U.S. SECURITIES AND
EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933
eConnect
(Name of Small Business
Issuer in its charter)
Nevada
454390 43-1239043
(State or jurisdiction of incorporation
(Primary Standard Industrial
I.R.S. Employer or organization) Classification Code
Number) Identification No.)
31310 Eaglehaven Center, Suite 10, Rancho Palos
Verdes, California 90275; (310) 541-4393
(Address and telephone number of Registrant's
principal executive offices and principal place of
business)
Shawn F. Hackman, Esq., 3360 West Sahara Avenue,
Suite 200, Las Vegas, Nevada 89102; (702) 732-2253
(Name, address, and telephone number of agent for
service)
Approximate date of proposed sale to the public: As
soon as practicable after this Registration
Statement
becomes effective.
If this Form is filed
to register additional
securities for an
offering pursuant to
Rule 462(b) under the
Securities Act, please
check the following
box and list the
Securities Act
registration 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 this 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
statement number of
the earlier effective
registration statement
for the same offering.
?
If the delivery of
the prospectus is
expected to be made
pursuant to Rule 434,
check the following
box.
?
CALCULATION OF REGISTRATION FEE
Title of
each class
of
securities
to be
registered
Amount to
be
registered
(1)
Proposed
maximum
offering
price per
unit (2)
Proposed
maximum
aggregate
offering
price
Amount of
registrati
on fee
Comm Stock
61,000,000
$0.19
$11,590,000
$3,222.02
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.
Pursuant to Rule 416, such additional amounts to
prevent dilution from stock splits or similar
transactions.
Calculated in accordance with Rule 457(c): The
average of the bid and asked price as of August 18,
1999.PART I. INFORMATION REQUIRED IN PROSPCTUS
PROSPECTUS
eConnect
61,000,000 Shares *
Common Stock
Offering Price $0.19 per Share
eConnect, a Nevada corporation ("Company"), is
hereby
offering up to 61,000,000 shares of its $0.001 par
value common stock ("Shares") at an offering price
of
$0.19 per Share on a delayed basis under Rule 415
pursuant to the terms of this Prospectus for the
purpose of providing working capital for the
Company.
The Shares offered hereby are highly speculative and
involve a high degree of risk to public investors
and
should be purchased only by persons who can afford
to
lose their entire investment (See "Risk Factors" on
page 4).
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION
OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Price to
Public
Underwriting
Discounts and
Commissions (2)
Proceeds to
Issuer (3)
Per
Share
$0.19
$0
$0.19
Information contained herein is subject to
completion
or amendment. The registration statement relating
to
the securities has been filed with the Securities
and
Exchange Commission. The securities may not be sold
nor may offers to buy be accepted prior to the time
the registration statement becomes effective. This
prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there
be any sale of these securities in any State in
which
such offer, solicitation or sale would be unlawful
prior to registration or qualification under the
securities laws of any such State.
Subject to Completion, Dated ________________, 1999
*Pursuant to SEC Rule 416, there will be a change in
the amount of securities being issued to prevent
dilution resulting from stock splits, stock
dividends, or similar transaction.
T
HE SHARES ARE OFFERED BY THE COMPANY SUBJECT TO
PRIOR
SALE, ACCEPTANCE OF THE SUBSCRIPTIONS BY THE COMPANY
AND APPROVAL OF CERTAIN LEGAL MATTERS BY COUNSEL TO
THE COMPANY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OPEN OFFER TO BUY INTO SECURITIES
OFFERED HEREBY A STATE IN WHICH, OR TO A PERSON
TRUE,
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE an
IMPLICATION THAT THERE HAS BEEN NO CHANGE in THE
INFORMATION CONTAINED HEREIN SUBSEQUENT TO THE DATE
THEREOF. HOWEVER, IF A MATERIAL CHANGE OCCURS,
THIS
prospectus WILL BE AMENDED OR SUPPLEMENTED
ACCORDINGLY FOR ALL EXISTING SHAREHOLDERS, AND FOR
ALL PROSPECTIVE INVESTORS WHO HAVE NOT YET BEEN
ACCEPTED AS SHAREHOLDERS IN THE COMPANY.
THIS PROSPECTUS DOES NOT INTENTIONALLY OMIT ANY
MATERIAL FACT OR CONTAIN ANY UNTRUE STATEMENT OF
MATERIAL FACT. NO PERSON OR ENTITY HAS BEEN
AUTHORIZED BY THE COMPANY TO GIVE ANY INFORMATION OR
MAKE A REPRESENTATION, WARRANTY, COVENANT, OR
AGREEMENT WHICH IS NOT EXPRESSLY PROVIDED FOR OR
CONTAINED IN THIS PROSPECTUS; IF GIVEN OR MADE, SUCH
INFORMATION, REPRESENTATION, WARRANTY, COVENANT, OR
AGREEMENT MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
THE COMPANY IS A REPORTING COMPANY. EACH PERSON WHO
RECEIVES A PROPSECTUS WILL HAVE AN OPPORTUNITY TO
MEET WITH REPRESENTATIVES OF THE COMPANY, DURING
NORMAL BUSINESS HOURS UPON WRITTEN OR ORAL REQUEST
TO
THE COMPANY, IN ORDER TO VERIFY ANY OF THE
INFORMATION INCLUDED IN THIS PROSPECTUS AND TO
OBTAIN
ADDITIONAL INFORMATION REGARDING THE COMPANY. IN
ADDITION, EACH SUCH PERSON WILL BE PROVIDED WITHOUT
CHARGE, UPON WRITTEN OR ORAL REQUEST, A COPY OF ANY
OF THE INFORMATION THAT IS INCORPORATED BY REFERENCE
IN THE PROSPECTUS AND THE ADDRESS (INCLUDING TITLE
OR
DEPARTMENT) AND TELEPHONE NUMBER TO WHICH SUCH
REQUEST IS TO BE DIRECTED.
ALL OFFEREES AND SUBSCRIBERS WILL BE ASKED TO
ACKNOWLEDGE IN WRITING THAT THEY HAVE READ THIS
PROSPECTUS CAREFULLY AND THOROUGHLY, and understood
the contents thereof, THEY WERE GIVEN THE
OPPORTUNITY
TO OBTAIN ADDITIONAL INFORMATION; AND THEY DID SO TO
THEIR SATISFACTION.
A maximum of 61,000,000 shares may be sold on a
delayed basis under Rule 415 under the Securities
Act
of 1933, as amended. The Price to Public only shows
the Shares and warrants for common stock that will
be
offered to the public; 8,000,000 of the total Shares
will be set aside for employees stock options and
31,000,000 shares will be set aside for warrants to
be give to each of the shareholders of record as of
June 30, 1999. In addition, 1,800,000 of the shares
are being sold by selling shareholders of the
Company: Ranco Plasticos, a Costa Rica corporation,
and Menhur Azul, S.A., a Costa Rica corporation.
The
offering will remain open until the last date that
the warrants can be exercised, which is June 30,
2002.
(2) No commissions will be paid in connection with
the sale of the Shares on this delayed basis.
(3) The Net Proceeds to the Company is before the
payment of certain expenses in connection with this
offering. See "Use of Proceeds."
TABLE OF CONTENTS
PROSPECTUS SUMMARY
1
RISK FACTORS
3
USE OF PROCEEDS
10
DETERMINATION OF OFFERING PRICE
10
DILUTION
11
PLAN OF DISTRIBUTION
12
LEGAL PROCEEDINGS
13
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS
14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
15
DESCRIPTION OF SECURITIES
16
INTEREST OF NAMED EXPERTS AND COUNSEL
17
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
17
ORGANIZATION WITHIN LAST FIVE YEARS
18
DESCRIPTION OF BUSINESS
18
PLAN OF OPERATION
30
DESCRIPTION OF PROPERTY
30
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 30
MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
32
EXECUTIVE COMPENSATION
33
FINANCIAL STATEMENTS
34
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
34
PROSPECTUS SUMMARY
The following summary is qualified in its entirety
by
detailed information appearing elsewhere in this
prospectus ("Prospectus"). Each prospective investor
is urged to read this Prospectus, and the attached
Exhibits, in their entirety.
The Company.
Background.
Betting, Inc. was originally organized under
the
laws of the State of Missouri on September 1, 1981,
as HANDY-TOP, INC. On April 20, 1983, the Articles
of Incorporation were amended to change the name of
the corporation to HTI Corporation. On May 28,
1993,
the Articles of Incorporation were amended to change
the name of the corporation to Leggoons, Inc. In
addition to changing the company's name, the May
28,1993, amendment to the Articles of Incorporation
increased the number of authorized shares of common
stock from 40,000 to 10,000,000 and decreased the
par
value of the common stock from $1.00 per share to
$.01 per share. Also on May 28, 1993, Leggoons,
Inc.,
declared a 14-for-1 stock split.
Leggoons, Inc., was engaged in the design,
manufacture and distribution of apparel and related
accessories which are sold to better specialty and
department stores nationwide under the brands
Leggoons, CPO by Leggoons, John Lennon Artwork
Apparel, and Snooggel. On January 19, 1996,
Leggoons, Inc., entered into a Licensing Agreement
with Robert Tamsky, a former director and employee
of
the Leggoons, Inc. Pursuant to the terms of the
Licensing Agreement, the Leggoons, Inc., granted Mr.
Tamsky effective January 1, 1996, the right to use
the LEGGOONS trademark in connection with the
design,
production, marketing, sales and sublicensing of all
clothing, wearing apparel and accessories bearing
the
"LEGGOONS" symbol. This right will continue until
December 31, 1998, and may be extended thereafter
each year for an additional year. In consideration
for the license, Mr. Tamsky, according to the
Licensing Agreement, shall pay to the Leggoons, Inc.
a royalty of five percent of the net sales of
"LEGGOONS" products.
