U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
eConnect
(Exact Name of Registrant as Specified in its Charter)
Nevada 43-1239043
(State of Incorporation) (I.R.S. Employer ID No.)
2500 Via Cabrillo Marina, Suite 112, San Pedro, California 90731
(Address of Principal Executive Offices) (Zip Code)
Consulting Agreement
(Full title of the Plan)
Brian F. Faulkner, Esq., 3900 Birch Street, Suite 113, Newport
Beach, California 92660
(Name and address of agent for service)
(949) 975-0544
(Telephone number, including area code, of agent for service)
CALCULATION OF REGISTRATION FEE
Title of Amount to be Proposed Proposed Amount of
Securities Registered Maximum Aggregate Registration
to be Offering Offering Fee
Registered Price Per Price
Share (1)
Common
Stock 3,000,000 $0.754(1) $2,262,000 $565.50
(1) This offering price per share is established under Rule
457(h)(1), citing Rule 457(c): The average of the high and low prices
as of November 7, 2000.
PROSPECTUS
3,000,000 SHARES (1)
COMMON STOCK, $0.001 PAR VALUE
eConnect
The following selling shareholder of eConnect, a Nevada
corporation, are hereby offering up to 3,000,000 shares of its
$0.001 par value common stock previously received under a
consulting agreement between this shareholder and the company at
the market price on a delayed basis under Rule 415 pursuant to
the terms of this prospectus: Ryan Kavanaugh. The company will
not receive any proceeds from this offering of common stock. The
trading symbol of the company's common stock on the Over the
Counter Bulletin Board is "ECNC."
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 5).
These securities have not been approved or disapproved by the
U.S. Securities and Exchange Commission or any state securities
commission nor has the U.S. 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.
Information contained herein is subject to completion or
amendment. The registration statement relating to the securities
has been filed with the U.S. 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.
Dated: November 8, 2000
(1) 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.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by detailed
information appearing elsewhere in this prospectus. Each
prospective investor is urged to read this prospectus in its
entirety.
The Company.
(a) Background.
eConnect 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 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. Based on a Certificate of
Amendment to Articles of Incorporation which was filed with, and
accepted, stamped, certified, and returned by, the Nevada
Secretary of State on August 24, 1999, the current number of
authorized shares of common stock in the Articles of
Incorporation of the company is 200,000,000.
(b) Business.
The company is made up of two divisions: The first, the
transactions division has a specific emphasis on ATM card with
PIN instant cash transactions. There are two aspects to the
industry of self serviced home or mobile swiped ATM card with PIN
entry or credit card transactions which the company has named
PERFECT (personal encrypted remote financial electronic card
transactions).
The first aspect is the development of the "Bank Eyes Only"T
transactions system whereby a consumer can use a remote terminal
from a home environment or mobile environment to read a credit
card or ATM card with PIN or a smart card which is then sent to a
host processor for card authorization. "Bank Eyes Only"
transactions refers to a direct Internet connection between the
consumer's terminal and the company's bank card authorization
system. The web merchant does not store nor has ready access to
the consumer's card data. These "Bank Eyes Only" terminals are
remote from the merchant (protecting the consumer's data) and are
wireless or landline or computer enabled. This should result in
greater consumer confidence in performing such financial
transactions. This system will also enable the consumer or
business person to effect instant cash payments to the recipient.
A transaction using the terminal device with an ATM card with
PIN is considered a cash payment. Internet "Bank Eyes Only" ATM
card with PIN payments could substantially affect global
commerce, completely changing the way people around the world do
business.
The second aspect of a PERFECT transaction is the usage of the
company's proprietary hardware placed in public locations for
self serviced bill payments by ATM card with PIN entry.
The second division is eGaming. The company currently owns 100%
interest in Top Sports S.A., a series of 12 walk in Dominican
Republic sportsbooks. The company's interest in gaming two fold:
(1) the generation of revenues; (2) the establishment of a base
for the usage of "bank eyes only" eCashPads for global ATM card
with PIN entry gaming.
The Offering.
3,000,000 shares of common stock of the company held by the
following consultant for the company will be offered as a shelf
registration under Securities and Exchange Commission Rule 415 at
the current market price: Ryan Kavanaugh ("Selling Shareholder").
If all the shares being offered to the public under the current
offering are sold, this will represent gross proceeds to the
Selling Shareholder of $2,262,00 (based on the average of the high and
Low price of $0.754 as of November 7, 2000). The company will
not realize any proceeds from this offering.
Liquidity of Investment.
Although the shares of commons stock of the company will be "free
trading," there has been only a limited public market for the
shares. Therefore, an investor may not be able to sell the
shares when he or she wishes; therefore, an investor may consider
his or her investment to be long-term. See "Risk Factors."
Risk Factors.
An 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 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.
Development Stage of Products.
The company has only recently completed development and testing
of the eCashPad and is presently launching the product in
November 2000 and is now taking sales orders at a selling price
of $59.95. However, the company has not completed the
development and testing of any other commercial products, and,
accordingly, has no profitable operating history upon which
investors may rely. The company has received limited revenues
from operations. The company's products and services will
require significant additional investment in research and
development and will require substantial additional resources.
There can be no assurance that any of the company's products will
meet applicable regulatory standards, obtain required regulatory
approvals, or be capable of being produced in commercial
quantities at reasonable costs.
