U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
JUNE 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
______________ TO ______________
COMMISSION FILE NUMBER: 33-68570
eConnect
(Exact name of registrant as specified in its charter)
Nevada 43-1239043
(State or jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
2500 Via Cabrillo Marina, Suite 112, San Pedro, California 90731
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (310) 514-9482
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 Par Value; Class A Warrants
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) been subject to such filing
requirements for the past 90 days. Yes X No .
As of August 1, 2000, the Registrant had 180,583,813 shares
of common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X .
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2000 3
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS
ENDED JUNE 30, 2000 AND JUNE 30, 1999 4
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30, 2000 AND JUNE 30, 1999 5
NOTES TO CONSOLDIATED FINANCIAL STATEMENTS 8
ITEM 2. PLAN OF OPERATION 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 21
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 26
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 26
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 26
ITEM 5. OTHER INFORMATION 27
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 27
SIGNATURE 27
PART I.
ITEM 1. FINANCIAL STATEMENTS.
eCONNECT
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
June 30, 2000
Current assets
Cash $ 164,143
Due from related party 310,525
Total current assets 474,668
Fixed assets, net 484,690
Other assets
Investments, net 2,101,011
Other intangibles, net 3,436,164
Purchased software 2,168,892
Deposit 250,000
Other assets 141,721
8,097,788
Total assets $9,057,146
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $2,261,000
Accrued liabilities 225,947
Due to related party 3,845,630
Due to affiliate 578,989
Notes payable - stockholders 711,818
Notes payable - current portion 544,971
Total current liabilities 8,168,355
Long-term liabilities
Note payable - long-term portion 734,727
Total liabilities 8,903,082
Stockholders' equity
Common stock; $.001 par value;
200,000,000 shares authorized,
177,103,813 shares issued and outstanding 177,104
Additional paid-in capital 63,278,319
Minority interest in consolidated subsidiary 15,625
Due from related party - secured by
Company's common stock (4,392,918)
Accumulated deficit (58,924,066)
Total stockholders' equity 154,064
Total liabilities and stockholders' equity 9,057,146
See Accompanying Notes to Financial Statements
eCONNECT
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months For the six months
Ended June 30 Ended June 30
2000 1999 2000 1999
Revenue
Sports Books
(excess payouts
over wagers) $ (462,573) $ - $ (462,573) $ -
Operating expenses
Sports Books 118,350 - 118,350 -
Consulting 5,648,127 841,365 15,517,044 867,615
Public relations 436,223 - 5,669,003 -
Research and
development 243,057 498,254 2,153,366 502,354
General and
administrative 2,392,073 488,167 4,343,900 547,097
Total operating
expenses 8,837,830 1,827,786 27,801,663 1,917,066
Net loss from
operations (9,300,403) (1,827,786) (28,264,236) (1,917,066)
Other income
(expense)
Interest income 106,535 - 193,885 -
Loss on
Investment - - - (2,062,500)
Equity losses
of investees - - (280,366) -
Total other
income (expense) 106,535 - (86,481) (2,062,500)
Net loss before
provision for
income taxes (9,193,868) (1,827,786) (28,350,717) (3,979,566)
Provision for
income taxes - - - -
Net loss (9,193,868) (1,827,786) (28,350,717) (3,979,566)
Basic and
diluted loss per
common share (0.06) (0.16) (0.19) (0.22)
Basic and
diluted weighted
average common
shares outstanding 166,744,917 11,181,234 151,417,577 18,233,711
See Accompanying Notes to Financial Statements
eCONNECT
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the six months ended
June 30
2000 1999
Cash flows from operating activities:
Net loss $ (28,350,717) $(3,979,566)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 785,127 -
Common shares issued for expenses 21,702,625 2,910,138
Equity losses of investees 280,366 -
Changes in operating assets and
liabilities:
Decrease in stock subscription receivable 220,176 -
Increase in due from related party (60,525) -
Increase in due from related party -
secured by Company's common stock (1,412,036) -
Increase in deposits (250,000) -
Increase in other assets (141,721) -
Increase in accounts payable 1,735,730 135,210
Increase in accrued liabilities 135,267 -
Increase in due to related parties 609,762 (282,535)
Decrease in due to affiliate (34,021) -
Increase in minority interest in
consolidated subsidiary 15,625 -
Increase in notes payable -
stockholders 361,818 -
Net cash used by operating
activities (4,402,524) (1,216,753)
Cash flows from investing activities:
Purchase of fixed assets (512,802) (5,478)
Payments for investments (980,797) -
Payments for purchased software (2,168,892) -
Net cash used by investing activities (3,662,491) (5,478)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 2,124,000 636,000
Principal payments on long-term debt (844,302) (100,000)
Proceeds from issuance of common stock 6,823,288 861,587
Net cash provided by financing activities 8,102,986 1,397,587
Net increase in cash 37,971 175,356
Cash, beginning of period 126,172 8,862
Cash, end of period 164,143 184,218
Supplemental disclosure of cash flow:
Cash paid for interest - 97,500
Cash paid for income taxes - -
Schedule of non-cash investing and
financing activities:
Remaining consideration of the
second half acquisition of
Top Sports, S.A. recorded as
Due to related parties 2,785,868 -
Remaining consideration of the
acquisition of
PowerClick, Inc. recorded as
Due to related parties 450,000 -
8,000,000 common shares issued
related to the acquisition
of PowerClick, Inc. 1,300,000 -
666,667 common shares issued for
accounts payable 550,000 -
6,000,000 common shares issued for
officer bonus payable 4,800,000 -
203,865 common shares issued for
stock subscription payable 81,546 -
9,400,000 common shares issued in
exchange for due from related party -
secured by Company's common stock - 2,598,750
See Accompanying Notes to Financial Statements
eCONNECT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been
prepared in accordance with U.S. Securities and Exchange
Commission requirements for interim financial statements.
Therefore, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. The financial statements
should be read in conjunction with the Form 10-KSB for the year
ended December 31, 1999 of eConnect ("the Company").
The results of operations for the interim periods shown in this
report are not necessarily indicative of results to be expected
for the full year. In the opinion of management, the information
contained herein reflects all adjustments necessary to make the
results of operations for the interim periods a fair statement of
such operation. All such adjustments are of a normal recurring
nature.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying financial statements include the accounts of
the Company's subsidiaries Top Sports, S.A. (99.94% owned) and
eConnect Caribbean, S.A. (75% owned). All inter-company accounts
have been eliminated and the minority interest recorded. The
Company's investment in PowerClick, Inc. (50%) is not
consolidated but reported on the equity basis of accounting. See
Note 3, "Acquisitions".
Revenue
Revenue (second quarter-April 1 - June 30, 2000) was reported
from the Company's wholly-owned subsidiary, Top-Sports, S.A.
which revenue is derived from non-internet gaming operations
located in Santo Domingo, Dominican Republic. Revenue consists
of the excess of the payouts in the amount of $3,376,137 over
wagers made in the amount of $2,913,564 resulting in a net gaming
loss of $462,573.
The Company acquired control of Top-Sports, S.A. as of April
1,2000, consequently the above revenue is included in the
Company's consolidated operations. The Company did not have a
controlling interest during the first quarter (January 1 - March
31, 2000), consequently, Top-Sports, S.A. operating results for
this period was reported on the equity basis of accounting, which
was a loss of $200,669.
Amortization
Goodwill representing the excess of the purchase price over the
equity of the ownership percentage in the Company's subsidiaries
and the costs of the intangible assets are amortized over a
three-year period. Because the Company has not begun its e-
commerce operations and installation is in process, no
amortization has been recorded on the purchased software. See
Note 4 "Purchased Software".
3. ACQUISITIONS
PowerClick, Inc.
In February 2000, the Company acquired 50% of the outstanding
capital stock of PowerClick, Inc. ("the investee") in
consideration of $1,200,000 cash (of which $450,000 is still due
and payable) and 8,000,000 shares of the Company's common stock
valued at $1,300,000 for an aggregate 50% investment of
$2,500,000, which is principally comprised of goodwill. To
date, a loss of $79,697 (first quarter March 31,2000) and six
months goodwill amortization of $319,292 have been recorded for a
net carrying value at June 30,2000 of $2,101,011. During the
second quarter, 5,200,000 shares of common stock valued at
$1,950,000 were given to PowerClick, Inc. stockholders for
consulting services and expensed in the accompanying
"Consolidated Statement of Operations".
Due to a dispute between the parties and unavailability of
necessary accounting records, PowerClick, Inc. did not report its
second quarter earnings/losses (April 1 - June 30, 2000) to the
Company's management. However, the Company's management does not
believe that such amounts, if reported, would have a material
impact to these consolidated financial statements. Consequently,
the above carrying value of $2,101,011 has not been adjusted for
the 50% share of PowerClick, Inc.'s second quarter's
earnings/losses.
Currently, the parties and their respective counsels are
attempting to resolve the dispute.
Top Sports, S.A.
The Company completed the second half of its Top Sports, S.A.
acquisition effective April 1, 2000 by acquiring 4,994 shares of
the remaining 5,000 capital shares outstanding. Of the 10,000
shares outstanding, the Company owns 9,994 shares. Dominican
Republic Law, which governs Top Sports, S.A., requires that there
be seven stockholders.
