UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL INFORMATION FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of The Securities
Exchange Act of 1934
Nevada 58-2670972
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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Issuer's telephone number: 852 2868 0668
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which to be so registered: each class is to be registered: Common Stock OTC Bulletin Board |
INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Financial Telecom Limited (USA), Inc. ("FTL" or "the Company") through its wholly-owned subsidiary, Financial Telecom Limited, a private company limited by shares incorporated in Hong Kong ("FTL HK"), is principally engaged in the business of providing real-time stock quotes and financial information of Hong Kong listed companies, including information on other international stock exchanges in the United States and Europe, to institutional and retail investors. FTL HK was the first company in Hong Kong to provide real-time financial information services using a wireless network for the dissemination of data. FTL HK generates revenue through the provision of online financial information services and the sale of well-known technical analysis software and related Internet and telephone services. FTL HK maintains a financial portal featuring stock trading, real-time quotes and company data banks for investors in Hong Kong and Mainland China. These investors include major investment houses, banks, securities firms, and mutual fund managers as well as individual investors.
FTL HK was incorporated in 1983. Pursuant to a Stock Purchase Agreement by and between FTL HK and the Hartcourt Companies, Inc. ("Hartcourt") dated August 19, 1999, Hartcourt acquired 4,964,990 ordinary shares of FTL HK. In 2003, FTL HK repurchased 3,427,349 shares and 92,000 shares of the ordinary shares of FTL HK from Bowland International Limited ("Bowland") and Tang Wing On, respectively. As a result of this repurchase, Hartcourt held all the issued and outstanding stock of FTL HK.
FTL was incorporated in Nevada in April 2003 with Hartcourt owning all issued shares. On September 10, 2003, FTL entered into a Share Exchange Agreement with Hartcourt, pursuant to which FTL purchased from Hartcourt 4,964,990 shares of common stock of FTL HK, representing all of the issued and outstanding capital stock of FTL HK. Pursuant to the Share Exchange Agreement, FTL HK became a wholly owned subsidiary of FTL. As the sole asset of FTL is FTL HK, the purpose of the transaction was to restructure FTL HK as a wholly-owned subsidiary of FTL.
The Company's headquarters are located at 308, Hang Bong Commercial Center, 28 Shanghai Street, Kowloon, Hong Kong. Its telephone number is (852) 2868 0668. The Company also maintains a website at www.fintel.com.
INDUSTRY OVERVIEW
The financial information market in Hong Kong can broadly be divided into two major segments based on the target audience and the content provided. The first segment, served by international data vendors such as Reuters and Bloomberg, is comprised of financial institutions and large corporations that receive a wide spectrum of financial data services. The second segment, much larger in terms of number of subscribers, is comprised of retail investors such as individuals, brokerage firms and small to medium size companies that are more focused on the local stock market. The Company's services target this second segment of retail investors.
As of May 1, 2004, there were eighty-six data vendors licensed to obtain data from the Hong Kong Exchanges and Clearing Limited, the sole stock exchange in Hong Kong. Of these eighty-six vendors, sixty-one are real time data vendors. Twenty-nine of these sixty-one vendors, of which the Company is one, are direct connected licensees. FTL HK currently provides real time data to three of these indirect connected licensees. Of the other twenty-five vendors, two are end-of-day data vendors and twenty-three are delayed data vendors.
The financial information market is largely dependent on the activeness of financial markets, especially the stock market. The stock market in Hong Kong has experienced a contraction in turnover value. The annual turnover value in 2001 was $255 billion, representing a drop of 33.5% from the previous year. It further dropped to $211 billion in 2002, a 17.5% decrease. The turnover value improved in the second half of 2003 after SARS, reaching an annual total of $332 billion, representing an increase of 57%. Although the turnover value has shown an overall improvement in 2003, the discouraging turnover in 2001 and 2002 unavoidably affected the sales performance of FTL HK. Investor confidence only started to improve towards the end of 2003.
In view of the gloomy outlook of the local market situation, the Company embarked on cost saving measures as well as exploring the Chinese market. China's stock market has seen rapid growth since it was established in 1990. According to recent government statistics as of year end 2003, China has 1,287 public companies listed at the Shanghai and Shenzhen stock exchanges and over 70 million investors owning brokerage accounts. Total turnover value was $401 billion in 2003, an increase of 15% over that in 2002. Based on total market capitalization, China is the world's sixth largest stock market, and among the stock markets in Asia, it ranks second only to Japan.
Based on the historical growth in China's security market, the Company predicts that by 2008 the number of listed companies in China will increase to 2,000. Further, it predicts that by 2010, on-line stock trading will be the major transaction vehicle in China. Along with these changes, an increasing amount of financial and investment products are becoming available to private investors. As China investors have more choices of where to invest their money, the demand for quality financial information also grows. The explosive growth in the stock market has created a surge in public demand for investment information and institutions to provide such information.
OPERATING STRATEGY
FTL's mission is to become the premier financial information service company in Hong Kong and Mainland China. Pursuant to this goal, FTL is committed to providing the most advanced network service and information technology and the most timely and relevant financial information to investors and financial institutions.