Also on January 19, 1996, the Leggoons, Inc.,
adopted
a formal plan to discontinue the designing, selling,
manufacturing and distribution of its apparel
products. As part of such plan, Leggoons, Inc.,
discontinued production on April 30, 1996, and
intended to either sell or liquidate the operations
within twelve months of that date.
On June 12, 1996, Leggoons, Inc., transferred all of
its assets and liabilities to a third party
assignee,
under an "Assignment for the Benefit of Creditors"
(the "Assignment"). An Assignment is a business
liquidation device available as an alternative to
bankruptcy. The third party assignee, a Nebraska
corporation, also named Leggoons, Inc. (the
"Assignee"), will be required to properly, timely,
and orderly dispose of all remaining assets for the
benefit of creditors. Included in the Assignment
were
the rights and obligations of the Licensing
Agreement. Leggoons, Inc. continued to maintain its
status as a shell corporation.
On February 18, 1997, Leggoons, Inc. entered into an
Agreement to License Assets from Home Point of
Sales,
Inc.(now know as Electronic Transactions &
Technology
- - "ET&T")) for the purpose of licensing certain
technology for the development of Personal Encrypted
Remote Financial Electronic Card Transactions
("PERFECT"). ET&T is a privately held corporation
70% owned by Thomas S. Hughes, President of the
Company. This technology provides consumers with
the
option to instantly pay bills or impulse purchase
from home with real time cash transactions.
Management believes the proprietary technology and
the large demand for wagering opportunities in
today's marketplace will combine to generate
substantial sales for the Company over the medium
term.
Thomas S. Hughes, Chairman of ET&T, became Chairman
and President of Leggoons, Inc., on March 1, 1997.
At that time, the name was changed to Betting, Inc.
On April 28, 1997, the Company entered into a Host
Processing Agreement with ET&T for the purpose of
having ET&T act as the bank host processing for all
Betting, Inc.'s transactions that are sent by
terminal s that read credit cards or ATM cards. On
March 27, 1998, the Company entered into a License
Agreement with ET&T for the purpose of licensing
additional technology for processing electronic
banking transactions. This licensing supplements
the
technology licensed under the Agreement dated
February 18, 1997.
On May 17, 1999, an Agreement and Plan of Merger
between Betting, Inc., a Missouri corporation, into
Betting, Inc., a Nevada corporation ("Company") was
executed by an authorized signatory of each company.
At a duly called meeting of shareholders on May 21,
1999, the merger of the two companies was approved
by
a majority of the shareholders appearing in person
or
by proxy. Effective on June 1, 1999, Articles of
Merger were filed with the Nevada Secretary of
State,
which formally resulted in the redomicile to the
State of Nevada. On June 4, 1999, a Certificate of
Amendment to Articles of Incorporation was filed
with
the Nevada Secretary of State changing the name of
the Company to "eConnect" and increasing the number
of authorized common shares to 100,000,000. On
August 23, 1999, a Certificate of Amendment to
Articles of Incorporation was filed with the Nevada
Secretary of State increasing the number of
authorized common shares to 200,000,000.
(b) Business.
The Company is made up of two divisions: The first,
eGaming, is presently generating revenues and
earnings from its eSportsbet and 777WINS.com
acquisitions (internet gaming). The second division
of eGate which is developing technology for ATM card
with PIN or smart card payments (same-as-cash - only
the merchant can reverse the transaction) using the
Personal Encrypted Remote Financial Electronic Card
Transactions ("PERFECT"). Thus, the Company is both
an Internet and non Internet company, and both a
gaming and non gaming company. focused on connecting
the consumer directly to the recipient merchant...
no
middlepersons. See "Description of Business."
The internet gaming industry is an industry that has
developed significantly in recent years. The
internet
gaming industry as a whole is under increasing
governmental scrutiny as the industry develops. It
is possible that at some point in the future there
could be legislation against gambling on the
internet
or other similar methods. See "Risk Factors."
The Offering.
Shares of the Company will be offered as a shelf
registration under Securities and Exchange
Commission
Rule 415 at $0.19 per Share. See "Plan of
Distribution." The offering will be primarily used
for the following purposes (maximum amounts): (a)
sales to the general public of the following: (i)
10,200,000 Shares; and (ii) 10,000,000 warrants
(exercisable at $1.00 per Share from the effective
date of this Registration Statement to December 31,
2001); (b) the issuance of one warrant to each
shareholder of record of the Company as of June 30,
1999 (maximum of 31,000,000) (exercisable at $1.00
per Share from June 30, 2000 to June 30, 2002); (c)
5,000,000 options for Shares to be issued in the
future to employees of the Company, exercisable at
$0.50 per Share; (d) 3,000,000 options for Shares to
be issued in the future to Thomas S. Hughes,
President of the Company, exercisable at $0.50 per
Share; and (e) 1,800,000 of restricted shares being
sold by selling shareholders of the Company: Ranco
Plasticos, a Costa Rica corporation, and Menhur
Azul,
S.A., a Costa Rica corporation. See "Plan of
Distribution." If all the Shares being offered to
the public are sold, this will represent net
proceeds
of a maximum of $3,838,000, less certain costs
associated with this offering. See "Use of
Proceeds." This balance will be used as working
capital for the Company.
Liquidity of Investment.
Although the Shares will be "free trading," and is
an
established market for the Shares, and there is a
large public float in the Shares as of August 13,
1999 (60,523,775), these shares are owned by only
415 shareholders. Therefore, an investor may not be
able to sell is Shares when he or she wishes;
therefore, an investor may consider his or her
investment to be long-term. See "Risk Factors."
Risk Factors.
And investment in the company involved risks due in
part to a limited previous financial and operating
history of Company, as well as competition in the
internet gaming industry. Also, certain potential
conflicts of interest arise due to the relationship
of the Company to management and others. See "Risk
Factors."
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE
IN NATURE AND INVOLVE A HIGH DEGREE OF RISK. THEY
SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD
TO
LOSE THEIR ENTIRE INVESTMENT. THEREFORE, EACH
PROSPECTIVE INVESTOR SHOULD, PRIOR TO PURCHASE,
CONSIDER VERY CAREFULLY THE FOLLOWING RISK FACTORS
AMONG OTHER THINGS, AS WELL AS ALL OTHER INFORMATION
SET FORTH IN THIS PROSPECTUS.
Limited Prior Operations and Experience.
The Company is newly reorganized, has only limited
revenues from its new internet operations, and has
only limited assets. There can be no assurance that
the Company will generate significant revenues in
the
future; and there can be no assurance that the
Company will operate at a profitable level. See
"Description of Business." If the Company is unable
to obtain customers and generate sufficient revenues
so that it can profitably operate, the Company's
business will not succeed. In such event, investors
in the Shares may lose their entire cash investment.
Also the Company and its management do not have
significant experience in the internet business, and
in particular the on-line gaming business. See
"Directors, Officers, Promoters, and Control
Persons."
Dependence on the Internet Industry
The Company's business is influenced by the rate of
use and expansion in the internet industry.
Although this industry, and in particular on-line
gaming, have been expanding at a rapid rate in
recent years, there is no guarantee that it will
continue to do so in the future. Declines in these
industries may influence the Company's revenues
adversely.
Influence of Other External Factors.
The internet industry, and internet gaming in
particular, is a speculative venture necessarily
involving some substantial risk. There is no
certainty that the expenditures to be made by the
Company will result in commercially profitable
business. The marketability of internet gaming will
be affected by numerous factors beyond the control
of
the Company. These factors include market
fluctuations, and the general state of the economy
(including the rate of inflation, and local economic
conditions), which can affect peoples' discretionary
spending. Factors which leave less money in the
hands
of potential clients of the Company will likely have
an adverse effect on the Company. The exact effect
of these factors cannot be accurately predicted, but
the combination of these factors may result in the
Company not receiving an adequate return on invested
capital.
Regulatory Factors.
Existing and 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 U.S. Senate is presenting
discussing a proposed bill by Senator Jon Kyl of
Arizona which would ban internet gaming in the
United
States. The passage of such a bill may adversely
affect the operation of the Company, including
increased costs if certain of the Company operations
are then moved to a foreign jurisdiction. The exact
affect of such legislation cannot be predicted until
it is in final form. If, however, a federal statute
was passed into legislation making Internet gambling
illegal, eSportsbet.com is prepared to make the
necessary adjustments to continue to operate
legally.
Competition.
The Company may experience substantial competition
in
its efforts to locate and attract clients. Many
competitors in the internet industry, and in
particular internet gaming, have greater experience,
resources, and managerial capabilities than the
Company and may be in a better position than the
Company to obtain access to attractive clientele.
There are a number of larger companies which will
directly compete with the Company. Such competition
could have a material adverse effect on the
Company's
profitability.
Success of Management.
Any potential investor is strongly cautioned that
the
purchase of these securities should be evaluated on
the basis of: (i) the limited diversification of the
venture capital opportunities afforded to the
Company, (ii) the high-risk nature and limited
liquidity of the Company, and (iii) the Company's
ability to utilize funds for the successful
development and distribution of revenues as derived
by the revenues received by the Company's yet
undeveloped portfolio of clients, and any new
potentially profitable ventures, among other things.
The Company can offer no assurance that any
particular client and/or property under its
management contract will become successful.
Reliance on Management.
The Company's success is dependent upon the hiring
of
key administrative personnel. None of the officers
or
directors, or any of the other key personnel, has
any
employment or non-competition agreement with the
Company. Therefore, there can be no assurance that
these personnel will remain employed by the Company.