The above 4,994 shares of Top-Sports, S.A. was acquired for
2,800,000 shares of the Company's common stock valued at
$3,450,000. The goodwill resulting from the acquisition of Top-
Sports, S.A. $2,860,527 is included in intangible assets.
eConnect Caribbean, S.A.
eConnect Caribbean, S.A. was organized under the laws of the
Dominican Republic and serves as the Company's Latin American
headquarters for all e-commerce transactions. The Company owns
75% of the outstanding capital shares with the remaining 25%
owned by the company's managing director. eConnect Caribbean is
in the start-up phase, no revenue has been recorded and start-up
costs of $71,114 have been expensed.
4. PURCHASED SOFTWARE
Purchased software represents the Connex Software System used in
processing e-commerce transactions. The system will be installed
in the Dominican Republic (currently in process), Ireland, Hong
Kong and Australia. The licensor, E-Funds, (located in Milwaukee,
Wisconsin) and the Company have worked out a payment plan to pay
$680,000 down and $1,752,000 over three years for an aggregate
$2,432,000.
The accompanying consolidated balance sheet liability has imputed
interest at 15.031% for a present value of $2,124,000 (including
the $680,000 down payment) assigning a value of $531,000 to each
of the above four geographic areas plus $44,892 in professional
service fees (installation costs billed and in process). The
balance is due in monthly installments of $58,400 through
February 2002 and monthly installments of $29,200 from March 2002
through February 2003. Under the terms of the license
agreement, the Company has a no term limitation to use the Connex
Software System; however, title to the software remains with the
licensor.
As of June 30, 2000, principal payments on the note payable are
as follows:
Six months ending December 31, 2000 $ 262,314
12 months ending December 31, 2001 587,234
12 months ending December 31, 2002 372,829
Period ending February 4, 2003 57,321
1,279,698
Less: amounts due within one year 544,971
Note payable - long-term portion $ 734,727
5. DEPOSIT
In connection with a "Letter of Intent", a non-binding agreement
with National Data Funding Corporation ("NDFC"), the Company has
deposited (non-refundable) $250,000. The "Letter of Intent"
requires the Company to pay the stockholders of NDFC $10,000,000,
10,000,000 shares of the Company's common stock in exchange for
100% ownership, and contribute to NDFC $1,000,000 and 1,000,000
shares of the Company's common stock for working capital.
Pursuant to the "Letter of Intent", the Company is required to
"spin off" NDFC as a publicly traded company in which the Company
will retain a 25% ownership. The "Letter of Intent", dated June
2, 2000, expires September 1, 2000.
6. DUE TO RELATED PARTIES
As of June 30, 2000, due to related parties totaled $3,845,630,
consisting of $3,395,630 due to the former sole stockholder of
Top Sports, S.A. and $450,000 due to the stockholders of
PowerClick, Inc. as discussed in Note 3, bearing no interest and
due on demand. The due to related party balance of $3,395,630 is
comprised of $609,762 payable in cash and the remaining
$2,785,868 payable in 2,800,000 shares of the Company's common
stock.
7. NOTES PAYABLE - STOCKHOLDERS
Notes payable - stockholders are comprised of five notes
aggregating $711,818 ($600,000 in cash; $111,818 in 242,500
shares of the Company's common stock). The notes dated in May
and June 2000 are due no later than six months from the notes'
dates, bearing a simple interest rate of 10% per month on the
cash balance.
8. GOING CONCERN
The Company incurred a net loss of approximately $28,000,000 for
the six months ended June 30, 2000. The Company's current
liabilities exceed its current assets by approximately $7,700,000
as of June 30, 2000. These factors create an uncertainty about
the Company's ability to continue as a going concern. The
Company's management has developed a plan, which includes
completing the development of technology products to generate
future revenues. The Company will also seek additional sources
of capital through the issuance of debt equity financing, but
there can be no assurance that the Company will be successful in
accomplishing its objectives.
The ability of the Company to continue as a going concern is
dependent on additional sources of capital and the success of the
Company's plan. The financial statements do not include any
adjustments that might be necessary if the Company is unable to
continue as a going concern.
ITEM 2. PLAN OF OPERATION.
Twelve Month Plan of Operation.
In the year 2000, the Registrant will focus its attention on the
marketing and development of the "PERFECT" industry (Personal
Encrypted Remote Financial Electronic Card Transactions), with
specific focus on the "Bank Eyes Only" Internet aspect of the
PERFECT transaction.
"Bank Eyes Only" refers to a direct Internet connection between
the consumer's terminal and the Registrant's bank card
authorization system by which the consumer will order an item
from an Internet merchant, but the credit card data or ATM data
will go directly to the Registrant's server and then to the bank,
bypassing the merchant. Thus, this service will enable
customers to pay for Internet purchases, bill payments and other
types of transactions from home by physically swiping either
credit cards or ATM cards with PIN entry. These "Bank Eyes Only"
transactions can be processed over the Internet without the
cardholder account information being stored at the merchant's web
site, and the merchant does not have ready access to the
consumer's bank card information.
The Registrant believes that the "Bank Eyes Only" transaction
processing system will effectively address Internet consumers'
concerns regarding personal and financial information security.
The Registrant will receive a projected flat fee of $1.00 for
each "Bank Eyes Only" transaction which will be paid by the
merchant, not the consumer.
The Registrant has begun initial sign ups of web Merchants for
this service and based on responses, will now expend substantial
dollars for an aggressive sign up campaign to begin
simultaneously on several fronts. To launch the service of
Internet "Bank Eyes Only" transactions, the Registrant has
implemented the following initiatives:
(a) Completion of testing of the eCashPads, the consumer "Bank
Eyes Only" device. The Registrant expects a national roll-out of
eCashPads in the third quarter of 2000.
(b) Development of "bankeyesonly.com" web sites in the United
States, Dominican Republic, Ireland, Australia and Hong Kong.
These web sites will be used to register web merchants within the
above listed countries to be able to receive a "Bank Eyes Only"
transaction by an eCashPad. A consumer will be able to go the
Registrant's website and with the use of his/her eCashPad
will be able to safely order merchandise on line.
(c) Aggressive recruiting of web merchants to the Registrant
"Bank Eyes Only" network. Registration of "Bank Eyes Only" web
merchants will be pursued by a team specialists to be hired who
understand their specific industry such as phone or cable or
collections and who will fully develop the pertinent "Bank Eyes
Only" applications for that industry and who will develop
strategic alliances within their specific industry. In addition,
the Registrant has structured a networking approach for mass
market consumer participation in finding "Bank Eyes Only"
merchants along with sales teams to sign on local web merchants.
(d) Using a revenue sharing plan from the flat fee, the
Registrant will incentivize private labels of eCashPads with
expected advertising and marketing of these private label
eCashPads by the web merchants to their consumer base. For
example, a merchant might distribute eCashPads with its logo to
its own consumers.
(e) Establishment of strategic alliances with a substantial
partner in each country. The partner will then proceed to
develop the business of "Bank Eyes Only" transactions by usage of
the simple and proprietary eCashPad which has been developed by
the Registrant.
(f) Establishment of the "International," which will be a four
country real time "Bank Eyes Only" with ATM card and PIN entry
game among the countries of the Dominican Republic, Ireland,
Australia, and Hong Kong, whereby consumers within those
countries will be able to use the eCashPad to effect same day
gaming with ATM card and PIN entry.
Current Developments.
On May 31, 2000, the Registrant entered into a Letter of Intent
with National Data Funding Corporation ("NDFC") to acquire 100%
of NDFC's capital stock and spin it off in a publicly trading
company and retaining a 25% ownership (see Exhibit 10.47 to
the Form 10-QSB). NDFC is a company that will provide eCashPad
distribution, encryption, and maintenance. The eCashPad is a
device which will attach to a personal computer to enable a
credit card or ATM transaction via Internet. NDFC will also
provide full merchant processing for all credit and debit cards
in support of eFunds-United States. The Registrant is in the
process of negotiating a final acquisition agreement.
Acquisitions of Subsidiaries.
On June 20, 2000, the Registrant verbally agreed to modify two
previous agreements entered into with Paul Egan. This verbal
agreement was committed to writing and made effective as of April
1, 2000 (see Exhibit 10.49 to this Form 10-QSB). In accordance
with this agreement, Mr. Egan is to receive 25% of the common
stock of eConnect Caribbean, S.A., as a Dominican Republic
subsidiary of the Registrant. The Registrant will own 99.94% of
Top Sports (of the 10,000 shares outstanding, the Company owns
9,994 shares; Dominican Republic Law, which governs Top Sports,
S.A., requires that there be seven stockholders). Mr. Egan would
resign as a director of Top Sports and would keep all
consideration received to date under the December 9, 1999 and
January 1, 2000 agreements and will not receive any other
consideration under either of these agreements. He will be
employed as President of eConnect Caribbean, S.A. for a term of
three years.
Promissory Notes.