FTL plans to aggressively expand to Mainland China through the formation of strategic partnerships with other technology and data solution companies. There is currently a shortage of accurate and timely financial information and investment options for both consumers and corporate entities in Mainland China. FTL aims to fill this void. FTL is also in the process of forming an international network of data vendors to provide a global financial information service using MetaStock as the end-user software. Through this operating strategy, FTL is positioning itself to satisfy the growth in demand for financial information in Hong Kong and Mainland China. FTL believes that this operating strategy will help it to achieve its goal of being the premier financial information service company in Hong Kong and Mainland China.
CURRENT PRODUCTS AND SERVICES
SINOBULL LINK-METASTOCK. SinoBull Link-MetaStock is a real-time quotation feed specifically designed for the well-known technical analysis software "MetaStock." MetaStock is a product of Equis, a division of Reuters. In 2001, FTL HK was appointed by Equis as the Hong Kong and Mainland China distributor of the MetaStock software. This appointment lasts until June 1, 2004, and is renewable thereafter upon mutual consent of FTL HK and Equis. Equis also commissioned FTL HK to prepare a Chinese version of MetaStock, specifically catered to the market in China. FTL HK will have the exclusive right to distribute the Chinese version of MetaStock. To support MetaStock, FTL HK has developed a data feed with Hong Kong and Mainland China stock and forex data running on FTL HK's proprietary iServer and iSync platform. MetaStock is marketed as a stand-alone software. Users can also subscribe to FTL HK's end-of-day or real time data feed service. The target market for MetaStock is institutional investors in the Hong Kong and Mainland China region.
EFT FINANCE. EFT Finance is a service jointly provided by FTL HK and the Chinese data vendor Shanghai NetBank Limited. EFT Finance provides international stock quotes along with news and market reports. EFT Finance also includes a semi-professional charting system. Two versions of EFT Finance are presently available: VIT and ADSL. The VIT version primarily serves the brokers and financial institutions markets by using the broadband dedicated virtual private network. The VIT version offers a high speed and reliable data transfer capability that is especially helpful when capturing data for charting purposes. The ADSL version, on the other hand, is a client/server application that utilizes the ADSL bandwidth connected to regional servers for access to broadband financial information. The ADSL version is characterized by a flexibility and convenience of installation. It incorporates simple display format and analytical tools targeting the mass investor population. FTL HK expects a high demand for this quote and trade platform once the QDII scheme is launched.
FINTEL DATA FEED. Fintel Data Feed is a direct feed supplying real-time or delayed data to third party applications. The data provided through Fintel Data Feed includes on-line trading, portfolio management, credit control and order routing system and back office system.
SPIDERLINK PRO. SpiderLink Pro is a comprehensive quotation system that offers real-time quotes on Hong Kong stocks, futures, market indices, international forex, precious metals and financial news. SpiderLink Pro also offers charting tools and real-time analytical reports designed for use by personal investors. The Hong Kong stock quotes cover all stocks, warrants and options in teletext format with broker queue and market trade information directly from the Hong Kong Stock Exchange. The forex feed includes multiple forex spot and cross rates including Euro, Japanese Yen, Sterling Pound, Swiss Franc, Australian Dollar, Canadian Dollar, New Zealand Dollar and United States Dollar. Major international market indices include the Hang Seng Index, Dow Jones Industrial Average Index, London FT 100, Nikkei Index, Frankfurt DAX, Paris CAC General, Singapore Straits Times, Sydney AOL and Toronto Composite Index. Precious metals quoted on SpiderLink Pro include Local London Gold, Local London Silver, Hong Kong Local London Gold and Hong Kong Gold.
MARKETING STRATEGY
In an effort to expand its client base both for institutional and individual users in the China and overseas markets, FTL plans to adopt a broad range of marketing activities designed to develop name recognition and promote its brand and services. FTL intends to initiate a number of strategies to promote both its own products as well as bundled products with third parties. These strategies include:
DIRECT MARKETING. The Company plans to market its services through direct mailing and follow up with demonstrations of its product and services. The Company intends to distribute registration forms and brochures via mail and facsimile that describe its line of services. The Company also plans to hire sales agents to market the Company's services at shops in complimentary fields, such as computer shops, electrical appliance shops and brokerage firms. The Company also plans on hiring sales agents to market its services directly to brokerage firms and investors in China.
LOCATING JOINT SERVICE PARTNERS. The Company plans to explore the possibility of coordinating the delivery of its services with other service providers in Mainland China and Taiwan, whereby the companies would join together to deliver comprehensive data coverage.
CHINESE TELEVISION. Over one thousand cable television stations exist in China. The Company plans to work with its current strategic partner EFO Group, which specializes in building TV video cards and satellite data transmission systems, to approach these television stations to explore the possibilities of building a financial television channel or providing financial quotation services over established networks.
ADVERTISEMENTS. The Company plans to advertise in Hong Kong and China via traditional media, including economic newspapers, financial magazines and journals. The Company also plans to place printed brochures in prominent financial institution user outlets to solicit walk-in clients.