Should any of these individuals cease to be
affiliated with the Company for any reason before
qualified replacements could be found, there could
be
material adverse effects on the Company's business
and prospects. In addition, management has no
experience is managing companies in the same
business
as the Company.
In addition, all decisions with respect to the
management of the Company will be made exclusively
by
the officers and directors of the Company.
Investors
will only have rights associated with minority
ownership interest rights to make decision which
effect the Company. The success of the Company, to
a
large extent, will depend on the quality of the
directors and officers of the Company. Accordingly,
no person should invest in the Shares unless he is
willing to entrust all aspects of the management of
the Company to the officers and directors.
Use of Proceeds Not Specific.
The proceeds of this offering have been allocated
only generally. Proceeds from the offering have been
allocated generally to legal and accounting, and
working capital. Accordingly, investors will entrust
their funds with management in whose judgment
investors may depend, with only limited information
about management's specific intentions with respect
to a significant amount of the proceeds of this
offering. See "Use of Proceeds."
Lack of Diversification.
The size of the Company makes it unlikely that the
Company will be able to commit its funds to
diversify
the business until it has a proven track record, and
the Company may not be able to achieve the same
level
of diversification as larger entities engaged in
this
type of business.
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
Company,
and the minority shareholders will not be able to
elect a representative to the Company's board of
directors.
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 Company'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
Company, and will be subject to legal limitations on
the payment of dividends out of paid-in capital.
Conflicts of Interest.
The officers and directors have other interests to
which they devote substantial 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
Company.
As a result, certain conflicts of interest may exist
between the Company 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 Company. 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 Company, any proposed investments for its
evaluation.
Investment Valuation Determined by the Board of
Directors.
The Company's Board of Directors is responsible for
valuation of the Company's investments. There are a
wide range of values which are reasonable for an
investment for the Company's services. Although the
Board of Directors can adopt several methods for an
accurate evaluation, ultimately the determination of
fair value involves subjective judgment not capable
of substantiation by auditing standards.
Accordingly,
in some instances it may not be possible to
substantiate by auditing standards the value of the
Company's investments. The Company's Board of
Directors will serve as the valuation committee,
responsible for valuing each of the Company's
investments. In connection with any future
distributions which the Company may make, the value
of the securities received by investors as
determined
by the Board may not be the actual value that the
investors would be able to obtain even if they
sought
to sell such securities immediately after a
distribution. In addition, the value of the
distribution may decrease or increase significantly
subsequent to the distributee shareholders' receipt
thereof, notwithstanding the accuracy of the Board's
evaluation.
Additional Financing May Be Required.
Even if all of the 20,200,000 Shares offered to the
public and in connection with the acquisition hereby
are sold, the funds available to the Company may not
be adequate for it to be competitive in the areas in
which it intends to operate. See "Plan of
Distribution." There is no assurance that
additional
funds will be available from any source when needed
by the Company for expansion; and, if not available,
the Company may not be able to expand its operation
as rapidly as it could if such financing were
available. The proceeds from this offering are
expected to be sufficient for the Company to become
develop and market it line of services. Additional
financing could possibly come in the form of
debt/preferred stock. If additional shares were
issued to obtain financing, investors in this
offering would suffer a dilutive effect on their
percentage of stock ownership in the Company.
However, the book value of their shares would not be
diluted, provided additional shares are sold at a
price greater than that paid by investors in this
offering. The Company does not anticipate having
within the next 12 months any cash flow or liquidity
problems
Purchases by Affiliates.
Certain officers, directors, principal shareholders
and affiliates may purchase, for investment
purposes,
a portion of the Shares offered hereby, which could,
upon conversion, increase the percentage of the
Shares owned by such persons. The purchases by these
control persons may make it possible for the
Offering
to meet the escrow amount.
No Assurance Shares Will Be Sold.
The 20,200,000 Shares being offered to the public
and
in connection with the acquisition are to be offered
directly by the Company, and no individual, firm, or
corporation has agreed to purchase or take down any
of the shares. No assurance can be given that any
or
all of the Shares will be sold.
Offering Price.
The offering price of the Shares bears no relation
to
book value, assets, earnings, and was calculated in
accordance with SEC Rule 457(c): The average of the
bid and asked price as of a date within five
business
days from the filing date of the Registration
Statement covering this offering August 18, 1999
($0.19). There can be no assurance that the Shares
will maintain market values commensurate with the
offering price. See "Determination of Offering
Price."
Dilution of Share Value.
Assuming the sale of all Shares offered to the
public
hereby (20,200,000), the net tangible book value of
the Shares would then be $0.0202 per Share compared
to the effective offering price of $0.19 per common
share (based on the number of shares issued and
outstanding as of June 30, 1999 plus all of the
shares being offered in this offering).
Accordingly,
persons purchasing Shares in this Offering would
then
suffer $0.1696 dilution to the net tangible book
value of their shares.
"Shelf" Offering
The Shares are offered directly by the Company on a
delayed basis pursuant to certain exercise rights of
warrants and conversion rights of debentures. No
individual, firm or corporation has agreed to elect
such exercise or conversion of any of the offered
Shares. No assurance can be given that any or all
of
the Shares will be issued. No broker-dealer has
been
retained as an underwriter and no broker-dealer is
under any obligation to purchase any of the Shares.
In addition, the officers and directors of the
Company, collectively, have limited experience in
the
offer and sale of securities on behalf of the
Company. See "Plan of Distribution."
Limited Public Market for Company's Securities.
Prior to the Offering, there has been only a limited
public market for the Shares being offered (a total
of issued and outstanding shares as of August 13,
1999 of 60,523,775 held by only 415 shareholders of
record). There can be no assurance that an active
trading market will develop or that purchasers of
the
Shares will be able to resell their securities at
prices equal to or greater than the respective
initial public offering prices. The market price of
the Shares may be affected significantly by factors
such as announcements by the Company or its
competitors, variations in the Company's results of
operations, and market conditions in the retail,
electron commerce, and internet industries in
general. The market price may also be affected by
movements in prices of stock in general. As a
result
of these factors, purchasers of the Shares offered
hereby may not be able to liquidate an investment in
the Shares readily or at all.
Penny Stock Regulations.
The Company's Shares will be quoted on the
"Electronic Bulletin Board" maintained by the
National Quotation Bureau, Inc., which reports
quotations by brokers or dealers making a market in
particular securities. In view of the fact that no
broker will be involved in the Offering, it is
likely
to be difficult to find a broker who is willing to
make an active market in the stock. The Securities
and Exchange Commission (the "Commission") has
adopted regulations which generally define "penny
stock" to be any equity security that has a market
price less than $5.00 per share. The Company's
shares
will become subject to rules that impose additional
sales practice requirements on broker-dealers who
sell penny stocks to persons other than established
customers and accredited investors (generally those
with assets in excess of $1,000,000 or annual income
exceeding $200,000, or $300,000 together with their
spouse). For transactions covered by these rules,
broker-dealers must make a special suitability
determination for the purpose of such securities and
must have received the purchaser's written consent
to
the transaction prior to the purchase.
Additionally, for any transaction effected involving
a penny stock, unless exempt, the rules require the
delivery, prior to the transaction, of a disclosure
schedule prepared by the Commission relating to the
penny stock market. A broker-dealer also must
disclose the commissions payable to both the broker-
- -
dealer and the registered representative, and
current
quotations for the securities. Finally, monthly
statements must be sent disclosing recent price
information for the penny stock held in the account
and information on the limited market in penny
stocks. Consequently, these rules may restrict the
ability of broker-dealers to sell the Company's
Shares and may affect the ability of purchasers in
the Offering to sell the Company's securities in the
secondary market. There is no assurance that a
market
will develop for the Company's Shares.
Shares Eligible For Future Sale
All of the 9,850,000 Shares 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, as amended
("Act").
See "Security Ownership of Certain Beneficial
Owners
and Management." Such Shares will not be available
for sale in the open market without separate
registration except in reliance upon Rule 144 under
the Act. 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 on year, including persons
who may be deemed affiliates of the Company (as that
term is defined under the Act) 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 on all national
securities exchanges and through NASDAQ 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.
Forward-Looking Statements.
This Prospectus contains "forward looking
statements"
within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the
Securities Act of 1934, as amended, and as
contemplated under the Private Securities Litigation
Reform Act of 1995, including statements regarding,
among other items, the Company's business
strategies,
continued growth in the Company's markets,
projections, and anticipated trends in the Company'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
Company's
expectations and are subject to a number of risks
and
uncertainties, certain of which are beyond the
Company's control. The Company 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 those factors described under "Risk
Factors" and elsewhere herein In light of these
risks and uncertainties, there can be no assurance
that the forward-looking information contained in
this Prospectus will in fact transpire or prove to
be
accurate. All subsequent written and oral forward-
looking statements attributable to the Company or
persons acting on its behalf are expressly qualified
in their entirety by this section.
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 Company'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 Company, including those related to
the
efforts of customers, suppliers, or other third
parties, will be fully resolved.
The Company currently believes that its systems are
Year 2000 compliant in all material respects, its
current systems and products may contain undetected
errors or defects with Year 2000 date functions that
may result in material costs. Although management
is
not aware of any material operational issues or
costs
associated with preparing its internal systems for
the Year 2000, the Company may experience serious
unanticipated negative consequences (such as
significant downtime for one or more of its web site
properties) or material costs caused by undetected
errors or defects in the technology used in its
internal systems. Furthermore, the purchasing
patterns of advertisers may be affected by Year 2000
issues as companies expend significant resources to
correct their current systems for Year 2000
compliance. The Company does not currently have any
information about the Year 2000 status of its
advertising customers. However, these expenditures
may result in reduced funds available for web
advertising or sponsorship of web services, which
could have a material adverse effect on its
business,
results of operations, and financial condition. The
Company's Year 2000 plans are based on management's
best estimates.
