U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
______________ TO ______________
COMMISSION FILE NUMBER: 33-68570
eConnect
(Exact name of registrant as specified in its charter)
Nevada 43-1239043
(State or jurisdiction of incorporation I.R.S. Employer
or organization) Identification No.)
2500 Via Cabrillo Marina, Suite 112, San Pedro, California 90731
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (310) 514-9482
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 Par Value; Class A Warrants
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) been subject to such filing
requirements for the past 90 days. Yes X No .
As of As of May 1, 2000, the Registrant had 162,394,801
shares of common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X .
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000 3
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
AND MARCH 31, 1999 4
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
AND MARCH 31, 1999 5
NOTES TO FINANCIAL STATEMENTS 6
ITEM 2. PLAN OF OPERATION 11
PART II
ITEM 1. LEGAL PROCEEDINGS 13
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 14
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14
ITEM 5. OTHER INFORMATION 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURE 14
PART I.
ITEM 1. FINANCIAL STATEMENTS.
eCONNECT
CONSOLIDATED BALANCE SHEET (Unaudited)
ASSETS
Current assets March 31, 2000
Cash $ 1,247,262
Due from related party 200,000
Total current assets 1,447,262
Fixed assets, net 135,506
Other assets
Investments, net 2,445,046
Goodwill, net 187,614
Other intangibles, net 680,520
Other assets 11,012
3,324,192
Total assets 4,906,960
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable 664,504
Accrued liabilities 57,795
Due to related party 607,221
Due to affiliate 1,725,000
Total current liabilities 3,054,520
Total liabilities 3,054,520
Stockholders' equity
Common stock; $.001 par value; 200,000,000
shares authorized, 154,870,876 shares
issued and outstanding 154,871
Additional paid-in capital 55,521,296
Due from related party - secured by
Company's common stock (4,093,529)
Accumulated deficit (49,730,198)
Total stockholders' equity 1,852,440
Total liabilities and stockholders' equity 4,906,960
See Accompanying Notes to Financial Statement
eCONNECT
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended March 31
2000 1999
Revenue - -
Operating expenses
Consulting 9,868,917 -
Public relations 5,232,780 -
Research and development 1,910,310 -
General and administrative 1,951,826 175,730
Total operating expenses 18,963,833 175,730
Net loss from operations (18,963,833) (175,730)
Other income (expense)
Interest income 87,350 -
Equity losses of investees (280,366) -
Total other income (expense) (193,016) -
Net loss before provision for
income taxes (19,156,849) (175,730)
Provision for income taxes - -
Net loss (19,156,849) (175,730)
Basic and diluted loss per
common share (0.14) (0.01)
Basic and diluted weighted
average common shares
outstanding 136,090,236 14,316,067
See Accompanying Notes to Financial Statements
eCONNECT
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the three months ended March 31
2000 1999
Cash flows from operating
activities:
Net loss (19,156,849) (175,730)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation and amortization 223,183 -
Common shares issued for
services 15,627,561 -
Equity losses of investees 280,366 -
Changes in operating assets and
liabilities:
Decrease in stock subscription
receivable 220,176 -
Decrease in due from related
party 50,000 -
Increase in due from related party -
secured by Company's common stock (1,112,647) -
Increase in other assets (11,012) -
Increase (decrease) in accounts
payable 139,234 (12,522)
Increase (decrease) in accrued
liabilities (32,885) 36,000
Decrease in due to related party (5,789) -
Decrease in stockholder loan
payable (350,000) -
Net cash used by operating
activities (4,128,662) (152,252)
Cash flows from investing
activities:
Purchase of fixed assets (138,144) -
Payments for investments (706,200) -
Net cash used by investing
activities (844,344) -
Cash flows from financing
activities:
Proceeds from issuance of
long-term debt - 16,600
Proceeds from issuance of
common stock 6,094,096 149,300
Net cash provided by financing
activities 6,094,096 165,900
Net increase in cash 1,121,090 13,648
Cash, beginning of period 126,172 8,862
Cash, end of period 1,247,262 22,510
Schedule of non-cash investing and
financing activities:
Remaining consideration of the
acquisition of Powerclick, Inc.
recorded as due to affiliate 1,725,000 -
eCONNECT
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)
For the three months ended March 31
2000 1999
2,000,000 common shares issued
related to the acquisition of
Powerclick, Inc. 325,000 -
666,667 common shares issued for
accounts payable 550,000 -
6,000,000 common shares issued for
officer bonus payable 4,800,000 -
203,865 common shares issued for
stock subscription payable 81,546 -
See Accompanying Notes to Financial Statements
eCONNECT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been
prepared in accordance with U.S. Securities and Exchange
Commission requirements for interim financial statements.
Therefore, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. The financial statements
should be read in conjunction with the Form 10-KSB for the year
ended December 31, 1999 of eConnect ("the Company").
The results of operations for the interim periods shown in this
report are not necessarily indicative of results to be expected
for the full year. In the opinion of management, the information
contained herein reflects all adjustments necessary to make the
results of operations for the interim periods a fair statement of
such operation. All such adjustments are of a normal recurring
nature.
During the first quarter of 2000, the Company's investees
(PowerClick and Top Sports S.A.) were operational, while the
"Bank Eyes Only" Internet products were in the development stage.
As described below under the caption "Business Combinations and
Investments," the investees' earnings or losses are recorded on
the equity method of accounting.
2. ACQUISITION
Powerclick, Inc. - In February 2000, the Company acquired 50% of
the outstanding capital stock of Powerclick, Inc. ("the
Investee") in consideration of $1,200,000 and 8,000,000 shares of
the Company's common stock ("the Acquisition"). As of March 31,
2000 the Company has made payments totaling $450,000 and issued
2,000,000 shares of the Company's common stock related to the
Acquisition. The remaining unpaid balance of $750,000 and
unissued common stock totaling 6,000,000 shares are recorded as
"Due to affiliate" totaling $1,725,000 at March 31, 2000. The
Company has accounted for its ownership interest in the Investee
under the equity-method as the Company has the ability to
exercise significant influence, but not control, and has an
ownership interest of the investee's voting stock between 20% and
50%. As of March 31, 2000, the investment in the Investee
exceeded the Company's share of the underlying net assets by
approximately $2,424,190. The excess of the underlying net
assets in the Investee is being amortized on a straight-line
basis over the estimated useful life of three years. For the
three months ended March 31, 2000, amortization expense related
to this investment approximated $120,000.
Business Combinations and Investments - This business combination
has been accounted for under the purchase method of accounting,
therefore the Company includes the results of operations of the
acquired business from the date of acquisition. Net assets of
the company acquired are recorded at fair value as of the date of
acquisition. The excess of the acquired business' purchase price
over the fair value of its net tangible and identifiable
intangible assets is then included in goodwill in the
accompanying consolidated balance sheet.