SEMINARS AND ROAD SHOWS. The Company intends to hold free interactive training seminars in locations such as brokerage firms, university classes and bank halls to generate exposure of its terminal products, including EFT Finance and MetaStock. By leveraging the reputation of these large and well-known institutions, the Company hopes to attract other enterprises and users to its services.
ESTABLISH A MULTI-REGION DATA NETWORK. The Company intends to approach individual market data vendors in various regions (such as Singapore, Taiwan, Thailand, United States, Canada and Australia) to explore the possibility of developing a cross-selling service. Under the joint service, the individual market data vendors would provide the local data feed, hardware, storage space, internet access bandwidth and user account information, which FTL would then distribute through its iServer infrastructure. EFT Finance has already joined as a member of this network providing data to Mainland China.
INTELLECTUAL PROPERTY
The Company's subsidiary, FTL HK, owns the intellectual property rights to its i-Server Data protocol, I-Link, Fintel Pro and Fintel online. Because these intellectual property rights have not been registered, they are vulnerable to infringement.
EMPLOYEES
As of May 1, 2004, the Company had five employees, four of whom are employed on a full-time basis. The Company also utilizes Hartcourt staff from time to time.
Following its spin-off from Hartcourt, the Company may seek to enter into an agreement with Hartcourt, pursuant to which Hartcourt will agree to continue to make available the services of certain of its employees to the Company on a part-time basis, if needed by the Company. The Company anticipates that any such agreement will be on commercially reasonable terms and have a limited term, while the Company develops independent infrastructure, including the hiring of necessary personnel. However, no such agreement currently exists and there can be no assurance that the Company will be able to secure terms favorable to it. If and when such agreement is entered into, the Company believes that it will enable it to more easily transition from being a subsidiary of Hartcourt into an independent operating company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS/RISK FACTORS
The following discussion should be read in conjunction with the Company's financial statements and the notes thereto and the other financial information appearing elsewhere in this document. In addition to historical information, the following discussion and other parts of this document contain certain forward-looking information. When used in this discussion, the words "believes," "anticipates," "expects," and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected due to a number of factors beyond our control. The Company does not undertake to publicly update or revise any of its forward-looking statements even if experience or future changes show that the indicated results or events will not be realized. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. You are also urged to carefully review and consider our discussions regarding the various factors, which affect our business, included in this section and elsewhere in this report.
Factors that might cause actual results, performance or achievements to differ materially from those projected or implied in such forward-looking statements include, among other things: (i) the impact of competitive products; (ii) changes in law and regulations; (iii) limitations on future financing; (iv) increases in the cost of borrowings and unavailability of debt or equity capital; (v) the inability of the Company to gain and/or hold market share; (vi) managing and maintaining growth; (vii) customer demands; (viii) market and industry conditions, (ix) the success of product development and new product introductions into the marketplace; (x) the departure of key members of management; as well as other risks and uncertainties that are described from time to time in the Company's filings with the Securities and Exchange Commission.
OVERVIEW
The Company's wholly-owned subsidiary, FTL HK, was established in 1983 by a group of professionals in the financial service industry. It was the first company in Hong Kong to provide real-time financial information services using a wireless network for the dissemination of data. The Company, through FTL HK, generates revenue through the provision of online financial information services and the sale of well-known technical analysis software and related Internet and telephone services. Through partnership with other financial information related companies, the Company is undertaking efforts to expand its client base both for institutional and individual users, and also for China and overseas markets.
With the recession in the Hong Kong and the depressed stock market, FTL HK has suffered a significant drop in revenue. The situation was further aggravated by the outbreak of sudden acute respiratory syndrome (SARS) in the first of half of 2003. FTL HK has also suffered a drop in revenue due to the suspension of its financial paging service in the first quarter of 2002. Fortunately, the Hong Kong economy has shown certain signals of recovery, which FTL HK believes will provide it with the opportunity to expand its business. The impressive economic growth in China also attracts the attention of international investors. Through developing new service integration and products, FTL hopes to achieve profitability for its future businesses.
RESULTS OF OPERATIONS
COMPARISON OF THE FISCAL YEARS ENDED DECEMBER 31, 2003 AND DECEMBER 31, 2002
During 2003, FTL HK suffered from an economic slump casued by SARS, which resulted in declines in revenue and net income. In 2003, FTL HK minimized its annual expenses to approximately 26% of the previous year total expenses by laying-off some of its employees, out sourcing jobs when required and reducing marketing expenses and consolidating various professional services and data sources.
NET SALES AND COST OF SALES. FTL HK recorded net sales of $373,476 in year 2003, compared to $488,557 in 2002. Net sales in 2003 consisted primarily of real-time financial data services and rental of equipment. The 24% drop in sales in 2003 when compared to 2002 was mainly due to the shrinkage in the local financial market caused by reductions by banks and brokerage houses of their budgets on data services and price-cutting among competitors. The outbreak of SARS also substantially reduced business activities in the first half of 2003. The demand for FTL HK's financial data service is closely related to the local stock market activities. The devastating effect of SARS had, in 2003, substantially affected the stock market activities and FTL HK's business.