USE OF PROCEEDS
Following the issuance of the 20,200,000 Shares and
warrants for common stock offered for sale by the
Company to the public, this will represent gross
proceeds to the Company of approximately $3,838,000
(less certain expenses of this offering). These
proceeds, less the expenses of the offering, will be
used to provide working capital for the Company.
The following table sets forth the use of proceeds
from this offering (based on the minimum and maximum
offering amounts):
Use of Proceeds
Maximum Offering
Amount
Percent
Transfer Agent Fee
$1,000
0.02%
Printing Costs
$1,000
0.02%
Legal Fees
$50,000
1.14%
Accounting Fees
$1,500
0.03%
Working Capital
$3,784,500
98.79%
Total
$3,838,000
100.00%
Management anticipates expending these funds for the
purposes indicated above. To the extent that
expenditures are less than projected, the resulting
balances will be retained and used for general
working capital purposes or allocated according to
the discretion of the Board of Directors.
Conversely,
to the extent that such expenditures require the
utilization of funds in excess of the amounts
anticipated, supplemental amounts may be drawn from
other sources, including, but not limited to,
general
working capital and/or external financing. The net
proceeds of this offering that are not expended
immediately may be deposited in interest or non-
interest bearing accounts, or invested in government
obligations, certificates of deposit, commercial
paper, money market mutual funds, or similar
investments.
DETERMINATION OF OFFERING PRICE
The offering price is not based upon the Company's
net worth, total asset value, or any other objective
measure of value based upon accounting measurements.
The offering price was determined under Securities
and Exchange Commission Rule 457(c), which states
that where the securities to be offered pursuant to
warrants or other rights to purchase such securities
the registration fee is to be calculated upon the
basis of the price at which the warrants or rights
or
securities subject thereto are to be offered to the
public. If such offering price cannot be determined
at the time of filing the registration statement,
the
registration fee is to be calculated upon the basis
of the highest of the following: (1) the price at
which the warrants or rights may be exercised, if
known at the time of filing the registration
statement; (2) the offering price of securities of
the same class included in the registration
statement; or (3) the price of securities of the
same
class, as determined in accordance with paragraph
(c)
of that Rule. Since the offering price based on the
warrants and debentures cannot be determined based
on
(1) and (2), it was calculated under Rule 457(c) as
the average of the bid and asked price as of a date
within five (5) business days of the filing date
(August 18, 1999): $0.19 per Share.
DILUTION
"Net tangible book value" is the amount that results
from subtracting the total liabilities and
intangible
assets of an entity from its total assets.
"Dilution"
is the difference between the public offering price
of a security and its net tangible book value per
Share immediately after the Offering, giving effect
to the receipt of net proceeds in the Offering. As
of June 30, 1999 (the date of the latest Form 10-QSB
for the Company, the net tangible book value of the
Company was $(1,958,514) or $(0.0634) per Share.
Giving effect to the issue by the Company of all
Shares and warrants for common stock being sold to
the public (20,200,000), the pro forma net tangible
book value of the Company would be $1,879,486, or
$0.0204 per Share, which would represent an
immediate
increase of $0.0838 in net tangible book value per
Share and $0.1696 per Share dilution per share to
new
investors. Dilution of the book value of the Shares
may result from future share offerings by the
Company.
The following table illustrates the pro forma per
Share dilution (these are based on the outstanding
shares of as of June 30, 1999):
Assuming
Maximum
Shares Sold
Offering Price (1)
$0.1900
Net tangible book value per
share before Offering (2)
$(0.0634)
Net tangible book value Share
after offering (3)
$0.0204
Increase attributable to
issue of stock to
new investors (4)
$0.0838
Dilution to new investors (5)
$0.1696
Percent Dilution to new
investors (6)
89.26%
Offering price before deduction of offering
expenses,
calculated on a "Common Share Equivalent" basis.
(2) The net tangible book value per share before
the
offering ($0.0634) is determined by dividing the
number of Shares outstanding as of June 30, 1999
into
the net tangible book value of the Company as of
that
date.
(3) The net tangible book value after the offering
is determined by adding the net tangible book value
before the offering to the estimated proceeds to the
Corporation from the current offering (assuming all
the Shares being offered to the public are issued).
The net tangible book value per share after the
offering ($0.0202) is determined by dividing the
number of Shares that will be outstanding after this
offering (91,885,100), assuming issue of all the
Shares offered (including those not being issued for
cash and not counting any shares issued after June
30, 1999), into the net tangible book value after
the
offering.
(4) The increase attributable to purchase of stock
by new investors is derived by taking the net
tangible book value per share after the offering
($0.0202) and subtracting from it the net tangible
book value per share before the offering ($0.0634)
for an increase of $0.0838.
(5) The dilution to new investors is determined by
subtracting the net tangible book value per share
after the offering ($0.0202) from the offering price
of the Shares in this offering ($0.1900), giving a
dilution value of $0.1696.
(6) The Percent Dilution to new investors is
determined by dividing the book value after the
offering ($0.0202) by the offering price per Share
($0.1900) and subtracting from 100, giving a
dilution
to new investors of 89.26%.
PLAN OF DISTRIBUTION
The Company will issue a maximum of 61,000,000
Shares
of its common stock, par value $0.001 per Share, as
follows (maximum amounts): (a) sales to the general
public of the following: (i) 10,200,000 Shares; and
(ii) 10,000,000 warrants (exercisable at $1.00 per
Share from the effective date of this Registration
Statement to December 31, 2001); (b) the issuance of
one warrant to each shareholder of record of the
Company as of June 30, 1999 (31,000,000; exercisable
at $1.00 per Share from June 30, 2000 to June 30,
2002); (c) 5,000,000 options for Shares to be issued
in the future to employees of the Company,
exercisable at $0.50 per Share; (d) 3,000,000
options
for Shares to be issued in the future to Thomas S.
Hughes, President of the Company, exercisable at
$0.50 per Share; and (e) 1,800,000 of restricted
shares being sold by selling shareholders of the
Company: Ranco Plasticos, a Costa Rica corporation,
and Menhur Azul, S.A., a Costa Rica corporation.
There can be no assurance that any of these Shares
will be issued, except for the warrants to
shareholders of record and in connection with the
acquisition. The gross proceeds to the Company
represented by issue of all the Shares and warrants
for Shares under this offering to the public
(20,200,000) will be $3,838,000. No commissions or
other fees will be paid, directly or indirectly, by
the Company, or any of its principals, to any person
or firm in connection with solicitation of sales of
the shares. The public offering price of the Shares
will be modified, from time to time, by amendment to
this Prospectus, in accordance with changes in the
market price of the Company's common stock. These
securities are offered by the Company subject to
prior issue and to approval of certain legal matters
by counsel.
Opportunity to Make Inquiries.
The Company will make available to each Offeree,
prior to any issue of the Shares, the opportunity to
ask questions and receive answers from the Company
concerning any aspect of the investment and to
obtain
any additional information contained in this
Prospectus, to the extent that the Company possesses
such information or can acquire it without
unreasonable effort or expense.
Execution of Documents.
Each person desiring to be issued Shares, either as
a
conversion of a debenture, or an exercise of a
warrant, must complete, execute, acknowledge, and
delivered to the Company certain documents, By
executing these documents, the subscriber is
agreeing
that such subscriber will be, a shareholder in the
Company and will be otherwise bound by the articles
of incorporation and the bylaws of the Company in
the
form attached to this Prospectus.
LEGAL PROCEEDINGS
The Company is not a party to any material pending
legal proceedings. On August 19, 1999, counsel for
Thomson Kernaghan, a Canadian investment firm
("TK"),
threatened to file suit against the Company in
connection with TK providing certain funds to the
Company in the amount of $500,000. The Company has
indicated to this counsel that based on the actions
of TK in this matter, the Company is not now
indebted
to TK in any amount since TK has caused damage to
the
Company and its shareholders well in excess of any
amount allegedly owed by the Company to TK. The
Company intends to vigorously defend any such action
and to pursue applicable counterclaims.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS,
AND CONTROL PERSONS
The names, ages, and respective positions of the
directors, officers, and significant employees of
the
Company are set forth below. There are no other
persons which can be classified as a promoter or
controlling person of the Company.
Thomas S. Hughes, President/Director.
Mr. Hughes, Age 52, has been President of the
Company
since March 1997. From 1993 to the present, he has
also served as the President of Electronic
Transactions & Technologies, a privately held Nevada
corporation which developed terminals for wireless
home and internet applications.
Jack M. Hall, Secretary/Director.
Mr. Hall, age 72, founded and is currently President
of Hall Developments, a real estate development
company he founded in 1991, which employs a staff of
10 people. Mr. Hall spends approximately 20 hours
per week searching out strategic alliances for the
Company.
Diane Hewitt, Treasurer/Director.
Ms. Hewitt, age 51, has been an interior designer
since 1991. Currently she owns and manages her own
firm, D. Diane Hewitt Designs. This firm's
expertise
is churches and employs a staff of five people. Ms.
Hewitt currently devotes approximately 25 hours per
week in working with the Company's image development
and consulting with the Company's advertising firm.
Anthony L. Hall, Vice President, Director of
Technology.