Investments in affiliated entities in which the Company has the
ability to exercise significant influence, but not control, and
generally is an ownership interest of the investee's voting stock
between 20% and 50%, are accounted for under the equity method of
accounting. Accordingly, under the equity method of accounting,
the Company's share of the investee's earnings or losses based on
its ownership interest are included in the consolidated
statements of operations. The investee's earnings or losses are
the net result of total revenues less total expenses. The
Company records its investments accounted for under the equity-
method as "Investments" on the consolidated balance sheet and its
share of the investee's earnings or losses in "Equity earnings or
losses of investees" on the consolidated statements of
operations. The portion of the Company's investment in an
investee that exceeds its claim of the net assets of the
investee, if any, is treated as goodwill and amortized over a
period of three years.
3. RELATED PARTY TRANSACTIONS
Due from related party - As of March 31, 2000, the Company loaned
$200,000 to a director of the Company. The balance is non-
interest bearing and is due on demand. The Company received a
$100,000 repayment of this amount in April 2000.
Due from related party - secured by Company's common stock - As
of March 31, 2000, the Company made loans totaling $4,093,529
(including accrued interest receivable of $231,821) to ET&T and
Thomas Hughes (an officer and director of the Company). The
balance is secured by approximately 9,400,000 shares of the
Company's common stock, which is owned by ET&T and Thomas Hughes,
bearing an interest rate of 10% and is due on demand.
4. GOING CONCERN
The Company incurred a net loss of approximately $19,000,000 for
the three months ended March 31, 2000. The Company's current
liabilities exceed its current assets by approximately $1,600,000
as of March 31, 2000. These factors create substantial doubt
about the Company's ability to continue as a going concern. The
Company's management has developed a plan to complete the
development of technology products to generate future revenues
and elect new directors to the board. The Company will also seek
additional sources of capital through the issuance of debt equity
financing, but there can be no assurance that the Company will be
successful in accomplishing its objectives.
The ability of the Company to continue as a going concern is
dependent on additional sources of capital and the success of the
Company's plan. The financial statements do not include any
adjustments that might be necessary if the Company is unable to
continue as a going concern.
ITEM 2. PLAN OF OPERATION.
(a) Twelve Month Plan of Operation.
In the year 2000, the Registrant will focus its attention on the
marketing and development of the PERFECT industry (Personal
Encrypted Remote Financial Electronic Card Transactions), with
specific focus on the "Bank Eyes Only"T Internet aspect of the
PERFECT transaction (see Exhibit 99.3 for a summary of the
trademark filed on March 15, 2000).
"Bank Eyes Only" refers to a direct Internet connection between
the consumer's terminal and the Registrants bank card
authorization system by which the consumer will order an item
from an Internet merchant, but the credit card data or ATM data
will go directly to the Registrant's server and then to the bank,
bypassing the merchant. Thus, this service will enable customers
to pay for Internet purchases, bill payments and other types of
transactions from home by physically swiping either credit cards
or ATM cards with PIN entry. These "Bank Eyes Only,"
transactions can be processed over the Internet without the
cardholder account information being stored at the merchant's web
site, nor does the merchant have ready access to the consumer's
bank card information.
The Registrant believes that "Bank Eyes Only" transaction
processing system will effectively address Internet consumers'
concerns regarding personal and financial information security.
The Registrant will receive a projected flat fee of $1.00 for
each "Bank Eyes Only" transaction which will be paid by the
merchant, not the consumer.
The Registrant has begun initial sign ups of web Merchants for
this service and based on responses, will now expend substantial
dollars for an aggressive May sign up campaign to begin
simultaneously on several fronts. To launch the service of
Internet "Bank Eyes Only" transactions, the Registrant has
implemented the following initiatives:
(1) The development of the eCashPad by Asia Pacific Micro, Inc,
under a manufacturing agreement entered into on January 21, 2000
(see Exhibit 10.29 to this Form 10-QSB). Production of the
eCashPad has commenced in Asia and is commercially targeted for
distribution in June 2000.
(2) The Registrant has entered into two agreements with eFunds
Corporation, a subsidiary of Deluxe Data, dated February 3, 2000
and February 4, 2000 to provide the Dominican Republic and
Ireland host systems for "Bank Eyes Only" transactions (see
Exhibits 10.34 and 10.36, respectively, to this Form 10-QSB).
This means that eFunds will help process the transaction after it
leaves the Registrant's server.
(3) Under the agreements with eFunds, the Registrant also
obtained a license of the eFunds CONNEX host system software for
usage in countries other than the United States. The CONNEX
system provides the Registrant with a proven host software system
which will effect "Bank Eyes Only" transactions as originated by
eCashPads.
(4) The purchase of an IBM Multiprise 2000 as a platform for the
CONNEX host system software in March 2000.
(5) The Registrant has entered into a letter of intent with Real
Solutions, Ltd. on March 9, 2000 to provide the IBM hardware
support in connection with the eFunds agreements (see Exhibit
10.40 to this Form 10-QSB). On April 13, 2000, the Registrant
entered into a formal Master Services Agreement with Real
Solutions, Ltd. in connection with this matter.
(6) On February 9, 2000, the Registrant consummated an
acquisition agreement with PowerClick, Inc., a Nevada
corporation, whereby the Registrant acquired 50% of the
outstanding capital stock of this company (see Exhibit 10.37 to
this Form 10-QSB). PowerClick, Inc. owns and operates a website
that provides a wide range of products and services to the
public, and is intended to be used as a vehicle to promote the
use of the "Bank Eyes Only" system.
(7) The Registrant has entered into an agreement with National
Data Funding Corporation ("NDFC") in April 2000 to provide
eCashPad distribution, encryption, and maintenance. The
eCashpad is a device which will attach to a personal computer to
enable a credit card or ATM transaction via Internet. NDFC will
also provide full merchant processing for all credit and debit
cards in support of the United States eFunds host.
(8) Completion of testing of the eCashPads, the consumer "Bank
Eyes Only" device. eCashPads will be in a pilot program through
the second quarter of 2000 with a national roll out anticipated
for the third quarter of 2000.
(9) On December 29, 1999, the Registrant entered into an
agreement for establishing eConnect2Trade.com, Incorporated
("ET") (see Exhibit 10.25 to this Form 10-QSB). The business of
ET is to be the marketing and sales of the Registrant's "same-as-
cash" transactions to the securities industry via any medium, but
initially via the internet using an ATM pin pad. The long term
goal of ET will be, for a fee, to act as a financial interface
between securities broker/dealers and their clients who are
transacting currencies via transactions using bank host
processing centers that are authorizing such transactions.
Although a recent Letter of Intent between ET and Empire
Financial Holding Co., a broker/dealer, did not proceed, it is
the intention of the Registrant to seek other contacts within the
brokerage industry (see Exhibit 10.28 to this Form 10-QSB).
(10) On March 10, 2000, the Registrant entered into a Joint
Venture Agreement for the creation of a software/hardware
solution that will facilitate a secure transaction interface and
communications between handheld computing devices and secure
transaction servers (see Exhibit 10.39 to this Form 10-QSB). The
net result to be to provide same as cash transactions over
virtual private networks. The combined hardware
/software/service is to be known as "PocketPay" an existing
trademark of eConnect.
(11) Development of "bankeyesonly.com" web sites in the United
States, Dominican Republic, Ireland, Australia and Hong Kong.