There can be no assurance that the company will generate
significant revenues in the future; and there can be no assurance
that the company will operate at a profitable level. 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.
As a result of the fixed nature of many of the
company's expenses, the company may be unable to adjust spending
in a timely manner to compensate for any unexpected delays in the
development and marketing of the company's products or any
capital raising or revenue shortfall. Any such delays or
shortfalls will have an immediate adverse impact on the company's
business, operations and financial condition.
Limited Revenues, History of Operating Loss and Accumulated Deficit.
The company has had limited revenue to date. Although the
company has been involved with e-commerce since 1999, it has been
primarily engaged in research and development. The company has
incurred significant operating losses: $28,264,236 for the six
months ended on June 30, 2000, $19,026,744 for the fiscal year
ended December 31, 1999, $776,138 for the four months ended
December 31, 1998, and $196,968 for the fiscal year ended August
31, 1998. At June 30, 2000, the company had an accumulated
deficit of $58,924,066. The future growth and profitability of
the company will be principally dependent upon its ability to
successfully complete development and testing of, obtain
regulatory approvals for, and market or license its primary
products. Accordingly, the company's prospects must be
considered in light of the risks, expenses and difficulties
frequently encountered in connection with the establishment of a
new business in a highly competitive industry, characterized by
new product introductions.
The company anticipates that it will incur substantial operating
expenses in connection with the research, development, testing
and approval of its proposed products and expects these expenses
to result in continuing and significant losses until such time as
the company is able to achieve adequate revenue levels. There
can be no assurance that the company will be able to
significantly increase revenues or achieve profitable operations.
Failure to obtain additional capital, if needed, would have a
material adverse effect on the company's operations.
Additional Financing Will Be Required.
The company 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 company is meeting its funding
requirements through financing provided by the Alpha Venture
Capital, Inc. through a common stock purchase agreement between
the company and this firm, dated September 28, 1999. However,
there is no guarantee that this funding source will continue to
be available in the future.
The current funds available to the 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 company 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.
Risks Associated with eCashPad Production.
The agreement under which the eCashPad is being manufactured for
the company only calls for an initial production run of 5,000
units, at a total cost of $80,000. The company 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 company will be able to conclude such an
agreement.
This agreement offers the company 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 company is presently seeking additional suppliers.
Risks in Connection with Approval of Regional ATM Networks.
Within the United States market, the company 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 company's
strategy is based on ATM card with PIN entry Internet payments,
and the company 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.
Acceptance and Effectiveness of Internet Electronic Commerce.
The company's success in e-commerce will be dependent on
consumer acceptance of e-retailing and an increase in the use of
the Internet for e-commerce. If the markets for e-commerce do
not develop or develop more slowly than the company expects, its
e-commerce business may be harmed. If Internet usage does not
grow, the company may not be able to increase revenues from
Internet advertising and sponsorships which also may harm both
our retail and e-commerce business. Internet use by consumers is
in an early stage of development, and market acceptance of the
Internet as a medium for content, advertising and e-commerce is
uncertain. A number of factors may inhibit the growth of
Internet usage, including inadequate network infrastructure,
security concerns, inconsistent quality of service, and limited
availability of cost-effective, high-speed access. If these or
any other factors cause use of the Internet to slow or decline,
our results of operations could be adversely affected.
Competition in Internet Commerce.
The company anticipates substantial competition in the
development of the PERFECT industry and the "Bank Eyes Only"
internet application in particular. The company 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 company which is the processing
of transactions.
Increased competition from e-commerce could result in reduced
margins or loss of market share, any of which could harm both our
retail and e-commerce businesses. Competition is likely to
increase significantly as new companies enter the market and
current competitors expand their services. Many of the company's
present and potential competitors are likely to enjoy substantial
competitive advantages, including larger numbers of users, more
fully-developed e-commerce opportunities, larger technical,
production and editorial staffs, and substantially greater
financial, marketing, technical and other resources. If the
company does not compete effectively or if it experiences any
pricing pressures, reduced margins or loss of market share
resulting from increased competition, the company's business
could be adversely affected.
Unreliability of Internet Infrastructure.
If the Internet continues to experience increased numbers of
users, frequency of use or increased bandwidth requirements, the
Internet infrastructure may not be able to support these
increased demands or perform reliably. The Internet has
experienced a variety of outages and other delays as a result of
damage to portions of its infrastructure, and could face
additional outages and delays in the future. These outages and
delays could reduce the level of Internet usage and traffic. In
addition, the Internet could lose its viability due to delays in
the development or adoption of new standards and protocols to
handle increased levels of activity. If the Internet
infrastructure is not adequately developed or maintained, use of
the company website may be reduced. Even if the Internet
infrastructure is adequately developed, and maintained, the
company may incur substantial expenditures in order to adapt its
services and products to changing Internet technologies. Such
additional expenses could severely harm the company's financial
results.
Transactional Security Concerns.
A significant barrier to Internet e-commerce is the secure
transmission of confidential information over public networks.
Any breach in security could cause interruptions and have an
adverse effect on the company's business.
Governmental Regulation of the Internet.
There are currently few laws that specifically regulate
communications or commerce on the Internet. Laws and regulations
may be adopted in the future, however, that address issues
including user privacy, pricing, taxation and the characteristics
and quality of products and services sold over the Internet.