The Company has issued five promissory notes totaling $711,818
($600,000 in cash and $111,818 for the value of 242,500 shares of
the Company's common stock). The notes are dated in May and
June 2000 and are due no later than six months from the notes'
dates, bearing a simple interest rate of 10% per year on the
cash balance.
Risk Factors in Connection with Plan of Operation.
An investment in the Registrant is subject to a number of
risks. Among these risks are the following:
(a) Development Stage.
The Registrant has not completed the development and testing of
any commercial products, and, accordingly, has no profitable
operating history upon which investors may rely. The Registrant
has received limited revenues from operations. The Registrant's
products and services will require significant additional
investment in research and development and will require
substantial additional resources. There can be no assurance that
any of the Registrant's products will meet applicable regulatory
standards, obtain required regulatory approvals, or be capable of
being produced in commercial quantities at reasonable costs.
There can be no assurance that the Registrant will
generate significant revenues in the future; and there can be no
assurance that the Registrant will operate at a profitable level.
If the Registrant is unable to obtain customers and generate
sufficient revenues so that it can profitably operate, the
Registrant's business will not succeed. In such event, investors
in the Shares may lose their entire cash investment. Also the
Registrant and its management do not have significant experience
in the internet business, and in particular the on-line gaming
business.
As a result of the fixed nature of many of the
Registrant's expenses, the Registrant may be unable to adjust
spending in a timely manner to compensate for any unexpected
delays in the development and marketing of the Registrant's
products or any capital raising or revenue shortfall. Any such
delays or shortfalls will have an immediate adverse impact on the
Registrant's business, operations and financial condition.
(b) Limited Revenues, History of Operating Loss and Accumulated
Deficit.
The Registrant has had limited revenue to date.
Although the Registrant has been involved with e-commerce since
1999, it has been primarily engaged in research and development.
The Registrant has incurred significant operating losses:
$19,026,744 for the fiscal year ended December 31, 1999, $776,138
for the four months ended December 31, 1998, and $196,968 for the
fiscal year ended August 31, 1998. At June 30, 2000, the
Registrant had an accumulated deficit of $58,924,066. The future
growth and profitability of the Registrant will be principally
dependent upon its ability to successfully complete development
and testing of, obtain regulatory approvals for, and market or
license its primary products. Accordingly, the Registrant's
prospects must be considered in light of the risks, expenses and
difficulties frequently encountered in connection with the
establishment of a new business in a highly competitive industry,
characterized by new product introductions.
The Registrant anticipates that it will incur substantial
operating expenses in connection with the research, development,
testing and approval of its proposed products and expects these
expenses to result in continuing and significant losses until
such time as the Registrant is able to achieve adequate revenue
levels. There can be no assurance that the Registrant will be
able to significantly increase revenues or achieve profitable
operations. Failure to obtain additional capital, if needed,
would have a material adverse effect on the Registrant's
operations.
(c) Additional Financing Will Be Required.
The Registrant will be required to raise significant capital to
fund its plan of operation; this is estimated to be $3,000,000
over the next 12 months. Currently, the Registrant is meeting its
funding requirements through financing provided by the Alpha
Venture Capital, Inc. through a common stock purchase agreement
between the Registrant and this firm, dated September 28, 1999.
However, there is no guarantee that this funding source will
continue to be available in the future.
The current funds available to the Registrant, and any revenue
generated by operations, will not be adequate for it to be
competitive in the areas in which it intends to operate, and may
not be adequate for the Registrant to survive. Therefore, the
Registrant will need to raise additional funds in order to fully
implement its business plan. The Registrant's continued
operations therefore will depend upon its ability to raise
additional funds through bank borrowings, equity or debt
financing. There is no assurance that the Registrant will be able
to obtain additional funding when needed, or that such funding,
if available, can be obtained on terms acceptable to the
Registrant. If the Registrant cannot obtain needed funds, it may
be forced to curtail or cease its activities. If additional
shares were issued to obtain financing, current shareholders may
suffer a dilution on their percentage of stock ownership in the
Registrant.
(d) Risks Associated with eCashPad Production.
The agreement under which the eCashPad is being manufactured for
the Registrant only calls for an initial production run of 5,000
units, at a total cost of $80,000. The Registrant must conclude
an agreement for a substantial additional manufacturing run in
order for the plan of business as set forth above to succeed.
There is no guarantee that the Registrant will be able to
conclude such an agreement.
This agreement offers the Registrant substantial savings by
contracting with an Asian country for manufacturing. Currently,
the manufacturer is stable but there is no guarantee that the
manufacturer may not be impacted by future changes in government
policies. The Registrant is presently seeking additional
suppliers.
(e) Risks in Connection with Approval of Regional ATM Networks.
Within the United States market, the Registrant is closely
working with NDFC to secure the go ahead for regional ATM card
networks for an eCashPad ATM card with PIN entry "Bank Eyes Only"
Internet payment. Such network currently permit the usage of
credit cards on their systems. Thus, a substantial part of the
Registrant's strategy is based on ATM card with PIN entry
Internet payments, and the Registrant may not receive bank
approvals from the regional ATM card networks in the United
States for such transactions. In such case, this payment system
could not be used in the United States, which could substantially
affect the prospects of the Registrant in this country. Even
though this type of payment system has already been approved in
the Dominican Republic and Ireland, and may be approved elsewhere
outside the United States, the Registrant would expect that a
substantial portion of its projected revenues would come form
United States based transactions.
(f) Acceptance and Effectiveness of Internet Electronic
Commerce.
The Registrant's success in e-commerce will be dependent on
consumer acceptance of e-retailing and an increase in the use of
the Internet for e-commerce. If the markets for e-commerce do
not develop or develop more slowly than the Registrant expects,
its e-commerce business may be harmed. If Internet usage does
not grow, the Registrant may not be able to increase revenues
from Internet advertising and sponsorships which also may harm
both our retail and e-commerce business. Internet use by
consumers is in an early stage of development, and market
acceptance of the Internet as a medium for content, advertising
and e-commerce is uncertain. A number of factors may inhibit the
growth of Internet usage, including inadequate network
infrastructure, security concerns, inconsistent quality of
service, and limited availability of cost-effective, high-speed
access. If these or any other factors cause use of the Internet
to slow or decline, our results of operations could be adversely
affected.
(g) Competition in Internet Commerce.
The Registrant anticipates substantial competition in the
development of the PERFECT industry and the "Bank Eyes Only"
internet application in particular. The Registrant believes that
the marketplace is large enough to absorb many competitor
companies who may focus on ancillary aspects of the PERFECT
industry such as the development of hardware or of merchant sign
ups, rather than on the core business of the Registrant which is
the processing of transactions.
Increased competition from e-commerce could result in reduced
margins or loss of market share, any of which could harm both our
retail and e-commerce businesses. Competition is likely to
increase significantly as new companies enter the market and
current competitors expand their services. Many of the
Registrant's present and potential competitors are likely to
enjoy substantial competitive advantages, including larger
numbers of users, more fully-developed e-commerce opportunities,
larger technical, production and editorial staffs, and
substantially greater financial, marketing, technical and other
resources. If the Registrant does not compete effectively or if
it experiences any pricing pressures, reduced margins or loss of
market share resulting from increased competition, the
Registrant's business could be adversely affected.
(h) Unreliability of Internet Infrastructure.
If the Internet continues to experience increased numbers of
users, frequency of use or increased bandwidth requirements, the
Internet infrastructure may not be able to support these
increased demands or perform reliably. The Internet has
experienced a variety of outages and other delays as a result of
damage to portions of its infrastructure, and could face
additional outages and delays in the future. These outages and
delays could reduce the level of Internet usage and traffic. In
addition, the Internet could lose its viability due to delays in
the development or adoption of new standards and protocols to
handle increased levels of activity. If the Internet
infrastructure is not adequately developed or maintained, use of
the Registrant website may be reduced. Even if the Internet
infrastructure is adequately developed, and maintained, the
Registrant may incur substantial expenditures in order to adapt
its services and products to changing Internet technologies.
Such additional expenses could severely harm the Registrant's
financial results.
(i) Transactional Security Concerns.
A significant barrier to Internet e-commerce is the secure
transmission of confidential information over public networks.
Any breach in security could cause interruptions and have an
adverse effect on the Registrant's business.
(j) Governmental Regulation of the Internet.
There are currently few laws that specifically regulate
communications or commerce on the Internet. Laws and regulations
may be adopted in the future, however, that address issues
including user privacy, pricing, taxation and the characteristics
and quality of products and services sold over the Internet.
Possible future consumer legislation, regulations and actions
could cause additional expense, capital expenditures,
restrictions and delays in the activities undertaken in
connection with the party planning business, the extent of which
cannot be predicted. The exact affect of such legislation cannot
be predicted until it is in final form.
(k) Influence of Other External Factors on Prospects for
Registrant.
The industry of the Registrant in general is a speculative
venture necessarily involving some substantial risk. There is no
certainty that the expenditures to be made by the Registrant will
result in a commercially profitable business. The marketability
of its products will be affected by numerous factors beyond the
control of the Registrant. These factors include market
fluctuations, and the general state of the economy (including the
rate of inflation, and local economic conditions), which can
affect companies' spending. Factors which leave less money in
the hands of potential customers of the Registrant will likely
have an adverse effect on the Registrant. The exact effect of
these factors cannot be accurately predicted, but the
combination of these factors may result in the Registrant not
receiving an adequate return on invested capital.