These web sites will be used to register web merchants within the
above listed countries to be able to receive a "Bank Eyes Only"
transaction by an eCashPad. A consumer will be able to go the
Registrant's website and with the use of his/her eCashPad will be
able to safely order merchandise on line.
(12) Aggressive recruiting of web merchants to the Registrant
"Bank Eyes Only" network. Registration of "Bank Eyes Only" web
merchants will be pursued by a team specialists to be hired who
understand their specific industry such as phone or cable or
collections and who will fully develop the pertinent "Bank Eyes
Only" applications for that industry and who will develop
strategic alliances within their specific industry. In addition,
the Registrant has structured a networking approach for mass
market consumer participation in finding "Bank Eyes Only"
merchants along with sales teams to sign on local web merchants.
(13) Using a revenue sharing plan from the flat fee, the
Registrant will incentivize private labels of eCashPads with
expected advertising and marketing of these private label
eCashPads by the web merchants to their consumer base. For
example, a merchant might distribute eCashPads with its logo to
its own consumers.
(14) Establishment of strategic alliances with a substantial
partner in each country. The partner will then proceed to
develop the business of "Bank Eyes Only" transactions by usage of
the simple and proprietary eCashPad which has been developed by
the Registrant.
(15) The activation of the Dominican Republic host system, and
host systems in Ireland, Hong Kong Host, and Australia as full
service centers which will provide not only "Bank Eyes Only"
Internet transactions by the usage of eCashPads but also full
service aspects of processing merchant retail terminal
transactions and ATM cash machines. Terminals could be placed in
strategic market areas of each country such as check cashing
centers or even grocery stores. In this regard, the Registrant
entered into a Joint Venture Agreement, dated March 27, 2000,
with Raymond and Li-Wang Kessler for the purpose of delivering a
delegation from the Peoples Republic of China to a meeting in the
United States with the Registrant to discuss launching the
Registrant's services in China (subsequent meetings with China
Delegation contact(s) and their associates will explore forging
business relationships in Singapore, Hong Kong, Macao and other
countries) (see Exhibit 10.44 to this Form 10-QSB).
(16) Establishment of the "International," which will be a four
country real time "Bank Eyes Only" with ATM card and PIN entry
game between the countries of the Dominican Republic, Ireland,
Australia, and Hong Kong, whereby consumers within those
countries will be able to use the eCashPad to effect same day
gaming with ATM card and PIN entry.
The Registrant intends to spin off eGaming and its PowerClick
subsidiary as separate publicly traded companies.
(b) Risk Factors in Connection with Plan of Operation.
An investment in the Registrant is subject to a number of
risks. Among these risks are the following:
(1) eCashPad Production. The agreement under which the eCashPad
is being manufactured for the Registrant only calls for an
initial production run of 5,000 units, at a total cost of
$80,000. The Registrant must conclude an agreement for a
substantial additional manufacturing run in order for the plan of
business as set forth above to succeed. There is no guarantee
that the Registrant will be able to conclude such an agreement.
This agreement offers the Registrant substantial savings by
contracting with an Asian country for manufacturing. Currently,
the manufacturer is stable but there is no guarantee that the
manufacturer may not be impacted by future changes in government
policies. The Registrant is presently seeking additional
suppliers.
(2) Approval of Regional ATM Networks. Within the United States
market, the Registrant is closely working with NDFC to secure the
go ahead for regional ATM card networks for an eCashPad ATM card
with PIN entry "Bank Eyes Only" Internet payment. Such network
currently permit the usage of credit cards on their systems.
Thus, a substantial part of the Registrant's strategy is based on
ATM card with PIN entry Internet payments, and the Registrant may
not receive bank approvals from the regional ATM card networks in
the United States for such transactions. In such case, this
payment system could not be used in the United States, which
could substantially affect the prospects of the Company in this
country. Even though this type of payment system has already
been approved in the Dominican Republic and Ireland, and may be
approved elsewhere outside the United States, the Company would
expect that a substantial portion of its projected revenues would
come form United States based transactions.
(3) 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
the Registrant's services 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.
(4) 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 business, the extent
of which cannot be predicted. For example, the U.S. Senate has
considered a proposed bill introduced by U.S. Senator John Kyl
that would ban Internet gaming in the United States. The passage
of such a bill may adversely affect the operation of the Company,
depending on the form of legislation. Even though all gaming
operations of the Company are off-shore and such transactions are
not accepted from the United States, the effect of such
legislation may influence the business.
(5) Competition. The Registrant anticipates substantial
competition in the development of the PERFECT industry and the
"Bank Eyes Only" internet application in particular. The
Registrant believes that the marketplace is large enough to
absorb many competitor companies who may focus on ancillary
aspects of the PERFECT industry such as the development of
hardware or of merchant sign ups, rather than on the core
business of the Registrant which is the processing of
transactions. Many competitors in this industry, and in internet
gaming will have greater experience, resources, and managerial
capabilities than the Company, may be in a better position than
the Company to obtain access to attractive clientele. Such
competition could have a material adverse effect on the Company's
profitability.
(6) 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 in managing companies in
the same business as the Company.
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 decisions that affect
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 or she is willing to entrust all aspects of the
management of the Company to the officers and directors.
(7) Conflicts of Interest. The officers and directors have
other interests to which they devote time, either individually or
through partnerships and corporations in which they have an
interest, hold an office, or serve on boards of directors. Each
will continue to devote such time to the business of the Company,
notwithstanding other obligations, that may reduce the time they
can devote 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 of the Company, any proposed investments for
its evaluation.
(8) Additional Financing Will Be Required. The Registrant will
be required to raise significant capital to fund its Plan of
Operation; this is estimated to be $3,000,000 over the next 12
months. Currently, the Registrant is meeting its funding
requirements through financing provided by the Alpha Venture
Capital, Inc. through a Common Stock Purchase Agreement between
the Registrant and this firm Alpha Venture Capital, Inc., dated
September 28, 1999 (see Exhibit 4.22 to this Form 10-QSB).
However, there is no guarantee that this funding source will
continue to be available in the future.
The current funds available to the Company, and any revenue
generated by operations, will not be adequate for it to be
competitive in the areas in which it intends to operate, and may
not be adequate for the Registrant to survive. Therefore, the
Company will need to raise additional funds in order to fully
implement its business plan. The Company's continued operations
therefore will depend upon its ability to raise additional funds
through bank borrowings, equity or debt financing. There is no
assurance that the Company will be able to obtain additional
funding when needed, or that such funding, if available, can be
obtained on terms acceptable to the Company. If the Company
cannot obtain needed funds, it may be forced to curtail or cease
its activities. If additional shares were issued to obtain
financing, current shareholders may suffer a dilution on their
percentage of stock ownership in the Company.
(9) Uncertainty Due to Year 2000 Issue. The Year 2000
issue arises because many computerized systems use two digits
rather than four to identify a year. Date sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in
errors when information using the year 2000 date is processed.