Possible future consumer legislation, regulations and actions
could cause additional expense, capital expenditures, restrictions
and delays in the activities undertaken in connection with the
party planning business, the extent of which cannot be predicted.
The exact affect of such legislation cannot be predicted until it
is in final form.
Influence of Other External Factors on Prospects for Company.
The industry of the company in general 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 a
commercially profitable business. The marketability of its
products 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
companies' spending. Factors which leave less money in the hands
of potential customers 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.
Success of Company Dependent on Management.
The company's success is dependent upon the hiring of key
administrative personnel. None of the company's officers,
directors, and key employees have an employment agreement with
the company; therefore, there can be no assurance that these
personnel will remain employed by the company after the
termination of such agreements. 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.
Control of the Company by Officers and Directors.
The company's officers and directors beneficially own
approximately 8.25% of the outstanding shares of the company's
common stock. As a result, such persons, acting together, have
the ability to exercise influence over all matters requiring
stockholder approval. Accordingly, it may be difficult for the
investors hereunder to effectuate control over the affairs of the
company. Therefore, it should be assumed that the officers,
directors, and principal common shareholders who control the
majority of voting rights will be able, by virtue of their stock
holdings, to control the affairs and policies of the company.
Limitations on Liability, and Indemnification, of Directors and
Officers.
The bylaws of the company provide for indemnification
of officer or directors of the company. In addition, the Nevada
Revised Statutes provide for permissive indemnification of
officers and directors and the company may provide
indemnification under such provisions. Any limitation on the
liability of any director, or indemnification of directors,
officer, or employees, could result in substantial expenditures
being made by the company in covering any liability of such
persons or in indemnifying them.
Potential Conflicts of Interest Involving Management.
The officers and directors have other interests to which they
devote time, either individually or through partnerships and
corporations in which they have an interest, hold an office, or
serve on boards of directors, and each will continue to do so
notwithstanding the fact that management time may be necessary to
the business of the 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.
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.
No Assurance of Continued Public Trading Market; Risk of Low
Priced Securities.
Prior to this offering, there has been only a limited
public market for the common stock of the company. The common
stock of the company is currently quoted on the National
Quotation Bureau's Pink Sheets after being delisted from the Over
the Counter Bulletin Board after the SEC trading suspension on
March 13, 2000. The company is currently applying for relisting
on the Over the Counter Bulletin Board as one of its market
makers has filed a Form 15c2-11 with the NASD Stock Market, Inc.
As a result, an investor may find it difficult to dispose of, or
to obtain accurate quotations as to the market value of the
company's securities. In addition, the common stock is subject to
the low-priced security or so called "penny stock" rules that
impose additional sales practice requirements on broker-dealers
who sell such securities. The Securities Enforcement and Penny
Stock Reform Act of 1990 ("Reform Act") requires additional
disclosure in connection with any trades involving a stock
defined as a penny stock (generally, according to recent
regulations adopted by the U.S. Securities and Exchange
Commission, any equity security that has a market price of less
than $5.00 per share, subject to certain exceptions), including
the delivery, prior to any penny stock transaction, of a
disclosure schedule explaining the penny stock market and the
risks associated therewith. The regulations governing low-
priced or penny stocks sometimes limit the ability of broker-
dealers to sell the company's common stock and thus, ultimately,
the ability of the investors to sell their securities in the
secondary market.
Effects of Failure to Maintain Market Makers.
If the company is unable to maintain a National Association
of Securities Dealers, Inc. member broker/dealers as market
makers after relisting on the Bulletin Board, the liquidity of
the common stock could be impaired, not only in the number of
shares of common stock which could be bought and sold, but also
through possible delays in the timing of transactions, and lower
prices for the common stock than might otherwise prevail.
Furthermore, the lack of market makers could result in persons
being unable to buy or sell shares of the common stock on any
secondary market. There can be no assurance the company will be
able to maintain such market makers.
Shares Eligible For Future Sale
All of the 15,260,000 shares of common stock which are currently
held, directly or indirectly, by management have been issued in
reliance on the private placement exemption under the Securities
Act of 1933. Such shares will not be available for sale in the
open market without separate registration except in reliance upon
Rule 144 under the Securities Act of 1933. In general, under
Rule 144 a person (or persons whose shares are aggregated) who
has beneficially owned shares acquired in a non-public
transaction for at least one year, including persons who may be
deemed affiliates of the company (as that term is defined under
that rule) would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of 1%
of the then outstanding shares of common stock, or the average
weekly reported trading volume during the four calendar weeks
preceding such sale, provided that certain current public
information is then available. If a substantial number of the
shares owned by these shareholders were sold pursuant to Rule 144
or a registered offering, the market price of the common stock
could be adversely affected.
Potential Status as a Pseudo California Corporation.
Section 2115 of the California General Corporation Law
subjects certain foreign corporations doing business in
California to various substantive provisions of the California
General Corporation Law in the event that the average of its
property, payroll and sales is more than 50% in California and
more than one-half of its outstanding voting securities are held
of record by persons residing in the State of California.
Currently, all of the sales by the company come from sources
outside the State of California; however, this may change in the
future.
Some of the substantive provisions include laws
relating to annual election of directors, removal of directors
without cause, removal of directors by court proceedings,
indemnification of officers and directors, directors standard of
care and liability of directors for unlawful distributions.
