision's estimate, assuming no gifts, pledges or sales pursuant to
Rule 144, of the number of shares of common stock owned by such
selling securityholder prior to the offering; and
o the maximum number of shares of common stock to be offered for such
selling securityholder's account and the amount and the percentage (if
one percent or more and calculated as if the selling security holder
were the sole seller of shares pursuant to this prospectus) of the
shares of common stock to be owned by the selling securityholder after
completion of the offering (assuming the selling securityholder sells
the maximum number of shares of common stock).
The selling securityholders are not required, and may choose not, to sell
any of their shares of common stock. Further, certain of the selling
securityholders may have already sold their shares of common stock prior to the
date of this prospectus.
<TABLE>
<CAPTION>
Shares Percent of
Owned Shares Outstanding
Prior to Being Shares Owned Shares Owned
Name Offering Offered After Offering After Offering
- ---- -------- ------- -------------- --------------
<S> <C> <C> <C> <C>
Ableman, Robert L. 100,000 50,000 50,000 *
Adams, Greg, IRA 30,000 15,000 15,000 *
Adams, Greg 10,000 5,000 5,000 *
Alfano, Michael J. 50,000 25,000 25,000 *
Alix Lowen Brown Trust 14,000 7,000 7,000 *
Alsfeld, Leonard N. (1) 25,000 25,000 0 *
Amantea Restaurant, Inc. 50,000 25,000 25,000 *
American Fronteer Financial Corporation (2) 256,279 256,279 0 *
Amos, Marshall C. 50,000 25,000` 25,000 *
Andriani, Michael & Robert 72,000 36,000 36,000 *
Argo, Harry M. 25,000 12,500 12,500 *
Artzer, Dennis C., M.D. 100,000 50,000 50,000 *
Babbitt, J. Randolph and Katherine H. 20,000 10,000 10,000 *
45
<PAGE>
<CAPTION>
Shares Percent of
Owned Shares Outstanding
Prior to Being Shares Owned Shares Owned
Name Offering Offered After Offering After Offering
- ---- -------- ------- -------------- --------------
<S> <C> <C> <C> <C>
Bacon, William and Cheryl 10,000 5,000 5,000 *
Baier, David D. 25,000 12,500 12,500 *
Baldwin, C. Lewis 34,090 17,045 17,045 *
Baldwin, Charles P. and Carolyn S. 50,000 25,000 25,000 *
Barbara A. Drake, Trustee u/a DTD 1/27/94 50,000 25,000 25,000 *
FBO Barbara A. Drake, et al.
Barnett, Robert E. and Deidre M. 50,000 25,000 25,000 *
Basile, Joseph A. and Mary S. 50,000 25,000 25,000 *
Beard, John H. and Karen J. 50,000 25,000 25,000 *
Belcher, Richard G. and Hays, Frances P. 50,000 25,000 25,000 *
Bell, Clay 110,000 55,000 55,000 *
Berkowitz, David (1) 10,000 10,000 0 *
Blackman, IV, Edward G. (1) 10,000 10,000 0 *
Blosfeld, Jerald W. 100,000 50,000 50,000 *
Bondra, Peter and Luba 200,000 100,000 100,000 *
Boney, Samuel D. 25,000 12,500 12,500 *
Branscome, Darrell R. 25,000 12,500 12,500 *
Brown, Gilbert M. 50,000 25,000 25,000 *
Martino, Lawrence P.
Eagle, Charles - JTWROS
Bruce, Colin (1) 10,000 10,000 0 *
Buckner, Jerry 50,000 25,000 25,000 *
Carlim, Inc. d/b/a Crusoe's 50,000 25,000 25,000 *
Carvell, John 65,000 32,500 32,500 *
Caslavka, Lynne and Georgina 25,000 12,500 12,500 *
Chancy, Phyllis 50,000 25,000 25,000 *
Chancy, Phyllis 20,000 10,000 10,000 *
Chandler, Michael and Cindy 32,000 16,000 16,000 *
Cobb, James B. 50,000 25,000 25,000 *
Cohen, Alan David 25,000 12,500 12,500 *
Coker, Robert E. 50,000 25,000 25,000 *
Colarusso, Antonio Antonio 56,000 28,000 28,000 *
Scacciavillani, Fabio
Comer, Cralle Z. 50,000 25,000 25,000 *
Consulting Gov't on Procurement, J S Sansone 110,000 55,000 55,000 *
Contract Systems Installations, Inc. 20,000 10,000 10,000 *
46
<PAGE>
<CAPTION>
Shares Percent of
Owned Shares Outstanding
Prior to Being Shares Owned Shares Owned
Name Offering Offered After Offering After Offering
- ---- -------- ------- -------------- --------------
<S> <C> <C> <C> <C>
Courembis, John L. and Miriam G. 50,000 25,000 25,000 *
Croonquist, Robert D. 450,000 225,000 225,000 *
Deeds, David E. 400,000 200,000 200,000 *
Elliott, Wendell D. 70,000 35,000 35,000 *
Ellison, Richard L. 80,000 40,000 40,000 *
Erickson, John F. 30,000 15,000 15,000 *
Fiorino, Thomas D. 50,000 25,000 25,000 *
Flynn Investments 100,000 50,000 50,000 *
Flynn, Terri L. 100,000 50,000 50,000 *
Folio, Andrew 70,000 35,000 35,000 *
Folio, Stephen and Diane S. Folio 50,000 25,000 25,000 *
Ford, Dennis 32,000 16,000 16,000 *
Fowler, Shawn P. (1) 20,000 20,000 0 *
Francis Electric 50,000 25,000 25,000 *
Galy, Andrew J. (1) 10,000 10,000 0 *
Gamello, William P. (1) 5,000 5,000 0 *
Garner R. Stroud Living Trust, Garner R. 100,000 50,000 50,000 *
Stroud TTEE DTD 5/6/86
Gerson, Ervin H. 25,000 12,500 12,500 *
Gerson, Ervin H., P.C., MPPP and Ervin H. 11,640 5,820 5,820 *
Gerson Trustee
Gerson, Ervin H., P.C., PSRP and Ervin H. 13,360 6,680 6,680 *
Gerson Trustee
Gilbert Brown Associates, Ltd. Profit Sharing 21,000 10,500 10,500 *
Trust
Gilbert M. Brown IRA 15,000 7,500 7,500 *
Goddard, Kennith L. 100,000 50,000 50,000 *
Goodwin, William Bruce 72,000 36,000 36,000 *
Gotthelf, William A. 25,000 12,500 12,500 *
Gozlan, Maurice and Stacy 200,000 100,000 100,000 *
Graham, Nancy P. 50,000 25,000 25,000 *
Gray, James C. 20,000 10,000 10,000 *
Great Atlantic Graphics, Inc. 50,000 25,000 25,000 *
Green, Ronald P. 100,000 50,000 50,000 *
Grundeman, Frederic E. 30,000 15,000 15,000 *
Gwyn, Clayborne B. 50,000 25,000 25,000 *
Hallisay, Paul L. 20,000 10,000 10,000 *
47
<PAGE>
<CAPTION>
Shares Percent of
Owned Shares Outstanding
Prior to Being Shares Owned Shares Owned
Name Offering Offered After Offering After Offering
- ---- -------- ------- -------------- --------------
<S> <C> <C> <C> <C>
Hampson, John K. 50,000 25,000 25,000 *
Hawkins, Russell and Temby, Margot 60,000 30,000 30,000 *
Hayes, Frances 50,000 25,000 25,000 *
Higgins, Kenneth R. and Sherry A. 25,000 12,500 12,500 *
Hoherz, David G. and Debra K. 30,000 15,000 15,000 *
Hoover, Paul R. and Janet F. 90,000 45,000 45,000 *
Imhoff, Lowell Dean 25,000 12,500 12,500 *
Jancso, James D. and Camille U. 60,000 30,000 30,000 *
Janes, Roger V. 25,000 12,500 12,500 *
Johnson, Robert L. 110,000 55,000 55,000 *
Kauders, Andrew E. 50,000 25,000 25,000 *
Kausch, Robert C. (1) 10,000 10,000 0 *
Kay, Anthony R. 550,000 550,000 0 2.9
Kay, Richard 200,000 100,000 100,000 *
Keith, Lawrence and Jeanne, JTWROS 40,000 20,000 20,000 *
Kennefick, James F. 100,000 50,000 50,000 *
Kirkpatrick Petis Cust. for Charles E. 150,000 75,000 75,000 *
Nightengale, IRA
Kittrell, Floyd L. and Rush F. 119,000 59,500 59,500 *
Klinghoffer, Edward M. 50,000 25,000 25,000 *
Komatz Joint Account 50,000 25,000 25,000 *
Krueger, Ross T., M.D. 60,000 30,000 30,000 *
Larry Silverstein IRA 100,000 50,000 50,000 *
Lazzara, Joseph E. 50,000 25,000 25,000 *
Lee, Forrest and Mary 60,000 30,000 30,000 *
Lee, Jr., F. Walton 60,000 30,000 30,000 *
Leonard, Richard John Nicholl 97,000 48,500 48,500 *
Lindvall, Jon R. and Laurie A. 20,000 10,000 10,000 *
Lippert, Donald J. 8,000 4,000 4,000 *
Loewenstein, Mark A. 60,000 30,000 30,000 *
Lutz, James 20,000 10,000 10,000 *
Madfis, John 25,000 12,500 12,500 *
Manuel, E. Pat 100,000 50,000 50,000 *
Mason, Gary R., M.D. 50,000 25,000 25,000 *
McClanahan, William I. And Barbara T. 50,000 25,000 25,000 *
McCoy, Daniel W. 30,000 15,000 15,000 *
48
<PAGE>
<CAPTION>
Shares Percent of
Owned Shares Outstanding
Prior to Being Shares Owned Shares Owned
Name Offering Offered After Offering After Offering
- ---- -------- ------- -------------- --------------
<S> <C> <C> <C> <C>
McKee, Del J. 20,000 10,000 10,000 *
McLeod, Latrelle S. 50,000 25,000 25,000 *
Mercantile Bank Custodian for Cotton-O'Neil 150,000 75,000 75,000 *
Clinic PA Profit Sharing Plan
Mercantile Bank of Topeka for Cotton-O'Neil 200,000 100,000 100,000 *
Clinic Employees Profit Sharing Trust FBO
Howard N. Ward
Meyers, Michael A. 16,000 8,000 8,000 *
Moran, John L. 100,000 50,000 50,000 *
Nakamura, Tadahiko 560,000 280,000 280,000 1.48%
Nixon, Michael P. (1) 10,000 10,000 0 *
Novey, Kurt (1) 50,000 50,000 0 *
Nuckols, Jr., Harry T. 50,000 25,000 25,000 *
Online Credit, Ltd. (3) 17,821,780 15,913,487 1,908,293 9.3%
Palermo, Romaine 77,500 38,750 38,750 *
Pearson, Wilbert D. 50,000 25,000 25,000 *
Pettett, Charles L. 50,000 25,000 25,000 *
Pholeric, John F., Jr. 50,000 25,000 25,000 *
Pickels, Curtis L., IRA 50,000 25,000 25,000 *
Pivonka, Michal and Renata 200,000 100,000 100,000 *
PM2 Money Purchase Plan Trust 50,000 25,000 25,000 *
Trustee: Joseph F. Hering
Poole, Vannette F. 100,000 50,000 50,000 *
Powers, William (1) 50,000 50,000 0 *
Pyle, Robert C. 50,000 25,000 25,000 *
Rasure, Richard and Sidney 28,000 14,000 14,000 *
Rauschkolb, Edward 25,000 12,500 12,500 *
Reinstein, Mark E. (1) 10,000 10,000 0 *
Reitan, Ralph M. 500,000 250,000 250,000 1.32%
Road & Show Cellular Eng-Chye Low 50,000 25,000 25,000 *
Robert T. Marsh Trust, Robert T. and Helen J. 20,000 10,000 10,000 *
Marsh Co-Trustees
Rollins, Lawson 50,000 25,000 25,000 *
Ruggiero, Richard J. and Maryanne 50,000 25,000 25,000 *
Salisbury, Robyn (1) 10,000 10,000 0 *
Sauble, George R. 20,000 10,000 10,000 *
Schelich, Ardell J., Trustee 100,000 50,000 50,000 *
49
<PAGE>
<CAPTION>
Shares Percent of
Owned Shares Outstanding
Prior to Being Shares Owned Shares Owned
Name Offering Offered After Offering After Offering
- ---- -------- ------- -------------- --------------
<S> <C> <C> <C> <C>
Schumacher, Eugene P. and Mary H. 50,000 25,000 25,000 *
Sears, Patricia A., IRA 72,000 36,000 36,000 *
Shah, Scott (1) 10,000 10,000 0 *
Sharpoo, Inc. 20,000 10,000 10,000 *
Shipp, Bernard 100,000 50,000 50,000 *
Shirley, Edward Wendell & Jane Rose 50,000 25,000 25,000 *
JTWROS
Shulze, Donna L. (1) 5,000 5,000 0 *
Shuster, Jr., John E. (1) 10,000 10,000 0 *
Silverstein, Benjamin and Gertrude 100,000 50,000 50,000 *
Silverstein, Larry 150,000 75,000 75,000 *
Simmons, Crystal and Fred 68,000 34,000 34,000 *
Sims, Phillip T. and Brenda F. 100,000 50,000 50,000 *
Slosberg, Barry 100,000 50,000 50,000 *
Smith, Brook T. 50,000 25,000 25,000 *
Smith, Charles E. 25,000 12,500 12,500 *
Smith, Larry B. 90,000 45,000 45,000 *
Smitten, Jeffrey C. 18,000 9,000 9,000 *
Sommervold, Charles and Glenyce 22,736 11,363 11,363 *
Southwest Crop Insurance 50,000 25,000 25,000 *
Streett, Robert W. TTEE Robert E. Streett Rev. 200,000 100,000 100,000 *
Trust
Sutton, Kelly (1) 5,000 5,000 0 *
Tacinelli, Joseph V. 50,000 25,000 25,000 *
Taggart, Robert (1) 59,586 59,586 0 *
Taggart, Troy G. (1) 20,000 20,000 0 *
Teele, William R. 100,000 50,000 50,000 *
TGC Diamond Family L.P. 15,000 7,500 7,500 *
Thompson, George D. 50,000 25,000 25,000 *
TMM Inc. 28,000 14,000 14,000 *
Tritt, Charles C. 50,000 25,000 25,000 *
Vendegnia, George V. and Teresa L. VonFeldt 20,000 10,000 10,000 *
Wagner, James F. and Kathryn J. 20,000 10,000 10,000 *
Wall, Howard 150,000 75,000 75,000 *
Weber, Thomas A. 50,000 25,000 25,000 *
Weinstein, Lawrence W. and Michelle B. 50,000 25,000 25,000 *
50
<PAGE>
<CAPTION>
Shares Percent of
Owned Shares Outstanding
Prior to Being Shares Owned Shares Owned
Name Offering Offered After Offering After Offering
- ---- -------- ------- -------------- --------------
<S> <C> <C> <C> <C>
Whitehead, George E. 120,000 60,000 60,000 *
Wikle, Luther M. 150,000 75,000 75,000 *
Williams, Junior and Ruby 200,000 100,000 100,000 *
Williams, Martin G., Jr. 50,000 25,000 25,000 *
Wilson, James Michael 90,000 45,000 45,000 *
Wolfson, Deborah 100,000 50,000 50,000 *
Yamamoto, Takuya 80,000 40,000 40,000 *
Yarbrough, Harvey and Charlotte 50,000 25,000 25,000 *
-----------
23,018,010
</TABLE>
- ----------------
*Less than 1%
(1) Employee of eVision or American Fronteer who received warrants for
participating as a broker in a private placement.
(2) Wholly owned subsidiary of eVision.
(3) Wholly owned subsidiary of Heng Fung Capital [S] Private Limited, which is
a wholly owned subsidiary of Heng Fung Holdings Company Limited, which
beneficially owns approximately 78% of eVision's common stock and whose
president is Fai H. Chan, Chairman of the Board of Directors and President
of eVision.
51
<PAGE>
PLAN OF DISTRIBUTION
eVision is registering the shares of common stock on behalf of the selling
securityholders. Selling securityholders include donees and pledgees selling
shares of common stock received from a named selling securityholder after the
date of this prospectus. All costs, expenses and fees in connection with the
registration of the shares of common stock offered hereby will be borne by
eVision. Brokerage commissions and similar selling expenses attributable to the
sale of shares of common stock will be borne by the selling securityholders.
Sales of shares of common stock may be effected by selling securityholders in
one or more types of transactions (which may include block transactions), in the
over-the-counter market, in negotiated transactions, through put or call option
transactions relating to the shares of common stock, through short sales of
shares of common stock, or a combination of such methods of sale, at market
prices prevailing at the time of sale, or at negotiated prices. Such
transactions may or may not involve brokers or dealers. eVision has not been
advised by the selling securityholders that they have entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their shares of common stock, nor that
there is an underwriter or coordinating broker acting in connection with the
proposed sale of shares of common stock by the selling securityholders. The
maximum commission or discount to be received by any NASD member or independent
broker/dealer may not be greater than eight percent for the sale of any shares
of common stock.
No member of the NASD, which is an affiliate of a selling security holder,
may participate in the distribution by the selling security holders of the
shares. All sales by the selling security holders of the shares must be
facilitated by independent broker-dealers. Sales of the securities may be made
pursuant to this prospectus or pursuant to Rule 144 adopted under the Securities
Act of 1933, as amended. The selling security holders and any broker-dealers
that act in connection with the sale of the shares might be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act and any
commission received by them and any profit on the resale of the shares of common
stock as principal might be deemed to be underwriting discounts and commissions
under the Securities Act. Such arrangement may necessitate a filing with the
NASD pursuant to Notice to Members 88-101. The selling security holders may
agree to indemnify any agent, dealer or broker-dealer that participates in
transactions involving sales of the shares against certain liabilities arising
under the Securities Act.
The selling securityholders may effect such transactions by selling shares
of common stock directly to purchasers or to or through broker-dealers, which
may act as agents or principals. Such broker-dealers may receive compensation in
the form of discounts, concessions, or commissions from the selling
securityholders and/or the purchasers of shares of common stock for whom such
broker-dealers may act as agents or to whom they sell as principal, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions).
The selling securityholders and any broker-dealers that act in connection
with the sale of shares of common stock might be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act, and any commissions
received by such broker-dealers and any profit on the resale of the shares of
52
<PAGE>
common stock sold by them while acting as principals might be deemed to be
underwriting discounts or commissions under the Securities Act. The selling
securityholders may agree to indemnify any agent, dealer or broker-dealer that
participates in transactions involving sales of the shares of common stock
against certain liabilities, including liabilities arising under the Securities
Act.
Because selling securityholders may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, the selling securityholders
will be subject to the prospectus delivery requirements of the Securities Act.
Selling securityholders also may resell all or a portion of the shares of
common stock in transactions in reliance upon Rule 144 or Regulation S under the
Securities Act, provided they meet the criteria and conform to the requirements
of such Rule or Regulation.
Upon eVision's being notified by a selling securityholder that any material
arrangement has been entered into with a broker-dealer for the sale of shares of
common stock through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing:
1. the name of each such selling shareholder and of the
participating broker-dealer(s);
2. the number of shares of common stock involved;
3. the price at which such shares of common stock were sold;
4. the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
5. that such broker-dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in
this prospectus; and
6. other facts material to the transaction.
In addition, upon eVision's being notified by a selling securityholder that
a donee or pledgee intends to sell more than 500 shares of common stock, eVision
will file a supplement to this prospectus.
53
<PAGE>
DESCRIPTION OF SECURITIES
The following is a summary description of eVision's capital stock.
eVision's authorized capital stock consists of 100,000,000 shares of
common stock and 25,000,000 shares of preferred stock. eVision may issue
the preferred stock in one or more series as determined by the board of
directors. As of September 30, 1999 there were 19,838,299 shares of common
stock issued and outstanding that were held of record by approximately 900
beneficial holders. In addition, 25,500 shares of Series B Preferred Stock
had been issued and were exchanged for Convertible Series B Preferred
Stock. 2,000,000 shares of preferred stock have been designated as
Convertible Series B Preferred Stock, of which 110,500 shares have been
issued. The holders of the 110,500 shares of Convertible Series B Preferred
Stock have been offered the right to exchange their shares of Convertible
Series B Preferred Stock for 110,500 shares of Convertible Series B-1
Preferred Stock. 2,000,000 shares of preferred stock have been designated
as Convertible Series B-1 Preferred Stock to be issued in exchange for
Convertible Series B Preferred Stock and pursuant to a private offering
that began in October 1999.
Common Stock
Each holder of record of common stock is entitled to one vote for each
share held on all matters properly submitted to the stockholders for their
vote. Cumulative voting in the election of directors is not authorized.
Holders of outstanding shares of common stock are entitled to those
dividends declared by the board of directors out of legally available
funds, and, in the event of liquidation, dissolution or winding up of the
affairs of eVision, holders are entitled to receive ratably the net assets
of eVision available to the stockholders. Holders of outstanding shares of
common stock have no preemptive, conversion or redemption rights. All of
the issued and outstanding shares of common stock are, and all unissued
common stock, when offered and sold will be, duly authorized, validly
issued, fully paid and nonassessable. To the extent that additional common
stock of eVision may be issued in the future, the relative interests of the
then existing stockholders may be diluted.
Preferred Stock
eVision's board of directors is authorized to issue from time to time,
without stockholder authorization, in one or more designated series, any or
all of the authorized but unissued shares of preferred stock with such
dividend, redemption, conversion, and exchange provisions as may be
provided by the board of directors with regard to such particular series.
Any series of preferred stock may possess voting, dividend, liquidation and
redemption rights superior to those of the common stock. The rights of the
54
<PAGE>
holders of common stock will be subject to and may be adversely affected by
the rights of the holders of any preferred stock that may be issued in the
future. Issuance of a new series of preferred stock, or providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could make it more difficult for a third party to acquire, or
discourage a third party from acquiring, the outstanding common stock of
eVision and make removal of the board of directors more difficult.
3,300,000 shares of preferred stock have been designated as Series B
Preferred Stock, of which 25,500 were issued and subsequently were
exchanged for Convertible Series B Preferred Stock. 2,000,000 shares of
preferred stock have been designated as Convertible Series B Preferred
Stock, of which 110,500 shares have been issued. 2,000,000 shares of
preferred stock have been designated as Convertible Series B-1 Preferred
Stock to be issued pursuant to a private offering that began in October
1999. The holders of the 110,500 shares of Convertible Series B Preferred
Stock have been offered the right to exchange these shares for 110,500
shares of Convertible Series B-1 Preferred Stock.
The Convertible Series B-1 Preferred Stock has a cumulative annual
dividend payable semi-annually of 8% in cash and 7% in shares of the
Convertible Series B-1 Preferred Stock when and if declared by the Board of
Directors. The semi-annual dividend payable in shares of the Convertible
Series B-1 Preferred Stock is equivalent to three and one-half one
hundredths of a share of Convertible Series B-1 Preferred Stock for each
outstanding share of Convertible Series B-1 Preferred Stock. The dividend
on the Convertible Series B-1 Preferred Stock is payable semi-annually
beginning October 31, 1999, and continuing each April 30 and October 31
thereafter, when and if declared by the Board of Directors. The Convertible
Series B-1 Preferred Stock is immediately convertible by the holder into
common stock at a price of $1.00 per share of common stock. If the common
stock does not have a closing bid price of at least $1.15 per share for at
least 20 trading days during the period commencing on September 30, 1999,
and ending on September 30, 2000, the Convertible Series B-1 Preferred
Stock will be convertible by the holder into the common stock at a price
equal to the higher of the five day average closing bid price of the common
stock prior to September 30, 2000, or $0.50 per share.