In addition, similar problems may arise in some systems, which
use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 issue may be experienced
after January 1, 2000, and if not addressed, the impact on
operations and financial reporting may range from minor errors to
significant system failure which could affect the Registrant's
ability to conduct normal business operations. This creates
potential risk for all companies, even if their own computer
systems are Year 2000 compliant. It is not possible to be
certain that all aspects of the Year 2000 issue affecting the
Registrant, including those related to the efforts of customers,
suppliers, or other third parties, will be fully resolved.
The Registrant currently believes that its systems are Year 2000
compliant in all material respects. Although management is not
aware of any material operational issues or costs associated with
preparing its internal systems for the Year 2000, the Registrant
may experience serious unanticipated negative consequences (such
as significant downtime for one or more of its suppliers) or
material costs caused by undetected errors or defects in the
technology used in its internal systems. Furthermore, the
purchasing patterns of customers may be affected by Year 2000
issues. The Registrant does not currently have any information
about the Year 2000 status of its potential material suppliers.
The Registrant's Year 2000 plans are based on management's best
estimates.
(c) Forward Looking Statements.
The foregoing Plan of Operation contains "forward looking
statements" within the meaning of Rule 175 under the Securities
Act of 1933, as amended, and Rule 3b-6 under the Securities Act
of 1934, as amended, including statements regarding, among other
items, the Registrant's business strategies, continued growth in
the Registrant's markets, projections, and anticipated trends in
the Registrant's business and the industry in which it operates.
The words "believe," "expect," "anticipate," "intends,"
"forecast," "project," and similar expressions identify forward-
looking statements. These forward-looking statements are based
largely on the Registrant's expectations and are subject to a
number of risks and uncertainties, certain of which are beyond
the Registrant's control. The Registrant cautions that these
statements are further qualified by important factors that could
cause actual results to differ materially from those in the
forward looking statements, including, among others, the
following: reduced or lack of increase in demand for the
Registrant's products, competitive pricing pressures, changes in
the market price of ingredients used in the Registrant's products
and the level of expenses incurred in the Registrant's
operations. In light of these risks and uncertainties, there can
be no assurance that the forward-looking information contained
herein will in fact transpire or prove to be accurate. The
Registrant disclaims any intent or obligation to update "forward
looking statements."
PART II.
ITEM 1. LEGAL PROCEEDINGS.
Other than as stated below, the Registrant is not a party to any
material pending legal proceedings and, to the best of its
knowledge, no such action by or against the Registrant has been
threatened:
(a) Securities and Exchange Commission Action (March 12, 1999).
On March 12, 1999, the Securities and Exchange Commission
("SEC") filed a complaint alleging the Company had failed to make
available to the investing public current and accurate
information about its financial condition and results of
operations through the filing of periodic reports as required by
the Securities Exchange Act of 1934 (specifically, the Form 10-
KSB for the 1997 and 1998 fiscal years, the Form 10QSB for each
of the first three quarters of fiscal 1998, and the corresponding
Notifications of Late Filings (Form 12b-25)). The SEC sought in
this action to compel the Company to file delinquent reports and
enjoin the Company from further violations of the reporting
requirements. The Company consented to the entry of a final
judgment granting the relief sought by the SEC.
Although this action has been concluded, since the permanent
injunction was entered the Company has been late with the
following reports: (a) Form 10QSB for the quarter ended February
28, 1999 (due by April 29, 1999 because of the filing of a Form
12b-25) - filed with the SEC on May 28, 1999; (b) Form 10QSB for
the quarter ended June 30, 1999 (due by August 14, 1999) - filed
with the SEC on August 23, 1999 (due to an error in the CIK code
for the Company entered on the EDGAR electronic filing system);
(c) a Form 10-QSB for the transition period ended December 31,
1998 (due by July 5, 1999) - filed with the SEC on September 3,
1999; (d) Form 8-K to reflect a certain acquisition by the
Company (due by May 21, 1999) - filed with the SEC on November
15, 1999; (e) Form 8-K to reflect two acquisitions by the Company
(due by September 15, 1999) - filed with the SEC on November 16,
1999; (f) Form 10-KSB for the period ended on December 31, 1999
(due by April 14, 2000) - filed with the SEC on May 9, 2000; and
(g) Form 10-QSB for the quarter ended March 31, 2000 (due by May
22, 2000).
(b) Securities and Exchange Commission Action (March 23, 2000).
In a complaint filed on March 23, 2000 (Securities and Exchange
Commission v. eConnect and Thomas S. Hughes, Civil Action No. CV
00 02959 AHM (C.D. Cal.)), the SEC alleged that since February
28, 2000, the Registrant issued false and misleading press
releases claiming: (1) the Registrant and its joint venture
partner had a unique licensing arrangement with PalmPilot; and
(2) a subsidiary of the Registrant had a strategic alliance with
a brokerage firm concerning a system that would permit cash
transactions over the Internet. The complaint further alleges
that the press releases, which were disseminated through a wire
service as well as by postings on internet bulletin boards,
caused a dramatic rise in the price of the Registrant's stock
from $1.39 on February 28 to a high of $21.88 on March 9, 2000,
on heavy trading volume. The SEC suspended trading in the
Registrant's common stock on the Over the Counter Bulletin Board
on March 13 for a period of 10 trading days (trading resumed on
the National Quotation Bureau's Pink Sheets on March 27, 2000).
The complaint alleges that despite the trading suspension and the
SEC's related investigation, the Registrant and Mr. Hughes
continued to issue false and misleading statements concerning the
Registrant's business opportunities. In addition to the interim
relief granted, the Commission seeks a final judgment against the
Registrant and Mr. Hughes enjoining them from future violations
of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder
(the anti-fraud provisions of that act) and assessing civil
penalties against them.
On March 24, 2000, a temporary restraining order was issued in
the above-entitled action prohibiting the Registrant and Mr.
Hughes, from committing violations of the antifraud provisions of
the federal securities laws. The Registrant and Mr. Hughes
consented to the temporary restraining order.
On April 6, 2000, without admitting or denying the allegations
contained in said complaint, the Registrant and Mr. Hughes
entered into a settlement by consent that has resulted in the
entry of permanent injunctive relief. The settlement agreement
with the SEC was accepted and a judgment of permanent injunction
was entered by the Court on April 7, 2000. The judgment that the
Registrant and Mr. Hughes consented to prohibits the Registrant
and Mr. Hughes from taking any action or making any statement, or
failing to make any statement that would violate Section 10(b) of
the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
The court has yet to determine whether disgorgement, civil
penalties or other relief should be assessed against the
Registrant or Mr. Hughes.
(c) Shareholder Class Action Lawsuits.
Barbara Einhorn, et al. v. eConnect, Thomas S. Hughes, Jack M.
Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case
No. 00-02674 MMM (JWJx);
Joel Eckstein, et al. v. eConnect, Inc. , Thomas S. Hughes, Jack
M. Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case
No. 00-02700 DDP (CWx);
Felicia Bernstein, et al. v. eConnect, Inc., et al., Case No. 00-
02703 FMC (BQRx);
Robert Colangelo, et al. v. eConnect, Inc., et al., Case No. 00-
02743 SVW (SHx);
Irving Baron, et al. v. eConnect, Inc. , Thomas S. Hughes, Jack
M. Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case
No. 00-02757 WJR (CTx);
James J. Warstler, et al. v. eConnect, Inc. , Thomas S. Hughes,
Jack M. Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis,
Case No. 00-02758 R (SHx);
Yakov Prager, et al. v. eConnect, Inc. , Thomas S. Hughes, Jack
M. Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case
No. 00-02759 GHK (RCx);
Gil Weisblum, et al. v. eConnect and Thomas S. Hughes, Case No.