Cost of sales included cost of capacity associated with the acquisition of data-feed from various data sources (including the Honk Kong Stock Exchange, the Future Exchange of Hong Kong, Bank of China and various international data vendors) and communication network rental necessary to provide real-time broadcasting and on-demand multimedia content delivery services via different connection topology. Cost of sales for 2003 was $288,424 as compared to $385,674 for 2002, a decrease of 25% attributable to the decline in sales. The decrease in operational margin is primarily attributable to the total fixed cost allocated to the lower level of revenue.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses ("SG&A") expenses amounted to $235,238 for 2003 compared to $917,860 for 2002, a reduction of 74%. The decrease in SG&A is primarily attributed to the reduction in staffing costs, consulting, legal and administrative costs.
OTHER INCOME. In 2003, FTL HK wrote back certain long outstanding payables and as a result, it recorded other income in the amount of $54,202.
LOSS ON DISPOSAL OF INVESTMENT IN SECURITY. During 2002, FTL HK sold certain shares it held in Hartcourt to satisfy its operational cash requirements. This resulted in the realized loss on investment in securities of $142,885 in 2002. The company presently does not hold any securities for investment purpose.
INTEREST EXPENSE. Interest expense was $38,856 in 2003, a reduction of 13% from $44,721 of the previous year. Interest expense represents payment of interest on loans from FTL HK's former shareholders and related parties. The decrease was a result of the lowering of prime lending rate in Hong Kong to which the interest rate on the loans is linked and reduction on the outstanding amount of such loans as well as the mortgage loan from the bank to Topomedia, the subsidiary which has been disposed of.
LIQUIDITY AND CAPITAL RESOURCES
FTL HK's principal capital requirements during 2003 were to satisfy ordinary operating expenditures. The Company plans to actively seek funding sources once it is spun-off. The Company plans to approach funding sources such as lenders interested in lending funds to the Company to meet its working capital requirements and investors interested in purchasing Company stock. The Company has no commitments for any such funding and there are no assurances that any will be secured on terms acceptable to the Company.
As shown in the accompanying financial statements, FTL HK incurred net losses of $1,525,127 and $72,782 for the years ended December 31, 2002 and 2003 respectively. In addition, FTL HK's cash inflow from operation is not adequate to meet its minimum monthly expenses. Its ability to continue as a going concern depends on the continued financial support from related parties including former shareholders and the success of its plan to seek funding sources once it is spun-off.
COMPARISON OF THE FISCAL YEARS ENDED DECEMBER 31, 2003 AND DECEMBER 31, 2002
OPERATING ACTIVITIES. The net cash used for operating activities was $195,597 in 2003, compared to $354,993 in 2002. The net cash out flow during 2003 was primarily a result of the net loss of $72,782 offset by noncash items totaling ($53,786) and changes in working capital accounts totaling ($69,029). The net cash out flow during 2002 was due to the net loss of $1,525,127 offset by noncash items totaling $1,020,418 and changes in working capital accounts totaling $146,026.
INVESTING ACTIVITIES. In 2003, no cash inflow or outflow from investing activities was recorded. In 2002, net cash provided by investing activities amounted to $195,109, resulting from the proceeds from disposal of fixed assets of $20,084, disposal of subsidiary of $122,376 and disposal of security of $60,097. The cash used in investing activities during 2002 was to purchase equipment for $7,448. Given the company's current financial situation, no major investing activities are expected in the foreseeable future unless it is successful in funding new funding sources.
FINANCING ACTIVITIES. In 2003, the only item that generated cash inflow to the Company from financing activities was advances from related parties in the amount of $244,017. In 2002, net cash provided by financing activities amounted to $101,203, resulting from advances from related-parties of $109,095, offset by the repayment of bank overdraft of $1,381 and repayment of bank loans of $6,511. The Company continues to receive financial support from related parties to fund its working capital requirements and to continue as a growing concern.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued the following new accounting pronouncements during 2003:
Interpretation No. 46 "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51" (FIN 46). FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after June 15, 2003. FIN 46 does not have any impact on the financial position or results of operations of the Company.
In April 2003, the FASB issued SFAS No. 149, "Accounting for Amendment of Statement 133 on Derivative Instruments and Hedging Activities," which amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. This Statement is generally effective for contracts entered into or modified after June 30, 2003, and all provisions should be applied prospectively. This statement does not affect the Company.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity," which establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. It is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of the Statement and still existing at the beginning of the interim period of adoption. Restatement is not permitted. This statement does not affect the Company.
ITEM 3. DESCRIPTION OF PROPERTY
The Company leases 1,759 square feet for approximately $2,730 per month ($32,760 annually) for its principal offices in Kowloon. The rental is under two separate leases. The lease for 918 square feet expires on February 4, 2006. The lease for the remaining 841 square feet expires on July 31, 2004. The Company does not own or invest in any real estate.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the number of shares and percentage of all shares of the Company's common stock outstanding as of May 1, 2004 held by (i) any person known to the Company to be the beneficial owner of 5% or more of the Company's outstanding common stock, (ii) each director, (iii) each executive officer of the Company, and (iv) all directors and executive officers as a group. The following table does not reflect the impact of fractional shares.
PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER (1) NUMBER OF SHARES (2) CLASS
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The Hartcourt Companies, Inc. 15,100,000 100%
Stephen Tang (Director, President) 0 0%
Richard Yan (Director, Treasurer) 0 0%
John Furutani (Director, Secretary) 0 0%
Officers & Directors as a Group 0 0%
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(1) Unless otherwise indicated, each of these holders has an address of c/o of
Financial Telecom Limited (USA), Inc., 15165 Ventura Boulevard, Suite 400,
Sherman Oaks, California 91403.
(2) For purposes of this table, beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission and includes voting or
investment power with respect to the securities. FTL common stock subject to
options, warrants or other rights to purchase that are currently exercisable or
are exercisable within 60 days after May 1, 2004 are deemed outstanding for
purposes of computing the percentage ownership of the persons holding such
options, warrants or other rights, but are not deemed outstanding for purposes
of computing the percentage ownership of any other person.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following tables sets forth certain information concerning the Company's executive officers and directors and the executive officers and directors of the Company's subsidiary, FTL HK. Except as otherwise noted, none of the executive officers are directors or officers of any publicly owned corporation or entity.
COMPANY DIRECTORS AND EXECUTIVE OFFICERS
NAME AGE PRINCIPAL POSITION ---- --- ------------------ Stephen Tang 51 Director, President Richard Yan 29 Director, Treasurer John Furutani 35 Director, Secretary Sidney Tsang 39 Director Li Wai Kong 46 Director |
MR. STEPHEN TANG. Mr. Tang is the founder of FTL HK and a director of Hartcourt. Mr. Tang has served as the President and as a director of FTL since April 28, 2003. He has substantial working experience in financial services in major Asian countries and has been involved in the development and implementation of consumer electronics for over twenty years. From 1985 until 2002, Mr. Tang held the position of Chief Executive Officer of FTL HK. Mr. Tang's contributions include development of new and innovative products and creation of strategic alliances in China, Taiwan, Korea and the United States. Mr. Tang holds a Master's degree in Business Administration from the Asian Institute of Management in Manila.
MR. RICHARD YAN. Mr. Yan is the Financial Controller of Hartcourt and is responsible for financial and accounting matters for the Company. Mr. Yan has served as FTL's director and Treasurer since April 28, 2003. Prior to joining Hartcourt in September 2002, he served as the Assistant Manager of KPMG Financial Advisory Services in Shanghai for three years, where he worked on due diligence, asset valuation work, financial analysis and business plans for M&A transactions. During the five years he was at KPMG, Mr. Yan was also a Management Consultant and Audit Manager. Mr. Yan is a Certified Public Accountant, and received his Bachelor degree in 1997 from Shanghai Jiaotong University. Mr. Yan is currently working towards a Masters of Business Administration degree from the same university.
MR. JOHN A. FURUTANI. Mr. Furutani is an attorney licensed to practice in the State of California. Mr. Furutani has served as FTL's director and Secretary since April 28, 2003. Mr. Furutani received a Bachelor's Degree in Political Science and Public Relations from the University of Southern California in 1988. In 1992, Mr. Furutani obtained a Juris Doctorate degree from Loyola Law School in Los Angeles, California. Since 1992, Mr. Furutani has practiced law in California with an emphasis on business litigation. Mr. Furutani serves as outside legal counsel to Hartcourt and the Company.
MR. SIDNEY TSANG. Mr. Tsang is a consultant of TWC Management Limited, providing various accounting and financial consultation to clients in Hong Kong covering issues such as financial controls, budgeting, taxation and financial reporting systems. Mr. Tsang has twenty years practical experience in accounting and financial controlling. Prior to joining TWC Management Limited, Mr. Tsang worked for the Dickson Group of Companies and the Emperor Group in Hong Kong, where he worked in accounting and financial management. Mr. Tsang is a fellow member of the Chartered Association of Certified Accountants and an Associate Member of the Hong Kong Society of Accountants in Hong Kong. Mr. Tsang has served as a director of the Company since March 1, 2004.
MR. LI WAI KONG. Mr. Li is the Project Director of Technicon Engineering Limited, a leading engineering firm providing a comprehensive turnkey package in building services engineering in Hong Kong and Mainland China. Technicon Engineering Limited serves both the public and private sectors with services that include electrical service, air-conditioning and refrigeration, fire service and plumbing and draining services. Mr. Li has been with Technicon Engineering Limited for twenty-two years and is responsible for the company's project management and oversight of its administrative functions. Mr. Li holds a master's degree in Engineering Management from the University of Technology in Sydney, Australia. He has served as a director of the Company since March 1, 2004.