Mr. Hall, age 34, has been Vice President and
Director of Technology of the Company since
inception. Mr. Hall has been the creative mind
behind
the state of the art advancements made by the
company. Mr. Hall is responsible for all
technological decisions including but not limited to
telephone call center, web site design and in- house
software implementation and computer systems
engineering and support. Mr. Hall is a unique
individual within the technological community. A
technological savante who combines incomparable
knowledge of the computer world with the savvy of a
successful businessman. Mr. Hall learned his trade
over the last six years with such renowned
institutions as the Kraft Group (owners of
International Forest Products and the New England
Patriots), Fidelity Investments, Partners Health
Care
and most recently as Managing Director of the firm
he
founded, Isis Technology Group.
Kevin J. Lewis, Vice President, Sports Book
Operations.
Mr. Lewis, age 36, has been Vice President and
Senior
Manager of Sports Book Operations of the Company
since it was founded. After a long and exhaustive
process, Mr. Lewis was selected from a select group
of candidates to lead the operations and sports
handicapping management of the company. He has 19
years experience as a sports book manager with
several of the largest and most profitable sports
books in the world. He has worked in Las Vegas, the
Domincan Republic, Antigua, Costa Rica and Canada
with such respected sports books as Tradewinds,
Grand
Prix Sports Book and WWTS. Mr. Lewis is known as a
sage amongst his peers and is, with little doubt,
the
best sports book and betting line manager in the
industry.
Over the next few months, James Wexler, will phase
into the position as CEO of the Company. Presently,
Thomas S. Hughes is fulfilling that role. Hughes
will remain as the chairman of the Company once
James
Wexler has taken the CEO position.
Mr. Wexler is a highly motivated professional with
almost six years experience in the investment
banking
industry primarily with the firms of Morgan Stanley
Dean Witter and Bear Stearns & Co., Inc. In
addition,
Mr. Wexler has more than twelve years experience in
the gambling and sports handicapping fields and is
considered a knowledgeable expert within the
industry. For many years, he has served as a
consultant to off shore sports books, handicappers
and sports bettors. Mr. Wexler's visionary
leadership
creates the ideal union between fundamental business
theory, state of the art technology and the
necessary
knowledge of sports gambling.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August 13,
1999, the outstanding Shares of common stock of the
Company owned of record or beneficially by each
person who owned of record, or was known by the
Company to own beneficially, more than 5% of the
Company's Common Stock, and the name and share
holdings of each officer and director and all
officers and directors as a group (out of a total
issued and outstanding shares of 60,523,775 as of
that date):
Title of
Class
Name and Address
of Beneficial
Owner (1)
Amount and
Nature of
Beneficial
Owner (2)
Percent of
Class
Common
Stock
Thomas S, Hughes
31310 Eaglehaven
Circle
Rancho Palos
Verdes,
California 90275
4,450,000
7.35%
Common
Stock
Electronic
Transactions
& Technologies
2500 Via
Cabrillo Marina,
Suite 112
San Pedro,
California 90731
5,400,000
8.92%
Common
Stock
Rogel
Technologies
3399 East 19th
Street
Signal Hill,
California 90804
5,000,000
8.26%
Common
Stock
Cede & Co.
P.O. Box 222
Bowling Green
Station
New York, New
York 10274
15,609,149
25.79%
(1) Other than the Shares owned by Mr. Hughes
directly and indirectly through Electronic
Transactions & Technologies, none of the other
officers or directors of the Company own any of the
Shares.
(2) Neither Mr. Clinton nor Mr. Hughes have the
right
to acquire any amount of the Shares within sixty
days
from options, warrants, rights, conversion
privilege,
or similar obligations.
DESCRIPTION OF SECURITIES
General Description.
The securities being offered are shares of common
stock. The Articles of Incorporation authorize the
issuance of 200,000,000 shares of common stock, with
a par value of $0.001. The holders of the Shares:
(a)
have equal ratable rights to dividends from funds
legally available therefore, when, as, and if
declared by the Board of Directors of the Company;
(b) are entitled to share ratably in all of the
assets of the Company available for distribution
upon
winding up of the affairs of the Company; (c) do not
have preemptive subscription or conversion rights
and
there are no redemption or sinking fund applicable
thereto; and (d) are entitled to one non-cumulative
vote per share on all matters on which shareholders
may vote at all meetings of shareholders. These
securities do not have any of the following rights:
(a) cumulative or special voting rights; (b)
preemptive rights to purchase in new issues of
Shares; (c) preference as to dividends or interest;
(d) preference upon liquidation; or (e) any other
special rights or preferences. In addition, the
Shares are not convertible into any other security.
There are no restrictions on dividends under any
loan
other financing arrangements or otherwise. See a
copy
of the Articles of Incorporation, and amendments
thereto, and Bylaws of the Company, attached as
Exhibit 3.1, Exhibit 3.2, and Exhibit 3.3,
respectively, to this Form SB-2.
Non-Cumulative Voting.
The holders of Shares of Common Stock of the Company
do not have cumulative voting rights, which means
that the holders of more than 50% of such
outstanding
Shares, voting for the election of directors, can
elect all of the directors to be elected, if they so
choose. In such event, the holders of the remaining
Shares will not be able to elect any of the
Company's
directors.
Dividends.
The Company does not currently intend to pay cash
dividends. The Company's proposed dividend policy is
to make distributions of its revenues to its
stockholders when the Company's Board of Directors
deems such distributions appropriate. Because the
Company does not intend to make cash distributions,
potential shareholders would need to sell their
shares to realize a return on their investment.
There
can be no assurances of the projected values of the
shares, nor can there be any guarantees of the
success of the Company.
A distribution of revenues will be made only when,
in
the judgment of the Company's Board of Directors, it
is in the best interest of the Company's
stockholders
to do so. The Board of Directors will review, among
other things, the investment quality and
marketability of the securities considered for
distribution; the impact of a distribution of the
investee's securities on its customers, joint
venture
associates, management contracts, other investors,
financial institutions, and the company's internal
management, plus the tax consequences and the market
effects of an initial or broader distribution of
such
securities.
Possible Anti-Takeover Effects of Authorized but
Unissued Stock.
Upon the completion of this Offering, assuming the
maximum offering of 61,000,000 is sold, the
Company's
authorized but unissued capital stock will consist
of
78,476,225 shares of common stock (based on the
issued and outstanding Shares of 60,523,775 as of
August 13, 1999). One effect of the existence of
authorized but unissued capital stock may be to
enable the Board of Directors to render more
difficult or to discourage an attempt to obtain
control of the Company by means of a merger, tender
offer, proxy contest, or otherwise, and thereby to
protect the continuity of the Company's management.
If, in the due exercise of its fiduciary
obligations,
for example, the Board of Directors were to
determine
that a takeover proposal was not in the Company's
best interests, such shares could be issued by the
Board of Directors without stockholder approval in
one or more private placements or other transactions
that might prevent, or render more difficult or
costly, completion of the takeover transaction by
diluting the voting or other rights of the proposed
acquiror or insurgent stockholder or stockholder
group, by creating a substantial voting block in
institutional or other hands that might undertake to
support the position of the incumbent Board of
Directors, by effecting an acquisition that might
complicate or preclude the takeover, or otherwise.
Transfer Agent.
The Company has engaged the services of Corporate
Stock Transfer, 370 17th Street, Suite 2350, Denver,
Colorado
80202, to act as transfer agent and registrar.
INTEREST OF NAMED EXPERTS AND COUNSEL
No named expert or counsel was hired on a contingent
basis, will receive a direct or indirect interest in
the small business issuer, or was a promoter,
underwriter, voting trustee, director, officer, or
employee of the small business issuer.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
No director of the Company will have personal
liability to the Company or any of its stockholders
for monetary damages for breach of fiduciary duty as
a director involving any act or omission of any such
director since provisions have been made in the
Articles of Incorporation limiting such liability.
The foregoing provisions shall not eliminate or
limit
the liability of a director (i) for any breach of
the
director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good
faith or, which involve intentional misconduct or a
knowing violation of law, (iii) under applicable
Sections of the Nevada Revised Statutes, (iv) the
payment of dividends in violation of Section 78.300
of the Nevada Revised Statutes or, (v) for any
transaction from which the director derived an
improper personal benefit.
The By-laws provide for indemnification of the
directors, officers, and employees of the Company in
most cases for any liability suffered by them or
arising out of their activities as directors,
officers, and employees of the Company if they were
not engaged in willful misfeasance or malfeasance in
the performance of his or her duties; provided that
in the event of a settlement the indemnification
will
apply only when the Board of Directors approves such
settlement and reimbursement as being for the best
interests of the Corporation. The Bylaws,
therefore,
limit the liability of directors to the maximum
extent permitted by Nevada law (Section 78.751).
The officers and directors of the Company are
accountable to the Company as fiduciaries, which
means they are required to exercise good faith and
fairness in all dealings affecting the Company. In
the event that a shareholder believes the officers
and/or directors have violated their fiduciary
duties
to the Company, the shareholder may, subject to
applicable rules of civil procedure, be able to
bring
a class action or derivative suit to enforce the
shareholder's rights, including rights under certain
federal and state securities laws and regulations to
recover damages from and require an accounting by
management.. Shareholders who have suffered losses
in connection with the purchase or sale of their
interest in the Company in connection with such sale
or purchase, including the misapplication by any
such
officer or director of the proceeds from the sale of
these securities, may be able to recover such losses
from the Company.
The registrant undertakes the following:
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 (the "Act") may be
permitted to directors, officers and controlling
persons of the small business issuer pursuant to the
foregoing provisions, or otherwise, the small
business issuer 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.
ORGANIZATION WITHIN LAST FIVE YEARS
The names of the promoters of the registrant are the
officers and directors as disclosed elsewhere in
this
Form SB-2. None of the promoters have received
anything of value from the registrant.