00-02770 MRP (CTx);
Kenneth Mazda, et al. v. eConnect, et al., Case No. 00-02776 LGB
(Mcx);
Domenico Pirraglia, et al. v. eConnect, et al., Case No. 00-02875
SVW (CWx);
Israel C. Hershkop and Shlomo Hershkop, et al. v. eConnect and
Thomas S. Hughes, Case No. 00-03095 MRP (RNRx);
Judith Bacun, et al. v. eConnect, Inc. , Thomas S. Hughes, Jack
M. Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case
No. 00-03161 FMC (JWJx);
Howard Fine, et al. v. eConnect, Inc. and Thomas Hughes, Case No.
00-03290 SVW (BQRx);
Arthur Smith, et al. v. eConnect, Thomas Hughes, Case No. 00-
03301 DT (Mcx);
Thomas Reimer, et al. v. eConnect, Thomas Hughes, Case No. 00-
03405 JSL;
Morris Tepper, et al. v. eConnect and Thomas S. Hughes, Case No.
00-03444 WJR (CTx);
Vin Bury, et al. v. eConnect, Thomas Hughes, Case No. 00-03446
ABC;
Frances Villari, et al. v. eConnect, Thomas Hughes, Case No. 00-
03447 LGB (SHx);
Benjamin Ringel, et al. v. eConnect, Inc. , Thomas S. Hughes,
Jack M. Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis,
Case No. 00-03591 RSWL (RNBx);
Anthony Massaro, et al. v. eConnect, Inc., Thomas S. Hughes, Jack
M. Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case
No. 00-03671 DDP (MANx);
Ardelle Gardner, et al. v. eConnect, Inc., Thomas S. Hughes, Jack
M. Hall, Dianne Hewitt, Anthony L. Hall, and Kevin J. Lewis, Case
No. 00-03897 MMM (RZx);
The foregoing twenty-one actions were filed on various dates
between March 14, 2000 and April 12, 2000, inclusive, and are all
pending in the United States District Court for the Central
District of California. These actions are brought by various
putative classes of the purchasers of the Registrant's common
stock. The putative classes alleged, none of which have been
certified, range from no earlier than November 18, 1999 through
March 13, 2000. Plaintiffs in the various actions assert that
the Registrant and Thomas S. Hughes, as well as (in certain of
the actions) Jack M. Hall, Diane Hewitt, Anthony L. Hall, and
Kevin J. Lewis, have violated Section 10(b) of the Exchange Act
(false or misleading statements and omissions which deceived
stock purchasers) and also Section 20(a) of the Exchange Act
(liability as a "controlling person" with respect to a primary
violation of securities laws). The principal allegations concern
various alleged material misrepresentations and omissions which
supposedly made the Registrant's public statements on and after
November 18, 1999 (and/or on and after November 23, 1999) false
and misleading, thereby artificially inflating the market in and
for the Company's common stock. The answers or other responses
of the defendants to the various initial complaints are not yet
due. The Registrant cannot as yet express any opinion as to the
probable outcome of these litigation matters. The Registrant
intends to defend these litigation matters vigorously.
(d) Employment Agreement - President/Chief Operating Officer.
On March 21, 2000, the Company consummated an amended employment
agreement with an individual for the position of President and
Chief Operating Officer for the Company (see Exhibit 10.42 to
this Form 10-QSB). On April 17, 2000, the Company terminated
this individual as President and Chief Operating Officer of the
Company. Based upon the amended employment agreement, the
remaining salary for the term of this agreement, will be due
within 30 days upon the termination of this individual if
terminated for reasons other than good cause. In addition,
through the date of termination, all of the granted stock options
and warrants will vest and be exercisable for their entire term.
Accordingly, the termination of this individual, for reasons
other than good cause, may potentially expose the Company to
incur a liability of approximately $1,260,000 for the remaining
portion of unpaid salary for the first, second, third, and fourth
years of this agreement. Furthermore, the termination may have
accelerated the vesting of the granted stock options and warrants
consisting of 1,000,000 warrants exercisable at $1.00 per share,
6,000,000 stock options exercisable at $0.40 per share, and
1,500,000 stock options exercisable at the lowest average daily
trading price of the Company's common stock within the first 90
days of the executive's employment. The Company's management
believes that the termination of this individual was in good
cause and intends to defend itself in this matter vigorously.
(e) Employment Agreement - Outside Counsel.
On March 22, 2000, the Company consummated an amended and
restated employment agreement with an individual and his firm to
act as outside counsel for the Company (see Exhibit 10-43 to this
Form 10-QSB). On April 14, 2000, the Company terminated this
individual and his firm as outside counsel. Based upon the
amended and restated employment agreement, the remaining
compensation for the term of this agreement will be due
immediately upon the termination of this individual and his firm
as outside counsel if terminated for reasons other than good
cause. In addition, any common stock and stock warrants granted
through the term of this agreement will be considered due in the
event of termination for reasons other than good cause.
Accordingly, the termination of this individual and his firm, for
reasons other than good cause, may potentially expose the Company
to incur a liability of approximately $700,000 for the remaining
portion of unpaid compensation for the first, second and third
years of this agreement. Furthermore, the termination may have
accelerated the vesting of the granted common stock and stock
warrants consisting of 600,000 common shares and 600,000 warrants
exercisable at $1.00 per share. The Company's management
believes that the termination of this individual and his firm was
in good cause and intends to defend itself in this matter
vigorously.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(a) Sales of Unregistered Securities.
The Registrant made the following sales of unregistered
securities during the three month period ended on March 31, 2000:
(1) Between February 2, 2000 and February 29, 2000, the
Registrant sold a total of 3,069,011 shares of common stock to 79
individuals at a price of $0.40 per share, for an aggregate
consideration of $1,227,604.
(2) During the period of January 1, 2000 through March 6, 2000,
the Registrant sold a total of 9,320,167 shares of common stock
to 17 individuals and firms in exchange for consulting and other
services performed for the Registrant (including 6,000,000 shares
issued to Ryan Kavanaugh in connection with the Consulting
Agreement with the Registrant (see Exhibit 10.41 to this Form 10-
QSB).
No commissions or fees were paid in connection with these sales.
All of the above sales were undertaken pursuant to a claim of
exemption from registration under the Securities Act of 1933 as
provided in Rule 506 under Regulation D.
(b) Use of Proceeds.
On August 20, 1999, the Registrant filed a Form SB-2 with the SEC
under Rule 415 (self offering) to register an aggregate amount of
61,000,000 shares of common stock (aggregate offering price of
$11,590,000 under Rule 457(c)). This offering was used primarily
for consulting services and acquisitions by the Registrant, and
commenced on the effective date of this registration statement
(September 7, 1999). However, 20,000,000 shares of common stock
under this offering were used for the registration of shares sold
under a Common Stock Purchase Agreement (through a post-effective
amendment to this Form SB-2 filed and effective on September 29,
1999 - File No. 333-79739).