FTL HK DIRECTORS AND EXECUTIVE OFFICERS
NAME AGE PRINCIPAL POSITION ---- --- ------------------ Alex Pang 51 Executive Director Tang Ping Wing 75 Finance Director Tang Wing Kuen 45 Director |
ALEX PANG. Since January 2002, Mr. Alex Pang has been the executive director in charge of overall management of FTL HK. Before serving as executive director, Mr. Pang was in charge of the marketing for FTL HK. Prior to joining FTL HK, he worked for the multi-national company San Miguel Brewery (HK) Limited in Hong Kong for fifteen years. Mr. Pang holds a bachelor's degree in business management from Hong Kong Baptist University.
TANG PING WING. Mr. Tang Ping Wing oversees the daily administering and financial functions of FTL HK. He has been with FTL HK in this position since its establishment in 1983. Mr. Tang Ping Wing has more than thirty years of management and administrative experience.
TANG WING KUEN. Mr. Tang Wing Kuen is a non-executive director of FTL HK. He resides in the U.K. and for the past nineteen years, has served as a medical practitioner. Mr. Tang Wing Kuen is active in neonatal research, academic meetings and conferences for professional development. He is a graduate of the University of Sheffield, UK, and a member of the British Medical Association, the Neonatal Society and the Royal College of Pediatrics and Child Health.
ELECTION AND TERM
Directors are elected to a one year term at each annual meeting of the Company's shareholders.
AUDIT COMMITTEE
The Company's audit committee is comprised of Mr. Li and Mr. Tsang. The Company's Board of Directors has determined that both Mr. Li and Mr. Tsang constitute independent directors and that Mr. Tsang qualifies as an "audit committee financial expert" within the meaning of Item 401 of Regulation S-B as promulgated by the Securities and Exchange Commission.
ITEM 6. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
None of the Company's employees' or executive officers' total annual salary and bonus exceeds $100,000. Similarly, none of FTL HK's employees' or executive officers' compensation exceeded $100,000 or would have exceeded $100,000 on an annualized basis, for any of the fiscal years ended December 31, 2003, 2002 or 2001, other than as set forth below.
The following tables sets forth: (1) for the fiscal year ended December 31, 2003, all compensation earned for services rendered to the Company, in all capacitates, by the individuals performing similar and related duties to those performed by a chief executive officer and (2) for each of the years ended December 31, 2003, 2002 and 2001, all compensation earned for services rendered to FTL HK, in all capacities, by the individual performing similar and related duties to those performed by a chief executive officer. None of the Company's or FTL HK's other executive officers earned compensation in excess of $100,000 during the years specified.
COMPANY SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
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LONG-TERM
COMPENSATION
AWARDS
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION OPTIONS
--------------------------- ---- --------- -------- ------------ -------
$6,000 per
month in FTL
Stephen Tang 2003 shares (1) $- $- $-
President
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(1) Comprised of $5,000 in FTL shares per month for services as President and $1,000 in FTL shares per month for services as director. These shares will not be granted until the Company's stock is approved for listing on the OTC Bulletin Board. The number of shares will be calculated based on the closing price on the first trading day of the next calendar quarter. Subsequent issuances will be on a quarterly basis.
FTL HK SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
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LONG-TERM
COMPENSATION
AWARDS
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION OPTIONS
--------------------------- ---- --------- -------- ------------ -------
Alex Pang 2003 $23,077 $- $- $-
Executive Director 2002 $49,185 - - -
2001 63,860 - - -
Stephen Tang 2003 - - - -
Managing Director 2002 - - - -
2001 102,670 - - -
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DIRECTOR COMPENSATION
Directors of FTL HK do not receive any compensation for their services. Directors of the Company receive a monthly compensation for their services in the form of shares of the Company with a fair market value of $1,000. These shares will not be granted until the Company's stock is approved for listing on the OTC Bulletin Board. The number of shares will be calculated based on the closing price on the first trading day of the next calendar quarter. Subsequent issuances will be on a quarterly basis.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following is a summary of transactions to which the Company or its subsidiaries is a party in which the amount involved since January 1, 2002 exceeded $60,000 and in which officers, directors, nominees and/or greater than 5% beneficial owners of the Company's common stock (or any immediate family members of the foregoing) had, or will have, a direct or indirect material interest.
On July 31, 2002, FTL HK sold its entire shareholding in Topomedia to Bowland for a consideration of $122,478 in partial settlement of a loan from Bowland to FTL HK. Mr. Stephen Tang, a director and executive officer of the Company, and Mr. Tang Ping Wing, a director and executive officer of FTL HK, are a shareholder and director, respectively, of Bowland. In addition, FTL HK agreed to waive the amount of $1,115,963 due from Topomedia International Limited subsequent to the disposal.
On September 1, 2003, Hartcourt, Bowland, Mr. Stephen Tang, and FTL entered into an agreement for the purchase of shares. Pursuant to the terms of the agreement, FTL purchased from Hartcourt all the issued shares of FTL HK and assumed certain obligations of FTL HK pertaining to Hartcourt, Bowland and Mr. Tang. As a result, the amount due to Hartcourt and its subsidiaries were assumed by FTL, which in turn waived such obligation from FTL HK of $697,566. In exchange for the waiver of amount due ($697,566) to Hartcourt, the Company issued 15,000,000 shares of common stock.