In addition, the Convertible Series B-1 Preferred Stock is
automatically convertible into common stock at $1.00 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-1 Preferred Stock
55
<PAGE>
may be redeemed by eVision. The Convertible Series B-1 Preferred Stock is
redeemable by eVision on or after October 1, 2003, at a price of $12.50 per
share plus any accrued and unpaid dividends.
Transfer Agent and Registrar
American Securities Transfer & Trust, Inc. serves as the transfer
agent and registrar for eVision's common stock.
SHARES ELIGIBLE FOR FUTURE SALE
eVision has 19,838,299 shares of common stock outstanding. Of the
19,838,299 shares, 10,833,664 shares of common stock are freely transferable and
1,685,185 shares of common stock that may be sold pursuant to Rule 144(k) will
be freely transferable by persons other than "affiliates" of eVision without
restriction or registration under the Securities Act of 1933.
The remaining 7,319,450 outstanding shares of common stock are "restricted
securities" within the meaning of Rule 144 under the Securities Act of 1933 and
may not be sold in the absence of registration unless an exemption from
registration is available, including the exemption contained in Rule 144. Of
such shares, no shares will become eligible for sale under Rule 144 commencing
90 days after the date of this prospectus.
In general, under Rule 144 as currently in effect, a stockholder who has
beneficially owned shares of common stock for at least one year is entitled to
sell, within any three-month period, a number of "restricted" shares that does
not exceed the greater of 1% of the then outstanding shares of common stock or
the average weekly trading volume during the four calendar weeks preceding such
sale. Sales under Rule 144 are also subject to certain manner of sale
limitations, notice requirements and the availability of current public
information about eVision. Rule 144(k) provides that a stockholder who is not
deemed to be an "affiliate" and who has beneficially owned shares of common
stock for at least two years is entitled to sell such shares at any time under
Rule 144(k) without regard to the limitations described above.
In addition to the shares of common stock that are currently outstanding, a
total of 40,528,176 shares of common stock have been reserved for issuance upon
exercise of outstanding options and warrants to purchase shares of common stock
at exercise prices of between $0.20 and $1.50 per share and upon conversion of
outstanding convertible notes into common stock and warrants and upon the
exercise of the warrants.
LEGAL MATTERS
The validity of the common stock offered in this prospectus will be passed
upon by Smith McCullough, P.C.
EXPERTS
The consolidated financial statements of eVision (formerly Fronteer
Financial Holdings, Ltd.) and subsidiaries as of September 30, 1998 and 1997,
and for each of the years in the three year period ended September 30, 1998,
have been included herein in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
56
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
I. QUARTERLY FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30, 1999
Page No.
a. Consolidated Balance Sheets as of June 30, 1999 (Unaudited)
and September 30, 1998.........................................F - 2
b. Unaudited Consolidated Statements of Operations for the three
months and nine months ended June 30, 1999 and 1998............F - 4
c. Unaudited Consolidated Statements of Comprehensive Income
(Loss) for the three months and nine months ended
June 30, 1999 and 1998.........................................F - 5
d. Unaudited Consolidated Statement of Stockholders' Deficit.........F - 6
e. Unaudited Consolidated Statements of Cash Flows for the nine months
ended June 30, 1999 and 1998...................................F - 7
f. Notes to Unaudited Consolidated Financial Statements.............F - 10
II. ANNUAL FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 1998
a. Independent Auditors' report.....................................F - 19
b. Consolidated Balance Sheets as of September 30, 1998 and 1997....F - 20
c. Consolidated Statements of Operations for each of the years
in the three year period ended September 30, 1998............F - 22
d. Consolidated Statements of Stockholders' Equity (Deficit) for
each of the years in the three year period ended
September 30, 1998............................................F - 24
e. Consolidated Statements of Cash Flows for each of the years
in the three year period ended September 30, 1998.............F - 25
f. Notes to Consolidated Financial Statements-----------------------F - 28
F-1
<PAGE>
<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, September 30,
ASSETS 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.
F-2
<PAGE>
<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 19,912,500 shares, $.10 par
value, no shares outstanding ......................................... -- --
Series B preferred stock, authorized 3,000,000 shares, $0.10
par value, no shares outstanding ..................................... -- --
Convertible Series B preferred stock, authorized 2,000,000
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.
F-3
<PAGE>
<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.
F-4
<PAGE>
<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.
F-5
<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
----------- ------ ------------ ----------- ------------- --------- -----
Balances as of
<S> <C> <C> <C> <C> <C> <C> <C>
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.
F-6
<PAGE>
<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)
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)
----------- -----------
(Continued)
See accompanying notes to unaudited consolidated financial statements.
F-7
<PAGE>
<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 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.
F-8
<PAGE>
<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 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.
F-9
<PAGE>
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.
F-10
<PAGE>
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 and certain directors control approximately
50% of the votes of Q6 and own 75% 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.
F-11
<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 without
audit. They 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 financial information presented separately herein. 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 ending 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
F-12
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
reclassified from other comprehensive income and be recognized as a component of
net income.
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 2002 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.
F-13
<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> <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
F-14
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
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.
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 in May 1999 by eVision for $1,000 as
determined by eBanker management. 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.
F-15
<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. The initial draw on
the loan was during October 1998. Therefore, eBanker received the 5,000,000
warrants to purchase common shares of Global at $0.25 per share. As of 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.
F-16
<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 - RELATED PARTY ACTIVITY
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.
As of June 30, 1999, Fronteer Capital held 119,790,000 shares of common stock
of Heng Fung Holdings carried at a fair value of $1,930,055. These shares were
purchased in open market transactions. During the nine months ended June 30,
1999, the Company recognized an unrealized gain of $1,017,114 on these
securities. The Company has classified these securities as trading securities
under Statement of Financial Accounting Standards No. 115.
F-17
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
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. Both amounts are shown net of
taxes in the consolidated statements of operations.
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.
F-18
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
eVision USA.Com, Inc. (formerly Fronteer Financial Holdings, Ltd.):
We have audited the accompanying consolidated balance sheets of eVision
USA.Com, Inc. (formerly Fronteer Financial Holdings, Ltd.) and Subsidiaries as
of September 30, 1998 and 1997, and the related consolidated statements of
operations, stockholders' equity (deficit), and cash flows for each of the
years in the three year period ended September 30, 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of eVision
USA.Com, Inc. (formerly Fronteer Financial Holdings, Ltd.) and Subsidiaries as
of September 30, 1998 and 1997, and the results of their operations and their
cash flows for each of the years in the three year period ended September 30,
1998 in conformity with generally accepted accounting principles.
KPMG LLP
Denver, Colorado
December 30, 1998
F-19
<PAGE>
<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries)
CONSOLIDATED BALANCE SHEETS
September 30,
ASSETS 1998 1997
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 1) ......................................... $ 9,112,652 2,080,722
Receivables from brokers or dealers and clearing organizations:
Affiliated organization (Note 7) ........................................ -- 2,045,134
Other ................................................................... 410,069 --
Trade receivables .......................................................... 1,157,841 786,971
Other receivables .......................................................... 667,425 382,208
Securities owned, at market value (Note 4) ................................. 1,688,085 871,322
Other assets ............................................................... 261,606 824,056
Net current assets of discontinued operations (Note 2) ..................... -- 1,268,286
----------- -----------
Total current assets .................................................... 13,297,678 8,258,699
PROPERTY, FURNITURE AND EQUIPMENT, net (Note 5) ............................... 1,541,131 1,167,883
DEFERRED INCOME TAXES (Note 11) ............................................... -- 613,784
OTHER LONG-TERM ASSETS ........................................................ 532,103 247,241
NET LONG-TERM ASSETS OF DISCONTINUED OPERATIONS
(Note 2) ................................................................ -- 715,475
----------- -----------
Total assets ............................................................ $15,370,912 11,003,082
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-20
<PAGE>
<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
CONSOLIDATED BALANCE SHEETS, CONTINUED
September 30,
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) 1998 1997
- ---------------------------------------------- ---- ----
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued expenses (Note 6) .......................... $ 2,514,860 3,373,672
Current portion of long-term debt (Note 8) .............................. 124,007 863,164
Accrued interest payable to related party (Note 10) ..................... 157,111 --
Notes payable to related parties (Note 7) ............................... -- 177,000
Deferred revenue ........................................................ 118,800 --
Other current liabilities ............................................... 306,574 249,555
------------ ------------
Total current liabilities ............................................ 3,221,352 4,663,391
LONG-TERM DEBT, net of current portion (Note 8) ............................ 107,532 927,843
CONVERTIBLE DEBENTURES (Note 9) ............................................ 6,101,448 --
CONVERTIBLE DEBENTURES TO RELATED PARTY
(Notes 3 and 10) ....................................................... 7,000,000 --
DEFERRED RENT CONCESSIONS .................................................. 1,654,766 1,716,529
OTHER LIABILITIES .......................................................... -- 88,000
------------ ------------
Total liabilities ..................................................... 18,085,098 7,395,763
------------ ------------
MINORITY INTEREST IN SUBSIDIARIES .......................................... 328,991 255,328
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIT) (Note 3):
Preferred stock, authorized
25,000,000 shares, $0.10 par value ................................... -- --
Common stock; authorized 100,000,000 shares, $0.01 par
value; 17,140,857 and 16,871,557 shares issued and outstanding
as of September 30, 1998 and 1997, respectively ...................... 171,408 168,715
Additional paid-in capital .............................................. 11,042,464 10,966,990
Accumulated deficit ..................................................... (13,907,049) (7,433,714)
Unearned ESOP shares (Note 13) .......................................... (350,000) (350,000)
------------ ------------
Total stockholders' equity (deficit) .............................. (3,043,177) 3,351,991
------------ ------------
COMMITMENTS AND CONTINGENCIES
(Notes 1, 3, 9, 10, 11, 12 and 16)
Total liabilities and stockholders' equity (deficit) .............. $ 15,370,912 11,003,082
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
F-21
<PAGE>
<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended September 30,
1998 1997 1996
---- ---- ----
REVENUE:
<S> <C> <C> <C>
Brokerage commissions ............................................ $ 14,763,287 13,779,477 10,825,987
Investment banking ............................................... 2,227,289 3,003,794 2,275,217
Trading profits, net ............................................. 405,962 274,563 453,144
Other broker/dealer .............................................. 1,489,853 774,329 791,001
Computer hardware and software operations ........................ 8,454,279 6,982,143 6,538,540
Other ............................................................ 46,634 286,108 485,132
------------ ------------ ------------
Total revenue ............................................. 27,387,304 25,100,414 21,369,021
COST OF SALES AND OPERATING
EXPENSES:
Broker/dealer commissions ........................................ 10,521,902 10,268,764 8,171,445
Computer cost of sales .......................................... 7,979,162 5,767,136 5,381,097
Unrealized loss on securities (Notes 4 and 7) .................... 1,751,792 -- --
Interest expense on convertible
debentures (Note 9) ............................................ 84,031 -- --
General and administrative ....................................... 13,359,245 11,252,747 9,997,828
Depreciation and amortization .................................... 389,234 338,945 396,203
------------ ------------ ------------
Total cost of sales and operating ........................ 34,085,366 27,627,592 23,946,573
expenses
Operating loss ................................................... (6,698,062) (2,527,178) (2,577,552)
OTHER INCOME (EXPENSE):
Gain on sale of Clearing Operation (Note 2) ...................... -- -- 1,332,974
Interest income .................................................. 300,705 150,203 642,274
Interest expense ................................................. (17,390) (27,940) (225,089)
Interest expense to related party
(Notes 3 and 10) .............................................. (388,129) -- --
Other ............................................................ (15,434) (22,580) (19,330)
------------ ------------ ------------
Total other income (expense) .............................. (120,248)
99,683 1,730,829
Loss before minority interest and income
taxes ............................................................ (6,818,310) (2,427,495) (846,723)
Minority interest in (earnings) loss ............................. 129,363 (11,331) (87,626)
------------ ------------ ------------
Loss from continuing operations before
income taxes .................................................. (6,688,947) (2,438,826) (934,349)
Income tax (expense) benefit ..................................... (290,320) 448,524 (55,799)
------------ ------------ ------------
Loss from continuing operations .................................. (6,979,267) (1,990,302) (990,148)
------------ ------------ ------------
(Continued)
See accompanying notes to consolidated financial statements.
F-22
<PAGE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
CONSOLIDATED STATEMENTS OF OPERATIONS, CONTINUED
Year Ended September 30,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Loss from continuing operations .................................. (6,979,267) (1,990,302) (990,148)
Loss on sale of discontinued operations, net of
income tax benefit of $159,748 and $409,692
in 1998 and 1997, respectively (Note 2) ...................... (249,861) (666,522) --
Loss from discontinued operations, net of income tax
benefit of $101,788 and $411,631 in 1998 and 1997,
respectively (Note 2) ......................................... (159,207) (799,048) (1,368,533)
------------ ------------ ------------
Loss from discontinued operations ................................ (409,068) (1,465,570) (1,368,533)
------------ ------------ ------------
Loss before extraordinary item ................................... (7,388,335) (3,455,872) (2,358,681)
Extraordinary item-forgiveness of debt, net of income
tax expense of $585,000 (Note 2) .............................. 915,000 -- --
------------ ------------ ------------
Net loss ......................................................... (6,473,335) (3,455,872) (2,358,681)
Preferred stock dividends ........................................ -- -- (59,061)
------------ ------------ ------------
Net loss applicable to common shareholders ....................... $ (6,473,335) (3,455,872) (2,417,742)
============ ============ ============
Weighted average number of common shares
outstanding ................................................... 16,459,515 16,760,597 13,858,963
============ ============ ============
Basic earnings (loss) per common share:
Continuing operations ......................................... $ (.42) (.12) (.07)
Discontinued operations:
Sale of discontinued operations ......................... (.02) (.04) --
Discontinued operations ................................. (.01) (.05) (.10)
Extraordinary item ............................................ .06 -- --
------------ ------------ ------------
Total ................................................... $ (.39) (.21) (.17)
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-23
<PAGE>
<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Additional
Preferred Common paid-in Accumulated Unearned
stock stock capital deficit ESOP stock Total
--------- ------ ---------- ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balances at September 30, 1995 ..... $ 875,000 109,129 6,367,561 (1,560,100) (350,000) 5,441,590
Series A preferred stock dividend .. -- -- -- (59,061) -- (59,061)
Purchase of subsidiary shares ...... -- -- (548) -- -- (548)
Purchase and cancellation of
preferred stock ................. (875,000) -- -- -- -- (875,000)
Proceeds from shares issued
through private placement, net
of issuance costs of $614,704 ... -- 52,290 5,084,956 -- -- 5,137,246
Purchase of common stock ........... -- -- (1,200,000) -- -- (1,200,000)
Net loss ........................... -- -- -- (2,358,681) -- (2,358,681)
----------- ----------- ----------- ----------- ----------- -----------
Balances at September 30, 1996 ..... -- 161,419 10,251,969 (3,977,842) (350,000) 6,085,546
Proceeds from shares issued
through private placement, net
of issuance costs of $80,257 .... -- 7,296 715,021 -- -- 722,317
Net loss ........................... -- -- -- (3,455,872) -- (3,455,872)
----------- ----------- ----------- ----------- ----------- -----------
Balances at September 30, 1997 ..... -- 168,715 10,966,990 (7,433,714) (350,000) 3,351,991
Issuance of common shares for
interest (Note 10) .............. -- 4,128 217,539 -- -- 221,667
Common stock received and
cancelled in disposition of net
assets of discontinued operations
(Note 2) ........................ -- (4,935) (488,565) -- -- (493,500)
Issuance of common shares for
branch office ................... -- 3,500 346,500 -- -- 350,000
Net loss ........................... -- -- -- (6,473,335) -- (6,473,335)
----------- ----------- ----------- ----------- ----------- -----------
Balances at September 30, 1998 ..... $ -- 171,408 11,042,464 (13,907,049) (350,000) (3,043,177)
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-24
<PAGE>
<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended September 30,
CASH FLOWS FROM OPERATING ACTIVITIES: 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net loss .................................................................. $(6,473,335) (3,455,872) (2,358,681)
Adjustments to reconcile net loss to net cash used by
continuing operations:
Consideration relating to issuance of common shares
for branch office ............................................... 334,094 -- --
Gain on sale of Clearing Operation .................................. -- -- (1,332,974)
Loss from Discontinued Operations ................................... 409,068 1,465,570 1,368,533
Depreciation and amortization ....................................... 389,234 338,945 396,203
Extraordinary item, net of income tax of $585,000 ................... (915,000) -- --
Amortization of deferred rent ....................................... (61,763) (52,298) (25,804)
Provision for bad debts ............................................. -- 274,752 --
Accretion on convertible bonds ...................................... 6,576 -- --
Equity in loss of affiliate ......................................... -- 22,580 19,330
Minority interest in earnings (loss) ................................ (129,363) 11,331 87,626
Unrealized loss on securities ....................................... 1,751,792 -- --
Other ............................................................... 290,320 55,000 (15,886)
Changes in operating assets and liabilities, net of
effects from sale of clearing operation:
Increase in broker/dealer customer
receivables, net ............................................. -- -- (5,069,631)
Decrease (increase) in receivables from brokers or
dealers and clearing organizations ........................... 1,635,065 (434,696) (1,555,209)
(Increase) decrease in trade receivables ......................... (370,870) 218,109 (661,822)
(Increase) decrease in other receivables ......................... (285,217) (375,083) 76,210
(Increase) decrease in securities owned, net of
securities sold but not yet purchased ....................... (2,568,555) 837,238 (507,324)
Decrease (increase) in other assets .............................. 562,450 (683,850) (41,155)
(Decrease) increase in accounts payable and accrued
liabilities .................................................. (858,812) 770,035 441,364
Decrease in broker/dealer customer payables ...................... -- -- (284,451)
Increase in payables to brokers or dealers
and clearing organizations ................................... -- -- 7,590,197
Increase (decrease) in deferred revenue .......................... 118,800 (24,400) 24,400
Increase (decrease) in other current liabilities ................. 435,797 (7,960) 375,710
----------- ----------- -----------
Net cash used by continuing operations ........................ (5,729,719) (1,040,599) (1,473,364)
Net cash provided (used) by discontinued
operations ................................................ 597,682 (1,222,461) (364,027)
----------- ----------- -----------
Net cash used by operating activities ......................... (5,132,037) (2,263,060) (1,837,391)
----------- ----------- -----------
(Continued)
See accompanying notes to consolidated financial statements.
F-25
<PAGE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
Year Ended September 30,
CASH FLOWS FROM INVESTING ACTIVITIES: 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Purchase of property, furniture and equipment .................... $ (746,576) (417,476) (519,999)
Proceeds from sale of Clearing Operation, net .................... -- 1,048,075 312,133
Other investing activities ....................................... (284,862) (214,393) (116,403)
Net cash provided by discontinued operations ..................... 221,975 2,498,472 210,518
------------ ------------ ------------
Net cash provided (used) by investing activities ............. (809,463) 2,914,678 (113,751)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible debentures,
net of offering costs ....................................... 6,297,898 -- --
Proceeds from issuance of convertible debentures
to related party ............................................ 7,000,000 -- --
Borrowings on debt ................................................ -- -- 732,110
Net payments on borrowings from related parties ................... (150,102) (190,900) (181,000)
Principal payments on borrowings .................................. (86,366) (1,207,802) (1,647,233)
Net proceeds from issuance of common stock ........................ -- 722,317 5,137,246
Dividends on preferred stock ...................................... -- -- (59,061)
Purchase of preferred stock ....................................... -- -- (875,000)
Purchase of common stock .......................................... -- -- (1,200,000
))))))))))))
Other financing activities ........................................ (88,000) 88,000 --
------------ ------------ ------------
Net cash provided (used) by financing activities ............ 12,973,430 (588,385) 1,907,062
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ................................................ 7,031,930 63,233 (44,080)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ........................ 2,080,722 2,017,489 2,061,569
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR .............................. $ 9,112,652 2,080,722 2,017,489
============ ============ ============
(Continued)
See accompanying notes to consolidated financial statements.
F-26
<PAGE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
SUPPLEMENTAL DISCLOSURES RELATED TO STATEMENTS OF CASH FLOWS :
Year Ended September 30,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash payments for:
Interest:
Continuing operations .............................................. $ 22,425 27,940 225,089
Discontinued operations ............................................ 9,350 142,508 254,275
---------- ---------- ----------
$ 31,775 170,448 479,364
========== ========== ==========
Income taxes:
Continuing operations .............................................. $ 7,047 129,831 177,079
========== ========== ==========
Sale of Clearing Operation (Note 2):
Sales price ........................................................... $ -- -- 3,351,352
Less: Transition costs ............................................... -- -- (167,026)
Receivable from MSI ........................................ -- 1,048,075 (1,048,075)
Cash sold .................................................. -- -- (1,824,118)
---------- ---------- ----------
Cash proceeds from sale of Clearing Operation ......................... $ -- 1,048,075 312,133
========== ========== ==========
OTHER NONCASH INVESTING AND FINANCING ACTIVITIES:
McLeod note payable applied against purchase
price of directories (Note 2) ...................................... $ -- 500,000 --
========== ========== ==========
Common stock received for sale of discontinued
operations (Note 2) ................................................ $ 493,500 -- --
========== ========== ==========
Interest paid by issuance of common stock (Note 10) ................... $ 221,667 -- --
========== ========== ==========
Acquisition of furniture and equipment by issuance
of common stock ................................................... $ 15,906 -- --
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-27
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of eVision USA.Com,
Inc. (formerly Fronteer Financial Holdings, Ltd.) (eVision, Fronteer or the
Company) and its majority owned and wholly owned subsidiaries. The Company is
a corporation, which was organized under the laws of the state of Colorado on
September 14, 1988. The Company currently has the following wholly owned
operating subsidiaries: American Fronteer Financial Corporation (AFFC),
formerly known as RAF Financial Corporation, which operates as a fully
disclosed securities broker/dealer; RAF Services, Inc. of Texas, RAF Services,
Inc. of Louisiana and RAF Services, Inc. (collectively, RAF Services), which
were established in order to participate in insurance brokerage activities in
certain states; Fronteer Capital, Inc., which was formed to operate as a
holding company of investment opportunities in "small cap" companies;
Corporate Net Solutions, Inc., which was formed to invest in computer and
Internet related opportunities; and Fronteer Corporate Services, Inc., a
Colorado Corporation, which was formed to provide corporate administrative
services to Fronteer subsidiaries and other companies. The Company also has a
majority owned subsidiary, Secutron Corp. (Secutron), which designs, develops,
installs, markets and supports software systems for the securities brokerage
industry. Secutron has a wholly owned subsidiary, MidRange Solutions Corp.,
which is a seller of hardware and software products. AFFC and Secutron are
Colorado corporations; Fronteer Capital, Inc. is a Delaware corporation; and
RAF Services are Louisiana, Nevada and Texas Corporations. During the year
ended September 30, 1998, Fronteer Asset Management Corporate, Inc., a wholly
owned subsidiary of Fronteer, was formed to provide asset management services.