(l) Success of Registrant Dependent on Management.
The Registrant's success is dependent upon the hiring of key
administrative personnel. None of the Registrant's officers,
directors, and key employees have an employment agreement with
the Registrant; therefore, there can be no assurance that these
personnel will remain employed by the Registrant after the
termination of such agreements. Should any of these individuals
cease to be affiliated with the Registrant for any reason before
qualified replacements could be found, there could be material
adverse effects on the Registrant's business and prospects. In
addition, management has no experience is managing companies in
the same business as the Registrant.
In addition, all decisions with respect to the management of
the Registrant will be made exclusively by the officers and
directors of the Registrant. Investors will only have rights
associated with minority ownership interest rights to make
decision which effect the Registrant. The success of the
Registrant, to a large extent, will depend on the quality of the
directors and officers of the Registrant. Accordingly, no person
should invest in the shares unless he is willing to entrust all
aspects of the management of the Registrant to the officers and
directors.
(m) Control of the Registrant by Officers and Directors.
The Registrant's officers and directors beneficially
own approximately 8.25% of the outstanding shares of the
Registrant's common stock. As a result, such persons, acting
together, have the ability to exercise influence over all matters
requiring stockholder approval. Accordingly, it may be difficult
for the investors hereunder to effectuate control over the
affairs of the Registrant. Therefore, it should be assumed that
the officers, directors, and principal common shareholders who
control the majority of voting rights will be able, by virtue of
their stock holdings, to control the affairs and policies of the
Registrant.
(n) Limitations on Liability, and Indemnification, of Directors and Officers.
The bylaws of the Registrant provide for
indemnification of officer or directors of the Registrant. In
addition, the Nevada Revised Statutes provide for permissive
indemnification of officers and directors and the Registrant may
provide indemnification under such provisions. Any limitation on
the liability of any director, or indemnification of directors,
officer, or employees, could result in substantial expenditures
being made by the Registrant in covering any liability of such
persons or in indemnifying them.
(o) Potential Conflicts of Interest Involving Management.
The officers and directors have other interests to
which they devote time, either individually or through
partnerships and corporations in which they have an interest,
hold an office, or serve on boards of directors, and each will
continue to do so notwithstanding the fact that management time
may be necessary to the business of the Registrant. As a result,
certain conflicts of interest may exist between the Registrant
and its officers and/or directors which may not be susceptible to
resolution.
In addition, conflicts of interest may arise in the
area of corporate opportunities which cannot be resolved through
arm's length negotiations. All of the potential conflicts of
interest will be resolved only through exercise by the directors
of such judgment as is consistent with their fiduciary duties to
the Registrant. It is the intention of management, so as to
minimize any potential conflicts of interest, to present first to
the Board of Directors to the Registrant, any proposed
investments for its evaluation.
(p) No Cumulative Voting
Holders of the shares are not entitled to accumulate their votes
for the election of directors or otherwise. Accordingly, the
holders of a majority of the shares present at a meeting of
shareholders will be able to elect all of the directors of the
Registrant, and the minority shareholders will not be able to
elect a representative to the Registrant's board of directors.
(q) Absence of Cash Dividends
The Board of Directors does not anticipate paying cash dividends
on the shares for the foreseeable future and intends to retain
any future earnings to finance the growth of the Registrant's
business. Payment of dividends, if any, will depend, among other
factors, on earnings, capital requirements, and the general
operating and financial condition of the Registrant, and will be
subject to legal limitations on the payment of dividends out of
paid-in capital.
(r) No Assurance of Continued Public Trading Market; Risk
of Low Priced Securities.
Prior to this offering, there has been only a limited
public market for the common stock of the Registrant. The common
stock of the Registrant is currently quoted on the National
Quotation Bureau's Pink Sheets after being delisted from the Over
the Counter Bulletin Board after the SEC trading suspension on
March 13, 2000. The Registrant is currently applying for
relisting on the Over the Counter Bulletin Board as one of its
market makers has filed a Form 15c2-11 with the NASD Stock
Market, Inc. As a result, an investor may find it difficult to
dispose of, or to obtain accurate quotations as to the market
value of the Registrant's securities. In addition, the common
stock is subject to the low-priced security or so called "penny
stock" rules that impose additional sales practice requirements
on broker-dealers who sell such securities. The Securities
Enforcement and Penny Stock Reform Act of 1990 ("Reform Act")
requires additional disclosure in connection with any trades
involving a stock defined as a penny stock (generally, according
to recent regulations adopted by the U.S. Securities and Exchange
Commission, any equity security that has a market price of less
than $5.00 per share, subject to certain exceptions), including
the delivery, prior to any penny stock transaction, of a
disclosure schedule explaining the penny stock market and the
risks associated therewith. The regulations governing low-
priced or penny stocks sometimes limit the ability of broker-
dealers to sell the Registrant's common stock and thus,
ultimately, the ability of the investors to sell their securities
in the secondary market.
(s) Effects of Failure to Maintain Market Makers.
If the Registrant is unable to maintain a National
Association of Securities Dealers, Inc. member broker/dealers as
market makers after relisting on the Bulletin Board, the
liquidity of the common stock could be impaired, not only in the
number of shares of common stock which could be bought and sold,
but also through possible delays in the timing of transactions,
and lower prices for the common stock than might otherwise
prevail. Furthermore, the lack of market makers could result in
persons being unable to buy or sell shares of the common stock on
any secondary market. There can be no assurance the Registrant
will be able to maintain such market makers.
(t) Shares Eligible For Future Sale
All of the 15,260,000 shares of common stock which are currently
held, directly or indirectly, by management have been issued in
reliance on the private placement exemption under the Securities
Act of 1933. Such shares will not be available for sale in the
open market without separate registration except in reliance upon
Rule 144 under the Securities Act of 1933. In general, under
Rule 144 a person (or persons whose shares are aggregated) who
has beneficially owned shares acquired in a non-public
transaction for at least one year, including persons who may be
deemed affiliates of the Registrant (as that term is defined
under that rule) would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of 1%
of the then outstanding shares of common stock, or the average
weekly reported trading volume during the four calendar weeks
preceding such sale, provided that certain current public
information is then available. If a substantial number of the
shares owned by these shareholders were sold pursuant to Rule 144
or a registered offering, the market price of the common stock
could be adversely affected.
(u) Uncertainty Due to Year 2000 Problem.
The Year 2000 issue arises because many computerized systems
use two digits rather than four to identify a year. Date
sensitive systems may recognize the year 2000 as 1900 or some
other date, resulting in errors when information using the year
2000 date is processed. In addition, similar problems may arise
in some systems which use certain dates in 1999 to represent
something other than a date. The effects of the Year 2000 issue
may be experienced before, on, or after January 1, 2000, and if
not addressed, the impact on operations and financial reporting
may range from minor errors to significant system failure which
could affect the Registrant's ability to conduct normal business
operations. This creates potential risk for all companies, even
if their own computer systems are Year 2000 compliant. It is not
possible to be certain that all aspects of the Year 2000 issue
affecting the Registrant, including those related to the efforts
of customers, suppliers, or other third parties, will be fully
resolved.
The Year 2000 issue arises because many computerized systems
use two digits rather than four to identify a year. Date
sensitive systems may recognize the year 2000 as 1900 or some
other date, resulting in errors when information using the year
2000 date is processed. In addition, similar problems may arise
in some systems which use certain dates in 1999 to represent
something other than a date. The effects of the Year 2000 issue
may be experienced after January 1, 2000, and if not addressed,
the impact on operations and financial reporting may range from
minor errors to significant system failure which could affect the
Registrant's ability to conduct normal business operations. This
creates potential risk for all companies, even if their own
computer systems are Year 2000 compliant. It is not possible to
be certain that all aspects of the Year 2000 issue affecting the
Registrant, including those related to the efforts of customers,
suppliers, or other third parties, will be fully resolved.
The Registrant currently believes that its systems are Year 2000
compliant in all material respects. Although management is not
aware of any material operational issues or costs associated with
preparing its internal systems for the Year 2000, the Registrant
may experience serious unanticipated negative consequences (such
as significant downtime for one or more of its suppliers) or
material costs caused by undetected errors or defects in the
technology used in its internal systems. Furthermore, the
purchasing patterns of consumers may be affected by Year 2000
issues. The Registrant does not currently have any information
about the Year 2000 status of its potential material suppliers.
The Registrant's Year 2000 plans are based on management's best
estimates.
Forward Looking Statements.
The foregoing Plan of Operation contains "forward looking
statements" within the meaning of Rule 175 under the Securities
Act of 1933, as amended, and Rule 3b-6 under the Securities Act
of 1934, as amended, including statements regarding, among other
items, the Registrant's business strategies, continued growth in
the Registrant's markets, projections, and anticipated trends in
the Registrant's business and the industry in which it operates.