ITEM 8. DESCRIPTION OF SECURITIES
The following description of the capital stock of the Company and certain provisions of the Company's Articles of Incorporation and Bylaws is a summary and is qualified in its entirety by the provisions of the Articles of Incorporation and Bylaws, which are attached as Exhibits.
The Company has authorized capital of Five Hundred Million shares (500,000,000) shares of common stock with $0.001 par value. As of May 1, 2004, there were 15,100,000 shares of FTL common stock outstanding, all of which are owned by Hartcourt.
COMMON STOCK
Each share of the Company's common stock entitles the holder thereof to one vote on all matters submitted to a vote by the Company's shareholders, except with respect to voting for election of directors. Generally, unless the Company's Articles of Incorporation or Nevada law requires otherwise, the affirmative vote of the majority of shares then represented and entitled to vote on such matter at a meeting at which a quorum was present when commenced, shall be the act of the shareholders. With respect to the election of directors, however, holders of the Company's common stock are entitled to cumulative voting rights. Cumulative voting permits each holder of Company common stock to cast an aggregate number of votes equal to the number of directorships to be filled multiplied by the number of shares of Company common stock as to which they are entitled to cast votes. The holders may cast all of such votes in favor of any individual nominee or may allocate them among multiple nominees as they choose.
NEVADA ANTI-TAKEOVER LEGISLATION AND ANTI-TAKEOVER DEVICES
Nevada's "Combination with Interested Stockholders Statute," Nevada Revised Statutes 78.411-78.444, which applies to Nevada corporations that have at least 200 stockholders, prohibits an "interested stockholder" from entering into a "combination" with the corporation, unless specific conditions are met. A "combination" includes:
o any merger with an "interested stockholder," or any other corporation
which is or after the merger would be, an affiliate or associate of the
interested stockholder;
o any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of assets, in one transaction or a series of transactions,
to an "interested stockholder," having (i) an aggregate market value
equal to 5% or more of the aggregate market value of the corporation's
assets, (ii) an aggregate market value equal to 5% or more of the
aggregate market value of all outstanding shares of the corporation, or
(iii) representing 10% or more of the earning power or net income of
the corporation;
o any issuance or transfer of shares of the corporation or its
subsidiaries, to the "interested stockholder," having an aggregate
market value equal to 5% or more of the aggregate market value of all
the outstanding shares of the corporation;
o the adoption of any plan or proposal for the liquidation or dissolution
of the corporation proposed by the "interested stockholder;"
o certain transactions which would have the effect of increasing the
proportionate share of outstanding shares of the corporation owned by
the "interested stockholder;" or
o the receipt of benefits, except proportionately as a stockholder, of
any loans, advances or other financial benefits by an "interested
stockholder." An "interested stockholder" is a person who (i) directly
or indirectly owns 10% or more of the voting power of the outstanding
voting shares of the corporation or (ii) an affiliate or associate of
the corporation which at any time within three years before the date in
question was the beneficial owner, directly or indirectly, of 10% or
more of the voting power of the then outstanding shares of the
corporation.
A corporation to which the statute applies may not engage in a "combination" within three years after the interested stockholder acquired its shares, unless the combination or the interested stockholder's acquisition of the shares that caused the interested stockholder to become an interested stockholder was approved by the board of directors before the interested stockholder acquired those shares. If this approval was not obtained, then after the three-year period expires, the combination may be consummated if all the requirements the Company's Articles of Incorporation are met and either:
o (i) the board of directors of the corporation approves, prior to the
person becoming an "interested stockholder," the combination or the
purchase of shares by the "interested stockholder" or (ii) the
combination is approved by the affirmative vote of holders of a
majority of voting power not beneficially owned by the "interested
stockholder" at a meeting called no earlier than three years after the
date the "interested stockholder" became one; or
o the aggregate amount of cash and the market value of consideration
other than cash to be received by holders of common shares and holders
of any other class or series of shares meets the minimum requirements
set forth in Sections 78.411 through 78.443, inclusive, and prior to
the consummation of the combination, except in limited circumstances,
the "interested stockholder" will not have become the beneficial owner
of additional voting shares of the corporation.
The above provisions do not apply to corporations that so elect in a charter amendment approved by a majority of the disinterested shares. Such a charter amendment, however, would not become effective for eighteen months after its passage and would apply only to stock acquisitions occurring after its effective date. The Company's Articles of Incorporation do not exclude the Company from the restrictions imposed by the above provisions.
Nevada's "Control Share Acquisition Statute," Sections 78.378 through 78.3793 of the Nevada Revised Statutes, prohibits an acquirer, in particular circumstances, from exercising voting rights of shares of a target corporation's stock after crossing specific threshold ownership percentages, except those voting rights that are granted by the target corporation's stockholders.
The existence of these statutes may make the Company a less attractive merger or acquisition candidate. Except as described above with respect to the statutory provisions of the Nevada anti-takeover laws, the Company has not adopted any anti-takeover devices with respect to its capital stock.