Corporate Net Solutions, Inc. and Fronteer Asset Management Corporate, Inc.,
which were incorporated in Delaware in May and June of 1998, respectively,
have not commenced operations.
Fronteer Development Finance Inc. (FDFI), is another majority owned subsidiary
included in the consolidated financial statements. FDFI is a Delaware
corporation, incorporated March 1998 to operate as a finance company to take
advantage of high-yield and other lending opportunities. The Company controls
approximately 96% of the voting power and approximately 46% of the outstanding
common shares of FDFI. FDFI has a wholly owned subsidiary, Fronteer Income
Growth, Inc. which was formed for the purpose of making investments. This
subsidiary was incorporated under the International Business Companies
Ordinances of the Territory of the British Virgin Islands.
During September 1998, the Company purchased an additional 9% of the
outstanding common shares of Secutron resulting in an ownership of
approximately 69% of outstanding common shares of Secutron. Subsequent to
September 30, 1998, the Company purchased an additional 4% of the outstanding
common shares resulting in ownership of approximately 73% of the outstanding
stock of Secutron.
F-28
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
AFFC operates as a fully disclosed securities broker/dealer and has offices in
twelve cities throughout the United States. As a registered securities
broker/dealer, AFFC is subject to regulation by the National Association of
Securities Dealers (NASD) and the Securities and Exchange Commission (SEC).
Periodically, regulatory bodies may conduct examinations or investigations of
AFFC and/or the Company. All significant intercompany accounts and
transactions have been eliminated in the preparation of the consolidated
financial statements.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents. Cash on deposit in excess of Federal Deposit Insurance
Corporation limits was $3,108,678 and $1,866,520, as of September 30, 1998 and
1997, respectively. There was no restricted cash as of September 30, 1998.
Included in cash and cash equivalents as of September 30, 1998 and 1997 was
$5,705,696 and $1,347,203, respectively, which were on deposit in U.S.
Government obligation funds. The U.S. Government obligation funds invest in
U.S. Treasury and agency obligations and in repurchase agreements, which have
these securities as collateral.
TRADE RECEIVABLES AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts is maintained at a level adequate to
absorb probable losses and credit losses inherent in the business based upon
the Company's prior history of credit losses. Management determines the
adequacy of the allowance based upon reviews of individual accounts, recent
loss experience, current economic conditions, the risk characteristics of the
various categories of accounts and other pertinent factors.
OTHER RECEIVABLES
Other receivables includes net receivables from employees of $485,000 for
loans made to retail brokers. Such loans bear interest at 8% per annum and
generally are due within two to five years from the date the broker joins
AFFC. The loans are amortized on a straight-line basis through a charge to
commissions expense and are forgiven ratably over the term of the loans. To
the extent a broker leaves AFFC prior to the end of the loan term, the
unamortized balance is collected from the broker.
SECURITIES
Securities transactions and related revenue and expense are recorded on a
settlement-date basis, usually the third business day following the trade
date. The effect of using settlement-date rather than trade date for the
recording of securities transactions is not significant.
In accordance with financial reporting requirements for broker/dealers, AFFC's
financial instruments, including securities, are all recorded at market value.
Securities without a readily available market value are recorded at estimated
fair value. Securities are valued monthly and the resulting unrealized
appreciation or depreciation is included in operations as trading profit or
loss. Realized gains and losses are determined using the average cost method.
F-29
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Statement of Financial Accounting Standards (SFAS) No. 119, Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments,
prescribes disclosure requirements for transactions in certain derivative
financial instruments including futures, forward, swap, and option contracts,
and other financial instruments with similar characteristics. Although the
Company is authorized to enter into such transactions in the ordinary course
of business, and may do so in the future, no such transactions have been
consummated.
REVENUE AND COST RECOGNITION
Revenue from the sale of computer equipment and installation of software is
generally recognized when the equipment and related software is installed and
accepted by the customer.
Costs incurred in researching, designing, and planning for the development of
new software are included in computer hardware and software operations in the
accompanying consolidated financial statements. All amounts are charged to
operations as incurred until such time as the costs meet the criteria for
capitalization. Such costs have not been significant. General and
administrative costs are charged to expenses as incurred.
Revenues from advertising sales were recognized at the point individual
directories were published. Costs of selling and production were recorded as
deferred directory costs when incurred and charged to cost of sales in the
period during which the related directory was published. Deferred directory
costs were allocated to incomplete directories based upon the relative
percentage of contracts sold as of year-end on incomplete directories to total
current year earned revenues. Printing costs were charged to cost of sales in
the period during which the related directory was published. Costs of
distribution were charged to cost of sales as incurred.
PROPERTY, FURNITURE AND EQUIPMENT
Property, furniture and equipment are recorded at cost. Additions, renewals
and betterments are capitalized, whereas expenditures for maintenance and
repairs are charged to expense. The cost and related accumulated depreciation
of assets retired or sold are removed from the appropriate asset and
depreciation accounts, and the resulting gain or loss is reflected in income.
It is the policy of the Company to provide depreciation using the accelerated
and straight-line methods based on the estimated useful lives of the assets.
Real property has an estimated useful life of forty years; furniture and
vehicles of three to five years; and equipment has estimated lives ranging
from five to ten years.
F-30
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
INCOME TAXES
Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax basis and
operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company has adopted the "disclosure method" provisions of Statement of
Financial Accounting Standards No. 123 (SFAS No. 123), Accounting for
Stock-Based Compensation. As permitted under SFAS No. 123, the Company continues
to recognize stock-based compensation costs under the intrinsic value based
method of accounting as prescribed by Accounting Principles Board Opinion No. 25
(APB No. 25), Accounting for Stock Issued to Employees.
LOSS PER COMMON SHARE
During the year ended September 30, 1998, the Company adopted SFAS No. 128,
Earnings per Share. Basic earnings (loss) per common share has been calculated
based upon the net earnings (loss) available to common stockholders divided by
the weighted average number of common shares outstanding during the period.
Diluted earnings (loss) per common share would not be different than basic
earnings (loss) per common share due to the fact that including the potential
common shares would result in antidilution as a result of the loss from
continuing operations.
ESTIMATES
The preparation of financial statements, in accordance with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, Disclosure about Fair Value of Financial Instruments, requires
all entities to disclose the fair value of financial instruments, both assets
and liabilities recognized and not recognized in the consolidated balance
sheets. The carrying amounts as of September 30, 1998 and 1997 for financial
instruments approximate their fair values due to the short maturity of these
instruments or because the related interest rates of long-term instruments
approximate current market rates.
F-31
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
As a securities broker/dealer, AFFC is engaged in various securities trading
and brokerage activities. A portion of AFFC's transactions are collateralized
and are executed with and on behalf of institutional investors including other
broker/dealers. AFFC's exposure to credit risk associated with the
nonperformance of these customers in fulfilling their contractual obligations
pursuant to securities transactions can be directly impacted by volatile
trading markets which may impair the customers' abilities to satisfy their
obligations to AFFC. AFFC's principal activities are also subject to the risk
of counterparty nonperformance.
YEAR 2000 (UNAUDITED)
The Company is working to resolve the potential impact of the Year 2000 on the
ability of the Company's computerized information systems to accurately
process information that may be date-sensitive. Any of the Company's programs
that recognize a date using "00" as the year 1900 rather than the year 2000
could result in errors or system failures. The Company has completed its Year
2000 assessment and has begun the correction and replacement steps in its Year
2000 Plan. The total cost of the Year 2000 Plan is estimated to be less than
$50,000, of which less than approximately $20,000 has been spent through
September 30, 1998. The Company's formal contingency plans are currently being
developed and are expected to be completed by June 1999. If the Company and
third parties upon which it relies are unable to address this issue in a
timely manner, it could result in a material financial risk to the Company.
RECLASSIFICATIONS
Certain reclassifications have been made to prior years' consolidated
financial statements to conform to current year's presentation.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
131, Disclosures about Segments of an Enterprise and Related Information,
which is effective for periods beginning after December 15, 1997. This
statement established standards for the method that public entities use to
report selected information about operating segments in annual financial
statements and requires that those enterprises report selected information
about operating segments in interim financial reports issued to stockholders.
It also establishes standards for related disclosures about products and
services, geographical areas and major customers. The Company does not believe
that the adoption of the statement will have a significant effect on the
disclosures in its consolidated financial statements and will adopt it when
required.
In June 1998, SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, was issued which is effective for all fiscal years beginning after
June 15, 1999. The Company currently does not participate in these activities
and consequently does not believe adoption of the statement will have an
effect on the consolidated financial statements.
F-32
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 2 - DISCONTINUED OPERATIONS AND OTHER SIGNIFICANT
BUSINESS ACTIVITIES
DISCONTINUED OPERATIONS
On March 20, 1998, the Company sold the remaining net assets pertaining to the
directory business and Fronteer Marketing Group (FMG), which operations were
discontinued during the year ended September 30, 1997, as described below. The
net assets had not previously been identified as part of discontinued
operations. The net assets were sold for the return by former officers of the
Company of 493,500 shares of the Company's common stock. The net assets were
valued by the Board of Directors based on appraisals, existing financing
arrangements and estimates. The loss on the sale of the net assets was
$249,861, net of an income tax benefit of $159,748.
On February 25, 1997, McLeod USA Publishing Company (McLeod, formerly known as
Telecom* USA Publishing Company) purchased six yellow page directories located
in North Dakota from the Company for approximately $2,800,000. The purchase
price was pursuant to an existing option agreement (Option Agreement) between
McLeod and the Company and was based on related directory revenues. The
purchase price consisted of $2,300,000 in cash and $500,000 in the form of a
nonrecourse loan that was applied against the price of the six yellow page
directories in accordance with the Option Agreement.
On the same date, another third party purchased another directory from the
Company for approximately $202,000 in cash. The purchase price was based on
related directory revenues. These dispositions represented most all of the
Company's remaining directory business assets. As such, the Company had
discontinued its activities in the directory business.
On September 15, 1997, a third party purchased all of the primary operating
assets of FMG for approximately $421,000. The purchase price was based on
existing financing arrangements and the cost of anticipated fixed asset
upgrades. A portion of the purchase price was paid in the form of a promissory
note in the amount of $141,344 to be paid over 28 months at $5,048 per month.
The remainder of the purchase price was paid in the form of a promissory note
in the amount equal to FMG's cost of anticipated fixed asset upgrades
installed in existing telemarketing centers. Monthly payments of principal and
interest at 10% of between $3,000 and $8,000 per month were to be made through
December 2000 at which time the balance was due and payable to the Company. On
March 20, 1998, the promissory notes were sold as part of the sale of the
remaining net assets of discontinued operations as mentioned above.
Accordingly, the Company has discontinued its activities in the direct
marketing business.
Effective April 1, 1997, the Company sold all of the stock of Fronteer
Personnel Services (FPS.) One of the principals is a former employee of the
Company. The purchase price was determined by the Board of Directors of the
Company and represented an assumption of certain liabilities of FPS by the
acquiring entity. The assumed liabilities were reflected at their fair values
on the books of FPS and were less than $20,000. Accordingly, the Company has
discontinued its activities in the employee leasing business. Separate
disclosures of FPS have not been made due to the immateriality of its
operations and associated assets and liabilities in relation to the
consolidated financial statements. The assets and liabilities and results of
operations for FPS are included in the amounts disclosed for the directory
business.
F-33
<PAGE>
<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS , CONTINUED
Information relating to the loss from discontinued operations is as follows:
Year Ended September 30, 1998: Directory
----------------------------- Business FMG Total
--------- --- -----
<S> <C> <C> <C>
Revenue ...................................................................... $ -- -- --
Cost of sales and operating expenses ......................................... 236,502 24,493 260,995
----------- ----------- -----------
(236,502) (24,493) (260,995)
----------- ----------- -----------
Nonoperating costs ........................................................... -- -- --
----------- ----------- -----------
Loss before income taxes ..................................................... (236,502) (24,493) (260,995)
Income tax benefit ........................................................... 92,236 9,552 101,788
----------- ----------- -----------
Net loss from discontinued operations ....................................... $ (144,266) (14,941) (159,207)
=========== =========== ===========
Loss on sale of discontinued operations, net
of income tax benefit of $159,748 ....................................... $ (249,861) -- (249,861)
=========== =========== ===========
<CAPTION>
Year Ended September 30, 1997: Directory
----------------------------- Business FMG Total
--------- --- -----
<S> <C> <C> <C>
Revenue ...................................................................... $ 4,866,454 364,652 5,231,106
Cost of sales and operating expenses ......................................... 4,733,860 1,580,934 6,314,794
----------- ----------- -----------
132,594 (1,216,282) (1,083,688)
----------- ----------- -----------
Nonoperating costs ........................................................... (28,848) (98,143) (126,991)
----------- ----------- -----------
Earnings (loss) before income taxes .......................................... 103,746 (1,314,425) (1,210,679)
Income tax benefit (expense) ................................................. (35,274) 446,905 411,631
----------- ----------- -----------
Net earnings (loss) from discontinued
operations .............................................................. $ 68,472 (867,520) (799,048)
=========== =========== ===========
Loss on sale of discontinued operations, net
of income tax benefit of $409,692 ....................................... $ (458,181) (208,341) (666,522)
=========== =========== ===========
(Continued)
F-34
<PAGE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS , CONTINUED
Year Ended September 30, 1998: Directory
----------------------------- Business FMG Total
--------- --- -----
<S> <C> <C> <C>
Revenue ...................................................................... $ 7,100,335 317,549 7,417,884
Cost of sales and operating expenses ......................................... 7,587,311 953,122 8,540,433
----------- ----------- -----------
(486,976) (635,573) (1,122,549)
----------- ----------- -----------
Nonoperating costs ........................................................... (156,877) (89,107) (245,984)
----------- ----------- -----------
Loss before income taxes ..................................................... (643,853) (724,680) (1,368,533)
Income tax expense ........................................................... -- -- --
----------- ----------- -----------
Loss from discontinued operations ............................................ $ (643,853) (724,680) (1,368,533)
=========== =========== ===========
</TABLE>
F-35
<PAGE>
<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The net assets and liabilities of the discontinued operations included in the
accompanying consolidated balance sheets are as follows:
September 30, 1997
Directory
business FMG Total
--------- --- -----
<S> <C> <C> <C>
Current assets:
Cash ............................................................. $ 140,939 (16,323) 124,616
Trade receivables ................................................ 1,367,960 103,909 1,471,869
Allowance for doubtful trade receivables ......................... (122,928) (34,667) (157,595)
Other receivables ................................................ 81,306 -- 81,306
Current portion of long-term notes receivable .................... 55,000 66,576 121,576
Other assets ..................................................... 236,415 -- 236,415
----------- ----------- -----------
Total current assets .......................................... 1,758,692 119,495 1,878,187
----------- ----------- -----------
Current liabilities:
Accounts payable, accrued expenses and
other liabilities ............................................ 469,974 29,243 499,217
Current portion of long-term debt ................................ -- 69,949 69,949
Deferred revenue ................................................. -- 350 350
Other current liabilities ........................................ 37,818 2,567 40,385
----------- ----------- -----------
Total current liabilities ..................................... 507,792 102,109 609,901
----------- ----------- -----------
Net current assets ......................................... $ 1,250,900 17,386 1,268,286
=========== =========== ===========
Long-term assets:
Property, furniture and equipment, net ........................... $ 365,501 91,456 456,957
Long-term notes receivable ....................................... 250,000 80,768 330,768
----------- ----------- -----------
Total long-term assets ........................................ 615,501 172,224 787,725
----------- ----------- -----------
Long-term liabilities:
Long-term debt, net of current portion ........................... -- 72,250 72,250
----------- ----------- -----------
Total long-term liabilities ................................... -- 72,250 72,250
----------- ----------- -----------
Net long-term assets ....................................... $ 615,501 $ 99,974 $ 715,475
=========== =========== ===========
</TABLE>
F-36
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
CLEARING ACTIVITIES
On July 23, 1996, the Company sold AFFC's securities brokerage clearing
division (Clearing Operation) to MultiSource Services, Inc. (MSI), a new
broker/dealer, for a purchase price of $3,000,000, including a $1,500,000
contingency in the form of a forgivable loan, plus the net assets of the
Clearing Operation. MSI was formed by Oppenheimer Funds, Inc. (OFI) for the
purpose of acquiring the Clearing Operation, and OFI was to retain 80% of the
outstanding common stock of MSI. Fronteer received 20% of the outstanding
common stock of MSI. As a result of this transaction, AFFC became a fully
disclosed clearing correspondent of MSI. The loan of $1,500,000 was recorded
as a loan payable to MSI and was forgivable based on MSI's revenues during the
28 months following the closing date.
During the year ended September 30, 1997, Fronteer and AFFC were notified by
OFI that a decision had been reached by OFI that MSI and its business were not
consistent with the long-term business plans of OFI. Subsequently, a new
clearing firm was selected for the customer business of AFFC, and the customer
business previously cleared by MSI was moved to the new clearing firm in
October 1997. MSI reached its revenue targets for the first $750,000 of the
loan, and as a result of this and MSI's decision to no longer be in the
clearing business, the entire $1,500,000 loan was forgiven and was recognized
as an extraordinary item during the year ended September 30, 1998.
Subsequent to September 30, 1998, the Company and AFFC entered into an
agreement with MSI and OFI to which MSI would withdraw as a registered
broker/dealer with the SEC, resign as a member of the NASD and pay the Company
a total of $430,000. As a result of the agreement and closing which occurred
on December 16, 1998, OFI owns 100% of the outstanding common stock of MSI.
Both the Company and AFFC, and OFI and MSI released each other from any claims
as part of the agreement.
NOTE 3 - STOCKHOLDERS' EQUITY
On October 16, 1998, the Company commenced a private placement of 1,500,000
shares of its Series B preferred stock, which was authorized by the Board of
Directors on October 13, 1998, at a price of $10.00 per share and has a
cumulative annual dividend rate of 8% in cash and 7% in shares of Series B
preferred stock (1998 Private Offering). The cash portion of the dividend is
guaranteed by Fronteer's parent company, Heng Fung Holdings Company Limited
(Heng Fung Holdings) through October 2003. The Series B preferred stock is
redeemable by the Company on and after October 2003 at a price of $12.50 per
share plus accrued and unpaid dividends. The Company agreed to issue warrants
to purchase a certain variable number of shares of Series B preferred stock at
a purchase price of $12.00 per share for five years. The 1998 Private Offering
terminates February 1999. There have been no issuances of Series B preferred
stock under the 1998 Private Offering.
F-37
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
In December 1997, Heng Fung Capital [S] Private Limited (Heng Fung Private), a
subsidiary of Heng Fung Holdings, a public company traded on the Hong Kong
Stock Exchange, purchased 1,136,364 shares of the Company's outstanding common
stock from Robert A. Fitzner, Jr. and Robert L. Long, officers and directors
of the Company, and from two other employees of AFFC. In December 1997, Robert
A. Fitzner, Jr. and Heng Fung Private agreed that, upon the regulatory
approval of the National Association of Securities Dealers, Inc. (NASD) of a
change in the beneficial ownership of 25% or more of AFFC, Heng Fung Private
would purchase an additional 3,556,777 shares of Fronteer's outstanding common
stock from Mr. Fitzner. In conjunction with the transaction, Fronteer entered
into an agreement (Convertible Debenture Agreement) with Heng Fung Finance
Company Limited (Heng Fung Finance), a wholly owned subsidiary of Heng Fung
Private, pursuant to which Fronteer agreed to sell Heng Fung Finance a ten
year $4,000,000 10% Convertible Debenture that is convertible at $.53125 per
share into 7,529,411 shares of Fronteer common stock. The purchase of the
$4,000,000 convertible debenture was completed on December 30, 1997. On
December 26, 1997, the Board of Directors of Fronteer, at the request of Heng
Fung Finance made pursuant to the terms of the Convertible Debenture
Agreement, appointed Mr. Fai H. Chan and Mr. Robert H. Trapp, to the Board of
Directors of Fronteer.
On January 29, 1998, the NASD approved the change in the beneficial ownership
of 25% or more of AFFC, and on February 18, 1998 Heng Fung Private purchased
the additional 3,556,777 shares of Fronteer's outstanding common stock from
Mr. Fitzner. Contemporaneously with that purchase, Mr. Fitzner, Mr. Long and
Mr. Dennis Olson resigned as directors of the Company and its subsidiaries.
Also, Mr. Fitzner resigned as the Chairman of the Company and as the President
and Chief Executive Officer of AFFC, Mr. Long resigned as the Secretary of the
Company and Mr. Olson resigned as the President of the Company. At the same
time, Mr. Chan and Mr. Trapp, the two remaining directors appointed at the
request of Heng Fung Finance, reduced the number of directors on the Company's
Board of Directors to three and appointed Mr. Kwok Jen Fong , a practicing
solicitor in Singapore, as a director of the Company to fill the remaining
vacancy. The directors also appointed Mr. Chan as the Chairman of the Board
and the President of the Company, Mr. Trapp as Managing Director of the
Company and Gary L. Cook as the Secretary and Treasurer of the Company.
Messrs. Chan and Trapp and Mr. Zucker also became directors of AFFC, Mr. Trapp
was appointed the President of AFFC, Brian F. Zucker was appointed the
Managing Director of AFFC and Mr. Cook was appointed the Treasurer of AFFC.
Mr. Cook also remains as the Secretary of AFFC. On February 20, 1998, the
Board of Directors of Fronteer appointed Jeffrey Busch and Robert Jeffers,
Jr., both practicing attorneys, as directors of Fronteer. In addition, because
Heng Fung Finance purchased the additional 3,556,777 shares, it received the
option to purchase an additional 10 year $11,000,000 10% convertible
debenture, convertible at $0.61 per share of the Company's common stock,
pursuant to the Convertible Debenture Agreement.
F-38
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Subsequently, Heng Fung Finance exercised its option and purchased $2,500,000
of the $11,000,000 10% convertible debenture. On September 23, 1998, the
Company agreed to amend the terms of the Convertible Debenture Agreement for
the remaining $8,500,000 available. The amendment changed the conversion price
to the lower of $0.35 or the market value of the Company's common stock at the
time of conversion and increased the interest rate to 12%. In addition, the
revision changed the conversion price, upon default, to $0.10 per share of the
Company's common stock. On September 25, 1998, Heng Fung Finance purchased a
$500,000 12% convertible debenture. The quarterly interest payments on the
convertible debentures purchased pursuant to the Convertible Debenture
Agreement are currently being made in shares of the Company's common stock and
resulted in 412,800 shares being issued through September 30, 1998 to Heng
Fung Finance. As of September 30, 1998, Heng Fung Finance had purchased
$7,000,000 in convertible debentures. Subsequent to September 30, 1998, Heng
Fung Finance purchased an additional $1,000,000 12% convertible debenture in
order for the company to acquire Class B common shares of FDFI in accordance
with the FDFI Offering Memorandum described in Note 9.
On April 25, 1998, the Board of Directors approved a resolution to compensate
Heng Fung Finance for its time, efforts, capital costs and expenses in setting
up and operating a New York City office which was transferred to Fronteer to
be operated as an AFFC institutional sales location upon final NASD approval.
Compensation, as agreed to by the Board of Directors and determined based upon
actual capital costs and expenses incurred, as well as certain estimates, was
$350,000 payable in 350,000 shares of common stock of Fronteer.