The words "believe," "expect," "anticipate," "intends,"
"forecast," "project," and similar expressions identify forward-
looking statements. These forward-looking statements are based
largely on the Registrant's expectations and are subject to a
number of risks and uncertainties, certain of which are beyond
the Registrant's control. The Registrant cautions that these
statements are further qualified by important factors that could
cause actual results to differ materially from those in the
forward looking statements, including, among others, the
following: reduced or lack of increase in demand for the
Registrant's products, competitive pricing pressures, changes in
the market price of ingredients used in the Registrant's products
and the level of expenses incurred in the Registrant's
operations. In light of these risks and uncertainties, there can
be no assurance that the forward-looking information contained
herein will in fact transpire or prove to be accurate. The
Registrant disclaims any intent or obligation to update "forward
looking statements."
PART II.
ITEM 1. LEGAL PROCEEDINGS.
Other than as stated below, the Registrant is not a party to any
material pending legal proceedings and, to the best of its
knowledge, no such action by or against the Registrant has been
threatened:
Securities and Exchange Commission Action (March 12, 1999).
On March 12, 1999, the Securities and Exchange Commission
("SEC") filed a complaint alleging the Registrant had failed to
make available to the investing public current and accurate
information about its financial condition and results of
operations through the filing of periodic reports as required by
the Securities Exchange Act of 1934 (specifically, the Form 10-
KSB for the 1997 and 1998 fiscal years, the Form 10QSB for each
of the first three quarters of fiscal 1998, and the corresponding
Notifications of Late Filings (Form 12b-25)). The SEC sought in
this action to compel the Registrant to file delinquent reports
and enjoin the Registrant from further violations of the
reporting requirements. The Registrant consented to the entry of
a final judgment granting the relief sought by the SEC.
Although this action has been concluded, since the permanent
injunction was entered the Registrant has been late with the
following reports: (a) Form 10QSB for the quarter ended February
28, 1999 (due by April 29, 1999 because of the filing of a Form
12b-25) - filed with the SEC on May 28, 1999; (b) Form 10QSB for
the quarter ended June 30, 1999 (due by August 14, 1999) - filed
with the SEC on August 23, 1999 (due to an error in the CIK code
for the Registrant entered on the EDGAR electronic filing
system); (c) a Form 10-QSB for the transition period ended
December 31, 1998 (due by July 5, 1999) - filed with the SEC on
September 3, 1999; (d) Form 8-K to reflect a certain acquisition
by the Registrant (due by May 21, 1999) - filed with the SEC on
November 15, 1999; (e) Form 8-K to reflect two acquisitions by
the Registrant (due by September 15, 1999) - filed with the SEC
on November 16, 1999; (f) Form 10-KSB for the period ended on
December 31, 1999 (due by April 14, 2000) - filed with the SEC on
May 9, 2000; and (g) Form 10-QSB for the quarter ended March 31,
2000 (due by May 22, 2000).
Securities and Exchange Commission Action (March 23, 2000).
In a complaint filed on March 23, 2000 (Securities and Exchange
Commission v. eConnect and Thomas S. Hughes, Civil Action No. CV
00 02959 AHM (C.D. Cal.)), the SEC alleged that since February
28, 2000, the Registrant issued false and misleading press
releases claiming: (1) the Registrant and its joint venture
partner had a unique licensing arrangement with PalmPilot; and
(2) a subsidiary of the Registrant had a strategic alliance with
a brokerage firm concerning a system that would permit cash
transactions over the Internet. The complaint further alleges
that the press releases, which were disseminated through a wire
service as well as by postings on internet bulletin boards,
caused a dramatic rise in the price of the Registrant's stock
from $1.39 on February 28 to a high of $21.88 on March 9, 2000,
on heavy trading volume. The SEC suspended trading in the
Registrant's common stock on the Over the Counter Bulletin Board
on March 13 for a period of 10 trading days (trading resumed on
the National Quotation Bureau's Pink Sheets on March 27, 2000).
The complaint alleges that despite the trading suspension and the
SEC's related investigation, the Registrant and Mr. Hughes
continued to issue false and misleading statements concerning the
Registrant's business opportunities. In addition to the interim
relief granted, the Commission seeks a final judgment against the
Registrant and Mr. Hughes enjoining them from future violations
of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder
(the anti-fraud provisions of that act) and assessing civil
penalties against them.
On March 24, 2000, a temporary restraining order was issued in
the above-entitled action prohibiting the Registrant and Mr.
Hughes, from committing violations of the antifraud provisions of
the federal securities laws. The Registrant and Mr. Hughes
consented to the temporary restraining order.
On April 6, 2000, without admitting or denying the allegations
contained in said complaint, the Registrant and Mr. Hughes
entered into a settlement by consent that has resulted in the
entry of permanent injunctive relief. The settlement agreement
with the SEC was accepted and a judgment of permanent injunction
was entered by the Court on April 7, 2000. The judgment that the
Registrant and Mr. Hughes consented to prohibits the Registrant
and Mr. Hughes from taking any action or making any statement, or
failing to make any statement that would violate Section 10(b) of
the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
The court has yet to determine whether disgorgement, civil
penalties or other relief should be assessed against the
Registrant and/or Mr. Hughes.
Shareholder Class Action Lawsuits.
Einhorn, et al. v. eConnect, Thomas S. Hughes, Jack M. Hall,
Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case No. 00-
02674 MMM (JWJx);
Eckstein, et al. v. eConnect, Inc. , Thomas S. Hughes, Jack M.
Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case
No. 00-02700 DDP (CWx);
Bernstein, et al. v. eConnect, Inc., et al., Case No. 00-02703
FMC (BQRx);
Colangelo, et al. v. eConnect, Inc., et al., Case No. 00-02743
SVW (SHx);
Baron, et al. v. eConnect, Inc. , Thomas S. Hughes, Jack M. Hall,
Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case No. 00-
02757 WJR (CTx);
Warstler, et al. v. eConnect, Inc. , Thomas S. Hughes, Jack M.
Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case
No. 00-02758 R (SHx);
Prager, et al. v. eConnect, Inc. , Thomas S. Hughes, Jack M.
Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case
No. 00-02759 GHK (RCx);
Weisblum, et al. v. eConnect and Thomas S. Hughes, Case No. 00-
02770 MRP (CTx);
Mazda, et al. v. eConnect, et al., Case No. 00-02776 LGB (Mcx);
Pirraglia, et al. v. eConnect, et al., Case No. 00-02875 SVW
(CWx);
Hershkop and Hershkop, et al. v. eConnect and Thomas S. Hughes,
Case No. 00-03095 MRP (RNRx);
Bacun, et al. v. eConnect, Inc. , Thomas S. Hughes, Jack M. Hall,
Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case No. 00-
03161 FMC (JWJx);
Fine, et al. v. eConnect, Inc. and Thomas Hughes, Case No. 00-
03290 SVW (BQRx);
Smith, et al. v. eConnect, Thomas Hughes, Case No. 00-03301 DT
(Mcx);
Reimer, et al. v. eConnect, Thomas Hughes, Case No. 00-03405 JSL;
Tepper, et al. v. eConnect and Thomas S. Hughes, Case No. 00-
03444 WJR (CTx);
Bury, et al. v. eConnect, Thomas Hughes, Case No. 00-03446 ABC;
Villari, et al. v. eConnect, Thomas Hughes, Case No. 00-03447 LGB
(SHx);
Ringel, et al. v. eConnect, Inc. , Thomas S. Hughes, Jack M.
Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case
No. 00-03591 RSWL (RNBx);
Massaro, et al. v. eConnect, Inc., Thomas S. Hughes, Jack M.
Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case
No. 00-03671 DDP (MANx);
Gardner, et al. v. eConnect, Inc., Thomas S. Hughes, Jack M.
Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case
No. 00-03897 MMM (RZx);
Schneyer, et al. v. eConnect, Case No. CV-00-03783 MMM (JWJx);
Ginocchi, et al. v. eConnect, Case No. 00-04003 MMM (JWJx);
Matrisciani, et al. v. eConnect, Case No. 00-04181 MMM (JWJx);
Dutton, et al. v. eConnect, Case No. 00-04505 LGB (Ex);
Shaw, et al. v. eConnect, Case No. 00-04637 LGB (Ex);
Gowrie, et al. v. eConnect, Case No. 00-04686 LGB (Ex);
Belcher, et al. v. eConnect, Case No.00-04792 LGB (Ex);
Lively, et al. v. eConnect, Case No. 00-03112 MMM (JWJx);
Levine, et al. v. eConnect, Case No. 00-03649 MMM (JWJx); and
Berkowitz, et al. v. eConnect, Case No. 00-04152 MMM (JWJx).
The foregoing thirty-one actions were filed on various
dates between March 14, 2000 and early May 2000, inclusive, and
are all pending in the United States District Court for the
Central District of California. These actions are brought by
various putative classes of the purchasers of the Registrant's
common stock. The putative classes alleged, none of which have
been certified, range from no earlier than November 18, 1999
through March 13, 2000. Plaintiffs in the various actions assert
that the Registrant and Thomas S. Hughes, as well as (in certain
of the actions) Jack M. Hall, Diane Hewitt, Anthony L. Hall, and
Kevin J. Lewis, have violated Section 10(b) of the Exchange Act
(false or misleading statements and omissions which deceived
stock purchasers) and also Section 20(a) of the Exchange Act
(liability as a "controlling person" with respect to a primary
violation of securities laws). The principal allegations concern
various alleged material misrepresentations and omissions which
supposedly made the Registrant's public statements on and after
November 18, 1999 (and/or on and after November 23, 1999) false
and misleading, thereby artificially inflating the market in and
for the Registrant's common stock.