The total amount of shares sold under this offering through
December 31, 1999 is 24,210,817, and an additional 14,490,746
shares for the quarter ended on March 31, 2000 (for a total of
38,701,563 shares sold in this offering). Out of the total
offering, the Registrant issued 9,088,442 shares out of those
registered from the Common Stock Purchase Agreement for a total
consideration of $933,000 through December 31, 1999, and an
additional 2,877,084 shares for the quarter ended March 31, 2000
for a total consideration of $2,871,000. In addition, the
Registrant issued 4,988,730 shares upon the exercise of warrants,
for a total consideration of $1,995,492. The expenses involved
with this offering to March 31, 2000 were approximately $370,640
(which includes an 8% commission of payable on the sales made
under the Common Stock Purchase Agreement). The net cash
proceeds from this offering (gross proceeds of $5,799,492 less
offering expenses) of $5,428,852 were used for working capital
for the Registrant. This offering has not as yet terminated.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
(a) Promissory Note and Security Agreement.
The Registrant, and Electronic Transactions & Technologies (a
privately held corporation majorty owned by Thomas Hughes,
President of the Registrant) and Mr. Hughes entered into a
Promissory Note, dated December 1, 1999 (see Exhibit 10.19 to
this Form 10-QSB), to reflect the principal sum of approximately
$2,900,000 owed by ET&T and Mr. Hughes to the Registrant for
various sums paid by the Registrant to ET&T. During the first
quarter of 2000, the Registrant advanced approximately $1,000,000
to ET&T. This additional amount, along with the existing amount
owed, are set forth in an Amended and Restated Promissory Note
(see Exhibit 10.45 to this Form 10-QSB) and are secured by the
9,400,000 shares of the Registrant owned by Mr. Hughes and ET&T
as reflected in an accompanying Amended and Restated Security
Agreement (see Exhibit 10.46 to this Form 10-QSB).
(b) eSportsbet.com.
Under an Agreement dated January 7, 2000, the Registrant
acquired the eSportsbet.com website from PowerClick, Inc. (the
owner of that website on that date) (see Exhibit 10.27 to this
Form 10-QSB). In return, the Registrant agreed to be responsible
to any liabilities that may have been incurred by PowerClick
during its ownership and control of eSportsbet.com. The
Registrant intends to use this website in its eGaming operations
in the Dominican Republic.
(c) Beneficial Ownership of Shares.
With regard to the beneficial ownership of shares of the
Registrant's common stock as of May 1, 2000, management has
reexamined the control that Thomas Hughes exercises over ET&T and
the 5,400,000 shares owned by that firm. Based on this review,
the Registrant has determined that the shares owned by ET&T
should be attributed to the beneficial ownership of Mr. Hughes:
Resulting in a total beneficial ownership of Mr. Hughes of
5,550,000 (3.42% of the total issued and outstanding as of that
date of 162,394,801 and bringing the total of the directors and
executive officers of 15,240,000 (9.33% of the total).
(d) License Agreement of February 18, 1997.
On February 18, 1997, the Registrant entered into an Agreement to
License Assets from Home Point of Sales, Inc.("HPOS") (now know
as "ET&T) (see Exhibit 10.1 to this Form 10-QSB). Under the
terms of this license agreement, it was the intention of the
parties hereto that if and when any additional shares of the
common stock of the Registrant are issued to the public or any
employees, ET&T's ownership interest in the Registrant shall be
and remain no less than 60% and that ownership interest of the
ten current shareholder of the Registrant (James Clinton) shall,
at that time, be no less than 10%. ET&T has never sought to
enforce this provision in this license agreement. On February
2, 2000, the Registrant issued a total of 1,638,789 shares to
James Clinton or his nominees based on the stated reason that
compliance with said 10% provision in such license agreement was
required (this is in addition to the 1,850,000 shares so issued
in 1999). Shares issued under said provision of this license
agreement were not issued for consideration and therefore may not
have been properly issued in compliance with Nevada Revised
Statutes 78.211.
ITEM 6. EXHBITS AND REPORTS ON FORM 8-K.
(a) Reports on Form 8-K. Reports on Form 8-K were filed during
the first quarter of the fiscal year covered by this Form 10-QSB,
as follows:
(1) Form 8-K filed on January 18, 2000 reflecting the settlement of
litigation between the Registrant and CALP II, LP.
(2) Form 8-K filed on March 15, 2000 reflecting the following: (i)
the dismissal of the former certifying accountant for the
Registrant, Farber & Hass, effective March 8, 2000; and (ii) the
retention of L.L. Bradford & Company as the new certifying
accountant for the Registrant, effective March 8, 2000.
(3) Form 8-K filed on March 31, 2000 reflecting the filing of a
complaint on March 23, 2000 by the U.S. Securities and Exchange
Commission against the Registrant and Thomas Hughes, and the
issuance of a temporary restraining order against the Registrant
and Mr. Hughes.
(b) Exhibits. Exhibits included or incorporated by reference
herein: See Exhibit Index
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
eConnect
Dated: May 25, 2000 By: /s/ Thomas S. Hughes
Thomas S. Hughes, President
EXHIBIT INDEX
Exhibit Description
No.
2 Agreement and Plan of Merger, dated June 1, 1999
(incorporated by reference to Exhibit 2 of the Form 10-KSB filed
on May 9, 2000).
3.1 Articles of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 of the Registration Statemet on Form SB-
2/A filed on July 22, 1999).
3.2 Certificate of Amendment of Articles of Incorporation
(incorporated by reference to Exhibit 3.2 of the Registration
Statement on Form SB-2/A filed on July 22, 1999).
3.3 Certificate of Amendment of Articles of Incorporation
(incorporated by reference to Exhibit 3.3 of the Registration
Statement on Form SB-2/A filed on September 3, 1999).
3.4 Bylaws of the Registrant (incorporated by reference to
Exhibit 3.3 of the Registration Statement on Form SB-2/A filed on
July 22, 1999).
4.1 Class A Warrant Agreement (incorporated by reference to
Exhibit 4.2 of Leggoons, Inc. Registration Statement on Form S-1
filed on October 28, 1993).
4.2 Retainer Stock Plan for Non-Employee Directors and
Consultants, dated April 26, 1999 (incorporated by reference to
Exhibit 4.1 of the Form S-8 filed on May 14, 1999).
4.3 Consulting and Service Agreement between the Registrant and
James Wexler, dated May 20, 1998 (incorporated by reference to
Exhibit 4.2 of the Form S-8 filed on May 14, 1999).
4.4 Consulting Agreement between the Registrant and Rogel
Patawaran, dated March 18, 1998 (incorporated by reference to
Exhibit 4.3 of the Form S-8 filed on May 14, 1999).
4.5 Consulting Agreement between the Registrant and David Ninci,
dated February 22, 1999 (incorporated by reference to Exhibit 4.4
of the Form S-8 filed on May 14, 1999).