On February 16, 1996, the Company commenced a private placement of 6,000,000
shares of its $.0l par value common stock at a price of $1.00 per share, and
6,000,000 Class A redeemable common stock purchase warrants at a price of $.10
per warrant (collectively, the Private Placement). The warrants entitle the
holder to purchase one share of common stock at $1.50 per share at any time
until May 1, 2000. 5,958,658 shares of common stock and warrants were issued
through the Private Placement for proceeds of $5,859,563, net of issuance
costs of $694,961. In addition, the Company issued 595,865 warrants to AFFC in
accordance with the Private Placement which allows the holder to purchase one
share of common stock at a price of $1.50 per warrant until May 1, 2000.
The Company has granted options pursuant to three stock option plans, the
Incentive Stock Option Plan, (1988 Plan), the 1996 Incentive and Nonstatutory
Option Plan (1996 Plan), and the September 1996 Incentive and Nonstatutory
Option Plan (September 1996 Plan). Options were granted to certain officers
and employees of the Company in accordance with the criteria of each
individual plan at exercise prices ranging from $.625 to $1.00 per share. As
of September 30, 1998 2,580,000 options are exercisable. During the years
ending September 30, 1999, 2000, 2001, 2002 and 2003, 732,333, 457,333
142,334, 109,000 and 109,000 options become exercisable. As of September 30,
1998, the Company had also granted 700,000 nonqualified stock options to
certain employees at an exercise price of $1.00 per share. These options
expire April 2, 2008 and are exercisable 50,000 per year beginning March 18,
1999, plus an additional 20,000 shares per year if branch where employees work
meets projected profits each year for five years.
F-39
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The following represents additional information relative to stock option
activity:
<TABLE>
<CAPTION>
September
Total 1988 Plan 1996 Plan 1996 Plan
Nonqualified ----- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Outstanding as of
September 30, 1996 ............... 3,390,000 557,000 1,250,000 1,243,000 340,000
Expired ....................... (340,000) -- -- -- (340,000)
Granted ....................... 340,000 -- -- -- 340,000
Canceled ...................... (125,000) (100,000) (10,000) (15,000) --
---------- ---------- ---------- ---------- ----------
Outstanding as of
September 30, 1997 ............... 3,265,000 457,000 1,240,000 1,228,000 340,000
Expired ....................... (340,000) -- -- -- (340,000)
Granted ....................... 2,070,000 -- -- 1,370,000 700,000
Canceled ...................... (165,000) -- (35,000) (130,000) --
---------- ---------- ---------- ---------- ----------
Outstanding as of
September 30, 1998 ............... 4,830,000 457,000 1,205,000 2,468,000 700,000
========== ========== ========== ========== ==========
Expiration dates:
2006 ...................... 1,530,000 457,000 615,000 458,000 --
2007 ...................... 360,000 -- 160,000 200,000 --
2008 ...................... 2,350,000 -- 160,000 1,490,000 700,000
2009 ...................... 320,000 -- 160,000 160,000 --
2010 ...................... 270,000 -- 110,000 160,000 --
---------- ---------- ---------- ---------- ----------
Outstanding as of
September 30, 1998 ............... 4,830,000 457,000 1,205,000 2,468,000 700,000
========== ========== ========== ========== ==========
</TABLE>
On November 25, 1998, the Board of Directors granted the holders of 2,930,000
incentive stock options the opportunity to cancel their existing options and
receive new grants at $.20 per share which was equal to the closing price of
the common stock as reported on the OTC Bulletin Board on that date. The
employees have until February 1, 1999 to decide whether to keep their existing
options or elect to receive the replacement options. The replacement options
will vest one-third on January 30, 1999, one-third on November 25, 1999 and
one-third on November 25, 2000.
Also, on November 25, 1998, the Company granted 2,800,000 nonqualified stock
options to purchase shares of common stock to members of the Board of
Directors at a price of $.20 per share which was equal to the closing price of
the common stock as reported on the OTC Bulletin Board on that date. The
options vest at the rate of 20% per year through November 25, 2003 and expire
on the anniversary date in 2008; provided, that no option shall be exercisable
until and unless basic earnings per share for any fiscal year commencing with
the fiscal year ending September 30, 1999, are equal to or exceed $0.10 per
share. On this same date, 1,793,500 options were granted to officers and
employees from the September 1996 Plan with the same terms except that
1,093,500 of such options do not have the basic earnings per share
requirement. These grants are based on shareholder approval to increase the
number of shares available for grant pursuant to the September 1996 Plan. If
shareholder approval is not obtained, then they become nonqualified options.
F-40
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
No compensation costs were charged to earnings for options granted under the
Company's plans. Management considers the difference between the pro forma net
loss or loss per share under the fair value method and that as calculated by
the Company per the consolidated statements of operations to be immaterial
based on the fair value of the underlying common stock and the recent activity
related thereto.
NOTE 4 - SECURITIES OWNED
Securities owned consisted of the following:
September 30,
1998 1997
---- ----
Corporate securities $ 1,401,672 490,505
U.S. government obligations 3,978 30,549
Municipal obligations 282,435 350,268
--------- -----------
$ 1,688,085 871,322
========= ===========
Corporate securities includes $1,066,972 invested in Heng Fung related entities.
(See Note 7.)
NOTE 5 - PROPERTY, FURNITURE AND EQUIPMENT
Property, furniture and equipment consisted of the following:
September 30,
1998 1997
---- ----
Real property $ 245,100 565,658
Furniture and equipment 2,923,665 3,083,863
Automobiles -- 125,073
Leasehold improvements 558,520 426,863
3,727,285 4,201,457
Less accumulated depreciation and amortization (2,186,154) (2,576,617)
---------- ----------
$ 1,541,131 1,624,840
========== ==========
Property, furniture and equipment, net, included in long-term assets of
discontinued operations was $456,957 as of September 30, 1997.
F-41
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following:
September 30,
1998 1997
---- ----
Trade accounts payable $ 1,313,225 1,783,812
Accrued legal reserves 500,000 575,000
Payroll related accounts 553,197 997,110
Other accrued expenses 148,438 17,750
---------- ----------
$ 2,514,860 3,373,672
========== ==========
NOTE 7 - RELATED PARTY ACTIVITY
Since January 1, 1998, Fronteer Capital, Inc., which received the proceeds of
the $4,000,000 Convertible Debenture purchased by Heng Fung Private in
December 1997 pursuant to the Convertible Debenture Agreement, that is
described in Notes 3 and 10, used a portion of the proceeds to purchase
approximately 116,430,000 shares of the common stock of Heng Fung Holdings in
open market transactions on the Hong Kong Stock Exchange at an average price
of approximately $0.02 per share. During the year ended September 30, 1998,
the Company recognized an unrealized loss of $1,573,793 on these securities.
Two officers and directors of the Company are directors of Heng Fung Holdings.
In addition, Mr. Chan beneficially owns approximately 10% of the outstanding
common stock of Heng Fung Holdings.
During the year ended September 30, 1998, the Company paid an outside director
$50,000 for legal services.
The Company had various notes payable to related parties in the amount of
$177,000 as of September 30, 1997. Such notes payable were unsecured, payable
on demand, and had interest at a variable rate not to exceed the interest rate
on the Company's previous line of credit with a financial institution. As of
September 30, 1997, the interest rate was 11.5%. The notes were paid in full
during the year ended September 30, 1998.
As a clearing correspondent of MSI, the Company paid MSI clearing fees of
$111,512 and $1,096,690 for the years ended September 30, 1998 and 1997,
respectively. The Company's $2,045,134 receivable from brokers or dealers and
clearing organizations--affiliated organization, primarily relates to broker
commissions outstanding from MSI as of September 30, 1997. For the year ended
September 30, 1997, Secutron recorded revenues of $275,699 for services
performed for MSI.
F-42
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
In accordance with an investment banking agreement, merger and acquisition
fees of $100,000 relating to the acquisition of the assets of RAFCO, Ltd.
(RAFCO) were paid to a then officer of the Company during the year ended
September 30, 1996. This same officer received consulting fees of $131,377
during the year ended September 30, 1997 in the form of a portion of one of
AFFC's inventory positions. The inventory positions were transferred to the
officer at market value. The officer resigned as an officer of the Company
during the year ended September 30, 1998, but remains an employee of the
Company.
During the year ended September 30, 1997, a then officer of the Company
received $334,000 in noncompetition compensation from the purchaser in
conjunction with the sale of the primary assets of the directory business as
discussed in Note 2. As of September 30, 1997, the Company had notes payable
to the same officer of $100,000. The officer resigned and these amounts were
repaid during the year ended September 30, 1998.
During the year ended September 30, 1996, the Company paid fees for legal
services of approximately $209,000, to a legal firm partially owned for most
of the year by an affiliate of a stockholder of the Company that held
approximately 12.4% of the outstanding common stock of the Company at the time
the services were performed.
NOTE 8 - LONG-TERM DEBT
Long-term debt is comprised of the following:
Maturity Interest September 30,
Payee Collateral date rate 1998 1997
- ----- ---------- -------- -------- ---- ----
MSI (1) (1) (1) (1) $ -- 1,500,000
Guaranty Bank Real Property 3-01-01 8.50% 116,667 156,667
Wilton State Bank Equipment 2-15-00 9.75% -- 125,949
Other Notes Equipment Various Various 114,872 150,590
-------- ---------
231,539 1,933,206
Less current portion (124,007) (933,113)
-------- ---------
$ 107,532 1,000,093
======== ==========
(1) The loan was payable to MSI and was issued in conjunction with the sale of
the Clearing Operation as discussed in Note 2. The $1,500,000 loan was
forgiven and recognized as an extraordinary item during the year ended
September 30, 1998.
Included in current and long-term liabilities of discontinued operations as of
September 30, 1997 was debt in the total amount of $142,199, of which $69,949
was the current portion.
F-43
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Minimumprincipal payments required on long-term debt are as follows for the
years ending September 30:
1999 $124,007
2000 48,004
2001 44,683
2002 14,845
--------
Total $231,539
========
NOTE 9 - CONVERTIBLE DEBENTURES
On May 26, 1998, FDFI commenced a private placement of 30,000 units (Unit)
each consisting of (i) one $1,000 convertible debenture, due August 1, 2008,
paying 10% per annum; (ii) 100 Class A common shares; and (iii) warrants
exercisable at $3.00 per share for 500 Class A common shares (FDFI Private
Placement). The convertible debentures are convertible into Class A common
shares at a conversion price of $5.00 per share. As of September 30, 1998,
7,308 units were issued through the FDFI Private Placement for proceeds of
$6,297,898, net of issuance costs of $1,010,102.
Per the terms of the FDFI Private Placement, the portion of the cost per Unit
allocable to the convertible debentures is 83.4%. Therefore, the convertible
debentures were recorded at 83.4% of the face amount of the convertible
debentures of $7,308,000 or $6,094,872. The discount on the convertible
debentures is being amortized as an adjustment to the stated interest rate of
10% using the interest method. Original issue discount amortization of $6,576
has been recognized through September 30, 1998.
The convertible debentures are scheduled to mature on August 1, 2008 and
generally are not callable by FDFI prior to maturity. Interest is at 10% per
annum, payable each January 31st and July 31st. These debentures are
convertible into shares of Class A common stock of FDFI at a conversion price
of $5.00 per share. Accrued interest expense on the convertible debentures at
September 30, 1998 was $77,454.
Subsequent to September 30, 1998, 650 additional Units were sold for proceeds
of $575,250, net of issuance costs of $74,750.
The Offering Memorandum for the FDFI Private Placement included 3,000,000
shares of authorized Class B common stock, and required Fronteer to purchase
Class B common stock in the amount of no less than 26.67% of the amount of
Units purchased by outside investors. As of December 15, 1998, the Company has
purchased 666,666 shares of the Class B common stock for $2,000,000, half of
which was purchased as of September 30, 1998. There were no commissions or
expenses associated with the Class B common stock issuance.
F-44
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 10 - CONVERTIBLE DEBENTURES TO RELATED PARTY
In December 1997, the Company sold Heng Fung Finance a ten year $4,000,000 10%
Convertible Debenture that is convertible into shares of common stock of the
Company at a price of $0.53125 per share until December 15, 2007, unless
sooner paid, and an option to purchase a $11,000,000 10% Convertible Debenture
that is convertible into shares of common stock of the Company at a price of
$0.61 per share until ten years from the date of issue unless sooner paid.
Heng Fung Finance partially exercised the option and purchased additional 10%
Convertible Debentures totaling $2,500,000. On September 23, 1998, Heng Fung
Finance and the Company agreed to amend the terms of the remaining $8,500,000
of the $11,000,000 10% Convertible Debenture by increasing the interest rate
to 12%, changing the conversion price to the lower of $0.35 or the fair market
value per share, and changing the default conversion price to $0.10 per share.
On September 25, 1998, Heng Fung Finance partially exercised its option to
purchase $8,500,000 of 12% Convertible Debentures by purchasing a $500,000 12%
Convertible Debenture from the Company. As of September 30, 1998, Heng Fung
Finance had purchased a total of $7,000,000 in convertible debentures.
The quarterly interest payments on the convertible debentures purchased
pursuant to the Convertible Debenture Agreement are currently being made in
shares of the Company's common stock and resulted in 412,800 shares being
issued through September 30, 1998 to Heng Fung Finance. Subsequent to
September 30, 1998, an additional 283,618 common shares of the Company were
issued to pay the accrued interest payable at September 30, 1998. Also,
subsequent to September 30, 1998, Heng Fung Finance purchased an additional
$1,000,000 12% convertible debenture in order for the Company to acquire Class
B common shares of FDFI in accordance with the FDFI Offering Memorandum
described in Note 9.
NOTE 11 - INCOME TAXES
Income tax expense (benefit) relating to the loss from continuing operations
for the three years in the period ended September 30, consisted of the
following:
1998 1997 1996
---- ---- ----
Current $ -- 99,956 70,799
Deferred 290,320 (548,480) (15,000)
-------- --------- --------
$ 290,320 (448,524) 55,799
======== ========= ========
F-45
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Income tax expense (benefit) for the years ended September 30, 1998, 1997 and
1996, differs from the amounts computed by applying the U.S. Federal income
tax rate of 34% to loss from continuing operations before income taxes as a
result of the following:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Computed "expected" income tax benefit $(2,274,242) (829,201) (317,679)
Increase (decrease) in income taxes resulting
from:
Nondeductible expenses 159,948 10,158 19,998
State taxes, net of Federal benefit (150,268) (82,000) 11,000
Unconsolidated subsidiaries for tax purposes (111,476) 99,956 55,799
Change in valuation allowance for deferred tax
assets 2,504,784 505,000 286,681
Other 161,574 (152,437) --
----------- ----------- -----------
Income tax expense (benefit) $ 290,320 (448,524) 55,799
=========== =========== ===========
</TABLE>
Temporary differences between financial statement carrying amounts and the tax
bases of assets and liabilities that result in significant deferred tax assets
and liabilities are as follows:
<TABLE>
<CAPTION>
September 30,
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Deferred rent concessions ........................ $ 645,000 652,000
Forgivable loan .................................. -- 585,000
Accrued expenses ................................. 459,000 301,000
Allowance for doubtful accounts .................. 136,000 210,000
Unamortized employee loans ....................... 135,000 35,000
Unrealized loss on investments ................... 683,000 --
Investments in subsidiaries and affiliates ....... 97,000 97,000
Contribution and operating loss carryforwards .... 1,992,000 375,000
----------- -----------
Gross deferred tax assets ........................ 4,147,000 2,255,000
Valuation allowance .............................. (4,096,000) (1,591,216)
----------- -----------
Deferred tax assets after valuation allowance ....... 51,000 663,784
Deferred tax liabilities:
Property and equipment ........................... (51,000) (50,000)
----------- -----------
Gross deferred tax liabilities ................... (51,000) (50,000)
----------- -----------
Net deferred tax asset ....................... $ -- $ 613,784
=========== ===========
</TABLE>
F-46
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The net deferred tax assets as of September 30, 1997 have been presented in
the accompanying consolidated balance sheet as a net long-term deferred asset.
Net operating losses of approximately $5,066,000 expire during the years from
2011 to 2013.
The consolidated tax return of the Company for the year ended September 30,
1996 is currently being examined by the Internal Revenue Service. The Company
has not received any correspondence from the examiner regarding the status of
the examination or any possible adjustments.
In assessing the realizability of deferred tax assets, management considered
whether it is more likely than not that the deferred tax asset would be
realized. The ultimate realization of the deferred tax asset is dependent on
the generation of future taxable income in the period in which the temporary
differences become deductible. The Company has established a valuation
allowance for deferred taxes due to the uncertainty that the full amount of
the deferred tax asset will be utilized. In determining the valuation
allowance, management considered factors including the reversal of existing
temporary differences and estimates of future taxable income.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
Fronteer and AFFC lease office space under long-term noncancelable operating
leases. The leases for office space provide for annual escalations for
utilities, taxes, and service costs, as well as escalating rental rates over
the term of the leases. Minimum future rental payments required by such leases
are as follows for the years ended September 30:
1999 $1,829,758
2000 1,817,651
2001 1,746,355
2002 1,581,817
2003 1,312,086
Thereafter 3,673,388
Rent expense included in the consolidated statements of operations was
$1,809,255, $1,387,125 and $1,178,024 for the years ended September 30, 1998,
1997 and 1996.
F-47
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
A former officer, director and shareholder; individually, and in conjunction
with his consulting company filed claims on July 30, 1998 in the District
Court for the City and County of Denver, Colorado against the Company,
Secutron and MidRange and against certain current and former officers,
directors, shareholders and affiliates. The claims asserted that these
entities and individuals breached their fiduciary duties, breached contracts,
approved an illegal distribution and participated in a fraudulent conveyance.
In total, there are twelve asserted claims for relief which seek actual,
exemplary damages, costs and attorneys' fees, an injunction and other similar
relief. The vast majority of claims for relief are based upon a transaction
which was not completed. The Company and its counsel anticipate the filing of
a motion for summary judgement regarding those claims on the basis that the
transaction assumed to have taken place in the complaint did not, in fact,
take place. However, the remaining claims are based upon a written contract
entitled Settlement Agreement between Secutron, the claimant and his
consulting company. The settlement agreement provided for Secutron to pay
$10,000 per month through January 2011 to the consulting company for which
$1,500,000 on the breach of contract has been claimed. Little discovery has
been conducted at this time. Management is of the opinion that the ultimate
outcome will not adversely affect the consolidated financial position or
consolidated results of operations of the Company.
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.
On April 14, 1998, Fronteer Capital and Heng Fung Finance committed to provide
to Global Med Technologies, Inc. (Global) lines of credit for up to $1,650,000
and $1,500,000, respectively, for a total combined loan commitment of
$3,150,000 over the following twelve months. The loans bear interest
calculated at a rate of 12% per annum and will mature 366 days after April 14,
1998.
Pursuant to the loan commitment provided by Heng Fung Finance, Heng Fung
Finance has appointed five members to the Board of Directors of Global, Global
has agreed that Global's Board of Directors will not exceed nine and Heng Fung
Finance has the option to cancel all Global then existing management and
employee contracts. For issuing the commitment, Heng Fung Finance earned
warrants to purchase 6,000,000 shares of Global's common stock. The warrants
are exercisable at $0.25 per share for up to 10 years and Global agreed to
register by July 14, 1998, the shares for resale under the Securities Act of
1933.
As long as Global has used its best efforts to file such registration
statement covering such shares with the SEC and responded to any comments from
the SEC in a timely manner, Global will not be deemed to be in default under
the Heng Fung Finance loan as the shares were not registered for resale by
July 14, 1998.
F-48
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The loan commitment provided by Fronteer Capital has substantially the same
terms and conditions as the loan commitment provided by Heng Fung Finance
except that, if Heng Fung Finance had not appointed directors to Global's
Board of Directors, Fronteer Capital has the right to appoint a maximum of
three members to the Board of Directors of Global. Global had the right to
draw the $1,650,000 from Fronteer Capital after the total loan from Heng Fung
Finance is drawn and if the loan provided by Fronteer Capital is drawn
Fronteer Capital will earn warrants to purchase 6,000,000 shares of Global's
common stock upon the same terms and conditions as the warrants to purchase
6,000,000 shares of Global's common stock earned by Heng Fung Finance. Dr.
Michael I. Ruxin, the Chief Executive Officer of Global, has agreed to
personally guarantee the repayment of $1,650,000 of the Fronteer Capital line
of credit. The guarantee is limited to certain of Dr. Ruxin's assets. For
issuing the commitment, Fronteer Capital has earned warrants to purchase
1,000,000 of the 6,000,000 shares of Global's common stock.
If Global defaults on the repayment of any amount borrowed by Global pursuant
to the Heng Fung Finance commitment, 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. Heng Fung Finance
will also have the right to convert the outstanding amount of the loan into
shares of Global's common stock at a conversion price of $0.05 per share, all
employment contracts of the management and officers of Global will be invalid
immediately, and their employment will be subject to reconfirmation by Heng
Fung Finance. 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, Fronteer Capital 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.
On September 11, 1998, Fronteer Capital, entered into an agreement with FDFI,
whereby Fronteer Capital agreed to assign to FDFI its rights to and
obligations in the loan commitment to Global. Subsequent to September 30,
1998, Global drew $1,200,000 and as a result, FDFI earned the additional
5,000,000 warrants to purchase 5,000,000 shares of Global's common stock at
$0.25 per share.
On September 23, 1998, the Company agreed to amend the terms of the $4,000,000
10% Convertible Debenture Purchase Agreement (Convertible Debenture Agreement)
it had entered into with Heng Fung Finance (See Notes 3 and 10). The amendment
changed the conversion price to the lower of $0.35 or the market value of the
Company's common stock at the time of conversion and increased the interest rate
to 12% on the remaining $8,500,000 of the $11,000,000 10% Convertible Debenture.
In addition, the amendment changed the conversion price, upon default, to $0.10
per share of the Company's common stock. On September 25, 1998, Heng Fung
Finance purchased a $500,000 12% Convertible Debenture. As of September 30,
1998, Heng Fung Finance had purchased a total of $7,000,000 of convertible
debentures.
F-49
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
On October 7, 1998, FDFI, Heng Fung Finance, and Global entered into an
agreement whereby FDFI purchased, Heng Fung Finance sold and Global consented
to the sale of $1,000,000 principal amount of loans made by Heng Fung Finance
to Global along with a warrant to purchase an aggregate of 4,000,000 shares of
Global's common stock. FDFI paid Heng Fung Finance $1,100,000 for the loans
and warrants. The loans and warrants purchased by FDFI were a portion of loans
and warrants given pursuant to a joint loan commitment made by Heng Fung
Finance and Fronteer Capital (subsequently transferred to FDFI) for the
benefit of Global.
NOTE 13 - EMPLOYEE STOCK OWNERSHIP AND EMPLOYEE BENEFIT PLANS
The Company has adopted an employee stock ownership plan (ESOP) for its
employees. Contributions to the plan are at the discretion of the Board of
Directors. All employees as of October 1, 1989, are eligible to participate in
the plan, and new employees after that date become eligible on April 1 or
October 1 which follows the completion of one year of employment. The plan
provides that more than half of the assets in the plan must consist of the
Company's common stock. The ESOP is administered by a board of trustees under
the supervision of an advisory committee, both of which are appointed by the
Company's Board of Directors. Employees 20% vest in ESOP contributions after
two years, vesting an additional 20% each year up to 100% after six years in
the ESOP. The ESOP has a loan to the Company of $350,000 representing the
payment during the year ended September 30, 1997 by the Company of the ESOP's
debt. The loan is secured by 436,840 shares of the Company's common stock and
is recorded in unearned ESOP shares in the consolidated financial statements.