No class has yet been certified in connection with any of these
actions. All cases have been combined into one case before the
Honorable Margaret M. Morrow, entitled In Re eConnect, Inc.
Securities Litigation, Master File No. 00-02674 MMM (JWJx).
Negotiations are underway regarding the settlement of these
actions.
Additionally, a shareholder of the Registrant named John P.
Maloney, filed an individual action for "securities fraud and
misrepresentation" against the Registrant and Mr. Hughes on May
12, 2000 in small claims court in Torrance, California. The
Registrant subsequently removed the action to the United States
District Court for the Central District of California, and
requested that it be consolidated with In Re eConnect, Inc.
Securities Litigation. However, on September 11, 2000, the
Honorable Margaret M. Morrow ruled that Mr. Maloney's action
should be remanded to the state small claims court.
Employment Agreement - President/Chief Operating Officer.
On March 21, 2000, the Registrant consummated an amended
employment agreement with an individual for the position of
President and Chief Operating Officer for the Registrant (see
Exhibit 10.42 to this Form 10-QSB). On April 17, 2000, the
Registrant terminated this individual as President and Chief
Operating Officer of the Registrant. Based upon the amended
employment agreement, the remaining salary for the term of this
agreement, will be due within 30 days upon the termination of
this individual if terminated for reasons other than good cause.
In addition, through the date of termination, all of the granted
stock options and warrants will vest and be exercisable for their
entire term. Accordingly, the termination of this individual,
for reasons other than good cause, may potentially expose the
Registrant to incur a liability of approximately $1,260,000 for
the remaining portion of unpaid salary for the first, second,
third, and fourth years of this agreement. Furthermore, the
termination may have accelerated the vesting of the granted stock
options and warrants consisting of 1,000,000 warrants exercisable
at $1.00 per share, 6,000,000 stock options exercisable at $0.40
per share, and 1,500,000 stock options exercisable at the lowest
average daily trading price of the Registrant's common stock
within the first 90 days of the executive's employment. The
Registrant's management believes that the termination of this
individual was in good cause and intends to defend itself in this
matter vigorously.
Employment Agreement - Outside Counsel.
On March 22, 2000, the Registrant consummated an amended and
restated employment agreement with an individual and his firm to
act as outside counsel for the Registrant (see Exhibit 10-43 to
this Form 10-QSB). On April 14, 2000, the Registrant terminated
this individual and his firm as outside counsel. Based upon the
amended and restated employment agreement, the remaining
compensation for the term of this agreement will be due
immediately upon the termination of this individual and his firm
as outside counsel if terminated for reasons other than good
cause. In addition, any common stock and stock warrants granted
through the term of this agreement will be considered due in the
event of termination for reasons other than good cause.
Accordingly, the termination of this individual and his firm, for
reasons other than good cause, may potentially expose the
Registrant to incur a liability of approximately $700,000 for the
remaining portion of unpaid compensation for the first, second
and third years of this agreement. Furthermore, the termination
may have accelerated the vesting of the granted common stock and
stock warrants consisting of 600,000 common shares and 600,000
warrants exercisable at $1.00 per share. The Registrant's
management believes that the termination of this individual and
his firm was in good cause and intends to defend itself in this
matter vigorously.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Sales of Unregistered Securities.
The Registrant made the following sales of unregistered
securities during the three month period ended on June 30, 2000:
(a) During April 2000, the Registrant issued 6,000,000 of its
common stock for the acquisition of PowerClick valued at
$975,000. The Registrant also issued 250,000 shares of its
common stock to an individual for research and development valued
at $156,250. An additional 2,500,000 shares of its common stock
were issued to two individuals for finder's fees valued at a
total of $781,250.
(b) On June 27, 2000, the Registrant issued 200,000 shares of
its common stock to two individuals for consulting services
valued at $59,400.
(c) On June 15, 2000, the Registrant issued 3,000,000 shares of
common stock to an individual valued at $600,000, of which a
portion was for consulting services valued at $100,000 and the
Registrant received $500,000 cash for the remainder.
No commissions or fees were paid in connection with these sales.
All of the above sales were undertaken pursuant to a claim of
exemption from registration under the Securities Act of 1933 as
provided in Rule 506 under Regulation D.
Use of Proceeds.
During the quarter ended on June 30, 2000, the Registrant
did not make any sales of securities under the Form SB-2
currently on filed with the SEC.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
Appointment to the Board of Directors.
On May 23, 2000, the Registrant's Board of Directors appointed
Laurence B. Donoghue and David Weiler to the Board of Directors,
effective June 1, 2000. Mr. Donoghue accepted his appointment as
a member of the Board; however, Mr. Weiler has yet to accept his
appointment. The current members of the Board of Directors
decided that the position shall remain vacant until such a time
as the Board shall fill the vacancy.
Beneficial Ownership of Shares.
With regard to the beneficial ownership of shares of the
Registrant's common stock as shown in the Form 10-KSB for the
year ended December 31, 1999, management has reexamined the
control that Thomas Hughes exercises over ET&T and the 5,400,000
shares owned by that firm. Based on this review, the Registrant
has determined that the shares owned by ET&T should be attributed
to the beneficial ownership of Mr. Hughes: Resulting in a total
beneficial ownership of Mr. Hughes of 5,550,000 (3.42% of the
total issued and outstanding common stock as of May 1, 2000 of
162,394,801, and resulting in total ownership of the directors
and executive officers of 15,240,000 (9.33% of the total as of
that date).
ITEM 6. EXHBITS AND REPORTS ON FORM 8-K.
Exhibits.
Exhibits included or incorporated by reference herein are set
forth under the Exhibit Index.
Reports on Form 8-K.
There were no reports on Form 8-K filed during the second quarter
of the fiscal year covered by this Form 10-QSB
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
eConnect
Dated: October 16, 2000 By: /s/ Thomas S. Hughes
Thomas S. Hughes, President
EXHIBIT INDEX
Exhibit No. Description
2 Agreement and Plan of Merger, dated June 1, 1999
(incorporated by reference to Exhibit 2 of the Form 10-KSB filed
on May 9, 2000).
3.1 Articles of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 of the Registration Statement on Form
SB-2/A filed on July 22, 1999).
3.2 Certificate of Amendment of Articles of Incorporation
(incorporated by reference to Exhibit 3.2 of the Registration
Statement on Form SB-2/A filed on July 22, 1999).
3.3 Certificate of Amendment of Articles of Incorporation
(incorporated by reference to Exhibit 3.3 of the Registration
Statement on Form SB-2/A filed on September 3, 1999).
3.4 Bylaws of the Registrant (incorporated by reference to
Exhibit 3.3 of the Registration Statement on Form SB-2/A filed on
July 22, 1999).
4.1 Class A Warrant Agreement (incorporated by reference to
Exhibit 4.2 of Leggoons, Inc. Registration Statement on Form S-1
filed on October 28, 1993).
4.2 Retainer Stock Plan for Non-Employee Directors and
Consultants, dated April 26, 1999 (incorporated by reference to
Exhibit 4.1 of the Form S-8 filed on May 14, 1999).
4.3 Consulting and Service Agreement between the Registrant and
James Wexler, dated May 20, 1998 (incorporated by reference to
Exhibit 4.2 of the Form S-8 filed on May 14, 1999).
4.4 Consulting Agreement between the Registrant and Rogel
Patawaran, dated March 18, 1998 (incorporated by reference to
Exhibit 4.3 of the Form S-8 filed on May 14, 1999).
4.5 Consulting Agreement between the Registrant and David Ninci,
dated February 22, 1999 (incorporated by reference to Exhibit 4.4
of the Form S-8 filed on May 14, 1999).
4.6 Consulting Agreement between the Registrant and Harry
Hargens, dated January 17, 1999 (incorporated by reference to
Exhibit 4.5 of the Form S-8 filed on May 14, 1999).
4.7 Consulting Agreement between the Registrant and Charlene
Charles, dated March 10, 1999 (incorporated by reference to
Exhibit 4.6 of the Form S-8 filed on May 14, 1999).
4.8 Internet Consulting Services Agreement between the
Registrant and Steve Goodman, dated May 3, 1999 (incorporated by
reference to Exhibit 4.2 of the Form S-8 filed on July 2, 1999).
4.9 Consulting Agreement between the Registrant and Rogel
Patawaran, dated June 8, 1999 (incorporated by reference to
Exhibit 4.3 of the Form S-8 filed on July 2, 1999).
4.10 Consulting and Service Agreement between the Registrant and
Edward Wexler, dated May 20, 1999 (incorporated by reference to
Exhibit 4.4 of the Form S-8 filed on July 2, 1999).
4.11 Consultant Agreement between the Registrant and Richard
Epstein, dated June 3, 1999 (incorporated by reference to Exhibit
4.5 of the Form S-8 filed on July 2, 1999).