Section 2115 does not apply to any corporation which, among other
things, has outstanding securities designated as qualified for
trading as a national market security on NASDAQ if such
corporation has at least eight hundred holders of its equity
securities as of the record date of its most recent annual
meeting of shareholders. It is currently anticipated that the
company will not be subject to Section 2115 of the California
General Corporation Law which, in addition to other areas of the
law, will subject the company to Section 708 of the California
General Corporation Law which mandates that shareholders have the
right of cumulative voting at the election of directors.
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
The proceeds from the sale of the shares of the Selling
Shareholder will be paid directly to these individuals for their
own personal use. The company will not receive any proceeds from
this offering. If the Selling Shareholder sells all 3,000,000
shares offered hereby, this will result in gross proceeds to the
Selling Shareholder of $2,262,000 (based on the average of the high
And low prices of $0.754 as of November 7, 2000).
DETERMINATION OF OFFERING PRICE
The offering price of the shares being offered hereby is to
be determined based on the market price of the shares of common
stock of the company on the Over the Counter Bulletin Board on
the date of sale thereof.
SELLING SECURITY HOLDER
The Selling Shareholder will be offering his shares of common
stock in this offering as follows:
Name of Amount of Amount Offered Amount of Percentage
to Current Account(1) Current After
Offering Offering Current
Offering(2)
Ryan
Kavanaugh 3,000,000 3,000,000 0 0.00%
(1) As the company, at the time of filing this prospectus, does
not satisfy the requirements for use of Form S-3, then the
following limitation applies with respect to restricted
securities being offered hereby: the amount of securities to be
reoffered or resold by means of the reoffer prospectus, by each
person, and any other person with whom he or she is acting in
concert for the purpose of selling securities of the company, may
not exceed, during any three month period, the amount specified
in Rule 144(e); that is, shall not exceed the greater of one
percent of the shares outstanding as shown by the most recent
report or statement published by the issuer, or the average
weekly reported volume of trading in such securities on all
national securities exchanges and/or reported through the
automated quotation system of a registered securities association
during the four calendar weeks preceding the filing of notice
required by paragraph (h), or if no such notice is required the
date of receipt of the order to execute the transaction by the
broker or the date of execution of the transaction directly with
a market maker.
The latest report by the company, a Form SB-2 POS filed with the
Securities and Exchange Commission on September 12, 2000,
indicates that the total issued and outstanding common stock of
the company as of September 1, 2000 is 184,641,313; one percent
of this amount is 1,846,413. The average weekly reported trading
volume of trading in the common stock of the company commencing
on October 9, 2000 and ending on November 3, 2000 is 10,222,375.
Therefore, the sale of 3,000,000 shares by the Selling
Shareholder is in compliance with Rule 144(e).
(2) Based on the total issued and outstanding shares of common
stock of the company of 184,641,313 as of September 1, 2000.
PLAN OF DISTRIBUTION
3,000,000 shares of common stock of the company being held by the
following consultant for the company will be offered as a shelf
registration under Securities and Exchange Commission Rule 415 at
the current market price: Ryan Kavanaugh ("Selling Shareholder").
These shares were originally obtained under a consulting
agreement between the company and Mr. Kavanaugh. If all the
shares being offered to the public under the current offering are
sold, this will represent gross proceeds to the Selling
Shareholder of $2,262,000 (based on the average of the high and low
prices of $0.754 as of November 7, 2000). The company will not
realize any proceeds from this offering.
Manner of Sales; Broker-Dealer Compensation.
The Selling Shareholder, or any successors in interest to the
Selling Shareholder, may sell their shares of common stock in one
or more of the following methods:
ordinary brokers' transactions;
transactions involving cross or block trades or otherwise on the
Bulletin Board;
purchases by brokers, dealers or underwriters as principal and
resale by these purchasers for their own accounts pursuant to
this prospectus;
"at the market" to or through market makers or into an existing
market for the company's common stock;
in other ways not involving market makers or established
trading markets, including direct sales to purchases or sales
effected through agents;
through transactions in options, swaps or other derivatives
(whether exchange-listed or otherwise);
in privately negotiated transactions;
to cover short sales; or
any combination of the foregoing.
The Selling Shareholder also may sell his shares in reliance upon
Rule 144 under the Securities Act of 1933 at such times as they
are eligible to do so. The company has been advised by the
Selling Shareholder that he has not made any arrangements for the
distribution of the shares of common stock. Brokers, dealers or
underwriters who effect sales for the Selling Shareholder may
arrange for other brokers, dealers or underwriters to
participate. Brokers, dealers or underwriters engaged by the
Selling Shareholder will receive commissions or discounts from
him in amounts to be negotiated prior to the sale. These
brokers, dealers or underwriters may act as agent or as
principals.
From time to time, the Selling Shareholder may pledge,
hypothecate or grant a security interest in some or all of the
shares of common stock being offered for sale, and the pledgees,
secured parties or persons to whom these securities have been
pledged shall, upon foreclosure in the event of default, be
considered a selling shareholder hereunder. In addition, the
Selling Shareholder may, from time to time, sell short his common
stock. In these instances, this prospectus may be delivered in
connection with these short sales and the shares of the common
stock may be used to cover these short sales.