The board of trustees has not determined the method of repayment of the loan
to the Company.
Once the board of trustees has determined the method of the loan repayment,
the allocation of shares within the ESOP to employees is based on employees
wages. For the years ended September 30, 1997 and 1996, the Company
contributed $24,898 and $10,500, respectively, to the plan. The Company did
not contribute to the plan nor did the Board of Directors commit any shares to
the ESOP during the year ended September 30, 1998. The ESOP owns 448,682
shares of the Company's common stock as of September 30, 1998.
The Company has three retirement saving plans covering all employees who are
over 21 years of age and have completed one year of eligibility service. The
plans meet the qualifications of Section 401(k) of the Internal Revenue Code.
Under the plans, eligible employees can contribute through payroll deductions
up to 15% of their base compensation. The Company makes a discretionary
matching contribution equal to a percentage of the employee's contribution.
The Company contributed $83,894, $82,890, and $67,079 for the years ended
September 30, 1998, 1997 and 1996, respectively. One of the Company's savings
plans owns 2,973 shares of the Company's common stock as of September 30,
1998.
The Company does not provide any post employment benefits to retired or
terminated employees.
F-50
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 14 - MINIMUM NET CAPITAL REQUIREMENTS
AFFC, as a registered securities broker/dealer, is subject to the Securities
and Exchange Commission Uniform Net Capital Rule (Rule 15c3-1) (the Rule).
AFFC has elected to operate pursuant to the alternative standard provided by
the Rule.
Under the alternative standard, AFFC is required to maintain "net capital" of
not less than $250,000. As of September 30, 1998, AFFC had "net capital" of $
408,204.
F-51
<PAGE>
<TABLE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 15 - SEGMENT REPORTING
Year ended September 30, 1998
-----------------------------
Discontinued *
Operations AFFC Secutron FDFI Others Eliminations Total
Consolidated ------------- ---- -------- ---- ------ ------------ -----
- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from
unaffiliated customers ...... $ -- 8,454,279 37,923 8,711 -- 27,387,304
Intersegment revenues .......... -- -- 412,327 -- 72,672 (484,999) --
----------- ----------- ----------- --------- ----------- ----------- -----------
Total revenues ................. -- 18,886,391 8,866,606 37,923 81,383 (484,999) 27,387,304
----------- ----------- ----------- --------- ----------- ----------- -----------
Operating loss ................. (260,995) (3,910,741) (281,785) (46,255) (2,459,281) (6,959,057)
Other income (expense), net .... -- 250,304 170 -- (370,722) -- (120,248)
----------- ----------- ----------- --------- ----------- ----------- -----------
Loss from operations before
minority interest and
income taxes ................ (260,995) (3,660,437) (281,615) (46,255) (2,830,003) -- (7,079,305)
=========== =========== =========== ========= =========== =========== ===========
Loss on sale of discontinued
operations, net of income
tax benefit of $159,748 .... (249,861) -- -- -- -- -- (249,861)
=========== =========== =========== ========= =========== =========== ===========
Depreciation and
amortization ................ 55,409 323,033 29,802 -- 36,399 -- 444,643
=========== =========== =========== ========= =========== =========== ===========
Capital expenditures ........... $--- 34,392 -- 5,203 -- 762,482
=========== =========== =========== ========= =========== =========== ===========
Identifiable assets as of
September 30, 1998 .......... $--- 1,408,056 7,174,173 6,523,283 (5,009,316) 15,370,912
=========== =========== =========== ========= =========== =========== ===========
<CAPTION>
Year ended September 30, 1997
-----------------------------
Discontinued *
Operations AFFC Secutron FDFI Others Eliminations Total
Consolidated ------------- ---- -------- ---- ------ ------------ -----
- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from
unaffiliated customers ...... $ 5,231,106 18,118,271 6,982,143 -- -- 30,331,520
Intersegment revenues .......... 28,253 -- 454,000 -- (482,253) --
----------- ----------- ----------- --------- ----------- ----------- -----------
Total revenues ................. 5,259,359 18,118,271 7,436,143 -- (482,253) 30,331,520
----------- ----------- ----------- --------- ----------- ----------- -----------
Operating profit (loss) ........ (1,083,688) (2,160,897) 129,215 (495,496) -- (3,610,866)
Other income (expense), net .... (126,991) 123,499 (931) (22,885) -- (27,308)
----------- ----------- ----------- --------- ----------- ----------- -----------
Earnings (loss) from
operations
before minority interest
and income taxes ............ (1,210,679) (2,037,398) 128,284 (518,381) -- (3,638,174)
=========== =========== =========== ========= =========== =========== ===========
Loss on sale of discontinued
operations, net of income tax
benefit of $409,692 ......... (666,522) -- -- -- -- (666,522)
=========== =========== =========== ========= =========== =========== ===========
Depreciation and amortization .. 752,558 258,227 71,667 9,051 -- 1,091,503
=========== =========== =========== ========= =========== =========== ===========
Capital expenditures ........... $ 68,469 390,403 27,073 -- -- 485,945
=========== =========== =========== ========= =========== =========== ===========
Identifiable assets as of
September 30, 1997 .......... $ 1,983,761 6,839,443 1,868,317 469,828 (158,267) 11,003,082
=========== =========== =========== ========= =========== =========== ===========
F-52
<PAGE>
<CAPTION>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Year ended September 30, 1996
-----------------------------
Discontinued *
Operations AFFC Secutron FDFI Others Eliminations Total
Consolidated ------------- ---- -------- ---- ------ ------------ -----
- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from
unaffiliated customers ...... $ 7,417,684 14,830,681 6,538,540 -- -- -- 28,786,905
Intersegment revenues .......... 70,313 -- 437,051 -- -- (507,364) --
----------- ----------- ----------- --------- ----------- ----------- -----------
Total revenues ................. 7,487,997 14,830,681 6,975,591 -- -- (507,364) 28,786,905
----------- ----------- ----------- --------- ----------- ----------- -----------
Operating profit (loss) ........ (1,122,549) (2,647,329) 281,775 -- (212,000) -- (3,700,101)
Other income (expense), net .... (245,984) 404,597 (6,742) -- -- -- 151,871
Gain on sale of Clearing
Operation ................... -- 1,332,974 -- -- -- -- 1,332,974
----------- ----------- ----------- --------- ----------- ----------- -----------
Earnings (loss) from
operations
before minority interest
and income taxes ............ (1,368,533) (909,756) 275,033 -- (212,000) -- (2,215,256)
=========== =========== =========== ========= =========== =========== ===========
Depreciation and amortization .. 823,939 270,419 116,733 -- 9,051 -- 1,220,142
=========== =========== =========== ========= =========== =========== ===========
Capital expenditures ........... $ 874,595 480,004 54,493 -- -- -- 1,409,092
=========== =========== =========== ========= =========== =========== ===========
Identifiable assets as of
September 30, 1996 .......... $ 4,426,411 8,729,572 1,456,302 -- 522,390 (610,555) 14,524,120
=========== =========== =========== ========= =========== =========== ===========
</TABLE>
Identifiable assets by industry are those assets that are used in the
Company's operations in each segment. See Note 2 relating to discontinued
operations.
*The information in this column is for both the directory business and FMG.
NOTE 16- SUBSEQUENT EVENTS
The Company signed a letter of intent dated September 23, 1998 with Auerbach
Financial Group, Inc. (Auerbach) in which it is proposed that Auerbach, Pollak
& Richardson, Inc. (APR), a securities broker/dealer subsidiary of Auerbach,
and AFFC, be combined into one securities broker/dealer. On October 28, 1998,
the Company entered into a letter of commitment with Auerbach in which the
Company and Auerbach have outlined the terms that will result in the Company's
owning an interest in Auerbach, in Auerbach's acquiring a portion of the
business assets of AFFC, and in AFFC and APR forming a strategic alliance. The
Company and Auerbach are still discussing the portion of AFFC that will be
acquired by Auerbach and the final terms thereof. It is currently contemplated
that Auerbach would issue the Company a convertible promissory note and a
percentage of the outstanding common stock of Auerbach in exchange for the
portion of AFFC acquired by Auerbach from the Company. It is also contemplated
that the Company would have the ability to eventually own a majority of
Auerbach. The final terms of the transaction have not been agreed upon and any
such transaction would be subject to the execution and consummation of a final
agreement and obtaining required regulatory approvals.
F-53
<PAGE>
eVISION USA.COM, INC. AND SUBSIDIARIES
(Formerly Fronteer Financial Holdings, Ltd. and Subsidiaries))
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
With respect to the 1998 Private Offering discussed in Note 3, Heng Fung
Holdings has guaranteed the payment of each annual 8% cash dividend on the
Series B preferred stock sold by the Company if such dividend is not paid by
the Company. In consideration for making such guaranty, the Company issued
Heng Fung Holdings 250,000 shares of the Company's common stock subsequent to
year end. 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. In such event, 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.
The NASD, which administers the Nasdaq SmallCap Market, has established
criteria for securities, including the Company's common stock, to be included
on the Nasdaq SmallCap Market. Effective February 23, 1998, in order for the
Company's common stock to continue to be included on the Nasdaq SmallCap
Market, the Company had to maintain $2 million in net tangible assets, a
market capitalization of $35 million or net income of $500,000 in the most
recently completed fiscal year or in two of the last three most recently
completed fiscal years. In addition, continued inclusion required that the
Company have a public float of at least 500,000 shares with a market value of
at least $1 million, that there be at least two market-makers in the Company's
common stock and that the common stock have a minimum bid price of $1 per
share. The maintenance requirements also required the Company to have at least
two independent directors and an audit committee, a majority of which are
independent directors. The Company's failure to meet the maintenance
requirements resulted in the discontinuance of the inclusion of the Company's
common stock on the Nasdaq SmallCap Market effective at the close of trading
October 21, 1998.
Trading in the Company's common stock has continued to be conducted in the
non-Nasdaq over-the-counter market in what are commonly referred to as the
electronic bulletin board and the "pink sheets." As a result, an investor may
find it more difficult to dispose of or to obtain accurate quotations as to
the market value of the Company's common stock. In addition, the Company is
subject to a rule promulgated by the SEC which provides that if the Company
fails to meet criteria set forth in such rule, various sales practice
requirements are imposed on broker/dealers who sell the Company's common stock
to persons other than established customers and accredited investors. For
these types of transactions, the broker/dealer has to make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transactions prior to sale. Consequently, the rule may
have an adverse effect on the ability of broker/dealers to sell the Company's
common stock, which may affect the ability of purchasers to sell the Company's
common stock in the market.
F-54
<PAGE>
- --------------------------------------------------------------------------------
eVision has not authorized any dealer,
salesperson or other person to give any
information or represent anything not eVISION USA.COM, INC.
contained in this prospectus. You must not
rely on any unauthorized information. This
prospectus does not offer to sell or buy any
shares of common stock in any jurisdiction
where it is unlawful.
23,018,010 shares
of common stock
-------------
PROSPECTUS
-------------
November , 1999
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Expenses payable by us in connection with the issuance and distribution of
the securities being registered hereby are as follows:
SEC Registration Fee................................ $ 4,471
NASD Fee............................................ $ 844
Accounting Fees and Expense......................... $ 0*
Legal Fees and Expenses............................. $ 20,000*
Blue Sky Fees and Expenses.......................... $ 0*
Printing, Freight and Engraving..................... $ 5,000*
Miscellaneous....................................... $ 0*
Total...................................... $ 30,315*
- -------------------
*Estimated.
Item 14. Indemnification of Directors and Officers.
American Fronteer Financial Corporation has a $1,000,000 directors and
officers liability insurance policy. This insurance policy insures the past,
present and future directors and officers of eVision, with certain exceptions,
from claims arising out of any error, omission, misstatement, misleading
statement, neglect or breach of duty or act by any of the directors while acting
in their capacities as such. Claims include claims arising under federal and
state securities laws.
Section 7-109-102 of the Colorado Business Corporation Act permits a
Colorado corporation to indemnify any director against liability if such
person acted in good faith and, in the case of conduct in an official capacity
with the corporation, that the director's conduct was in the corporation's
best interests and, in all other cases, that the director's conduct was at
least not opposed to the best interests of the corporation or, with regard to
criminal proceedings, the director had no reasonable cause to believe the
director's conduct was unlawful.
eVision's Articles of Incorporation provide that each director, officer,
employee, fiduciary or agent of eVision (and their heirs, executors and
administrators) shall be indemnified by eVision against expenses reasonably
incurred by or imposed upon them in connection with or arising out of any
action, suit or proceeding in which they may be involved or to which they may be
made a party by reason of their being or having been a director, officer,
employee, fiduciary or agent of eVision, or at eVision's request of any other
corporation of which it is a shareholder or creditor and from which such persons
are not entitled to be indemnified (whether or not they continue to be a
director, officer, employee, fiduciary or agent at the time of imposing or
II-1
<PAGE>
incurring such expenses), except in respect to matters as to which they shall be
finally adjudged in such action, suit or proceeding to be liable for negligence
or misconduct. In addition, eVision's Articles of Incorporation provide that
subject to applicable state law, in the event of a settlement of any such
action, suit or proceeding, indemnification shall be provided only in connection
with such matters covered by the settlement as to which eVision is advised by
counsel that the person to be indemnified did not commit a breach of duty.
eVision's Bylaws include provisions requiring eVision to indemnify any
person who was or is a party or is threatening to be made a party to any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether formal or informal, by
reason of the fact that such person is or was eVision's director, officer,
employee, fiduciary or agent, or is or was serving at eVision's request as a
director, officer, partner, trustee, employee, fiduciary or agent of any foreign
or domestic profit or nonprofit corporation or of any partnership, joint
venture, trust, profit or nonprofit unincorporated association, limited
liability company or other enterprise or an employee benefit plan against
reasonably incurred expenses (including attorneys' fees), judgments, penalties,
fines (including any excise tax assessed with respect to an employee benefit
plan) and amounts paid in settlement reasonably incurred by such person in
connection with such action, suit or proceeding if it is determined by
disinterested directors that such person conducted himself or herself in good
faith and that such person reasonably believed (i) in the case of conduct in
such person's official capacity with eVision, that such person's conduct was in
eVision's best interest, or (ii) in all other cases (except criminal cases) that
such person's conduct was at least not opposed to eVision's best interest, or
(iii) in the case of any criminal proceeding, that such person had no reasonable
cause to believe such person's conduct was unlawful. No indemnification shall be
made with respect to any claim, issue or matter in connection with a proceeding
by or in which the person being indemnified is adjudged liable to eVision or in
connection with any proceeding charging that the person being indemnified
derived an improper personal benefit, whether or not involving acting in an
official capacity, in which such person was adjudged liable on the basis that
such person derived an improper personal benefit. Further, indemnification in
connection with a proceeding brought by or in its right shall be limited to
reasonable expenses, including attorneys' fees, incurred in connection with the
proceeding. Reasonable expenses (including attorneys' fees) incurred in
defending an action, suit or proceeding) may be paid by eVision to any person
being indemnified in advance of the final disposition of the action, suit or
proceeding upon receipt of (i) a written affirmation by the person being
indemnified as to such person's good faith and belief that such person met the
standards of conduct described by the Bylaws, (ii) a written undertaking,
executed personally or on behalf of the person being indemnified, to repay such
advances if it is ultimately determined that such person did not meet the
prescribed standards of conduct, and (iii) a determination is made by a
disinterested director (as described in the Bylaws) that the facts then known to
a disinterested director would not preclude indemnification. The Bylaws require
that it report in writing to shareholders with or before notice of the next
meeting of shareholders of any indemnification of or advance of expenses to any
director under the indemnification provisions of the Bylaws.
II-2
<PAGE>
Item 15. Recent Sales of Unregistered Securities.
In December 1997, eVision sold Online Credit Limited ("Online Credit") a
ten year $4,000,000 10% Convertible Debenture that is convertible into shares of
common stock of eVision at a price of $0.53125 per share until December 15,
2007, unless sooner paid, and an option to purchase a $11,000,000 10%
Convertible Debenture that is convertible into shares of common stock of eVision
at a price of $0.61 per share until ten years from the date of issue unless
sooner paid. Subsequently, Online Credit partially exercised the option and
purchased additional 10% Convertible Debentures totaling $2,500,000. On
September 23, 1998, Online Credit and eVision agreed to amend the terms of the
remaining $8,500,000 of the $11,000,000 10% Convertible Debenture by increasing
the interest rate to 12%, changing the conversion price to the lower of $0.35 or
the fair market value per share, and changing the default conversion price to
$0.10 per share. On September 25, 1998, Online Credit partially exercised its
option to purchase $8,500,000 of 12% Convertible Debentures by purchasing a
$500,000 12% Convertible Debenture from eVision. On November 11, 1998, Online
Credit partially exercised its option to purchase $8,500,000 of 12% Convertible
Debentures by purchasing a $1,000,000 12% Convertible Debenture from eVision. As
of September 30, 1999, Online Credit had purchased a total of $8,000,000 in
convertible debentures. The interest on the convertible debentures was paid
through June 30, 1999, with 1,982,217 shares of eVision's common stock.
The sales of the convertible debentures and issuance of shares for interest
were made in reliance upon the exemption from registration provided by Section
4(2) of the Securities Act of 1933, as amended ("1933 Act"). The purchaser had
access to full information concerning eVision The certificates for the shares
and the convertible debentures contain a restrictive legend advising that the
shares and the convertible debentures may not be offered for sale, sold or
otherwise transferred without having first been registered under the 1933 Act or
pursuant to an exemption from registration under the 1933 Act. No underwriters
were involved in the transaction.
On April 25, 1998, the board of directors of eVision approved a resolution
to give consideration to Online Credit for its time, efforts, capital costs and
expenses in setting up and operating a New York City office which was
transferred to eVision to be operated as an eVision institutional sales location
upon final NASD approval. Consideration, as agreed to by the board of directors
and determined based upon actual capital costs and expenses incurred, as well as
certain estimates, was $350,000 which was paid by issuing 350,000 shares of
common stock of eVision. The issuance of the common stock was made in reliance
upon the exemption from registration provided by Section 4(2) of the 1933 Act.
The purchaser had access to full information concerning eVision and represented
that it purchased the common stock for the purchaser's own account and not for
the purpose of distribution. The certificate for the common stock contains a
restrictive legend advising that the common stock may not be offered for sale,
sold or otherwise transferred without having first been registered under the
1933 Act or pursuant to an exemption from registration under the 1933 Act. No
underwriters were involved in the transaction.
In October of 1998, eVision issued 250,000 shares of its common stock to an
affiliate of Heng Fung Holdings in exchange for Heng Fung Holdings' guaranty of
the payment by eVision of the 8% cash dividend on the shares of Series B
Preferred Stock offered by eVision in a private offering. The sale of the common
II-3
<PAGE>
stock was made in reliance upon the exemption from registration provided by
Section 4(2) of the 1933 Act. The purchaser had access to full information
concerning eVision and represented that it purchased the common stock for the
purchaser's own account and not for the purpose of distribution. The certificate
for the common stock contains a restrictive legend advising that the common
stock may not be offered for sale, sold or otherwise transferred without having
first been registered under the 1933 Act or pursuant to an exemption from
registration under the 1933 Act.
Between October 1998 and April, 1999, eVision issued 25,500 shares of its
Series B Preferred Stock to various investors at a purchase price of $10.00 per
share. The sales of preferred stock were made in reliance upon the exemptions
from registration provided by Section 4(2) of the Securities Act of 1933, as
amended and Rule 506 of Regulation D adopted under the 1933 Act. The purchasers
had access to full information concerning eVision and represented that they
purchased the shares for the purchasers' own accounts and not for the purpose of
distribution. The certificates for the shares contain a restrictive legend
advising that the shares may not be offered for sale, sold or otherwise
transferred without having first been registered under the 1933 Act or pursuant
to an exemption from registration under the 1933 Act. American Fronteer
Financial Corporation was the underwriter for the offering and received a 10%
commission in addition to a 3% non-accountable expense allowance and warrants.
Between May and September 1999, eVision issued 105,500 shares of its
Convertible Series B Preferred Stock to various investors in exchange for the
25,500 shares of Series B Convertible Preferred Stock and at a purchase price of
$10.00 per share. The sales of preferred stock were made in reliance upon the
exemptions from registration provided by Section 4(2) of the Securities Act of
1933, as amended and Rule 506 of Regulation D adopted under the 1933 Act. The
purchasers had access to full information concerning eVision and represented
that they purchased the shares for the purchasers' own accounts and not for the
purpose of distribution. The certificates for the shares contain a restrictive
legend advising that the shares may not be offered for sale, sold or otherwise
transferred without having first been registered under the 1933 Act or pursuant
to an exemption from registration under the 1933 Act. American Fronteer
Financial Corporation was the underwriter for the offering and received a 10%
commission in addition to a 3% non-accountable expense allowance and warrants.
In October 1999, eVision commenced an offering of 1,500,000 shares of its
Convertible Series B-1 Preferred Stock to holders of Convertible Series B
Preferred Stock who can exchange their Convertible Series B Preferred Stock for
Convertible Series B-1 Preferred Stock and to others at a purchase price of
$10.00 per share. The sales of preferred stock are being made in reliance upon
the exemptions from registration provided by Section 4(2) of the Securities Act
of 1933, as amended and Rule 506 of Regulation D adopted under the 1933 Act. The
purchasers have access to full information concerning eVision and must represent
that they are acquiring the shares for the purchasers' own accounts and not for
the purpose of distribution. The certificates for the shares will contain a
restrictive legend advising that the shares may not be offered for sale, sold or
II-4
<PAGE>
otherwise transferred without having first been registered under the 1933 Act or
pursuant to an exemption from registration under the 1933 Act. American Fronteer
Financial Corporation is the underwriter for the offering and will receive a 10%
commission in addition to a 3% non-accountable expense allowance and warrants.
On September 18, 1999, eVision issued Anthony R. Kay 550,000 shares of
common stock in consideration of the settlement of a lawsuit. The issuance of
the common stock was made in reliance upon the exemption from registration
provided by Section 4(2) of the 1933 Act. Mr. Kay had access to full information
concerning the company and represented that he accepted the common stock for his
own account and not for the purpose of distribution. The certificate for the
common stock contains a restrictive legend advising that the common stock may
not be offered for sale, sold or otherwise transferred without having first been
registered under the 1933 Act or pursuant to an exemption from registration
under the 1933 Act. No underwriters were involved in the transaction.
Item 16. Exhibits and Financial Statement Schedules.
(a) The following is a list of all exhibits filed as part of this
Registration Statement or, as noted, incorporated by reference to this
Registration Statement:
Exhibit No. Description and Method of Filing
- ---------- --------------------------------
Exhibit 2.1 Asset Purchase Agreement dated March 1, 1998, by and between
eVision and Fronteer Marketing Group, Inc. and North Country
Yellow Pages, Inc. and Dennis W. Olson (incorporated by
reference to Exhibit 2.1 to eVision's Current Report on Form
8-K dated June 22, 1998).
Exhibit 3.1 Articles of Incorporation of eVision (incorporated by
reference to Exhibit 3.0 to eVision's Annual Report on Form
10-K for the year ended September 30, 1995).
Exhibit 3.1(i) Articles of Amendment to eVision's Articles of Incorporation
dated April 28, 1995 (incorporated by reference to Exhibit
3.0(i) to eVision's Current Report on Form 8-K dated May 9,
1995).