4.6 Consulting Agreement between the Registrant and Harry
Hargens, dated January 17, 1999 (incorporated by reference to
Exhibit 4.5 of the Form S-8 filed on May 14, 1999).
4.7 Consulting Agreement between the Registrant and Charlene
Charles, dated March 10, 1999 (incorporated by reference to
Exhibit 4.6 of the Form S-8 filed on May 14, 1999).
4.8 Internet Consulting Services Agreement between the
Registrant and Steve Goodman, dated May 3, 1999 (incorporated by
reference to Exhibit 4.2 of the Form S-8 filed on July 2, 1999).
4.9 Consulting Agreement between the Registrant and Rogel
Patawaran, dated June 8, 1999 (incorporated by reference to
Exhibit 4.3 of the Form S-8 filed on July 2, 1999).
4.10 Consulting and Service Agreement between the Registrant and
Edward Wexler, dated May 20, 1999 (incorporated by reference to
Exhibit 4.4 of the Form S-8 filed on July 2, 1999).
4.11 Consultant Agreement between the Registrant and Richard
Epstein, dated June 3, 1999 (incorporated by reference to Exhibit
4.5 of the Form S-8 filed on July 2, 1999).
4.12 Consultant Agreement between the Registrant and Ezzat
Jallad, dated March 10, 1999 (incorporated by reference to
Exhibit 4.6 of the Form S-8 filed on July 2, 1999).
4.13 Consultant Agreement between the Registrant and Shar
Offenberg, dated June 20, 1998 (incorporated by reference to
Exhibit 4.7 of the Form S-8 filed on July 2, 1999).
4.14 Consultant Agreement between the Registrant and Richard
Parnes, dated May 10, 1999 (incorporated by reference to Exhibit
4.8 of the Form S-8 filed on July 2, 1999).
4.15 Consulting Contract between the Registrant and Robert Bragg,
dated August 19, 1999 (incorporated by reference to Exhibit 4.2
of the Form S-8 filed on August 31, 1999).
4.16 Consultant Agreement between the Registrant and Dominique
Einhorn, dated August 9, 1999 (incorporated by reference to
Exhibit 4.3 of the Form S-8 filed on August 31, 1999).
4.17 Consultant Agreement between the Registrant and Richard
Epstein, dated August 16, 1999 (incorporated by reference to
Exhibit 4.4 of the Form S-8 filed on August 31, 1999).
4.18 Consultant Agreement between the Registrant and Jane Hauser,
dated August 16, 1999 (incorporated by reference to Exhibit 4.5
of the Form S-8 filed on August 31, 1999).
4.19 Form of Debenture issued by the Registrant to CALP II, LP,
dated June 9, 1999 (incorporated by reference to Exhibit 4.3 of
the Registration Statement on Form SB-2/A filed on July 22,
1999).
4.20 Registration Rights Agreement between the Registrant and
CALP II, LP, dated June 9, 1999 (incorporated by reference to
Exhibit 4.2 of the Registration Statement on Form SB-2/A filed on
July 22, 1999).
4.21 Form of Warrant issued by the Registrant to CALP II, LP,
dated June 9, 1999 (incorporated by reference to Exhibit 4.4 of
the Registration Statement on Form SB-2/A filed on July 22, 1999).
4.22 Common Stock Purchase Agreement between the Registrant and
Alpha Venture Capital, Inc., dated September 28, 1999
(incorporated by reference to Exhibit 4.2 of the Registration
Statement on Form SB-2 POS filed on September 29, 1999).
4.23 Registration Rights Agreement between the Registrant and
Alpha Venture Capital, Inc., dated September 28, 1999
(incorporated by reference to Exhibit 4.3 of the Registration
Statement on Form SB-2 POS filed on September 29, 1999).
4.24 Warrant issued by the Registrant to Alpha Venture Capital,
Inc., dated September 28, 1999 (incorporated by reference to
Exhibit 4.4 of the Registration Statement on Form SB-2 POS filed
on September 29, 1999).
4.25 Amended and Restated Retainer Stock Plan for Non-Employee
Directors and Consultants, dated February 1, 2000 (incorporated
by reference to Exhibit 4.1 of the Form S-8 filed on February 10,
2000).
4.26 Consulting Services Agreement between the Registrant and
Laurel-Jayne Yapel Manzanares, dated February 1, 2000
(incorporated by reference to Exhibit 4.2 of the Form S-8 filed
on February 10, 2000).
4.27 Consulting Services Agreement between the Registrant and
Marcine Aniz Uhler, dated February 1, 2000 (incorporated by
reference to Exhibit 4.3 of the Form S-8 filed on February 10, 2000).
4.28 Consulting Services Agreement between the Registrant and
William Lane, dated February 7, 2000 (incorporated by reference
to Exhibit 4.4 of the Form S-8 filed on February 10, 2000).
4.29 Consulting Services Agreement between the Registrant and
Earl Gilbrech, dated February 7, 2000 (incorporated by reference
to Exhibit 4.5 of the Form S-8 filed on February 10, 2000).
4.30 Consulting Services Agreement between the Registrant and
Dominique Einhorn, dated February 7, 2000 (incorporated by
reference to Exhibit 4.6 of the Form S-8 filed on February 10,
2000).
4.31 Consulting Services Agreement between the Registrant and
Edward James Wexler, dated February 7, 2000 (incorporated by
reference to Exhibit 4.7 of the Form S-8 filed on February 10,
2000).
10.1 Agreement to License Assets between the Registrant and Home
Point of Sales, Inc., dated February 18, 1997 (incorporated by
reference to Exhibit 10.16 to the Form 8-K filed on February 25,
1997).
10.2 Escrow Agreement between the Registrant, Home Point of
Sales, Inc, and First National Bank of Omaha, dated February 18,
1997 (incorporated by reference to Exhibit 10.17 to the Form 8-K
filed on February 25, 1997).
10.3 Host Processing Agreement between the Registrant and
Electronic Transactions & Technologies, dated April 28, 1997
(incorporated by reference to Exhibit 10.3 of the Form 10-KSB/A
for the fiscal year ended on August 31, 1998).
10.4 Licensing Agreement between the Registrant and Electronic
Transactions & Technologies, dated March 27, 1998 (incorporated
by reference to Exhibit 10.4 of the Form 10-KSB/A for the fiscal
year ended on August 31, 1998).
10.5 Promissory Note between Electronic Transactions &
Technologies and Unipay, Inc., dated April 26, 1999 (incorporated
by reference to Exhibit 10.5 of the Form 10-KSB filed on May 9,
2000).
10.6 Joint Venture Agreement between the Registrant and First
Entertainment Holding Corp., dated April 29, 1999 (incorporated
by reference to Exhibit 10.6 of the Form 10-KSB filed on May 9,
2000).
10.7 Letter of Commitment between the Registrant and Rogel
Technologies, dated May 6, 1999 (incorporated by reference to
Exhibit 2 to the Form 8-K filed on November 15, 1999).
10.8 Acquisition Agreement between the Registrant and eBet.com,
Inc., dated August 12, 1999 (incorporated by reference to Exhibit
2 to the Form 8-K/A filed on November 15, 1999).