From time to time one or more of the Selling Shareholders may
transfer, pledge, donate or assign shares of their common stock
to lenders or others and each of these persons will be considered
a Selling Shareholder for purposes of this prospectus. The
number of shares of the company's common stock beneficially owned
by the Selling Shareholder if he so transfers, pledges, donates
or assigns shares of his common stock will decrease as and when
he takes these actions. The plan of distribution for the
company's common stock by the Selling Shareholder set forth
herein will otherwise remain unchanged, except that the
transferees, pledgees, donees or other successors will be
considered selling shareholders hereunder.
Subject to the limitations discussed above, the Selling
Shareholder may enter into hedging transactions with broker-
dealers and the broker-dealers may engage in short sales of the
company's common stock in the course of hedging the positions
they assume with the Selling Shareholder, including in connection
with distributions of the common stock by these broker-dealers.
The Selling Shareholder may also enter into option or other
transactions with broker-dealers that involve the delivery of the
company's common stock to the broker-dealers, who may then
resell or otherwise transfer these shares. The Selling
Shareholder also may loan or pledge the company's common stock
to a broker-dealer and the broker-dealer may sell the common
stock so loaned or upon a default may sell or otherwise transfer
the pledged common stock.
Filing of a Post-Effective Amendment In Certain Instances.
If the Selling Shareholder notifies the company that he has
entered into a material arrangement (other than a customary
brokerage account agreement) with a broker or dealer for the sale
of shares of common stock under this prospectus through a block
trade, purchase by a broker or dealer or similar transaction, the
company will file a post- effective amendment to the registration
statement for this offering. The post-effective amendment will
disclose:
The name of each broker-dealer involved in the transaction.
The number of shares of common stock involved.
The price at which those shares of common stock were sold.
The commissions paid or discounts or concessions allowed to the
broker-dealer(s).
If applicable, that these broker-dealer(s) did not conduct any
investigation to verify the information contained or incorporated
by reference in this prospectus, as supplemented.
Any other facts material to the transaction.
Certain Persons May Be Deemed to Be Underwriters.
The Selling Shareholder and any broker-dealers who execute sales
for him may be deemed to be "underwriters" within the meaning of
the Securities Act of 1933 because of the number of shares of
common stock to be sold or resold by these persons or entities or
the manner of sale of these shares, or both. If a Selling
Shareholder or any broker-dealer or other holders were determined
to be underwriters, any discounts, concessions or commissions
received by them or by brokers or dealers acting on their behalf
and any profits received by them on the resale of their shares of
common stock might be deemed to be underwriting discounts and
commissions under the Securities Act.
Regulation M.
The company has informed the Selling Shareholder that Regulation
M promulgated under the Securities Exchange Act of 1934 may be
applicable to him with respect to any purchase or sale the
company's common stock. In general, Rule 102 under Regulation M
prohibits any person connected with a distribution of the
company's common stock from directly or indirectly bidding for,
or purchasing for any account in which it has a beneficial
interest, any of the common stock or any right to purchase this
stock, for a period of one business day before and after
completion of its participation in the distribution.
During any distribution period, Regulation M prohibits the
Selling Shareholder and any other persons engaged in the
distribution from engaging in any stabilizing bid or purchasing
the company's common stock except for the purpose of preventing
or retarding a decline in the open market price of the common
stock. None of these persons may effect any stabilizing
transaction to facilitate any offering at the market. As the
Selling Shareholder will be reoffering and reselling the
company's common stock at the market, Regulation M will prohibit
him from effecting any stabilizing transaction in contravention
of Regulation M with respect to this stock.
Opportunity to Make Inquiries.
The company will make available to any investor, prior to any
issue of the resale 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.
INTERESTS OF NAMED EXPERTS AND COUNSEL
Other than as set forth below, 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 company.
Brian F. Faulkner, Esq., counsel for the company named in
this registration statement as giving an opinion on the validity
of the securities, will be receiving 1,150,000 shares of common
stock pursuant to the company's Amended and Restated Non-Employee
Directors and Consultants Retainer Stock Plan under a Form S-8 in
exchange for legal services previously rendered, and to be
rendered in the future, to the company. These legal services
consist of advice and preparation work in connection with reports
of the company filed under the Securities Exchange Act of 1934,
and other general corporate and securities work for the company.
Marc R. Tow, Esq. will be receiving 150,000 shares of common
stock under this Plan for assistance provided to Mr. Faulkner in
his work for the company. George Brenner, the former independent
certified public accountant for the company, who now does per
diem accounting work for the company, will be receiving 100,000
shares of common stock under this Plan for past work for the
company subsequent to his resignation.
MATERIAL CHANGES
There have been no material changes in the company's affairs
which have occurred since the end of the latest fiscal year for
which certified financial statements were included in the latest
annual report to security holders and which have not been
described in a report on a Form 10-QSB or Form 8-K filed under
the Securities Exchange Act of 1934, or the latest Form SB-2 POS
filed with the Securities and Exchange Commission on September
12, 2000, except that the company has completed development and
testing of the eCashPad and is presently launching the product in
November 2000 and is now taking sales orders at a selling price
of $59.95.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
(a) The documents listed in (1) and (2) below are specifically
incorporated by reference into this Prospectus:
1. The company's latest annual report on Form 10-KSB filed
pursuant to Section 13(a) of the Exchange Act which contains
financial statements for the company's latest fiscal year for
which a Form 10-KSB was required to have been filed; and
2. All other reports filed pursuant to Section 13(a) of the
Exchange Act since the end of the fiscal year covered by the
annual report referred to in (1) above; and
3. Since the common stock of the company is registered under
Section 12 of the Exchange Act, the description of such class of
securities which is contained in the latest Form SB-2 POS of the
company filed under the Securities Act of 1933, including any
amendment or reports filed for the purpose of updating such
description.