DESCRIPTION OF BUSINESS
In its' aggressive pursuit to deliver diverse,
leading-edge solutions, the Company has created a
wide range of customer-driven service programs and
patent-pending products that are technologically
proven, accepted by consumers and endorsed by
businesses of every size. The Company is made up of
two divisions: The first, eGaming, is presently
generating revenues and earnings from its eSportsbet
and 777WINS.com acquisitions. The second division
of eGate which is developing technology for ATM card
with PIN or smart card payments (same-as-cash - only
the merchant can reverse the transaction) using the
Personal Encrypted Remote Financial Electronic Card
Transactions ("PERFECT"). Thus, the Company is both
an Internet and non Internet company, and both a
gaming and non gaming company. focused on connecting
the consumer directly to the recipient merchant...
no middlepersons.
eGaming Division.
This division of of the Company consists of
777WINS.com and eSportsbetcom. These recent
acquisitions are generating revenues and earnings
for the Company. eSportsbet and 777WINS.com are
both located in Costa Rica. eSportsbet is
projecting $1 million in revenue by the fourth
quarter of 1999 and 777WINS.com is projecting
$500,000 in revenue by the same time period.
It is intended that eSportsbet will have a web
presence shortly. 777WINS.com is increasing their
band width and is the first Internet casino to offer
a Tournament whereby the winners travel to a real
Casino in Costa Rica. eGaming will be creating the
sites of Bingo and Slots over the next several
months.
The Company is presently generating about $150,000
per month in revenues from this division. A new
business unit will be EzyGame,which will be the on
site or off site usage of the Company's equipment to
effect Lottery and Powerball transactions by ATM
card or EzyCard.
(a) Business Strategy.
There are currently less than 50 off shore sports
books servicing an average less than 1000 clients
each. In fact, there are less than 10 Internet
sites that are fully operational for on-line
wagering. In concise terms, less than 0.06 % of
bettors are wagering off shore. More significantly,
less than 0.0125% of bettors are wagering through
the Internet. The off shore gambling market is a
virgin industry with over 80 million potential
customers and virtually no place for these people to
bet. We are in a position to exploit this
opportunity and have already begun the process.
eSportsbet.com was founded in early 1998 and has
recently emerged from its development stage. The
sports book has been fully operational since
September 1, 1998. Development of on-line sports
wagering services is now complete. This division of
the company can best be described as being in the
business of providing a legal, reliable, and secure
home or bank to place wagers. Our key strengths
include state-of-the-art-technology, customer
service and innovative marketing. Our management
team is in place. We have hired a sports book
manager to complete our team. We are currently
hiring ten employees to answer phone calls from
prospective customers and current clients who wish
to place wagers.
The marketplace has been expanding rapidly. The
Company is now poised to capitalize on the
convergence increased Internet access, ease of web
site operability and security with a flourishing
demand to place wagers in this form. Current
customers of offshore sports books are requesting
that the Company provide the ability to place wagers
on-line much in the same way that individual
investors can enact stock transactions on-line with
companies such as Fidelity, Schwabb and E-Trade.
To assure the best possible service decisions are
made, the Company has implemented the following
criteria for servicing the most important asset, the
Company's clients: Service assistance for customers
with opening new accounts, reducing time, effort and
expense by delineating responsibilities by
department. Service will be implemented using six
separate departments: new accounts, accounts payable
and receivable, customer service, phone clerks to
accept wagers and the executive office.
Advertising and marketing will be the Company's
largest expense; the focus on attaining customers
and keeping clients is the Company's foremost goal.
The idea is to keep customers indefinitely by
continually offering them a valuable service,
thereby diminishing the Company's costs of
continually reaching and appealing to them. In
order to separate the Company from others in this
field, wise selection of service offerings is
therefore critical to eSportsbet.com's success.
(b) Marketing and Advertising Strategy.
eSportsbet.com's marketing strategy is to enhance,
promote and support the fact that the Company's
product is unique in terms of ease of operability,
reliability, security. Most importantly, from a
bettor's perspective it is the opinion of management
that the Company's product offer the highest odds
pay outs in the entire industry.
eSportsbet.com's marketing strategy incorporates
plans to sell its product through several channels.
These distribution channels include: Friday,
Saturday and Sunday sports sections of regional
newspapers; print media in direct market sports and
male dominated periodicals; thirty and sixty second
radio spots on popular sports talk radio shows;
printed flyers and brochures handed out at major
sporting events. The determining factors in choosing
these channels are customer profile; i.e., age,
gender, sports enthusiast, etc. Key competition uses
only print media in industry publications and word
of mouth as distribution channels. The Company's
mix of distribution channels will give the
advantages of complete market saturation, not
limiting the Company to region or sports specific
publications versus the competition.
eSportsbet.com recognizes the key to success at this
time requires extensive promotion. This must be
done aggressively on a wide scale. To accomplish
the Company's sales goals, an extremely capable
advertising agency and public relations firm will be
required.
The Company will develop an advertising campaign
built around ease of operability, reliability,
security, instant pay outs if requested and most
importantly from a bettor's perspective, and, in the
opinion of the Company, the highest pay out odds
available anywhere in the industry. Further, the
Company will develop a consistent reach and
frequency with advertising throughout the year. In
addition to standard advertising practices,
eSportsbet.com will gain considerable recognition
through grass roots, guerrilla marketing campaigns.
This strategy will include flyers handed out to
spectators of the four major sporting events and
boxing, promotions made available to local sports
bars in Boston and other metropolitan areas.
eSportsbet.com's overall advertising and promotional
objectives are to: Position eSportsbet.com as the
leader in the market; increase company awareness and
brand name recognition; generate qualified sales
leads and potential new distributors; create
product-advertising programs supporting our market
dominant position; coordinate sales literature,
materials, telemarketing programs; and direct
response promotions in order to continually saturate
the market with our name and logo. Establish the
proper image of eSportsbet.com which in our opinion
is the "bank" of the betting world and indicates
that association with security, safety and stability
The Company is building its capabilities in database
marketing. Registration cards and periodic customer
surveys will help the Company understand the
customer, and help to measure the success of the
marketing, sales and product activities. The
Company plans to develop a customer information
system that will help make sound decisions by
providing historical answers to the marketing
questions that are posed.
The Company will use in house telemarketing service
to perform the following functions:
Address customer complaints
Respond to inquiries
Generate new business
(c) Direct Response Mail.
The Company will be exploring the benefits of
incremental, coordinated direct mail programs in the
next several months. The Company will be
approaching this quantitatively, as customer
targeting ability is improved. The Company has
purchased mailing lists from sports gambling
magazines and newsletters and sports bettors from
Las Vegas casinos. In addition, the direct mail
activities will be continually directed to the
existing customer base to ask for referrals. A $100
betting voucher will be provided to these clients
for every referral that signs up.
(d) Internal/External Newsletter.
The Company is currently planning to produce a
newsletter to serve as an informational piece for
internal personnel, the sales force, and customers.
It will include sections covering each major
department or organization within eSportsbet.com,
useful trade information and the latest updates.
Importantly, these newsletters will provide
incentives and promotions for clients and new
customers.
eGate Division.
EzyLink Consumer Sales Group:
(a) EzyDepot Transaction Terminal.
The EzyDepot is a low-cost terminal that can be used
as a consumer activated shopping and pay-station
kiosk. The EzyDepot is an intelligent and
programmable device, and features a 4-line display,
qwerty keyboard, modem, and built-in receipt
printer. New programming and data can be remotely
loaded to units already in the field. In terms of
flexibility for consumer operation, any functions
that a kiosk or ATM is able to perform, can also be
achieved by the EzyDepot
(b) EzyShop Shopping System.
EzyShop is an exciting new service that allows
people to shop for goods while in waiting rooms and
other public areas. Catalogs from leading
merchandisers and an EzyDepot unit, a compact
terminal designed to process credit card
transactions, is placed at all EzyShop locations.
Consumers browse the catalogs and then place their
orders using the EzyDepot. The process simply
involves keying in a product code, typing in a
delivery address and swiping a major credit card
through the EzyDepot's built in credit card reader.
A printed receipt confirms the transaction.
By using a small, low-cost device, rather than a
traditional PC-based kiosk, an EzyDepot can be
profitably placed in locations where a traditional
kiosk could not, such as waiting rooms in doctors'
offices, car washes, etc
EzyShop is not a catalog merchandising company.
Instead, we work with some of the nation's leading
catalog retailers, providing our client's the
flexibility to promote demographically targeted
merchandise to their own customers. Therefore, any
product or service can be easily sold through
EzyShop.
Companies featuring the EzyShop service, called
EzyRetailers, earn a percentage of all sales
generated through the EzyDepot. EzyRetailers carry
no inventory and have no overhead, yet benefit from
the profits generated by this revolutionary new
distribution channel.
(c) EzyPay.
Recent reports from the U.S. Federal Reserve state
that an estimated 70+ billion checks are written
every year. Overall costs incurred by a merchant or
financial institution to process each consumer check
can be as high as $3.50. This adds up to more than
$40 billion spent each year by retailers to accept
check payments.
The Company's EzyPay eliminates the ongoing
inconvenience of accepting, processing and handling
payments by check, cash or other paper instruments.
Designed to dramatically improve customer service
and reduce the inherent cost of processing paper
transactions, EzyPay is the means by which pre-
authorized debits are electronically transmitted
from a customer's credit card account to the
businesses' accounts.