Exhibit 3.1(ii) Articles of Amendment to eVision's Articles of Incorporation
dated June 27, 1996 (incorporated by reference to Exhibit
3.0(ii) to eVision's Annual Report on Form 10-K for the year
ended September 30, 1996).
Exhibit 3.1(iii) Articles of Amendment to eVision's Articles of Incorporation
dated October 15, 1998.
Exhibit 3.1(iv) Articles of Amendment to eVision's Articles of Incorporation
dated November 17, 1998.
Exhibit 3.1(v) Articles of Amendment to eVision's Articles of Incorporation
dated April 19, 1999 (incorporated by reference to Exhibit
3.1 to eVision's Quarterly Report on Form 10-Q/A for the
Quarter ended March 31, 1999).
Exhibit 3.1(vi) Articles of Amendment to eVision's Articles of Incorporation
dated May 5, 1999.
II-5
<PAGE>
Exhibit No. Description and Method of Filing
- ---------- --------------------------------
Exhibit 3.1(vii) Articles of Amendment to eVision's Articles of Incorporation
dated September 25, 1999.
Exhibit 3.2 Restated Bylaws of eVision adopted February 14, 1996
(incorporated by reference to Exhibit 3.2 to eVision's
Annual Report on Form 10-K for the year ended September 30,
1996).
Exhibit 5.0 Opinion of Smith McCullough, P.C. regarding legality.*
Exhibit 10.1 Amended and Restated 1988 Incentive and Nonstatutory Stock
Option Plan as amended September 10, 1996 (incorporated by
reference to Exhibit 10.1 to eVision's Annual Report on Form
10-K for the year ended September 30, 1996).
Exhibit 10.2 Employee Stock Ownership Plan (incorporated by reference to
Exhibit 10.2 to eVision's Annual Report on Form 10-K for the
year ended September 30, 1996).
Exhibit 10.3 401(k) Plan and Amendment I thereto (incorporated by
reference to Exhibit 10.3 to eVision's Annual Report on Form
10-K for the year ended September 30, 1996).
Exhibit 10.4 Amended and Restated 1996 Incentive and Nonstatutory Stock
Option Plan, as amended September 10, 1996 (incorporated by
reference to Exhibit 10.6 to eVision's Annual Report on Form
10-K for the year ended September 30, 1996).
Exhibit 10.5 September 1996 Incentive and Nonstatutory Stock Option Plan
(incorporated by reference to Exhibit 10.7 to eVision's
Annual Report on Form 10-K for the year ended September 30,
1996).
Exhibit 10.6 $4,000,000 10% Convertible Debenture Purchase Agreement by
and between eVision and Heng Fung Finance Company Limited
dated December 17, 1997 (incorporated by reference to
Exhibit 10.7 to eVision's Annual Report on Form 10-K for the
year ended September 30, 1996).
Exhibit 10.7 Amendment No. 1 to $4,000,000 10% Convertible Debenture
Purchase Agreement by and between eVision and Heng Fung
Finance Company Limited dated September 23, 1998
(incorporated by reference to Exhibit 10.1 to eVision's
Current Report on Form 8-K dated September 11, 1998).
Exhibit 10.8 Amendment to the $4,000,000 10% Convertible Debenture
Purchase Agreement dated December 17, 1997 (incorporated by
reference to Exhibit 10.0 to eVision's Form 10-Q/A for the
quarter ended march 31, 1998).
II-6
<PAGE>
Exhibit No. Description and Method of Filing
- ---------- --------------------------------
Exhibit 10.9 Loan and Warrant Purchase Agreement by and between Heng Fung
Finance Company Limited, Fronteer Development Finance Inc.
and Global Med Technologies, Inc. dated October 7, 1998
(incorporated by reference to Exhibit 10.10 to eVision's
Annual Report on Form 10-K for the year ended September 30,
1998).
Exhibit 10.10 Assignment, Assumption and Consent Agreement by and between
Global Med Technologies, Inc., Dr. Michael F. Ruxin, M.D.,
Fronteer Capital Inc. and Fronteer Development Finance Inc.
dated September 11, 1998 (incorporated by reference to
Exhibit 10.11 to eVision's Annual Report on Form 10-K for
the year ended September 30, 1998).
Exhibit 10.11 First Amendment to Fronteer Financial Holdings, Ltd.
September 1996 Incentive and Nonstatutory Stock Option Plan
dated February 19, 1997 (incorporated by reference to
Exhibit 10.12 to eVision's Annual Report on Form 10-K for
the year ended September 30, 1998)..
Exhibit 10.12 Amendment No. 1 to $500,000 12% Convertible Debenture dated
March 23, 1999 (incorporated by reference to Exhibit 10.1 to
eVision's Quarterly Report on Form 10-Q for the Quarter
ended March 31, 1999).
Exhibit 10.13 Guaranty Agreement between eVision and Heng Fung Holdings
Company Limited dated May 5, 1999 (incorporated by reference
to Exhibit 10.2 to eVision's Quarterly Report on Form 10-Q
for the Quarter ended March 31, 1999).
Exhibit 10.14 Second Amendment to the 1996 Incentive and Nonstatutory
Stock Option Plan of eVision dated November 25, 1998
(incorporated by reference to Exhibit 10.3 to eVision's
Quarterly Report on Form 10-Q for the Quarter ended March
31, 1999).
Exhibit 10.15 First Amendment to Loan Agreement among Global Med
Technologies, Inc., Michael I. Ruxin, M.D., eBanker USA.Com,
Inc. and Heng Fung Finance Company Limited dated March 8,
1999 (incorporated by reference to Exhibit 10.4 to eVision's
Quarterly Report on Form 10-Q for the Quarter ended March
31, 1999).
Exhibit 10.16 Stock Purchase Agreement by and between eVision and
Ladsleigh Investments Limited, BVI, made as of July 30, 1999
(incorporated by reference to Exhibit 2.1 to eVision's
Current Report on Form 8-K dated August 5, 1999).
Exhibit 10.17 Pledge and Escrow Agreement by and between eVision and
Ladsleigh Investments, BVI, made as of July 30, 1999
(incorporated by reference to Exhibit 2.2 to eVision's
Current Report on Form 8-K dated August 5, 1999).
Exhibit 10.18 Promissory Note made by Ladsleigh Investments Limited, BVI
to eVision dated July 30, 1999 (incorporated by reference to
Exhibit 2.3 to eVision's Current Report on Form 8-K dated
August 5, 1999).
II-7
<PAGE>
Exhibit No. Description and Method of Filing
- ---------- --------------------------------
Exhibit 10.19 Exchange and Sale of Stock Agreement between the Company and
Q6 Technologies, Inc. dated June 18, 1999 (incorporated by
reference to Exhibit 10.4 to eVision's Quarterly Report on
Form 10-Q for the Quarter ended June 30, 1999).
Exhibit 10.20 Management Agreement dated August 18, 1998 between Fronteer
Development Finance Inc. and Fronteer Financial Holdings,
Ltd.
Exhibit 16 Letter from KPMG LLP dated September 3, 1999 (incorporated
by reference to Exhibit 16 to eVision's Current Report on
Form 8-K dated September 3, 1999).
Exhibit 21 Subsidiaries of eVision.
Exhibit 23.1 Consent of KPMG LLP.
Exhibit 23.2 Consent of Smith McCullough, P.C. *
*To be filed by amendment.
(b) Financial Statement Schedules Not Applicable
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
1. to include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
2. to reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the registration statement; and
3. to include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change in such
information in the registration statement.
(2) that, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed the initial bona fide
offering thereof; and
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-8
<PAGE>
(4) insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City and County of Denver, State
of Colorado on November 11, 1999.
eVISION USA.COM, INC.
By: /s/ Fai H. Chan
--------------------------------------
Fai H. Chan, President
By: /s/ Gary L. Cook
--------------------------------------
Gary L. Cook, Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Fai H. Chan Director November 11, 1999
- -------------------------------
Fai H. Chan
/s/ Robert H. Trapp Director November 11, 1999
- -------------------------------
Robert H. Trapp
/s/ Kwok Jen Fong Director November 11, 1999
- -------------------------------
Kwok Jen Fong
/s/ Robert Jeffers, Jr. Director November 11, 1999
- -------------------------------
Robert Jeffers, Jr.
/s/ Jeffrey M. Bush Director November 11, 1999
- -------------------------------
Jeffrey M. Busch
/s/ Tong Wan Chan Director November 11, 1999
- -------------------------------
Tong Wan Chan
II-10
<PAGE>
EXHIBIT INDEX
Exhibit No. Description and Method of Filing
- ---------- --------------------------------
Exhibit 2.1 Asset Purchase Agreement dated March 1, 1998, by and between
eVision and Fronteer Marketing Group, Inc. and North Country
Yellow Pages, Inc. and Dennis W. Olson (incorporated by
reference to Exhibit 2.1 to eVision's Current Report on Form
8-K dated June 22, 1998).
Exhibit 3.1 Articles of Incorporation of eVision (incorporated by
reference to Exhibit 3.0 to eVision's Annual Report on Form
10-K for the year ended September 30, 1995).
Exhibit 3.1(i) Articles of Amendment to eVision's Articles of Incorporation
dated April 28, 1995 (incorporated by reference to Exhibit
3.0(i) to eVision's Current Report on Form 8-K dated May 9,
1995).
Exhibit 3.1(ii) Articles of Amendment to eVision's Articles of Incorporation
dated June 27, 1996 (incorporated by reference to Exhibit
3.0(ii) to eVision's Annual Report on Form 10-K for the year
ended September 30, 1996).
Exhibit 3.1(iii) Articles of Amendment to eVision's Articles of Incorporation
dated October 15, 1998.
Exhibit 3.1(iv) Articles of Amendment to eVision's Articles of Incorporation
dated November 17, 1998.
Exhibit 3.1(v) Articles of Amendment to eVision's Articles of Incorporation
dated April 19, 1999 (incorporated by reference to Exhibit
3.1 to eVision's Quarterly Report on Form 10-Q/A for the
Quarter ended March 31, 1999).
Exhibit 3.1(vi) Articles of Amendment to eVision's Articles of Incorporation
dated May 5, 1999.
Exhibit 3.1(vii) Articles of Amendment to eVision's Articles of Incorporation
dated September 25, 1999.
Exhibit 3.2 Restated Bylaws of eVision adopted February 14, 1996
(incorporated by reference to Exhibit 3.2 to eVision's
Annual Report on Form 10-K for the year ended September 30,
1996).
Exhibit 5.0 Opinion of Smith McCullough, P.C. regarding legality.*
Exhibit 10.1 Amended and Restated 1988 Incentive and Nonstatutory Stock
Option Plan as amended September 10, 1996 (incorporated by
reference to Exhibit 10.1 to eVision's Annual Report on Form
10-K for the year ended September 30, 1996).
<PAGE>
Exhibit No. Description and Method of Filing
- ---------- --------------------------------
Exhibit 10.2 Employee Stock Ownership Plan (incorporated by reference to
Exhibit 10.2 to eVision's Annual Report on Form 10-K for the
year ended September 30, 1996).
Exhibit 10.3 401(k) Plan and Amendment I thereto (incorporated by
reference to Exhibit 10.3 to eVision's Annual Report on Form
10-K for the year ended September 30, 1996).
Exhibit 10.4 Amended and Restated 1996 Incentive and Nonstatutory Stock
Option Plan, as amended September 10, 1996 (incorporated by
reference to Exhibit 10.6 to eVision's Annual Report on Form
10-K for the year ended September 30, 1996).
Exhibit 10.5 September 1996 Incentive and Nonstatutory Stock Option Plan
(incorporated by reference to Exhibit 10.7 to eVision's
Annual Report on Form 10-K for the year ended September 30,
1996).
Exhibit 10.6 $4,000,000 10% Convertible Debenture Purchase Agreement by
and between eVision and Heng Fung Finance Company Limited
dated December 17, 1997 (incorporated by reference to
Exhibit 10.7 to eVision's Annual Report on Form 10-K for the
year ended September 30, 1996).
Exhibit 10.7 Amendment No. 1 to $4,000,000 10% Convertible Debenture
Purchase Agreement by and between eVision and Heng Fung
Finance Company Limited dated September 23, 1998
(incorporated by reference to Exhibit 10.1 to eVision's
Current Report on Form 8-K dated September 11, 1998).
Exhibit 10.8 Amendment to the $4,000,000 10% Convertible Debenture
Purchase Agreement dated December 17, 1997 (incorporated by
reference to Exhibit 10.0 to eVision's Form 10-Q/A for the
quarter ended march 31, 1998).
Exhibit 10.9 Loan and Warrant Purchase Agreement by and between Heng Fung
Finance Company Limited, Fronteer Development Finance Inc.
and Global Med Technologies, Inc. dated October 7, 1998
(incorporated by reference to Exhibit 10.10 to eVision's
Annual Report on Form 10-K for the year ended September 30,
1998).
Exhibit 10.10 Assignment, Assumption and Consent Agreement by and between
Global Med Technologies, Inc., Dr. Michael F. Ruxin, M.D.,
Fronteer Capital Inc. and Fronteer Development Finance Inc.
dated September 11, 1998 (incorporated by reference to
Exhibit 10.11 to eVision's Annual Report on Form 10-K for
the year ended September 30, 1998).
<PAGE>
Exhibit No. Description and Method of Filing
- ---------- --------------------------------
Exhibit 10.11 First Amendment to Fronteer Financial Holdings, Ltd.
September 1996 Incentive and Nonstatutory Stock Option Plan
dated February 19, 1997 (incorporated by reference to
Exhibit 10.12 to eVision's Annual Report on Form 10-K for
the year ended September 30, 1998)..
Exhibit 10.12 Amendment No. 1 to $500,000 12% Convertible Debenture dated
March 23, 1999 (incorporated by reference to Exhibit 10.1 to
eVision's Quarterly Report on Form 10-Q for the Quarter
ended March 31, 1999).
Exhibit 10.13 Guaranty Agreement between eVision and Heng Fung Holdings
Company Limited dated May 5, 1999 (incorporated by reference
to Exhibit 10.2 to eVision's Quarterly Report on Form 10-Q
for the Quarter ended March 31, 1999).
Exhibit 10.14 Second Amendment to the 1996 Incentive and Nonstatutory
Stock Option Plan of eVision dated November 25, 1998
(incorporated by reference to Exhibit 10.3 to eVision's
Quarterly Report on Form 10-Q for the Quarter ended March
31, 1999).
Exhibit 10.15 First Amendment to Loan Agreement among Global Med
Technologies, Inc., Michael I. Ruxin, M.D., eBanker USA.Com,
Inc. and Heng Fung Finance Company Limited dated March 8,
1999 (incorporated by reference to Exhibit 10.4 to eVision's
Quarterly Report on Form 10-Q for the Quarter ended March
31, 1999).
Exhibit 10.16 Stock Purchase Agreement by and between eVision and
Ladsleigh Investments Limited, BVI, made as of July 30, 1999
(incorporated by reference to Exhibit 2.1 to eVision's
Current Report on Form 8-K dated August 5, 1999).
Exhibit 10.17 Pledge and Escrow Agreement by and between eVision and
Ladsleigh Investments, BVI, made as of July 30, 1999
(incorporated by reference to Exhibit 2.2 to eVision's
Current Report on Form 8-K dated August 5, 1999).
Exhibit 10.18 Promissory Note made by Ladsleigh Investments Limited, BVI
to eVision dated July 30, 1999 (incorporated by reference to
Exhibit 2.3 to eVision's Current Report on Form 8-K dated
August 5, 1999).
Exhibit 10.19 Exchange and Sale of Stock Agreement between the Company and
Q6 Technologies, Inc. dated June 18, 1999 (incorporated by
reference to Exhibit 10.4 to eVision's Quarterly Report on
Form 10-Q for the Quarter ended June 30, 1999).
<PAGE>
Exhibit No. Description and Method of Filing
- ---------- --------------------------------
Exhibit 10.20 Management Agreement dated August 18, 1998 between Fronteer
Development Finance Inc. and Fronteer Financial Holdings,
Ltd.
Exhibit 16 Letter from KPMG LLP dated September 3, 1999 (incorporated
by reference to Exhibit 16 to eVision's Current Report on
Form 8-K dated September 3, 1999).
Exhibit 21 Subsidiaries of eVision.
Exhibit 23.1 Consent of KPMG LLP.
Exhibit 23.2 Consent of Smith McCullough, P.C. *
*To be filed by amendment.
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
FRONTEER FINANCIAL HOLDINGS, LTD.
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the Corporation is Fronteer Financial Holdings, Ltd.
SECOND: The following amendments to the Articles of Incorporation were duly
adopted by the board of directors on October 13, 1998, in accordance with
Section 7-106-102 of the Colorado Business Corporation Act.
Article VII of the Articles of Incorporation is hereby amended by adding
the following Section 7.4:
Section 7.4 Series B Preferred Stock. 3,000,000 shares of the Corporation's
preferred stock shall consist of Series B Preferred Stock ("Series B"). The
rights, preferences, privileges and restrictions imposed upon the Series B are
set forth in this Section 7.4 of this Article VII.
(a) Dividends. The Series B is entitled to receive, out of funds
legally available therefor, cumulative dividends at the rate of 8% percent per
annum in cash and 7% per annum in shares of Series B, when and if declared by
the Board of Directors. The dividend payable in shares of Series B will be
equivalent to .07 share of Series B for each outstanding share of Series B. The
dividend on the Series B is payable annually beginning October 31, 1999, when
and if declared by the Board of Directors. Any dividends earned on the Series B
prior to October 31, 1999, shall be earned pro rata from the Original Issue
Date. The Series B is not convertible at any time. The Series B is redeemable by
the Company on and after October 1, 2003, at a price of $10.00 per share plus
any accrued and unpaid dividends.
If any dividends payable on the Series B are not paid for any reason,
the right of the holders of the Series B to receive payment of such dividends
shall not lapse or terminate, but said unpaid dividends shall accumulate and
shall be paid without interest to the holders of the Series B, when and if
declared by the Board of Directors of the Corporation, before any sum or sums
shall be set aside for or applied to the purchase or redemption of the Series B
or the purchase, redemption or other acquisition for value of the Common Stock
and before any dividend shall be paid or declared, or any other distribution
shall be ordered or made, upon the Common Stock. After cumulative dividends on
the Series B for all past dividend periods and for the then current year
dividend period shall have been declared and paid or set apart, if the Board of
Directors shall declare dividends out of funds legally available therefor, such
additional dividends may be declared on the Common Stock.
1
<PAGE>
(b) Liquidation and Dissolution. Upon the voluntary or involuntary
liquidation, winding up or dissolution of the Corporation, out of the assets
available for distribution to shareholders each share of Series B shall be
entitled to receive, in preference to any payment on the Common Stock only, an
amount equal to Ten Dollars ($10.00) per share, plus cumulative dividends as
provided in Section 7.4(a) of this Article VII accrued and unpaid to the date
payment is made available to the Series B. After the full preferential
liquidation amount has been paid to, or determined and set apart for, Series B,
the remaining assets shall be payable to the holders of the Common Stock. In the
event the assets of the Corporation are insufficient to pay the full
preferential liquidation amount required to be paid to the Series B, the Series
B shall receive such funds pro rata on a share for share basis until the full
liquidating preference on the Series B is paid in full, and the balance, if any,
to the Common Stock.
A reorganization shall not be considered to be a liquidation, winding
up or dissolution within the meaning of this Section 7.4(b) of this Article VII
and the Series B shall be entitled only to the rights provided in the plan of
reorganization.
(c) Voting. A holder of a share of Series B shall be entitled to one
vote on any and all matters, including the election of directors, and shall,
except as otherwise may be provided by law, vote as a class with the holders of
outstanding Common Stock.
(d) No Conversion Rights. The holders of Series B have no conversion
rights.
(e) Special Definitions. For purposes of this Section 7.4 of this
Article VII, the term "Original Issue Date" shall mean, the original date on
which a share of Series B was first issued.
(f) No Preemptive Rights. No holder of the Series B shall be entitled
as of right to subscribe for, purchase, or receive any part of any new or
additional shares of any class, whether now or hereafter authorized, or of
bonds, debentures, or other evidences of indebtedness convertible into or
exchangeable for shares of any class, but all such new or additional shares of
any class, or bonds, debentures, or other evidences of indebtedness convertible
into or exchangeable for shares, may be issued and disposed of by the Board of
Directors on such terms and for such consideration (to the extent permitted by
law), and to such person or persons as the Board of Directors in their absolute
discretion may deem advisable.
(g) Optional Redemption of Series B.
(i) On and after October 1, 2003, the Series B is subject to
redemption, out of funds legally available therefor, in whole, or from time to
time, in part, at the option of the Board of Directors. If only a part of the
shares of Series B is to be redeemed, the redemption shall be carried out pro
rata subject to adjustment to avoid redemption of fractional shares. The
2
<PAGE>
redemption price shall be Ten Dollars ($10.00) per share plus cumulative
dividends as provided in Section 7.4(a) of this Article VII accrued and unpaid
to the date fixed for redemption.
(ii) Adjustment for Stock Splits and Combinations. If the
Corporation shall at any time or from time to time after the Original Issue Date
applicable to Series B effect a subdivision of the outstanding Series B, the
applicable Series B redemption price then in effect immediately before that
subdivision shall be proportionately decreased and, conversely, if the
Corporation shall at any time or from time to time after the Original Issue Date
applicable to Series B combine the outstanding shares of Series B, the
applicable Series B redemption price then in effect immediately before the
combination shall be proportionately increased. Any adjustments under this
Section 7.4(g)(ii) of this Article VII shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(iii) At least 45 days before the date fixed for redemption
(hereinafter referred to as the "Redemption Date"), written notice (hereinafter
referred to as the "Redemption Notice") shall be mailed postage prepaid, to each
holder of record of the Series B which is to be redeemed, at the holder's
address shown on the records of the Corporation. The Redemption Notice shall
contain the following information:
(a) the number of shares of Series B held by the holder which
are to be redeemed by the Corporation, and the total number of shares of Series
B held by all holders to be so redeemed;
(b) the Redemption Date and the applicable Redemption Price;
and
(c) that the holder is to surrender to the Corporation, at
the place designated therein, the holder's certificate or certificates
representing the shares of Series B to be redeemed.
(iv) Each holder of shares of Series B to be redeemed shall
surrender the certificate or certificates representing such shares to the
Corporation at the place designated in the Redemption Notice, and thereupon the
applicable redemption price for such shares as set forth herein shall be paid to
the order of the person or entity whose name appears on such certificate or
certificates and each surrendered certificate shall be cancelled and retired.
(v) From and after the later of the Redemption Date or 45 days
from the date the Corporation shall have given the Redemption Notice, no shares
of Series B thereupon subject to redemption shall be entitled to any further
accrual of any dividends.
(vi) The Corporation's deliverance of payment of the redemption
price shall be good and sufficient discharge to the Corporation of the holder's
investment in the Series B. If less than the full amount of the investment of
the holder in the Series B is redeemed, the Corporation shall deliver to the
3
<PAGE>
holder a new Series B certificate representing the balance of the investment by
the holder in the Series B which remains outstanding.
Dated: October 15, 1998
FRONTEER FINANCIAL HOLDINGS, LTD.,
a Colorado corporation
By: /s/Gary L. Cook
------------------------------------
Gary L. Cook, Secretary and Treasurer
4
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
FRONTEER FINANCIAL HOLDINGS, LTD.