(b) All documents subsequently filed by the company pursuant to
Sections 13(a), 13(c), or 14 of the Exchange Act, prior to the
termination of the offering are also incorporated by reference
into this Prospectus.
(c) Information:
1. The company will provide to each person, including any
beneficial owner, to whom a Prospectus is delivered, a copy of
any or all of the information that has been incorporated by
reference in the prospectus but not delivered with the
prospectus;
2. The company will provide this information upon written or
oral request;
3. The company will provide this information at no cost to the
requester; and
4. The name, address, and telephone number to which the request
for this information must be made: Thomas S. Hughes, President,
eConnect, 2500 Via Cabrillo Marina, Suite 112, San Pedro,
California 90731; (310) 514-9482.
5. The company files annual, quarterly and special reports,
proxy statements and other information with the U.S. Securities
and Exchange Commission, Washington, D.C. 20549. The company has
also filed with the Commission this registration statement on
Form S-8 under the Securities Act of 1933 with respect to the
shares of common stock offered by this prospectus. This
prospectus does not contain all of the information set forth in
the registration statement and the exhibits and schedules filed
with the registration statement. Certain items are omitted in
accordance with the rules and regulations of the Commission. For
further information with respect to the company and the common
stock offered by this prospectus, reference is made to the
registration statement and the exhibits and schedules filed with
the registration statement. Statements contained in this
prospectus as to the contents of any contract or any other
document referred to are not necessarily complete, and in each
instance, reference is made to the copy of such contract or other
document filed as an exhibit to the registration statement, each
such statement being qualified in all respects by such reference.
A copy of the company's filings, including this
registration statement, and the exhibits and schedules filed with
it, may be inspected without charge at the public reference
facilities maintained by the Commission in Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and the Commission's
regional offices located at the Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago Illinois 60661 and Seven
World Trade Center, 13th Floor, New York, New York 10048, and
copies of all or any part of the registration statement may be
obtained from such offices upon the payment of the fees
prescribed by the Commission. The public may obtain information
on the operation of the public reference room by calling the
Commission at 1 (800) SEC-0330. The Commission maintains a World
Wide Web site that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission, including the company. The
address of the site is http://www.sec.gov. The registration
statement, including all its exhibits and any amendments, has
been filed electronically with the Commission.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
Limitation of Liability.
The articles of incorporation of the company provide that no
Director or Officer of this company shall be liable to the
company or its stockholders for any breach of fiduciary duty as
Officer or Director of this company. This provision shall not
affect liability for acts or omissions which involve intentional
misconduct, fraud, a knowing violation or law, or the payment of
dividends in violation of NRS 78.300.
Indemnification.
(a) Articles of Incorporation.
The articles of incorporation of the company provide the
following with respect to indemnification:
"All expenses incurred by Officers or Directors in defending a
civil or criminal action, suit, or proceeding, must be paid by
this company as they are incurred in advance of a final
disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of a Director or Officer to repay the
amount if it is ultimately determined by a court of competent
jurisdiction, that he or she did not act in good faith, and in
the manner he or she reasonably believed to be or not opposed to
the best interests of this company."
(b) Bylaws.
The bylaws of the company provide the following with respect to
indemnification:
"Section 1. Definitions. For purposes of this Article,
"Indemnitee" shall mean each Director or Officer who was or is a
party to, or is threatened to be made a party to, or is otherwise
involved in, any Proceeding (as hereinafter defined), by reason
of the fact that he or she is or was a Director or Officer of
this Corporation or is or was serving in any capacity at the
request of this Corporation as a Director, Officer, employee,
agent, partner, or fiduciary of, or in any other capacity for,
another corporation, partnership, joint venture, trust, or other
enterprise. The term "Proceeding" shall mean any threatened,
pending or completed action or suit (including, without
limitation, an action, suit or proceeding by or in the right of
this Corporation), whether civil, criminal, administrative or
investigative.
Section 2. Indemnification. Each Indemnitee shall be
indemnified and held harmless by this Corporation for all actions
taken by him or her, and for all omissions (regardless of the
date of any such action or omission), to the fullest extent
permitted by Nevada law, against all expense, liability and loss
(including, without limitation, attorney fees, judgments, fines,
taxes, penalties, and amounts paid or to be paid in settlement)
reasonably incurred or suffered by the Indemnitee in connection
with any Proceeding. Indemnification pursuant to this Section
shall continue as to an Indemnitee who has ceased to be a
Director or Officer and shall inure to the benefit of his or her
heirs, executors and administrators. This Corporation may, by
action of its Board of Directors, and to the extent provided in
such action, indemnify employees and other persons as though they
were Indemnitees. The rights to indemnification as provided in
this Article shall be non-exclusive of any other rights that any
person may have or hereafter acquire under an statute, provision
of this Corporation's Articles of Incorporation or Bylaws,
agreement, vote of stockholders or Directors, or otherwise.