EzyPay Benefits
- - Simple to use
- - Simple implementation
- - 100% electronic: no physical handling
- - Proven technology
- - Flexible
- - Automatic collection and deposit
- - Pre-authorized payments
- - Provides faster funds availability
- - Reduces costs of accepting paper checks
- - Improves customer retention
EzyPay Applications
- - Mortgage or medical payments
- - Dues or subscriptions
- - Utility bills
- - Cable companies
- - Telephone companies
- - Insurance premiums
eSecure Internet Group:
(a) eSecure Systems.
One of the Company's most exciting concepts is the
use of a traditional ATM card to make purchases over
the Internet. The use of an ATM card with PIN ID
offers a cost advantage to the retailer, and
security advantages to both the consumer and
retailer. In the ever expanding world of e-
commerce, it is imperative that card based business
transactions be safe and secure. The Company's
patented eSecure "Same-As-Cash" technology enabling
encrypted remote financial transactions is our
solution for providing secure ATM-card transactions
via the Internet. These ATM card with PIN or smart
card payments are the same-as-cash in that only the
merchant can reverse the transaction. The Company
has positioned itself as a "processor", or
"gateway", for these transactions and work with
banks and ISOs to sign up web merchants for debit
acceptance, just as store fronts are signed up for
on-line debit acceptance today.
For users of major credit cards, the Company's
eSecure "SafeTpay" system allows people to make
purchases and payments on-line. By simply swiping a
major credit card through any of the Company's
eSecure hardware products, the encryption processing
systems provide the ultimate in current anti-piracy
technology.
(b) ePINpad.
At the heart of our new ePINpad product is eSecure
technology. This system enables the consumer to
utilize his or her PC to make on-line purchases and
payments with an ATM or credit card! Plug-in
software enables the ePINpad to work seamlessly with
your current web browser.
(c) ePocketPay.
For the busy consumer in today's world, desktop or
counter top convenience is not enough. The ultimate
solution is a portable device, carried with the
conumer, which can transact business at any tine.
That device is the "ePocketPay".
The ePocketPay looks and works like a cell phone.
But, because a card reader with processing
capabilities is built into it, it represents a whole
new class of device. While walking down the street,
riding in a cab, or sitting in your office, someone
can order flowers for a spouse, pay a bill, book
airplane tickets....and simply swipe the card to
pay. The transaction is done and the merchandise or
service provider can proceed without risk of non-
payment; a risk that is always present in a
traditional phone order
The Company has been granted a broad patent for the
ePocketPay, and is seeking strategic alliance(s)
with cellular equipment and/or service providers to
develop working prototypes.
(d) eKeys.
For good reason, many consumers have a strong desire
to make internet based payments with an ATM or
credit card, but don't want any additional hardware
cluttering their desktops. As a solution to that
dilemma, the Company has patented "eKeys", a simple,
integrated and elegant keyboard / credit card
reader. eKeys simply attaches to a PC or Macintosh
computer. Finally, an integrated ATM / credit card
compatible encrypting keyboard / reader is at the
consumer's fingertips. eKeys also features a built
in modem so that the consumer can bypass the
internet to make direct secure payments to a vendor
or service provider.
Company Staff.
The Company staff consists of 7 employees at
777WINS.com, 11 employees at eSportsbet.com, 4
employees at EzyShop, 6 employees at Rogel
Technologies and 5 corporate staff. The staff
expertise ranges from sportsgaming specialists to
transaction processing specialists to encryption
specialists.
PLAN OF OPERATION
A discussion of the Company's plan of operation over
the next 12 months in incorporated into the
discussion of the Company's business. See
"Description of Business."
DESCRIPTION OF PROPERTY
The Company currently owns the following property in
connection with its operations:
Four servers for the operation of eSportsbet.com and
777WINNS.com, valued at $15,000 each.
(b) Approximately $50,000 of various office
equipment, including personal computers.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the past two years, certain transactions
which
occurred between the Company and its officers and
directors are set forth below. With respect to each
such transaction, the Company believes that the
terms
of each transaction were approximately as favorable
to the Company as could have been obtained from an
unrelated third party:
(1) The Company utilized cash accounts maintained
by
ET&T to fund day to day operations of the Company
over the period of March 1998 through September
1998.
At August 31, 1998, the net result of these
transactions is a payable to ET&T of $18,969.
(2) The Company issued 1,000,000 shares of
restricted common stock to Thomas S. Hughes during
May 1997 in exchange for service rendered to the
Company. The Company did not receive any cash
consideration for this common stock issuance and has
treated this as an expense to the Company of
$375,000.
(3) On February 18, 1997, Leggoons, Inc. entered
into an Agreement to License Assets from Home Point
of Sales, Inc.("HPOS") (now know as Electronic
Transactions & Technology - "ET&T")) (this agreement
is incorporated by reference at Exhibit 10.1 to this
Form SB-2). ET&T is a privately held corporation
70%
owned by Thomas S. Hughes, President of the Company,
which is focused on the emergence of the Personal
Encrypted Remote Financial Electronic Card
Transactions industry (although this agreement was
entered into prior to Mr. Hughes becoming affiliated
with the Company, it is included here since certain
of the conditions under that agreement have not been
completely fulfilled, as discussed below).
The assets included under this agreement are the
following: (a) The name "Betting, Inc.", as
trademarked by HPOS; (b) The Wagering Gate (receive
incoming data transfer commands from the Host Center
and other competitive Host Centers who have received
ATM and SMART card wagering payment from off site
home or office locations and then who command the
Wagering GATE to alert the recipient gaming
companies
that they have been paid and to respond back with an
acknowledgement of such payment; and, the general
promotion and education of home ATM and SMART card
wagering over the Internet through the HPOS Secure
Computer Keyboard or over the telephone through the
HPOS stand alone Infinity unit); (c) the specific
application of Wagering with an ATM card or SMART
card with the Secure Computer Keyboard (any other
uses of the Secure Computer Keyboard, such as Bill
Pay or Impulse Purchase that are not Wagering
transactions, are not included); (d) the HPOS
developed Merchant Response Software for the
specific
application only of transacting Off Site ATM and
Smart card Wagering through the Wagering Gate; and
(e) HPOS' interest in the use of and revenue from
the
HPOS Personal Encrypted Remote Financial Electronic
Card transaction relating to the Wagering Business
in
all HPOS partner countries.
Under terms of this licensing agreement, the Company
is to issue 2,900,000 shares of restricted common
stock to HPOS in exchange for licensing home ATM
card
and SMART card wagering technology developed by
HPOS.
Of this amount, 2,755,000 shares were placed in
escrow subject to cancellation on February 10, 1998,
in the event the bid price of the common stock of
the
Company is not at least $3.00 per share for any
twenty consecutive day period as reported on the
NASD's Electronic Bulletin Board or NASDAQ's Small
Cap Market from the date of the agreement through
February 10, 1998 (this escrow agreement is
incorporated by reference at Exhibit 10.2 to the
Form
SB-2).
As of the date of this Prospectus, the terms of the
Licensing Agreement have not been met by the
Company.
However, the Company has entered into amendment(s)
of the original agreement that provide for an
extension of the cancellation deadline from February
10, 1998, to September 1, 1999, subject to certain
conditions specified in the agreement. All
conditions set forth in the original agreement need
to be met on or before September 1, 1999.
The License Agreement also provides that in the
event
that the bid price for the common stock of the
Company is more than $3.00 per share for any twenty
consecutive day period, then HPOS shall have the
option to purchase up to 13,822,000 additional
shares
of the Company common stock at an exercise price of
$.30 per share.
(4) On April 28, 1997, the Company entered into a
Host Processing Agreement with ET&T for the purpose
of having ET&T act as the bank host processing for
all Company transactions that are sent by terminals
that read credit cards or ATM cards (this agreement
is incorporated by reference at Exhibit 10.3 to this
Form SB-2). ET&T is to charge the Betting, Inc. a
fee of $0.25 per transaction or 2.5% of the wager
being sent by Betting, Inc. to gaming operators.
These transactions are to originate from globally
placed Betting, Inc. equipment and/or Betting, Inc.
licensed operators.
(5) On March 27, 1998, the Company entered into a
License Agreement with ET&T for the purpose of
licensing additional technology for processing
electronic banking transactions (this agreement is
incorporated by reference at Exhibit 10.4 to this
Form SB-2). This licensing supplements the
technology licensed under the Agreement date
February
18, 1997. This agreement states that ET&T licenses
the following ET&T products to Betting, Inc. for the
exclusive global usage of wagering by PERFECT
originated ATM cards, credit cards, and smart cards:
The PayMaster, defined as a stand alone terminal
that
attaches to phone lines and which calls the ET&T
host
processing center with bank data.
The SLICK, defined as a stand alone keyboard
terminal
that attaches to phone lines and call the ET&T host
processing center with bank data that has bypassed
the Internet.
The PocketPay, defined as a pocket sized terminal
and
telephone that sends bank data by wireless
transmission to the ET&T host processing center.
The TV Pin Pad Remote, defined as a set top box and
TV remote that sends bank data by landline dial up
transmission to the ET&T host processing center.
Each ET&T product is exclusively licensed to
Betting,
Inc. on a global basis for the application of
PERFECT
wagering at a licensing fee of $2,000,000 each. The
duration of the exclusive license is 20 years. The
licensing fee is to be paid by the Company at the
rate of $30,000 per month; however, under the terms
of this License Agreement, this fee is not due and
payable until the technology for a particular
product
covered by the license has been perfected and is
ready for public use. As of the date of this Form
10-KSB, none of the products covered by the License
Agreement had been perfected, and, therefore, no
licensing fee is required to be paid at this time
(when this does occur, a statement to that effect
will be placed in a future report filed by the
Company).
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
(a) Market Information.
The Company's Shares are traded in the over-the-
counter market and the range of closing bid prices
shown below is as reported by the OTC Bulletin
Board.