4.12 Consultant Agreement between the Registrant and Ezzat
Jallad, dated March 10, 1999 (incorporated by reference to
Exhibit 4.6 of the Form S-8 filed on July 2, 1999).
4.13 Consultant Agreement between the Registrant and Shar
Offenberg, dated June 20, 1998 (incorporated by reference to
Exhibit 4.7 of the Form S-8 filed on July 2, 1999).
4.14 Consultant Agreement between the Registrant and Richard
Parnes, dated May 10, 1999 (incorporated by reference to Exhibit
4.8 of the Form S-8 filed on July 2, 1999).
4.15 Consulting Contract between the Registrant and Robert Bragg,
dated August 19, 1999 (incorporated by reference to Exhibit 4.2
of the Form S-8 filed on August 31, 1999).
4.16 Consultant Agreement between the Registrant and Dominique
Einhorn, dated August 9, 1999 (incorporated by reference to
Exhibit 4.3 of the Form S-8 filed on August 31, 1999).
4.17 Consultant Agreement between the Registrant and Richard
Epstein, dated August 16, 1999 (incorporated by reference to
Exhibit 4.4 of the Form S-8 filed on August 31, 1999).
4.18 Consultant Agreement between the Registrant and Jane Hauser,
dated August 16, 1999 (incorporated by reference to Exhibit 4.5
of the Form S-8 filed on August 31, 1999).
4.19 Form of Debenture issued by the Registrant to CALP II, LP,
dated June 9, 1999 (incorporated by reference to Exhibit 4.3 of
the Registration Statement on Form SB-2/A filed on July 22, 1999).
4.20 Registration Rights Agreement between the Registrant and
CALP II, LP, dated June 9, 1999 (incorporated by reference to
Exhibit 4.2 of the Registration Statement on Form SB-2/A filed on
July 22, 1999).
4.21 Form of Warrant issued by the Registrant to CALP II, LP,
dated June 9, 1999 (incorporated by reference to Exhibit 4.4 of
the Registration Statement on Form SB-2/A filed on July 22, 1999).
4.22 Common Stock Purchase Agreement between the Registrant and
Alpha Venture Capital, Inc., dated September 28, 1999
(incorporated by reference to Exhibit 4.2 of the Registration
Statement on Form SB-2 POS filed on September 29, 1999).
4.23 Registration Rights Agreement between the Registrant and
Alpha Venture Capital, Inc., dated September 28, 1999
(incorporated by reference to Exhibit 4.3 of the Registration
Statement on Form SB-2 POS filed on September 29, 1999).
4.24 Warrant issued by the Registrant to Alpha Venture Capital,
Inc., dated September 28, 1999 (incorporated by reference to
Exhibit 4.4 of the Registration Statement on Form SB-2 POS filed
on September 29, 1999).
4.25 Amended and Restated Retainer Stock Plan for Non-Employee
Directors and Consultants, dated February 1, 2000 (incorporated
by reference to Exhibit 4.1 of the Form S-8 filed on February 10,
2000).
4.26 Consulting Services Agreement between the Registrant and
Laurel-Jayne Yapel Manzanares, dated February 1, 2000
(incorporated by reference to Exhibit 4.2 of the Form S-8 filed
on February 10, 2000).
4.27 Consulting Services Agreement between the Registrant and
Marcine Aniz Uhler, dated February 1, 2000 (incorporated by
reference to Exhibit 4.3 of the Form S-8 filed on February 10,
2000).
4.28 Consulting Services Agreement between the Registrant and
William Lane, dated February 7, 2000 (incorporated by reference
to Exhibit 4.4 of the Form S-8 filed on February 10, 2000).
4.29 Consulting Services Agreement between the Registrant and
Earl Gilbrech, dated February 7, 2000 (incorporated by reference
to Exhibit 4.5 of the Form S-8 filed on February 10, 2000).
4.30 Consulting Services Agreement between the Registrant and
Dominique Einhorn, dated February 7, 2000 (incorporated by
reference to Exhibit 4.6 of the Form S-8 filed on February 10,
2000).
4.31 Consulting Services Agreement between the Registrant and
Edward James Wexler, dated February 7, 2000 (incorporated by
reference to Exhibit 4.7 of the Form S-8 filed on February 10,
2000).
4.32 Consulting Agreement between the Registrant and R. Scott
Hatfield, dated March 6, 2000 (incorporated by reference to
Exhibit 4.32 of the Form SB-2 POS filed on September 12, 2000).
4.33 Consulting Services Agreement between the Registrant and
Chris Jensen, dated April 24, 2000 (incorporated by reference to
Exhibit 4.33 of the Form SB-2 POS filed on September 12, 2000).
4.34 Consulting Agreement between the Registrant and Robert
Graham, dated May 11, 2000 (incorporated by reference to Exhibit
4.34 of the Form SB-2 POS filed on September 12, 2000).
4.35 Consulting Agreement between the Registrant and Richard
Epstein, dated May 20, 2000 (incorporated by reference to Exhibit
4.35 of the Form SB-2 POS filed on September 12, 2000).
4.36 Consulting Agreement between the Registrant and Richard
Epstein, dated June 2, 2000 (incorporated by reference to Exhibit
10.1 of the Form S-8 filed on July 10, 2000).
4.37 Consulting Services Agreement between the Registrant and
Rogel Patawaran, dated June 2, 2000 (incorporated by reference to
Exhibit 10.2 of the Form S-8 filed on July 10, 2000).
4.38 Consulting Agreement between the Registrant and Elle Travis,
dated June 2, 2000 (incorporated by reference to Exhibit 10.3 of
the Form S-8 filed on July 10, 2000).
4.39 Consulting Agreement between the Registrant and Charles
Yourshaw, dated June 5, 2000 (incorporated by reference to
Exhibit 10.1 of the Form S-8 filed on July 10, 2000).
4.40 Consulting Agreement between the Registrant and Nick Gorenc,
dated June 5, 2000 (incorporated by reference to Exhibit 10.2 of
the Form S-8 filed on July 10, 2000).
4.41 Consulting Agreement between the Registrant and Louis
Sabatasso, dated June 10, 2000 (incorporated by reference to
Exhibit 10.1 of the Form S-8 filed on July 10, 2000).
4.42 Consulting Agreement between the Registrant and Laurie
Belger, dated June 10, 2000 (incorporated by reference to Exhibit
10.2 of the Form S-8 filed on July 10, 2000).
10.1 Agreement to License Assets between the Registrant and Home
Point of Sales, Inc., dated February 18, 1997 (incorporated by
reference to Exhibit 10.16 to the Form 8-K filed on February 25,
1997).
10.2 Escrow Agreement between the Registrant, Home Point of
Sales, Inc, and First National Bank of Omaha, dated February 18,
1997 (incorporated by reference to Exhibit 10.17 to the Form 8-K
filed on February 25, 1997).
10.3 Host Processing Agreement between the Registrant and
Electronic Transactions & Technologies, dated April 28, 1997
(incorporated by reference to Exhibit 10.3 of the Form 10-KSB/A
for the fiscal year ended on August 31, 1998).
10.4 Licensing Agreement between the Registrant and Electronic
Transactions & Technologies, dated March 27, 1998 (incorporated
by reference to Exhibit 10.4 of the Form 10-KSB/A for the fiscal
year ended on August 31, 1998).
10.5 Promissory Note between Electronic Transactions &
Technologies and Unipay, Inc., dated April 26, 1999 (incorporated
by reference to Exhibit 10.5 of the Form 10-KSB filed on May 9,
2000).
10.6 Joint Venture Agreement between the Registrant and First
Entertainment Holding Corp., dated April 29, 1999 (incorporated
by reference to Exhibit 10.6 of the Form 10-KSB filed on May 9,
2000).
10.7 Letter of Commitment between the Registrant and Rogel
Technologies, dated May 6, 1999 (incorporated by reference to
Exhibit 2 to the Form 8-K filed on November 15, 1999).
10.8 Acquisition Agreement between the Registrant and eBet.com,
Inc., dated August 12, 1999 (incorporated by reference to Exhibit
2 to the Form 8-K/A filed on November 15, 1999).
10.9 Consulting Agreement between the Registrant and eMarkit,
Incorporated, dated August 16, 1999 (incorporated by reference to
Exhibit 10.9 of the Form 10-KSB filed on May 9, 2000).
10.10 Stock Exchange Agreement between the Registrant, La
Empresa Ranco Plasticos Limitada, Michael Lanes, and Jamie
Ligator, dated August 31, 1999 (incorporated by reference to
Exhibit 2.1 to the Form 8-K filed on November 16, 1999).
10.11 Agreement and Plan of Acquisition between the
Registrant and PowerClick, Inc., dated September 9, 1999
(incorporated by reference to Exhibit 10.11 of the Form 10-KSB
filed on May 9, 2000).
10.12 Consulting Agreement between the Registrant and
International Investor Relations Group, Inc., dated September 24,
1999 (incorporated by reference to Exhibit 10.12 of the Form 10-
KSB filed on May 9, 2000).