Section 3. Financial Arrangements. This Corporation may
purchase and maintain insurance or make other financial
arrangements on behalf of any person who is or was a Director,
Officer, employee or agent of this Corporation, or is or was
serving at the request of this Corporation in such capacity for
another corporation, partnership, joint venture, trust or other
enterprise for any liability asserted against him or her and
liability and expenses incurred by him or her in such capacity,
whether or not this Corporation has the authority to indemnify
him or her against such liability and expenses.
The other financial arrangements which may be made by this
Corporation may include, but are not limited to, (a) creating a
trust fund; (b) establishing a program of self-insurance; (c)
securing its obligation of indemnification by granting a security
interest or other lien on any of this Corporation's assets, and
(d) establishing a letter of credit, guarantee or surety. No
financial arrangement made pursuant to this section may provide
protection for a person adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be
liable for intentional misconduct, fraud, or a knowing violation
of law, except with respect to advancing expenses or
indemnification ordered by a court. Any insurance or other
financial arrangement made on behalf of a person pursuant to this
section may be provided by this Corporation or any other person
approved by the Board of Directors, even if all or part of the
other person's stock or other securities is owned by this
Corporation. In the absence of fraud:
(a) the decision of the Board of Directors as to the propriety
of the terms and conditions of any insurance or other financial
arrangement made pursuant to this section, and the choice of the
person to provide the insurance or other financial arrangement is
conclusive; and
(b) the insurance or other financial arrangement is not void or
voidable; does not subject any Director approving it to personal
liability for his action; and even if a Director approving the
insurance or other financial arrangement is a beneficiary of the
insurance or other financial arrangement.
Section 4. Contract of Indemnification. The provisions of this
Article relating to indemnification shall constitute a contract
between this Corporation and each of its Directors and Officers,
which may be modified as to any Director or Officer only with
that person's consent or as specifically provided in this
section. Notwithstanding any other provision of the Bylaws
relating to their amendment generally, any repeal or amendment of
this Article which is adverse to any Director or Officer shall
apply to such Director or Officer only on a prospective basis and
shall not limit the rights of an Indemnitee to indemnification
with respect to any action or failure to act occurring prior to
the time of such repeal or amendment. Notwithstanding any other
provision of these Bylaws, no repeal or amendment of these Bylaws
shall affect any or all of this Article so as to limit or reduce
the indemnification in any manner unless adopted by (a) the
unanimous vote of the Directors of this Corporation then serving,
or (b) the stockholders as set forth in Article XII hereof;
provided that no such amendment shall have retroactive effect
inconsistent with the preceding sentence.
Section 5. Nevada Law. References in this Article to Nevada law
or to any provision thereof shall be to such law as it existed on
the date these Bylaws were adopted or as such law thereafter may
be changed; provided that (a) in the case of any change which
expands the liability of an Indemnitee or limits the
indemnification rights or the rights to advancement of expenses
which this Corporation may provide, the rights to limited
liability, to indemnification and to the advancement of expenses
provided in this Corporation's Articles of Incorporation, these
Bylaws, or both shall continue as theretofore to the extent
permitted by law; and (b) if such change permits this
Corporation, without the requirement of any further action by
stockholders or Directors, to limit further the liability of
Indemnitees or to provide broader indemnification rights or
rights to the advancement of expenses than this Corporation was
permitted to provide prior to such change, liability thereupon
shall be so limited and the rights to indemnification and
advancement of expenses shall be so broadened to the extent
permitted by law."
The board of directors may from time to time adopt further bylaws
with respect to indemnification and may amend these bylaws to
provide at all times the fullest indemnification permitted by the
Nevada Revised Statutes.
(c)Nevada Revised Statutes.
NRS 78.7502 Discretionary and mandatory indemnification of
officers, directors, employees and agents: General provisions.
(1) A corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or
in the right of the corporation, by reason of the fact that he is
or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in
good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its
equivalent, does not, of itself, create a presumption that the
person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests
of the corporation, and that, with respect to any criminal action
or proceeding, he had reasonable cause to believe that his
conduct was unlawful.
(2) A corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys'
fees actually and reasonably incurred by him in connection with
the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as
to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be
liable to the corporation or for amounts paid in settlement to
the corporation, unless and only to the extent that the court in
which the action or suit was brought or other court of competent
jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems
proper.
(3) To the extent that a director, officer, employee or
agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred
to in subsections 1 and 2, or in defense of any claim, issue or
matter therein, the corporation shall indemnify him against
expenses, including attorneys' fees, actually and reasonably
incurred by him in connection with the defense.
NRS 78.751 Authorization required for discretionary
indemnification; advancement of expenses; limitation on
indemnification and advancement of expenses.
(1) Any discretionary indemnification under NRS 78.7502 unless
ordered by a court or advanced pursuant to subsection 2, may be
made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances. The
determination must be made:
(i) By the stockholders;
(ii) By the board of directors by majority vote of a quorum
consisting of directors who were not parties to the action, suit
or proceeding;
(iii) If a majority vote of a quorum consisting of directors
who were not parties to the action, suit or proceeding so orders,
by independent legal counsel in a written opinion; or
iv) If a quorum consisting of directors who were not
parties to the action, suit or proceeding cannot be obtained, by
independent legal counsel in a written opinion.