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the Corporation is Fronteer Financial Holdings, Ltd.
SECOND: The following amendments to the Articles of Incorporation were duly
adopted by the board of directors on November 13, 1998, in accordance with
Section 7-106-102 of the Colorado Business Corporation Act.
The last sentence of the first paragraph of Paragraph (a) of Section 7.4 of
Article VII of the Articles of Incorporation is hereby amended by replacing it
with a sentence that reads as follows:
"The Series B is redeemable by the Company on and after
October 1, 2003, at a price of $12.50 per share plus any accrued
and unpaid dividends."
The last sentence of Paragraph (g)(i) of Section 7.4 of Article VII of the
Articles of Incorporation is hereby amended by replacing it with a sentence that
reads as follows:
"The redemption price shall be Twelve Dollars and Fifty
Cents ($12.50) per share plus cumulative dividends as provided in
Section 7.4(a) of this Article VII accrued and unpaid to the date
fixed for redemption."
Dated: November 17, 1998
FRONTEER FINANCIAL HOLDINGS, LTD.,
a Colorado corporation
By: /s/Gary L. Cook
------------------------------------
Gary L. Cook, Secretary and Treasurer
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
eVISION USA.Com, Inc.
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned Corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the Corporation is eVision USA.Com, Inc.
SECOND: The following amendments to the Articles of Incorporation were duly
adopted by the board of directors on April 23, 1999, in accordance with Section
7-106-102 of the Colorado Business Corporation Act.
Article VII of the Articles of Incorporation is hereby amended by adding
the following Section 7.5:
Section 7.5 Convertible Series B Preferred Stock. 2,000,000 shares of
the Corporation's preferred stock shall consist of Convertible Series B
Preferred Stock ("Convertible Series B"). The rights, preferences,
privileges and restrictions imposed upon the Convertible Series B are set
forth in this Section 7.5 of this Article VII.
(a) Dividends. The Convertible Series B is entitled to receive,
out of funds legally available therefor, cumulative dividends at the
rate of 8% percent per annum in cash and 7% per annum in shares of
Convertible Series B, when and if declared by the Board of Directors.
The dividend payable in shares of Convertible Series B will be
equivalent to .07 share of Convertible Series B for each outstanding
share of Convertible Series B. The dividend on the Convertible Series
B is payable annually beginning October 31, 1999, when and if declared
by the Board of Directors. Any dividends earned on the Convertible
Series B prior to October 31, 1999, shall be earned pro rata from the
Original Issue Date. The Convertible Series B is redeemable by the
Company on and after October 1, 2003, at a price of $10.00 per share
plus any accrued and unpaid dividends.
If any dividends payable on the Convertible Series B are not paid
for any reason, the right of the holders of the Convertible Series B
to receive payment of such dividends shall not lapse or terminate, but
said unpaid dividends shall accumulate and shall be paid without
interest to the holders of the Convertible Series B, when and if
declared by the Board of Directors of the Corporation, before any sum
or sums shall be set aside for or applied to the purchase or
redemption of the Convertible Series B or the purchase, redemption or
<PAGE>
other acquisition for value of the Common Stock and before any
dividend shall be paid or declared, or any other distribution shall be
ordered or made, upon the Common Stock. After cumulative dividends on
the Convertible Series B for all past dividend periods and for the
then current year dividend period shall have been declared and paid or
set apart, if the Board of Directors shall declare dividends out of
funds legally available therefor, such additional dividends may be
declared on the Common Stock.
(b) Liquidation and Dissolution. Upon the voluntary or
involuntary liquidation, winding up or dissolution of the Corporation,
out of the assets available for distribution to shareholders each
share of Convertible Series B shall be entitled to receive, in
preference to any payment on the Common Stock only, an amount equal to
Ten Dollars ($10.00) per share, plus cumulative dividends as provided
in Section 7.5(a) of this Article VII accrued and unpaid to the date
payment is made available to the Convertible Series B. After the full
preferential liquidation amount has been paid to, or determined and
set apart for, Convertible Series B, the remaining assets shall be
payable to the holders of the Common Stock. In the event the assets of
the Corporation are insufficient to pay the full preferential
liquidation amount required to be paid to the Convertible Series B,
the Convertible Series B shall receive such funds pro rata on a share
for share basis until the full liquidating preference on the
Convertible Series B is paid in full, and the balance, if any, to the
Common Stock.
A reorganization shall not be considered to be a liquidation,
winding up or dissolution within the meaning of this Section 7.5(b) of
this Article VII and the Convertible Series B shall be entitled only
to the rights provided in the plan of reorganization.
(c) Voting. A holder of a share of Convertible Series B shall be
entitled to one vote on any and all matters, including the election of
directors, and shall, except as otherwise may be provided by law, vote
as a class with the holders of outstanding Common Stock.
(d) Conversion Rights. The holders of Convertible Series B have
the following conversion rights (the "Conversion Rights"):
(i) Right to Convert. Each share of Convertible Series B
shall be convertible into Common Stock, at the option of the
holder thereof, subject to any prior redemption or conversion by
the Board of Directors of the Corporation. Each share of
Convertible Series B shall be convertible, pursuant to this
paragraph, at the office of the Corporation or of any transfer
agent for such Convertible Series B, as the case may be, into
fully paid and nonassessable shares of Common Stock, at a price
of $2.00 per share of Common Stock, subject to adjustment
pursuant to paragraph (d)(iv) below ("Conversion Price").
2
<PAGE>
(ii) Automatic Conversion. Each share of Convertible Series
B shall be automatically converted into Common Stock at such time
as the last sale price of the Common Stock closes in the market
where it predominately trades ("Market Price") is at least $4.00
per share for 30 consecutive trading days. Upon the occurrence of
such event, each share of Convertible Series B shall be converted
into fully paid and nonassessable shares of Common Stock at the
Conversion Price.
(iii) Mechanics of Conversion. Before any holder of shares
of Convertible Series B shall be entitled to convert the same
into full shares of Common Stock pursuant to paragraph (d)(i)
above, the holder shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of
any transfer agent for such Convertible Series B, as the case may
be, and shall give written notice to the Corporation at such
office that the holder elects to convert the same and shall state
therein the holder's name or the name or names of the holder's
nominees in which the holder wishes the certificate or
certificates for shares of Common Stock to be issued. The
Corporation shall, as soon as practicable thereafter, issue and
deliver or cause to be issued and delivered at such office to
such holder, or to the holder's nominee or nominees, a
certificate or certificates for the number of full shares of
Common Stock to which the holder shall be entitled as aforesaid.
A conversion pursuant to paragraph (d)(i) above shall be deemed
to have occurred immediately prior to the close of business on
the date of such surrender of the shares of Convertible Series B
to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such
shares of Common Stock on such date.
Upon automatic conversion of Convertible Series B into full
shares of Common Stock pursuant to paragraph (d)(ii) above, the
holder of the Convertible Series B shall, upon request by the
Corporation, surrender the certificate or certificates therefor,
duly endorsed, at the office of the Corporation or any transfer
agent for such Convertible Series B, as the case may be, and
shall give written notice to the Corporation at such office that
the holder elects to convert the same and shall state therein the
holder's name or the name or names of the holder's nominees in
which the holder wishes the certificate or certificates for
shares of Common Stock to be issued. The Corporation shall, as
soon as practicable thereafter, issue and deliver or cause to be
issued and delivered at such office to such holder, or to the
holder's nominee or nominees, a certificate or certificates for
the number of full shares of Common Stock to which the holder
shall be entitled as aforesaid. A conversion pursuant to
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paragraph (d)(ii) above shall be deemed to have occurred
immediately upon close of business on the 30th consecutive
trading day the Market Price of the Common Stock is at least
$4.00 per share. Each holder of the Convertible Series B whose
Convertible Series B is converted to Common Stock shall be
entitled to, and the Corporation shall promptly pay in cash, or
set aside for payment, all unpaid dividends with respect to such
converted shares of the Convertible Series B, to and including
the time of conversion. A holder of the Convertible Series B
shall not be entitled to any remaining dividends with respect to
the Convertible Series B so converted, but shall be entitled to
receive, on the date of the conversion, the arrearages, if any,
with respect to any shares of the Convertible Series B so
converted.
(iv) Adjustments to Conversion Price.
(1) Special Definition. For purposes of this paragraph
(d)(iv), the "Original Issue Date" shall mean, the original
date on which a share of Convertible Series B was first
issued to each preferred shareholder.
(2) Adjustment for Stock Splits and Combinations. If
the Corporation shall at any time or from time to time after
the Original Issue Date effect a subdivision of the
outstanding Common Stock, the applicable Conversion Price
then in effect immediately before that subdivision shall be
proportionately decreased and, conversely, if the
Corporation shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common
Stock, the applicable Conversion Price then in effect
immediately before the combination shall be proportionately
increased. Any adjustments under this paragraph (d)(iv)(2)
shall become effective at the close of business on the date
the subdivision or combination becomes effective.
(3) Adjustment for Certain Dividends and Distributions.
In the event the Corporation at any time, or from time to
time, after the Original Issue Date shall make or issue, or
fix a record date for the determination of holders of Common
Stock entitled to receive, a dividend or other distribution
payable in shares of Common Stock, then and in each event
the applicable Conversion Price then in effect shall be
decreased as of the time of such issuance or, in the event
such a record date shall have been fixed, as of the close of
business on such record date, by multiplying the Conversion
Price then in effect by a fraction:
a) the numerator of which shall be the total
number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the
close of business on such record date, and
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b) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the
close of business on such record date plus the number
of shares of Common Stock issuable in payment of such
dividend or distribution; provided, however, if such
record date shall have been fixed and such dividend is
not fully paid or if such distribution is not fully
made on the date fixed therefor, the Conversion Price
shall be recomputed accordingly as of the close of
business on such record date and thereafter such
Conversion Price shall be adjusted pursuant to this
paragraph (d)(iv)(3) as of the time of actual payment
of such dividends or distributions.
(4) Adjustment for Other Dividends and Distributions.
In the event the Corporation at any time or from time to
time after the Original Issue Date shall make or issue, or
fix a record date for the determination of holders of Common
Stock entitled to receive, a dividend or other distribution
payable in securities of the Corporation other than shares
of Common Stock, then and in such event provisions shall be
made so that the holders of Convertible Series B shall
receive upon conversion thereof, in addition to the number
of shares of Common Stock receivable thereon, the amount of
securities of the Corporation which they would have received
had their Convertible Series B been converted into Common
Stock on the date of such event and had thereafter, during
the period from the date of such event to and including the
conversion date, retained such securities (together with any
distributions payable thereon during such period) receivable
by them as aforesaid during such period, giving application
to all adjustments called for during such period under this
paragraph (d) with respect to the rights of the holders of
the Convertible Series B.
(5) Adjustment for Reclassification, Exchange, or
Substitution. If the Common Stock issuable upon the
conversion of the Convertible Series B at any time or from
time to time after the Original Issue Date, shall be changed
into the same or different number of shares of any class or
classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or
combination of shares or stock dividends provided for in
paragraphs (d)(iv)(2) and (3) above, or a reorganization,
merger, consolidation, or sale of assets provided for in
paragraph (d)(iv)(6) below, then, and in each such event,
provisions shall be made (by adjustment to the Conversion
Price or otherwise) so that the holder of each share of
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Convertible Series B shall have the right thereafter to
convert each share of Convertible Series B into the kind and
amount of shares of stock and other securities receivable
upon such reorganization, reclassification, or other change,
by holders of the number of shares of Common Stock into
which such share of Convertible Series B might have been
converted immediately prior to such reorganization,
reclassification, or change, all subject to further
adjustment as provided herein.
(6) Adjustment for Reorganization, Merger,
Consolidation or Sales of Assets. If at any time or from
time to time after the Original Issue Date of the
Convertible Series B there shall be a capital reorganization
of the Corporation (other than a subdivision, combination,
reclassification, exchange or substitution of shares
provided for in paragraphs (d)(iv)(2) and (5) above) or a
merger or consolidation of the Corporation with or into
another corporation, or the sale of all or substantially all
of the Corporation's properties and assets to any other
person or entity, then, as a part of such reorganization,
merger, consolidation, or sale, provision shall be made (by
adjustment to the Conversion Price or otherwise) so that the
holders of the Convertible Series B shall thereafter be
entitled to receive upon conversion of the Convertible
Series B, the number and kind of shares of stock or other
securities or property of the Corporation, or of any
successor corporation resulting from such merger or
consolidation or sale, to which a holder of Common Stock
deliverable upon conversion of such shares would have been
entitled if such capital reorganization, merger,
consolidation, or sale occurred on the date of the
conversion.
(v) No Impairment. The Corporation will not, by amendment of
its Articles of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the
provisions of this paragraph (d) and in the taking of all such
action as may be necessary or appropriate, in order to protect
the conversion rights of the holders of the Convertible Series B
against impairment.
(vi) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Price or any
other adjustment pursuant to this paragraph (d), the Corporation
at its expense shall, upon request by a holder of Convertible
Series B, promptly compute such adjustment or readjustment in
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accordance with the terms hereof and furnish to each holder of
such Convertible Series B a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of such
affected Convertible Series B, furnish or cause to be furnished
to such holder a like certificate setting forth the (i) such
adjustment and readjustment, (ii) the Conversion Price at the
time in effect, and (iii) the number of shares of Common Stock
and the amount, if any, of other property which at the time would
be received upon the conversion of a share of such Convertible
Series. B.
(vii) Notices of Record Date. In the event that:
(1) the Corporation shall set a record date for
the purpose of entitling the holders of its shares of
Common Stock to receive a dividend, or other
distribution, payable otherwise than in cash;
(2) the Corporation shall set a record date for
the purpose of entitling the holders of its shares of
Common Stock to subscribe for or purchase any shares of
any class or to receive any other rights;
(3) there shall occur any capital reorganization
of the Corporation, reclassification of the shares of
the Corporation (other than a subdivision or
combination of its outstanding common stock),
consolidation or merger of the Corporation with or into
another corporation or conveyance of all or
substantially all of the assets of the Corporation to
another person or entity; or
(4) there shall occur a voluntary or involuntary
dissolution, liquidation, or winding up of the
Corporation;
then, and in any such case, the Corporation shall cause
to be mailed to the holders of record of the outstanding
shares of the Convertible Series B, at least 10 days prior
to the date hereinafter specified, a notice stating (a) the
date which (x) has been set as the record date for the
purpose of such dividend, distribution, or rights, or (y)
such reclassification, reorganization, consolidation,
merger, conveyance, dissolution, liquidation or, winding up
is to take place and (b) the record date as of which holders
of Common Stock of record shall be entitled to other
property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
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(viii) Notices. Any notice required by the provisions
of this paragraph (d) to be given to the holders of shares
of Convertible Series B shall be in writing and shall be
delivered by personal service or agent, by registered or
certified mail, return receipt requested, with postage
thereon fully prepaid. All such communications shall be
addressed to each holder of record at its address appearing
on the books of the Corporation. Service of any such
communication made only by mail shall be deemed complete on
the date of actual delivery as shown by the addressee's
registry or certification receipt or at the expiration of
the fourth business day after the date of mailing, whichever
is earlier in time.
(ix) Fractional Shares. No fractional shares of Common
Stock shall be issued upon conversion of Convertible Series
B. In lieu of any fractional shares to which the holder
would otherwise be entitled, the Corporation shall pay cash
equal to the product of such fraction multiplied by the
Market Price of one share of the Corporation's Common Stock
on the date of conversion.
(x) Payment of Taxes. The Corporation will pay all
taxes (other than taxes based upon income) and other
governmental charges that may be imposed with respect to the
issue or delivery of shares of Common Stock upon conversion
of shares of Convertible Series B, including without
limitation any tax or other charge imposed in connection
with any transfer involved in the issue and delivery of
shares of Common Stock in a name other than that in which
the shares of the Convertible Series B so converted were
registered.
(xi) Reservation of Common Stock. The Corporation shall
at all times reserve and keep available, out of its
authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of the Convertible
Series B, the full number of shares of Common Stock
deliverable upon the conversion of all shares of Convertible
Series B from time to time outstanding. The Corporation
shall from time to time increase the authorized number of
shares of Common Stock if the remaining unissued authorized
shares of Common Stock shall not be sufficient to permit the
conversion of all of the Convertible Series B at the time
outstanding.
(xii) Retirement of Convertible Series B Converted. No
shares of Convertible Series B that have been converted
shall ever again be reissued, and all such shares so
converted shall, upon such conversion, cease to be a part of
the authorized shares of the Corporation.
(e) No Preemptive Rights. No holder of the Convertible
Series B shall be entitled as of right to subscribe for,
purchase, or receive any part of any new or additional shares of
any class, whether now or hereafter authorized, or of bonds,
debentures, or other evidences of indebtedness convertible into
8
<PAGE>
or exchangeable for shares of any class, but all such new or
additional shares of any class, or bonds, debentures, or other
evidences of indebtedness convertible into or exchangeable for
shares, may be issued and disposed of by the Board of Directors
on such terms and for such consideration (to the extent permitted
by law), and to such person or persons as the Board of Directors
in their absolute discretion may deem advisable.
(f) Optional Redemption of Convertible Series B.
(i) Redemption. On and after October 1, 2003, the
Convertible Series B is subject to redemption, out of funds
legally available therefor, in whole, or from time to time,
in part, at the option of the Board of Directors. If only a
part of the shares of Convertible Series B is to be
redeemed, the redemption shall be carried out pro rata
subject to adjustment to avoid redemption of fractional
shares. The redemption price shall be Ten Dollars ($10.00)
per share plus cumulative dividends as provided in Section
7.5(a) of this Article VII accrued and unpaid to the date
fixed for redemption.
(ii) Adjustment for Stock Splits and Combinations. If
the Corporation shall at any time or from time to time after
the Original Issue Date applicable to Convertible Series B
effect a subdivision of the outstanding Convertible Series
B, the applicable Convertible Series B redemption price then
in effect immediately before that subdivision shall be
proportionately decreased and, conversely, if the
Corporation shall at any time or from time to time after the
Original Issue Date applicable to Convertible Series B
combine the outstanding shares of Convertible Series B, the
applicable Convertible Series B redemption price then in
effect immediately before the combination shall be
proportionately increased. Any adjustments under this
Section 7.5(g)(ii) of this Article VII shall become
effective at the close of business on the date the
subdivision or combination becomes effective.
(iii) Notice. At least 45 days before the date fixed
for redemption (hereinafter referred to as the "Redemption
Date"), written notice (hereinafter referred to as the
"Redemption Notice") shall be mailed postage prepaid, to
each holder of record of the Convertible Series B which is
to be redeemed, at the holder's address shown on the records
of the Corporation. The Redemption Notice shall contain the
following information:
(1) the number of shares of Convertible Series B
held by the holder which are to be redeemed by the
Corporation, and the total number of shares of
Convertible Series B held by all holders to be so
redeemed;
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<PAGE>
(2) the Redemption Date and the applicable
Redemption Price; and
(3) that the holder is to surrender to the
Corporation, at the place designated therein, the
holder's certificate or certificates representing the
shares of Convertible Series B to be redeemed.
(iv) Surrender. Each holder of shares of Convertible
Series B to be redeemed shall surrender the certificate or
certificates representing such shares to the Corporation at
the place designated in the Redemption Notice, and thereupon
the applicable redemption price for such shares as set forth
herein shall be paid to the order of the person or entity
whose name appears on such certificate or certificates and
each surrendered certificate shall be cancelled and retired.
(v) Dividends. From and after the later of the
Redemption Date or 45 days from the date the Corporation
shall have given the Redemption Notice, no shares of
Convertible Series B thereupon subject to redemption shall
be entitled to any further accrual of any dividends.
(vi) Payment. The Corporation's deliverance of payment
of the redemption price shall be good and sufficient
discharge to the Corporation of the Convertible Series B
redeemed. If less than the full number of a holder's shares
of Convertible Series B is redeemed, the Corporation shall
deliver to the holder a new Convertible Series B certificate
representing the balance of the holder's shares of
Convertible Series B.
Dated: May 5, 1999
eVISION USA.COM, INC.,
a Colorado corporation
By: /s/Gary L. Cook
-------------------------------------
Gary L. Cook, Secretary and Treasurer
10
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
eVISION USA.Com, Inc.
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned Corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the Corporation is eVision USA.Com, Inc.
SECOND: The following amendments to the Articles of Incorporation were duly
adopted by the board of directors on September 22, 1999, in accordance with
Section 7-106-102 of the Colorado Business Corporation Act.
Article VII of the Articles of Incorporation is hereby amended by adding
the following Section 7.6:
Section 7.6 Convertible Series B-1 Preferred Stock. 2,000,000 shares
of the Corporation's preferred stock shall consist of Convertible Series
B-1 Preferred Stock ("Convertible Series B-1"). The rights, preferences,
privileges and restrictions imposed upon the Convertible Series B-1 are set
forth in this Section 7.6 of this Article VII.
(a) Dividends. The Convertible Series B-1 is entitled to receive,
out of funds legally available therefor, cumulative dividends at the
rate of 8% percent per annum in cash and 7% per annum in shares of
Convertible Series B-1, when and if declared by the Board of
Directors. The annual dividend payable in shares of Convertible Series
B-1 will be equivalent to .07 share of Convertible Series B-1 for each
outstanding share of Convertible Series B-1. The dividend on the
Convertible Series B-1 is payable semi-annually beginning October 31,
1999 and continuing each April 30 and October 31 thereafter, when and
if declared by the Board of Directors. Any dividends earned on the
Convertible Series B-1 prior to October 31, 1999, shall be earned pro
rata from the Original Issue Date. The Convertible Series B-1 is
redeemable by the Company on and after October 1, 2003, at a price of
$10.00 per share plus any accrued and unpaid dividends.
If any dividends payable on the Convertible Series B-1 are not
paid for any reason, the right of the holders of the Convertible
Series B-1 to receive payment of such dividends shall not lapse or
terminate, but said unpaid dividends shall accumulate and shall be
paid without interest to the holders of the Convertible Series B-1,
when and if declared by the Board of Directors of the Corporation,
<PAGE>
before any sum or sums shall be set aside for or applied to the
purchase or redemption of the Convertible Series B-1 or the purchase,
redemption or other acquisition for value of the Common Stock and
before any dividend shall be paid or declared, or any other
distribution shall be ordered or made, upon the Common Stock. After
cumulative dividends on the Convertible Series B-1 for all past
dividend periods and for the then current year dividend period shall
have been declared and paid or set apart, if the Board of Directors
shall declare dividends out of funds legally available therefor, such
additional dividends may be declared on the Common Stock.
(b) Liquidation and Dissolution. Upon the voluntary or
involuntary liquidation, winding up or dissolution of the Corporation,
out of the assets available for distribution to shareholders each
share of Convertible Series B-1 shall be entitled to receive, in
preference to any payment on the Common Stock only, an amount equal to
Ten Dollars ($10.00) per share, plus cumulative dividends as provided
in Section 7.6(a) of this Article VII accrued and unpaid to the date
payment is made available to the Convertible Series B-1. After the
full preferential liquidation amount has been paid to, or determined
and set apart for, Convertible Series B-1, the remaining assets shall
be payable to the holders of the Common Stock. In the event the assets
of the Corporation are insufficient to pay the full preferential
liquidation amount required to be paid to the Convertible Series B-1,
the Convertible Series B-1 shall receive such funds pro rata on a
share for share basis until the full liquidating preference on the
Convertible Series B-1 is paid in full, and the balance, if any, to
the Common Stock.