10.9 Consulting Agreement between the Registrant and eMarkit,
Incorporated, dated August 16, 1999 (incorporated by reference to
Exhibit 10.9 of the Form 10-KSB filed on May 9, 2000).
10.10 Stock Exchange Agreement between the Registrant, La
Empresa Ranco Plasticos Limitada, Michael Lanes, and Jamie
Ligator, dated August 31, 1999 (incorporated by reference to
Exhibit 2.1 to the Form 8-K filed on November 16, 1999).
10.11 Agreement and Plan of Acquisition between the
Registrant and PowerClick, Inc., dated September 9, 1999
(incorporated by reference to Exhibit 10.11 of the Form 10-KSB
filed on May 9, 2000).
10.12 Consulting Agreement between the Registrant and
International Investor Relations Group, Inc., dated September 24,
1999 (incorporated by reference to Exhibit 10.12 of the Form 10-
KSB filed on May 9, 2000).
10.13 Agreement between the Registrant and Kanakaris
Communications, dated October 21, 1999 (incorporated by reference
to Exhibit 10.13 of the Form 10-KSB filed on May 9, 2000).
10.14 Letter of Commitment between the Registrant and Rogel
Technologies, dated October 23, 1999 (incorporated by reference
to Exhibit 10.14 of the Form 10-KSB filed on May 9, 2000).
10.15 Capital Contribution Agreement between the Registrant
and SafeTPay.com, dated November 5, 1999 (incorporated by
reference to Exhibit 10.15 of the Form 10-KSB filed on May 9, 2000).
10.16 Agreement between the Registrant and Rogel Technologies
dated November 23, 1999 (incorporated by reference
to Exhibit 10.16 of the Form 10-KSB filed on May 9, 2000).
10.17 Contract of Partnership between the Registrant and Top
Sports, S.A., dated November 20, 1999 (incorporated by reference
to Exhibit 10.17 of the Form 10-KSB filed on May 9, 2000).
10.18 Agreement between the Registrant and Alliance Equities,
dated November 29, 1999 (incorporated by reference to Exhibit
10.18 of the Form 10-KSB filed on May 9, 2000).
10.19 Secured Promissory Note issued to the Registrant by
Electronic Transactions & Technologies and Thomas S. Hughes,
dated December 1, 1999 (incorporated by reference to Exhibit
10.19 of the Form 10-KSB filed on May 9, 2000).
10.20 Security Agreement between the Registrant, Electronic
Transactions & Technologies, and Thomas S. Hughes, dated December
1, 1999 (incorporated by reference to Exhibit 10.20 of the Form
10-KSB filed on May 9, 2000).
10.21 Business Cooperation Agreement between the Registrant
and Top Sports, S.A., dated December 9, 1999 (incorporated by
reference to Exhibit 10.21 of the Form 10-KSB filed on May 9, 2000).
10.22 Consulting Agreement between the Registrant and Michael
Leste, dated December 10, 1999 (incorporated by reference to
Exhibit 10.22 of the Form 10-KSB filed on May 9, 2000).
10.23 Consulting Agreement between the Registrant and Michael
Kofoed, dated December 10, 1999 (incorporated by reference to
Exhibit 10.23 of the Form 10-KSB filed on May 9, 2000).
10.24 Agreement between the Registrant and Top Sports S.A.,
dated December 16, 1999 (incorporated by reference to Exhibit
10.24 of the Form 10-KSB filed on May 9, 2000).
10.25 Agreement between the Registrant and eMarkit,
Incorporated, dated December 29, 1999 (incorporated by reference
to Exhibit 10.25 of the Form 10-KSB filed on May 9, 2000).
10.26 Fee Agreement between the Registrant and Red Iguana
Trading Company, Inc., dated January 2, 2000 (see below).
10.27 Assignment of eSportsbet between the Registrant and
PowerClick, Inc., dated January 7, 2000 (see below).
10.28 Letter of Intent of Negotiation and Information
Exchange between eConnect2Trade.com, Incorporated, and Empire
Financial Holdings, Incorporated, dated January 21, 2000 (see below).
10.29 Manufacturing Agreement between the Registrant and Asia
Pacific Micro, Inc., dated January 21, 2000 (see below).
10.30 Consulting Services Agreement between the Registrant
and Boardwalk Associates, Inc., dated January 26, 2000 (see
below).
10.31 Consulting Services Agreement between the Registrant and
Coldwater Capital L.L.C., dated January 26, 2000 (see below).
10.32 Consultant Agreement between the Registrant and Harvey
M. Burstein, dated February 2, 2000 (see below).
10.33 Consultant Agreement between the Registrant and Terrie
Pham, dated February 2, 2000 (see below).
10.34 Software License, Development, and Maintenance
Agreement (Dominican Republic) between the Registrant and eFunds
Corporation, dated February 3, 2000 (see below).
10.35 Agreement between the Registrant and Burbank Coach
Works, dated February 3, 2000 (see below).
10.36 Software License, Development, and Maintenance
Agreement (Ireland) between the Registrant and eFunds
Corporation, dated February 4, 2000 (see below).
10.37 Acquisition Agreement between the Registrant and
PowerClick, Inc., dated February 9, 2000 (see below).
10.38 Loan Agreement between the Registrant and Richard
Epstein, dated February 15, 2000 (see below).
10.39 PocketPay Joint Venture Agreement between the
Registrant and Pilot Island Publishing, Inc., dated March 1, 2000
(see below).
10.40 Letter of Intent between the Registrant and Real
Solutions, Ltd., dated March 9, 2000 (see below).
10.41 Consulting Agreement between the Registrant and Ryan
Kavanaugh, dated March 10, 2000 (see below).
10.42 Amended Employment Agreement between the Registrant and
Stephen E. Pazian, dated March 21, 2000 (see below).
10.43 Amended and Restated Employment Agreement between the
Registrant and Stanley C. Morris, dated March 22, 2000 (see below).
10.44 China-Singapore-Hong Kong-Macao Joint Venture Agreement
between the Registrant, and Raymond Kessler and Li-Wang Kessler,
dated March 27, 2000 (see below).
10.45 Amended and Restated Secured Promissory Note issued to
the Registrant by Electronic Transactions & Technologies and
Thomas S. Hughes, dated March 31, 2000 (see below).
10.46 Amended and Restated Security Agreement between the
Registrant, Electronic Transactions & Technologies, and Thomas S.
Hughes, dated March 31, 2000 (see below).
21 Subsidiaries of the Registrant (incorporated by reference to
Exhibit 21 of the Form 10-KSB filed on May 9, 2000).
27 Financial Data Schedule (see below).
99.1 Patents: dated August 9, 1994, May 19, 1998, and September
15, 1998 (incorporated by reference to Exhibit 99.1 of the Form
10-KSB filed on May 9, 2000).
99.2 Trademarks: filed March 31, 1997, February 16, 1999, May 6,
1999, May 24, 1999, June 3, 1999, June 4, 1999, August 12, 1999,
and September 28, 1999 (incorporated by reference to Exhibit 99.2
of the Form 10-KSB filed on May 9, 2000).
99.3 Trademark filed on March 15, 2000 (see below).