(2) The articles of incorporation, the bylaws or an
agreement made by the corporation may provide that the expenses
of officers and directors incurred in defending a civil or
criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director or officer to repay
the amount if it is ultimately determined by a court of competent
jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this subsection do not affect any
rights to advancement of expenses to which corporate personnel
other than directors or officers may be entitled under any
contract or otherwise by law.
(3) The indemnification and advancement of expenses
authorized in NRS 78.7502 or ordered by a court pursuant to this
section:
(i) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under
the articles of incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, for either
an action in his official capacity or an action in another
capacity while holding his office, except that indemnification,
unless ordered by a court pursuant to or for the advancement of
expenses made pursuant to subsection 2, may not be made to or on
behalf of any director or officer if a final adjudication
establishes that his acts or omissions involved intentional
misconduct, fraud or a knowing violation of the law and was
material to the cause of action.
(ii) Continues for a person who has ceased to be a director,
officer, employee or agent and inures to the benefit of the
heirs, executors and administrators of such a person.
NRS 78.752 Insurance and other financial arrangements against
liability of directors, officers, employees and agents.
(1) A corporation may purchase and maintain insurance or
make other financial arrangements on behalf of any person who is
or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise for any
liability asserted against him and liability and expenses
incurred by him in his capacity as a director, officer, employee
or agent, or arising out of his status as such, whether or not
the corporation has the authority to indemnify him against such
liability and expenses.
(2) The other financial arrangements made by the corporation
pursuant to subsection 1 may include the following:
(i) The creation of a trust fund.
(ii) The establishment of a program of self-insurance.
(iii) The securing of its obligation of indemnification
by granting a security interest or other lien on any assets of
the corporation.
(iv) The establishment of a letter of credit, guaranty
or surety.
No financial arrangement made pursuant to this subsection may
provide protection for a person adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be
liable for intentional misconduct, fraud or a knowing violation
of law, except with respect to the advancement of expenses or
indemnification ordered by a court.
(3) Any insurance or other financial arrangement made on behalf
of a person pursuant to this section may be provided by the
corporation or any other person approved by the board of
directors, even if all or part of the other person's stock or
other securities is owned by the corporation.
(4) In the absence of fraud:
(i) The decision of the board of directors as to the
propriety of the terms and conditions of any insurance or other
financial arrangement made pursuant to this section and the
choice of the person to provide the insurance or other financial
arrangement is conclusive; and
(ii) The insurance or other financial arrangement:
(A) Is not void or voidable; and
(B) Does not subject any director approving it to personal
liability for his action, even if a director approving the
insurance or other financial arrangement is a beneficiary of the
insurance or other financial arrangement.
(5) A corporation or its subsidiary which provides self-
insurance for itself or for another affiliated corporation
pursuant to this section is not subject to the provisions of
Title 57 of NRS.
Undertaking.
The company 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 U.S.
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
All of the shares of common stock being offering pursuant to this
registration statement have been issued pursuant to a claim of
exemption from registration under Rule 506 of Regulation D under
Section 4(2) of the Securities Act of 1933, and similar
provisions under state securities laws and regulations, in that:
(a) no commissions or fees were paid in connection with this
sale; the sale was made to less than 35 non-accredited investors;
and (b) the purchaser either alone or with his purchaser
representative has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and
risks of the prospective investment, or the issuer reasonably
believes immediately prior to making any sale that such purchaser
comes within this description.
ITEM 8. EXHIBITS.
The Exhibits required by Item 601 of Regulation S-B, and an index
thereto, are attached.
ITEM 9. UNDERTAKINGS.
The undersigned company hereby undertakes:
(a) (1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the company's annual
report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(e) To deliver or cause to be delivered with the prospectus, to
each person to whom the prospectus is sent or given, the latest
annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting
the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information
required to be presented by Article 3 of Regulation S-X are not
set forth in the prospectus, to deliver, or cause to be delivered
to each person to whom the prospectus is sent or given, the
latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial
information
(h) That insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the company pursuant to the
foregoing provisions, or otherwise, the company 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 company of expenses incurred or paid by a
director, officer or controlling person of the company 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 company will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
company certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8 and has
duly caused 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 November 6, 2000.
eConnect
By: /s/ Thomas S. Hughes
Thomas S. Hughes
President/Chief Executive Officer
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 S-8 Registration
Statement, and to file the same with all exhibits thereto, and
all documents in connection therewith, with the U.S. 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
attorney-in-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 President/Chief Executive November 6, 2000
Thomas S. Hughes Officer/Director
/s/ Jack M. Hall Secretary/Director November 6, 2000
Jack M. Hall
/s/ Laurence Donoghue Director November 6, 2000
Laurence Donoghue
EXHIBIT INDEX
Exhibit No. Description
No.
4 Consulting Agreement between the company and Ryan
Kavanaugh, dated March 10, 2000 (incorporated by reference to
Exhibit 10.41 of the Form 10-QSB filed on May 30, 2000).
5 Opinion Re: Legality (see below).
23.1 Consent of Accountant (see below).
23.2 Consent of Counsel (see below).
24 Special Power of Attorney (see signature page).