A reorganization shall not be considered to be a liquidation,
winding up or dissolution within the meaning of this Section 7.6(b) of
this Article VII and the Convertible Series B-1 shall be entitled only
to the rights provided in the plan of reorganization.
(c) Voting. A holder of a share of Convertible Series B-1 shall
be entitled to one vote on any and all matters, including the election
of directors, and shall, except as otherwise may be provided by law,
vote as a class with the holders of outstanding Common Stock.
(d) Conversion Rights. The holders of Convertible Series B-1 have
the following conversion rights (the "Conversion Rights"):
(i) Right to Convert. Subject to any prior redemption or
conversion by the Board of Directors of the Corporation, each
share of Convertible Series B-1 shall be convertible, at the
office of the Corporation or of any transfer agent for such
Convertible Series B-1, as the case may be, into fully paid and
nonassessable shares of Common Stock, at a price of $1.00 per
share of Common Stock subject to adjustment pursuant to paragraph
(d)(iv) below ("Conversion Price").
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(ii) Automatic Conversion. Each share of Convertible Series
B-1 shall be automatically converted into Common Stock at such
time as Market Price of the Common Stock is at least $4.00 per
share for 30 consecutive trading days. Upon the occurrence of
such event, each share of Convertible Series B-1 shall be
converted into fully paid and nonassessable shares of Common
Stock at the Conversion Price.
(iii) Mechanics of Conversion. Before any holder of shares
of Convertible Series B-1 shall be entitled to convert the same
into full shares of Common Stock pursuant to paragraph (d)(i)
above, the holder shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of
any transfer agent for such Convertible Series B-1, as the case
may be, and shall give written notice to the Corporation at such
office that the holder elects to convert the same and shall state
therein the holder's name or the name or names of the holder's
nominees in which the holder wishes the certificate or
certificates for shares of Common Stock to be issued. The
Corporation shall, as soon as practicable thereafter, issue and
deliver or cause to be issued and delivered at such office to
such holder, or to the holder's nominee or nominees, a
certificate or certificates for the number of full shares of
Common Stock to which the holder shall be entitled as aforesaid.
A conversion pursuant to paragraph (d)(i) above shall be deemed
to have occurred immediately prior to the close of business on
the date of such surrender of the shares of Convertible Series
B-1 to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders
of such shares of Common Stock on such date.
Upon automatic conversion of Convertible Series B-1 into
full shares of Common Stock pursuant to paragraph (d)(ii) above,
the holder of the Convertible Series B-1 shall, upon request by
the Corporation, surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or any
transfer agent for such Convertible Series B-1, as the case may
be, and shall give written notice to the Corporation at such
office that the holder elects to convert the same and shall state
therein the holder's name or the name or names of the holder's
nominees in which the holder wishes the certificate or
certificates for shares of Common Stock to be issued. The
Corporation shall, as soon as practicable thereafter, issue and
deliver or cause to be issued and delivered at such office to
such holder, or to the holder's nominee or nominees, a
certificate or certificates for the number of full shares of
Common Stock to which the holder shall be entitled as aforesaid.
A conversion pursuant to paragraph (d)(ii) above shall be deemed
to have occurred immediately upon close of business on the 30th
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consecutive trading day the Market Price of the Common Stock is
at least $4.00 per share. Each holder of the Convertible Series
B-1 whose Convertible Series B-1 is converted to Common Stock
shall be entitled to, and the Corporation shall promptly pay in
cash, or set aside for payment, all unpaid dividends with respect
to such converted shares of the Convertible Series B-1, to and
including the time of conversion. A holder of the Convertible
Series B-1 shall not be entitled to any remaining dividends with
respect to the Convertible Series B-1 so converted, but shall be
entitled to receive, on the date of the conversion, the
arrearages, if any, with respect to any shares of the Convertible
Series B-1 so converted.
(iv) Adjustments to Conversion Price.
(1) Special Definitions. For purposes of this paragraph
(d)(iv), the "Original Issue Date" shall mean, the original
date on which a share of Convertible Series B-1 was first
issued to each preferred shareholder and "Market Price"
shall be determined as follows:
a) if the Common Stock is listed and registered on
any national securities exchange or traded on The
Nasdaq Stock Market ("Nasdaq"), the closing bid price;
b) if such Common Stock is not at the time listed
on any such exchange or traded on Nasdaq but is traded
on the OTC Bulletin Board, or if not, on the
over-the-counter market as reported by the National
Quotation Bureau or other comparable service, the
closing bid price for such stock; or
c) if clauses a) and b) above are not applicable,
the fair value per share of such Common Stock as
determined in good faith and on a reasonable basis by
the Board of Directors of the Corporation.
(2) Adjustment for Stock Splits and Combinations. If the
Corporation shall at any time or from time to time after the
Original Issue Date effect a subdivision of the outstanding
Common Stock, the applicable Conversion Price then in effect
immediately before that subdivision shall be proportionately
decreased and, conversely, if the Corporation shall at any time
or from time to time after the Original Issue Date combine the
outstanding shares of Common Stock, the applicable Conversion
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<PAGE>
Price then in effect immediately before the combination shall be
proportionately increased. Any adjustments under this paragraph
(d)(iv)(2) shall become effective at the close of business on the
date the subdivision or combination becomes effective.
(3) Adjustment for Certain Dividends and Distributions. In
the event the Corporation at any time, or from time to time,
after the Original Issue Date shall make or issue, or fix a
record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in
shares of Common Stock, then and in each event the applicable
Conversion Price then in effect shall be decreased as of the time
of such issuance or, in the event such a record date shall have
been fixed, as of the close of business on such record date, by
multiplying the Conversion Price then in effect by a fraction:
a) the numerator of which shall be the total number of
shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business
on such record date, and
b) the denominator of which shall be the total number
of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business
on such record date plus the number of shares of Common
Stock issuable in payment of such dividend or distribution;
provided, however, if such record date shall have been fixed
and such dividend is not fully paid or if such distribution
is not fully made on the date fixed therefor, the Conversion
Price shall be recomputed accordingly as of the close of
business on such record date and thereafter such Conversion
Price shall be adjusted pursuant to this paragraph
(d)(iv)(3) as of the time of actual payment of such
dividends or distributions.
(4) Adjustment for Other Dividends and Distributions. In the
event the Corporation at any time or from time to time after the
Original Issue Date shall make or issue, or fix a record date for
the determination of holders of Common Stock entitled to receive,
a dividend or other distribution payable in securities of the
Corporation other than shares of Common Stock, then and in such
event provisions shall be made so that the holders of Convertible
Series B-1 shall receive upon conversion thereof, in addition to
the number of shares of Common Stock receivable thereon, the
amount of securities of the Corporation which they would have
5
<PAGE>
received had their Convertible Series B-1 been converted into
Common Stock on the date of such event and had thereafter, during
the period from the date of such event to and including the
conversion date, retained such securities (together with any
distributions payable thereon during such period) receivable by
them as aforesaid during such period, giving application to all
adjustments called for during such period under this paragraph
(d) with respect to the rights of the holders of the Convertible
Series B-1.
(5) Adjustment for Reclassification, Exchange, or
Substitution. If the Common Stock issuable upon the conversion of
the Convertible Series B-1 at any time or from time to time after
the Original Issue Date, shall be changed into the same or
different number of shares of any class or classes of stock,
whether by capital reorganization, reclassification or otherwise
(other than a subdivision or combination of shares or stock
dividends provided for in paragraphs (d)(iv)(2) and (3) above, or
a reorganization, merger, consolidation, or sale of assets
provided for in paragraph (d)(iv)(6) below, then, and in each
such event, provisions shall be made (by adjustment to the
Conversion Price or otherwise) so that the holder of each share
of Convertible Series B-1 shall have the right thereafter to
convert each share of Convertible Series B-1 into the kind and
amount of shares of stock and other securities receivable upon
such reorganization, reclassification, or other change, by
holders of the number of shares of Common Stock into which such
share of Convertible Series B-1 might have been converted
immediately prior to such reorganization, reclassification, or
change, all subject to further adjustment as provided herein.
(6) Adjustment for Reorganization, Merger, Consolidation or
Sales of Assets. If at any time or from time to time after the
Original Issue Date, or in the twelve months following the
closing of the private placement in which the Convertible Series
B-1 is issued ("Closing Anniversary"), there shall be a capital
reorganization of the Corporation (other than a subdivision,
combination, reclassification, exchange or substitution of shares
provided for in paragraphs (d)(iv)(2) and (5) above) or a merger
or consolidation of the Corporation with or into another
corporation, or the sale of all or substantially all of the
Corporation's properties and assets to any other person or
entity, then, as a part of such reorganization, merger,
consolidation, or sale, provision shall be made (by adjustment to
the Conversion Price or otherwise) so that the holders of the
Convertible Series B-1 shall thereafter be entitled to receive
6
<PAGE>
upon conversion of the Convertible Series B-1, the number and
kind of shares of stock or other securities or property of the
Corporation, or of any successor corporation resulting from such
merger or consolidation or sale, to which a holder of Common
Stock deliverable upon conversion of such shares would have been
entitled if such capital reorganization, merger, consolidation,
or sale occurred on the date of the conversion.
(7) Adjustment for Stock Price. If at any time between
September 30, 1999, and September 30, 2000, the Market Price of
the Common Stock is not at least $1.15 per share for at least 20
trading days, the Conversion Price will be reduced to the greater
of the average of the Market Price of the Common Stock for the
five trading days prior to September 30, 2000, or $.50.
(v) No Impairment. The Corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, but will at all times in good
faith assist in the carrying out of all the provisions of this
paragraph (d) and in the taking of all such action as may be necessary
or appropriate, in order to protect the conversion rights of the
holders of the Convertible Series B-1 against impairment.
(vi) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price or any other
adjustment pursuant to this paragraph (d), the Corporation at its
expense shall, upon request by a holder of Convertible Series B-1,
promptly compute such adjustment or readjustment in accordance with
the terms hereof and furnish to each holder of such Convertible Series
B-1 a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment
is based. The Corporation shall, upon the written request at any time
of any holder of such affected Convertible Series B-1, furnish or
cause to be furnished to such holder a like certificate setting forth
the (i) such adjustment and readjustment, (ii) the Conversion Price at
the time in effect, and (iii) the number of shares of Common Stock and
the amount, if any, of other property which at the time would be
received upon the conversion of a share of such Convertible Series.
B-1.
(vii) Notices of Record Date. In the event that:
(1) the Corporation shall set a record date for the purpose
of entitling the holders of its shares of Common Stock to receive
a dividend, or other distribution, payable otherwise than in
cash;
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(2) the Corporation shall set a record date for the purpose
of entitling the holders of its shares of Common Stock to
subscribe for or purchase any shares of any class or to receive
any other rights;
(3) there shall occur any capital reorganization of the
Corporation, reclassification of the shares of the Corporation
(other than a subdivision or combination of its outstanding
common stock), consolidation or merger of the Corporation with or
into another corporation or conveyance of all or substantially
all of the assets of the Corporation to another person or entity;
or
(4) there shall occur a voluntary or involuntary
dissolution, liquidation, or winding up of the Corporation;
then, and in any such case, the Corporation shall cause to
be mailed to the holders of record of the outstanding shares of
the Convertible Series B-1, at least 10 days prior to the date
hereinafter specified, a notice stating (a) the date which (x)
has been set as the record date for the purpose of such dividend,
distribution, or rights, or (y) such reclassification,
reorganization, consolidation, merger, conveyance, dissolution,
liquidation or, winding up is to take place and (b) the record
date as of which holders of Common Stock of record shall be
entitled to other property deliverable upon such
reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up.
(viii) Notices. Any notice required by the provisions of this
paragraph (d) to be given to the holders of shares of Convertible
Series B-1 shall be in writing and shall be delivered by personal
service or agent, by registered or certified mail, return receipt
requested, with postage thereon fully prepaid. All such communications
shall be addressed to each holder of record at its address appearing
on the books of the Corporation. Service of any such communication
made only by mail shall be deemed complete on the date of actual
delivery as shown by the addressee's registry or certification receipt
or at the expiration of the fourth business day after the date of
mailing, whichever is earlier in time.
(ix) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of Convertible Series B-1. In lieu of
any fractional shares to which the holder would otherwise be entitled,
the Corporation shall pay cash equal to the product of such fraction
multiplied by the Market Price of one share of the Corporation's
Common Stock on the date of conversion.
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<PAGE>
(x) Payment of Taxes. The Corporation will pay all taxes (other
than taxes based upon income) and other governmental charges that may
be imposed with respect to the issue or delivery of shares of Common
Stock upon conversion of shares of Convertible Series B-1, including
without limitation any tax or other charge imposed in connection with
any transfer involved in the issue and delivery of shares of Common
Stock in a name other than that in which the shares of the Convertible
Series B-1 so converted were registered.
(xi) Reservation of Common Stock. The Corporation shall at all
times reserve and keep available, out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the
conversion of the Convertible Series B-1, the full number of shares of
Common Stock deliverable upon the conversion of all shares of
Convertible Series B-1 from time to time outstanding. The Corporation
shall from time to time increase the authorized number of shares of
Common Stock if the remaining unissued authorized shares of Common
Stock shall not be sufficient to permit the conversion of all of the
Convertible Series B-1 at the time outstanding.
(xii) Retirement of Convertible Series B-1 Converted. No shares
of Convertible Series B-1 that have been converted shall ever again be
reissued, and all such shares so converted shall, upon such
conversion, cease to be a part of the authorized shares of the
Corporation.
(e) No Preemptive Rights. No holder of the Convertible Series B-1
shall be entitled as of right to subscribe for, purchase, or receive any
part of any new or additional shares of any class, whether now or hereafter
authorized, or of bonds, debentures, or other evidences of indebtedness
convertible into or exchangeable for shares of any class, but all such new
or additional shares of any class, or bonds, debentures, or other evidences
of indebtedness convertible into or exchangeable for shares, may be issued
and disposed of by the Board of Directors on such terms and for such
consideration (to the extent permitted by law), and to such person or
persons as the Board of Directors in their absolute discretion may deem
advisable.
(f) Optional Redemption of Convertible Series B-1.
(i) Redemption. On and after October 1, 2003, the Convertible
Series B-1 is subject to redemption, out of funds legally available
therefor, in whole, or from time to time, in part, at the option of
the Board of Directors. If only a part of the shares of Convertible
Series B-1 is to be redeemed, the redemption shall be carried out pro
rata subject to adjustment to avoid redemption of fractional shares.
The redemption price shall be Ten Dollars ($10.00) per share plus
cumulative dividends as provided in Section 7.6(a) of this Article VII
accrued and unpaid to the date fixed for redemption.
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<PAGE>
(ii) Adjustment for Stock Splits and Combinations. If the
Corporation shall at any time or from time to time after the Original
Issue Date applicable to Convertible Series B-1 effect a subdivision
of the outstanding Convertible Series B-1, the applicable Convertible
Series B-1 redemption price then in effect immediately before that
subdivision shall be proportionately decreased and, conversely, if the
Corporation shall at any time or from time to time after the Original
Issue Date applicable to Convertible Series B-1 combine the
outstanding shares of Convertible Series B-1, the applicable
Convertible Series B-1 redemption price then in effect immediately
before the combination shall be proportionately increased. Any
adjustments under this Section 7.6(f)(ii) of this Article VII shall
become effective at the close of business on the date the subdivision
or combination becomes effective.
(iii) Notice. At least 45 days before the date fixed for
redemption (hereinafter referred to as the "Redemption Date"), written
notice (hereinafter referred to as the "Redemption Notice") shall be
mailed postage prepaid, to each holder of record of the Convertible
Series B-1 which is to be redeemed, at the holder's address shown on
the records of the Corporation. The Redemption Notice shall contain
the following information:
(1) the number of shares of Convertible Series B-1 held by
the holder which are to be redeemed by the Corporation, and the
total number of shares of Convertible Series B-1 held by all
holders to be so redeemed;
(2) the Redemption Date and the applicable Redemption Price;
and
(3) that the holder is to surrender to the Corporation, at
the place designated therein, the holder's certificate or
certificates representing the shares of Convertible Series B-1 to
be redeemed.
(iv) Surrender. Each holder of shares of Convertible Series B-1
to be redeemed shall surrender the certificate or certificates
representing such shares to the Corporation at the place designated in
the Redemption Notice, and thereupon the applicable redemption price
for such shares as set forth herein shall be paid to the order of the
person or entity whose name appears on such certificate or
certificates and each surrendered certificate shall be cancelled and
retired.
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(v) Dividends. From and after the later of the Redemption Date or
45 days from the date the Corporation shall have given the Redemption
Notice, no shares of Convertible Series B-1 thereupon subject to
redemption shall be entitled to any further accrual of any dividends.
(vi) Payment. The Corporation's deliverance of payment of the
redemption price shall be good and sufficient discharge to the
Corporation of the Convertible Series B-1 redeemed. If less than the
full number of a holder's shares of Convertible Series B-1 is
redeemed, the Corporation shall deliver to the holder a new
Convertible Series B-1 certificate representing the balance of the
holder's shares of Convertible Series B-1.
Dated: September 25, 1999
eVISION USA. COM, INC.,
a Colorado corporation
By: /s/Gary L. Cook
-------------------------------------
Gary L. Cook, Secretary and Treasurer
11
MANAGEMENT AGREEMENT
AGREEMENT made as of August 10, 1998 by and between FRONTEER DEVELOPMENT
FINANCE INC., a Delaware corporation (the "Corporation"), and FRONTEER FINANCIAL
HOLDINGS, LTD., a Colorado corporation ("Manager").
WHEREAS, the Corporation operates as a finance company, taking advantage of
high-yield and other lending opportunities; and
WHEREAS, the Corporation desires to retain Manager directly to render
management services to it, and its subsidiaries and affiliates (if any), with
regard to its operations as a finance company, and Manager is willing to provide
such services on the terms and conditions hereinafter set forth.
NOW THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged by the parties, it is hereby mutually agreed as follows:
1.(a) The Corporation hereby retains Manager to render Management
Services (as defined below) to the Corporation and its subsidiaries, and Manager
hereby agrees to render such services as requested from time to time by the
board of Directors of the Corporation, for the period commencing on the date
hereof and continuing until termination of this Agreement in accordance with the
terms hereof. Management Services shall include assistance to the management of
the Corporation with respect to the business and operations of the Corporation
or any of its subsidiaries (and affiliated companies), including, without
limitation, assistance in (i) the identification of lending opportunities, (ii)
credit analysis of potential borrowers, (iii) structure of loans, including
yield-enhancing equity participation and collateral arrangements, and (iv)
administration of loans.
(b) The Manager shall at all times be and conduct itself as an
independent contractor in respect of the Corporation, and shall not, under any
circumstances, create or purport to create any obligation on behalf of the
Corporation except as otherwise expressly directed by the Board of Directors of
the Corporation.
2.(a) As compensation for Management Services, the Corporation will
pay, so long as this Agreement continues in effect, an annual fee in an amount
equal to 10% of the Corporation's pre-tax profits (pro-rated for partial years)
as determined from the Company's annual audited financial statements for the
applicable year, which amount shall be paid for each year (or portion thereof)
during the term hereof, within 30 days after the receipt of the Corporation's
annual audited financial statements for such year.
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(b) In addition to the aforementioned fees, the Corporation shall
reimburse Manager for its reasonable out-of-pocket costs and expenses incurred
in connection with the performance of its advisory and consulting service
hereunder.
3. It is understood that the Manager may from time to time act as manager
to, or enter into similar agreements, or conduct any other business, or engage
in any other business transaction, with, any other person or entity whether or
not such person or entity competes with the Corporation, without the necessity
of obtaining approval from the Corporation.
4. The Manager shall and shall cause its employees, officers, directors,
agents and representatives to keep all information, material and data of any
kind (written and oral) with respect to the Corporation, its business and
affairs, including, but not limited to, the contents of this Agreement
(collectively, the "Information"), confidential. The Manager shall not disclose
and shall prohibit its employees, officers, directors, agents and
representatives from disclosing any Information to any party, other than the
Corporation or the Corporation's authorized representative without the
Corporation's prior written consent, except with respect to Information which is
publicly available (other than as a result of disclosure by the Manager, its
employees, officers, directors, agents or representatives) or as required by
law.
5. The Corporation agrees to indemnify the Manager, and all officers,
directors, shareholders, affiliates or controlling persons thereof ("Indemnified
Parties"), and to save and hold them harmless from and in respect of, any and
all (a) liabilities, fees, costs and expenses paid in connection with, resulting
from or relating to any claim, action or demand against any and all such
Indemnified Parties that arise out of or in any way relate to the Corporation,
its properties, business, or affairs and (b) such claims, actions and demands
and any losses or damages resulting from such claims, actions and demands,
including amounts paid in settlement or compromise of any such claim, action or
demand; provided however, that this indemnity shall not extend to conduct of
such Indemnified Party not undertaken in good faith to promote the best
interests of the Corporation, nor to any gross negligence or wilful misconduct
of an Indemnified Party. If an Indemnified Party seeks indemnification under
this Agreement and the Corporation challenges such party's right to
indemnification, the Corporation shall advance the amounts claimed hereunder to
the indemnified party until a court of competent jurisdiction determines that
the party receiving such advanced amounts shall return such amounts to the
Corporation to the extent specified in such judgment.
6. This Agreement may be terminated by either the Corporation or the
Manager for any reason on 30 days prior written notice of termination by the
terminating party delivered to the other party.
7. Any notice required to be given hereunder shall be in writing and shall
be deemed sufficient if delivered in person or mailed by certified mail as
follows: if to the Corporation, to it at its office at One Norwest Center, 1700
Lincoln Street, 32nd Floor, Denver, Colorado 80203, Attention: President, or
such address as the Corporation may hereafter designate for that purpose; and if
to Manager, to it at its office at One Norwest Center, 1700 Lincoln Street, 32nd
Floor, Denver, Colorado 80203, Attention: President, or such other address as
Manager may hereafter designate for that purpose.
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8. This Agreement constitutes the entire agreement between the parties and
supersedes all prior agreements and understandings, both written and oral, with
respect to the subject matter hereof. this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, including any corporation into which the Corporation shall consolidate
or merge or to which it shall transfer substantially all of its assets. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Colorado applicable to contracts made and to be performed entirely
within such state.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written.
FRONTEER DEVELOPMENT FINANCE, INC.
By: /s/Gary L. Cook
--------------------------------------
Name: Gary L. Cook
Title: Treasurer
FRONTEER FINANCIAL HOLDINGS, LTD.
By: /s/Robert H. Trapp
--------------------------------------
Name: Robert H. Trapp
Title: President
3
SUBSIDIARIES OF eVISION
Name of Subsidiary Jurisdiction of Incorporation
- ------------------ -----------------------------
eBroker USA.Com, Inc. Colorado
American Fronteer Financial Corporation Colorado
RAF Services, Inc. of Texas Texas
RAF Services, Inc. of Louisiana Louisiana
RAF Services, Inc. Nevada
Q6 Technologies, Inc. Colorado
Secutron Corp. Colorado
MidRange Solutions Corp. Colorado
eBanker USA.com, Inc. Colorado
Fronteer Income Growth, Inc. Foreign
Corporate Net Solutions, Inc. Delaware
Fronteer Corporate Services, Inc. Colorado
Consent of Independent Auditors
The Board of Directors
eVision USA.Com, Inc.
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
KPMG LLP
Denver, Colorado
November 12, 1999