The quotations shown reflect inter-dealer prices,
without retail mark-up, mark-down or commission and
may not necessarily represent actual transactions.
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ending on December 31, 1999
High
Low
First Quarter
1.062
5
0.375
Second Quarter
0.85
0.41
Per Share Common Stock Bid Prices by Quarter
For the Transition Period Ended on December 31, 1998
*
High
Low
Transition Period
0.98
0.05
* Due to a change in the fiscal year end of the
Company from August 31 to December 31 as a result of
the merger of the Company with Betting, Inc.
(Missouri).
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended August 31, 1998
High
Low
First Quarter
0.12
0
Second Quarter **
0.08
0
Third Quarter
0.15
0.03
Fourth Quarter
0.20
0.06
** The Shares did not trade from February 18, 1998
through February 28, 1998
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended August 31, 1997
High
Low
First Quarter
8
5.875
Second Quarter ***
8.125
7.625
Third Quarter ***
0.812
5
0.062
5
Fourth Quarter
0.562
5
0.06
*** The Shares did not trade from December 13, 1996
through April 24, 1997
(b) Holders of Common Equity.
As of August 13, 1999, there were 415 shareholders
of
record of the Company's common stock.
(c) Dividends.
The Company has not declared or paid a cash dividend
to stockholders since it became a "C" corporation
on
November 18, 1993. The Board of Directors presently
intends to retain any earnings to finance Company
operations and does not expect to authorize cash
dividends in the foreseeable future. Any payment of
cash dividends in the future will depend upon the
Company's earnings, capital requirements and other
factors.
EXECUTIVE COMPENSATION
(a) No officer or director of the Company is
receiving any remuneration at this time, except as
follows: Thomas S. Hughes received a salary payment
in June 1999 of $50,000. He had not previously
received any salary from the Company.
(b) There are no annuity, pension or retirement
benefits proposed to be paid to officers, directors,
or employees of the corporation in the event of
retirement at normal retirement date pursuant to any
presently existing plan provided or contributed to
by
the corporation or any of its subsidiaries.
(c) No remuneration is proposed to be in the future
directly or indirectly by the corporation to any
officer or director under any plan which is
presently
existing.
FINANCIAL STATEMENTS
The Financial Statements required by Item 310 of
Regulation S-B (in the form of the latest Annual
Report on Form 10-KSB and Quarterly Report on Form
10-QSB) are incorporated by reference in this
Prospectus, and are set forth in their entirety as
Exhibits 13.1 and 13.2 to this Form SB-2.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
(a) On August 1, 1998, the Company engaged the
services of George Brenner, C.P.A. of Beverly Hills,
California, to provide an audit of the Company's
financial statements for the fiscal years ended
August 31, 1997 and 1998. The former accountant for
the Company, BDO Seidman L.L.P. of St. Louis
Missouri
declined the stand for re-election for the 1997
engagement. The independent auditor's reports for
August 31, 1996 and 1995, were modified as to the
uncertainties about the Company's ability to
continue
as a going concern. The decision to change
accountants was approved by the Company's Board of
Directors with the selection of the successor
accountant. The Company and its former accountants
had no disagreement during the fiscal years ended
August 31, 1996 and 1995, and through the date they
declined to stand for re-election.
(b) Effective on July 19, 1999, the independent
accountant who was previously engaged as the
principal accountant to audit the registrant's
financial statements, resigned. This accountant's
report on the financial statements for the past two
years neither contained an adverse opinion or a
disclaimer of opinion, nor was qualified or modified
due to uncertainty, audit scope, or accounting
principles. The decision to change accountants was
approved by the Board of Directors.
During the registrant's two most recent fiscal years
and any subsequent interim period preceding such
resignation, there were no disagreements with the
former accountant on any matter of accounting
principles or practices, financial statement
disclosure, or auditing scope or procedure. In
addition, there were no "reportable events" as
described in Item 304(a)(1)(v)(A) through (D) of
Regulation S-K that occurred within the registrant's
two most recent fiscal years and the subsequent
interim period preceding the former accountant's
resignation.
(c) Effective on July 22, 1999, the firm of Farber
&
Hass has been engaged to serve as the new principal
accountant to audit the registrant's financial
statements. During the registrant's two most recent
fiscal years, and the subsequent interim period
prior
to engaging that accountant, neither the registrant
(nor someone on its behalf) consulted the newly
engaged accountant regarding any matter.
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Information on this item is set forth in Propsectus
under the heading "Disclosure of Commission Position
on Indemnification for Securities Act Liabilities."
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Information on this item is set forth in the
Prospectus under the heading "Use of Proceeds."
RECENT SALES OF UNREGISTERED SECURITIES
None.
EXHIBITS
The Exhibits required by Item 601 of Regulation S-B,
and an index thereto, are attached.
UNDERTAKINGS
The undersigned registrant hereby undertakes to:
(a) (1) File, during any period in which it offers
or sells securities, a post-effective amendment to
this registration statement to:
(i) Include any prospectus required by section
10(a)(3) of the Securities Act; (ii) Reflect in the
prospectus any facts or events which, individually
or
together, represent a fundamental change in the
information in the registration statement; and
Notwithstanding the forgoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered) and any deviation
From the low or high end of the estimated maximum
offering range may be reflected in the form of
prospects filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in the
volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the
effective registration statement. (iii) Include any
additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities
Act, treat each post-effective amendment as a new
registration statement of the securities offered,
and
the offering of the securities at that time to be
the
initial bona fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain
unsold
at the end of the offering.
(d) Provide to the underwriter at the closing
specified in the underwriting agreement certificates
in such denominations and registered in such names
as
required by the underwriter to permit prompt
delivery
to each purchaser.
(e) Insofar as indemnification for liabilities
arising under the Securities Act of 1933 (the "Act")
may be permitted to directors, officers and
controlling persons of the small business issuer
pursuant to the foregoing provisions, or otherwise,
the small business issuer 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 small business issuer of expenses
incurred or paid by a director, officer or
controlling person of the small business issuer 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 small business issuer 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 Securities Act and will
be
governed by the final adjudication of such issue.
SIGNATURES
In accordance with the requirements of the
Securities
Act of 1933, the registrant certifies that it has
reasonable grounds to believe that it meets all of
the requirements for filing on Form SB-2 and
authorized this registration statement to be signed
on its behalf by the undersigned, thereunto duly
authorize, in the City of San Pedro, State of
California, on August 19, 1999.
eCONNECT
By: /s/ Thomas S. Hughes
Thomas S. Hughes, President
Special Power of Attorney
The undersigned constitute and appoint Thomas S.
Hughes their true and lawful attorney-in-fact and
agent with full power of substitution, for him and
in
his name, place, and stead, in any and all
capacities, to sign any and all amendments,
including
post-effective amendments, to this Form SB-2
Registration Statement, and to file the same with
all
exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange
Commission, granting such attorney-in-fact the full
power and authority to do and perform each and every
act and thing requisite and necessary to be done in
and about the premises, as fully and to all intents
and purposes as he might or could do in person,
hereby ratifying and confirming all that such
attorney0in-fact may lawfully do or cause to be done
by virtue hereof.
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
date indicated:
Signature
Title
Date
/s/ Thomas S.
Hughes
Thomas S.
Hughes
President, Chief
Executive Officer,
Director
August 19, 1999
/s/ Jack M.
Hall
Jack M. Hall
Secretary,
Director
August 19, 1999
/s/ Diane
Hewitt
Diane Hewitt
Treasurer
(Principal
Financial and
Accounting
Officer), Director
August 19, 1999
EXHIBIT INDEX
Exhibit
Number
Description
Method of
Filing
3.1
Articles of Incorporation (incorporated by
reference to Exhibit 3.1 to the Registration
Statement on Form SB-2 filed on July 2, 1999)
Incorporated
by Reference
3.2
Certificate of Amendment of Articles of
Incorporation (incorporated by reference to
Exhibit 3.2 to the Registration Statement on
Form SB-2 filed on July 2, 1999)
Incorporated
by Reference
3.3
Certificate of Amendment of Articles of
Incorporation
See Below
3.4
Bylaws (incorporated by reference to Exhibit
3.3 to the Registration Statement on Form SB-2
filed on July 2, 1999)
Incorporated
by Reference
4
Class A Warrant Agreement (incorporated by
reference to Exhibit 4.2 of Leggoons, Inc.'s
Registration Statement on Form S-1 filed on
October 28, 1993).
Incorporated
by Reference
5, 23.1
Opinion Re: Legality; Consent of Counsel
See Below
10.1
Agreement to License Assets (incorporated by
reference to Exhibit 10.16 to the Form 8-K
filed on February 25, 1997)
Incorporated
by Reference
10.2
Escrow Agreement (incorporated by reference to
Exhibit 10.17 to the Form 8-K filed on
February 25, 1997)
Incorporated
by Reference
10.3
Host Processing Agreement (incorporated by
reference to Exhibit 10.3 of the Form 10-KSB/A
for the fiscal year ended August 31, 1998)
Incorporated
by Reference
10.4
Licensing Agreement (incorporated by reference
to Exhibit 10.4 of the Form 10-KSB/A for the
fiscal year ended August 31, 1998)
Incorporated
by Reference
10.5
Letter of Commitment (incorporated by
reference to Exhibit 10.5 to the Form 10-QSB
for the quarter ended June 30, 1999)
Incorporated
by Reference
13.1
Latest Annual Report to Security Holders on
Form 10-KSB/A
See Below
13.2
Latest Quarterly Report to Security Holders on
Form 10-QSB
See Below
23.2
Consent of Accountant
See Below
24
Special Power of Attorney
See
Signature
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