10.13 Agreement between the Registrant and Kanakaris
Communications, dated October 21, 1999 (incorporated by reference
to Exhibit 10.13 of the Form 10-KSB filed on May 9, 2000).
10.14 Letter of Commitment between the Registrant and Rogel
Technologies, dated October 23, 1999 (incorporated by reference
to Exhibit 10.14 of the Form 10-KSB filed on May 9, 2000).
10.15 Capital Contribution Agreement between the Registrant
and SafeTPay.com, dated November 5, 1999 (incorporated by
reference to Exhibit 10.15 of the Form 10-KSB filed on May 9,
2000).
10.16 Agreement between the Registrant and Rogel
Technologies, dated November 23, 1999 (incorporated by reference
to Exhibit 10.16 of the Form 10-KSB filed on May 9, 2000).
10.17 Contract of Partnership between the Registrant and Top
Sports, S.A., dated November 20, 1999 (incorporated by reference
to Exhibit 10.17 of the Form 10-KSB filed on May 9, 2000).
10.18 Agreement between the Registrant and Alliance Equities,
dated November 29, 1999 (incorporated by reference to Exhibit
10.18 of the Form 10-KSB filed on May 9, 2000).
10.19 Secured Promissory Note issued to the Registrant by
Electronic Transactions & Technologies and Thomas S. Hughes,
dated December 1, 1999 (incorporated by reference to Exhibit
10.19 of the Form 10-KSB filed on May 9, 2000).
10.20 Security Agreement between the Registrant, Electronic
Transactions & Technologies, and Thomas S. Hughes, dated December
1, 1999 (incorporated by reference to Exhibit 10.20 of the Form
10-KSB filed on May 9, 2000).
10.21 Business Cooperation Agreement between the Registrant
and Top Sports, S.A., dated December 9, 1999 (incorporated by
reference to Exhibit 10.21 of the Form 10-KSB filed on May 9,
2000).
10.22 Consulting Agreement between the Registrant and Michael
Leste, dated December 10, 1999 (incorporated by reference to
Exhibit 10.22 of the Form 10-KSB filed on May 9, 2000).
10.23 Consulting Agreement between the Registrant and Michael
Kofoed, dated December 10, 1999 (incorporated by reference to
Exhibit 10.23 of the Form 10-KSB filed on May 9, 2000).
10.24 Agreement between the Registrant and Top Sports S.A.,
dated December 16, 1999 (incorporated by reference to Exhibit
10.24 of the Form 10-KSB filed on May 9, 2000).
10.25 Agreement between the Registrant and eMarkit,
Incorporated, dated December 29, 1999 (incorporated by reference
to Exhibit 10.25 of the Form 10-KSB filed on May 9, 2000).
10.26 Shares Sales Contract between the Registrant and Paul
Egan, dated January 1, 2000 (incorporated by reference to Exhibit
10.26 of the Form SB-2 POS filed on September 12, 2000).
10.27 Fee Agreement between the Registrant and Red Iguana
Trading Company, Inc., dated January 2, 2000 (incorporated by
reference to Exhibit 10.26 of the Form 10-QSB filed on May 30,
2000).
10.28 Assignment of eSportsbet between the Registrant and
PowerClick, Inc., dated January 7, 2000 (incorporated by
reference to Exhibit 10.27 of the Form 10-QSB filed on May 30,
2000).
10.29 Letter of Intent of Negotiation and Information
Exchange between eConnect2Trade.com, Incorporated, and Empire
Financial Holdings, Incorporated, dated January 21, 2000
(incorporated by reference to Exhibit 10.28 of the Form 10-QSB
filed on May 30, 2000).
10.30 Manufacturing Agreement between the Registrant and Asia
Pacific Micro, Inc., dated January 21, 2000 (incorporated by
reference to Exhibit 10.29 of the Form 10-QSB filed on May 30,
2000).
10.31 Consulting Services Agreement between the Registrant
and Boardwalk Associates, Inc., dated January 26, 2000
(incorporated by reference to Exhibit 10.30 of the Form 10-QSB
filed on May 30, 2000).
10.32 Consulting Services Agreement between the Registrant
and Coldwater Capital L.L.C., dated January 26, 2000
(incorporated by reference to Exhibit 10.31 of the Form 10-QSB
filed on May 30, 2000).
10.33 Consultant Agreement between the Registrant and Harvey
M. Burstein, dated February 2, 2000 (incorporated by reference to
Exhibit 10.32 of the Form 10-QSB filed on May 30, 2000).
10.34 Consultant Agreement between the Registrant and Terrie
Pham, dated February 2, 2000 (incorporated by reference to
Exhibit 10.33 of the Form 10-QSB filed on May 30, 2000).
10.35 Software License, Development, and Maintenance
Agreement (Dominican Republic) between the Registrant and eFunds
Corporation, dated February 3, 2000 (incorporated by reference to
Exhibit 10.34 of the Form 10-QSB filed on May 30, 2000).
10.36 Agreement between the Registrant and Burbank Coach
Works, dated February 3, 2000 (incorporated by reference to
Exhibit 10.35 of the Form 10-QSB filed on May 30, 2000).
10.37 Software License, Development, and Maintenance
Agreement (Ireland) between the Registrant and eFunds
Corporation, dated February 4, 2000 (incorporated by reference to
Exhibit 10.36 of the Form 10-QSB filed on May 30, 2000).
10.38 Acquisition Agreement between the Registrant and
PowerClick, Inc., dated February 9, 2000 (incorporated by
reference to Exhibit 10.37 of the Form 10-QSB filed on May 30,
2000).
10.39 Loan Agreement between the Registrant and Richard
Epstein, dated February 15, 2000 (incorporated by reference to
Exhibit 10.38 of the Form 10-QSB filed on May 30, 2000).
10.40 PocketPay Joint Venture Agreement between the
Registrant and Pilot Island Publishing, Inc., dated March 1, 2000
(incorporated by reference to Exhibit 10.39 of the Form 10-QSB
filed on May 30, 2000).
10.41 Letter of Intent between the Registrant and Real
Solutions, Ltd., dated March 9, 2000 (incorporated by reference
to Exhibit 10.40 of the Form 10-QSB filed on May 30, 2000).
10.42 Consulting Agreement between the Registrant and Ryan
Kavanaugh, dated March 10, 2000 (incorporated by reference to
Exhibit 10.41 of the Form 10-QSB filed on May 30, 2000).
10.43 Amended Employment Agreement between the Registrant and
Stephen E. Pazian, dated March 21, 2000 (incorporated by
reference to Exhibit 10.42 of the Form 10-QSB filed on May 30,
2000).
10.44 Amended and Restated Employment Agreement between the
Registrant and Stanley C. Morris, dated March 22, 2000
(incorporated by reference to Exhibit 10.43 of the Form 10-QSB
filed on May 30, 2000).
10.45 China-Singapore-Hong Kong-Macao Joint Venture Agreement
between the Registrant, and Raymond Kessler and Li-Wang Kessler,
dated March 27, 2000 (incorporated by reference to Exhibit 10.44
of the Form 10-QSB filed on May 30, 2000).
10.46 Amended and Restated Secured Promissory Note issued to
the Registrant by Electronic Transactions & Technologies and
Thomas S. Hughes, dated March 31, 2000 (incorporated by reference
to Exhibit 10.45 of the Form 10-QSB filed on May 30, 2000).
10.47 Amended and Restated Security Agreement between the
Registrant, Electronic Transactions & Technologies, and Thomas S.
Hughes, dated March 31, 2000 (incorporated by reference to
Exhibit 10.46 of the Form 10-QSB filed on May 30, 2000).
10.48 Master Service Agreement between the Registrant and
REAL Solutions, Ltd., dated April 13, 2000 (incorporated by
reference to Exhibit 10.48 of the Form SB-2 POS filed on
September 12, 2000).
10.49 Consulting and Services Agreement between the
Registrant and Peters Entertainment.com, Inc., dated April 14,
2000 (incorporated by reference to Exhibit 10.49 of the Form SB-2
POS filed on September 12, 2000).
10.50 Letter of Intent between the Registrant and National
Data Funding Corporation, dated May 22, 2000 (see below)
10.51 Agreement between the Registrant and Top Sports, S.A.,
dated June 20, 2000 (see below)
16.1 Letter on change in certifying accountant (incorporated by
reference to Exhibit 16 of the Form 8-K filed on July 23, 1999).
16.2 Letter on change in certifying accountant (incorporated by
reference to Exhibit 16 of the Form 8-K filed on March 15, 2000).
21 Subsidiaries of the Registrant (see below).
27 Financial Data Schedule (see below).
99.1 Patents: dated August 9, 1994, May 19, 1998, and September
15, 1998 (incorporated by reference to Exhibit 99.1 of the Form
10-KSB filed on May 9, 2000).
99.2 Trademarks: filed March 31, 1997, February 16, 1999, May 6,
1999, May 24, 1999, June 3, 1999, June 4, 1999, August 12, 1999,
and September 28, 1999 (incorporated by reference to Exhibit 99.2
of the Form 10-KSB filed on May 9, 2000).
99.3 Trademark filed on March 15, 2000 (incorporated by reference
to Exhibit 99.3 of the Form 10-QSB filed on May 30, 2000).