DIVIDENDS
The Company has never paid a dividend on its common stock and does not anticipate paying any dividends on its common stock in the foreseeable future. It is the current policy of the Company's board of directors to retain any earnings to finance operations and expansion of the Company's business. The payment of future dividends is within the discretion of the board of directors and will depend upon the Company's future earnings, if any, its capital requirements, financial condition and other relevant factors.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDEND'S ON THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is currently no public market for trading the Company's securities. The sole holder of record of the Company's common stock is Hartcourt.
ITEM 2. LEGAL PROCEEDINGS
From time to time, the Company and FTL HK may be involved in litigation relating to claims arising out of their operations. As of May 1, 2004, neither the Company nor FTL HK is a party to any material legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company has not had any changes in or disagreements with its accountants on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. Clancy and Co., P.L.L.C.'s report on the financial statements of the Company for the years ended December 31, 2003 and 2002, did not contain any adverse opinion or disclaimer of opinion, nor was it modified as to uncertainty, audit scope, or accounting principles, however it was modified to include an explanatory paragraph regarding the Company's ability to continue as a going concern.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
None.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
In general, each director and officer of the Company is eligible to be indemnified by the Company against all expenses, including attorneys' fees, judgments, fines, punitive damages and amounts paid in settlement, that were incurred in connection with a proceeding to which such director or officer was a party by reason of the fact that such officer or director was acting on behalf of the Company to the fullest extent permissible under the Nevada Revised Statutes.
The Company's Bylaws also require the Company to indemnify its officers, directors, employees and agents against all expenses incurred by them in connection with any legal action, including shareholder derivative suits, based on any action or omission alleged to have been committed while acting within the scope of such relationship to the Company to the fullest extent permissible under the Nevada Revised Statutes. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
PART F/S
The financial statements of the Company begin on page F-1 of this Form 10-SB.
PART III
ITEMS 1 AND 2. INDEX TO AND DESCRIPTION OF EXHIBITS
Exhibit Number Description of Document
-------------- -----------------------
2.1 Articles of Incorporation of Financial Telecom Limited (USA),
Inc.
2.2 Amended and Restated Bylaws of Financial Telecom Limited
(USA), Inc.
6.1 Agreement between Hong Kong Futures Exchange Limited and
Financial Telecom Limited
6.2 Market Service Datafeed Agreement between Stock Exchange
Information Services Limited and Financial Telecom Limited
|
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.
FINANCIAL TELECOM LIMITED (USA), INC.
By: /s/ Stephen Tang
---------------------------------
Stephen Tang, President
Date: May 13, 2004
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FINANCIAL TELECOM LIMITED (USA), INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report.................................................F-2 Consolidated Balance Sheets..................................................F-3 Consolidated Statements of Operations........................................F-4 Consolidated Statements of Changes in Stockholders' Deficiency...............F-5 Consolidated Statements of Cash Flows........................................F-6 Notes to Consolidated Financial Statements................................F-7-14 |
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Financial Telecom Limited (USA), Inc.
We have audited the accompanying consolidated balance sheets of Financial Telecom Limited (USA), Inc., a Nevada Corporation, and Subsidiaries (the "Company") as of December 31, 2003 and 2002, and the related consolidated statements of operations, changes in stockholders' deficiency, and cash flows for years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2003 and 2002, and the consolidated results of its operations and its cash flows for the periods indicated in conformity with generally accepted accounting principles in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has a negative working capital and a significant accumulated deficit resulting in a net stockholders' deficiency. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also discussed in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Clancy and Co., P.L.L.C. Clancy and Co., P.L.L.C. Phoenix, Arizona April 5, 2004 |
FINANCIAL TELECOM LIMITED (USA), INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
ASSETS
------ 2003 2002
------------ ------------
Current assets
Cash and cash equivalents $ 52,245 $ 3,825
Trade receivables 25,885 --
Prepayments and other current assets 416 2,266
Due from related parties (Note 3) -- 25,187
------------ ------------
Total current assets 78,546 31,278
Fixed assets, net (Note 4) 7,154 15,426
------------ ------------
TOTAL ASSETS $ 85,700 $ 46,704
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
Current liabilities
Trade payables and accrued liabilities $ 444,112 $ 474,785
Deferred revenue 39,304 53,625
Due to related parties (Note 3) 776,345 1,255,081
------------ ------------
Total current liabilities 1,259,761 1,783,491
Minority interest (116,107) (54,049)
Stockholders' deficiency
Common stock: $0.001 par value; 500,000,000 shares
authorized and issued and outstanding shares
- 2003:15,100,000; 2002:8,484,339 15,100 1,087,736
Additional paid-in capital 1,770,202 --
Accumulated deficit (2,843,256) (2,770,474)
------------ ------------
Total stockholders' deficiency (1,057,954) (1,682,738)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 85,700 $ 46,704
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-3
|
FINANCIAL TELECOM LIMITED (USA), INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31
2003 2002
------------ ------------
Service fee income $ 373,476 $ 488,557
Costs of sales 288,424 385,674
------------ ------------
Gross profit 85,052 102,883
Operating expenses
General and administrative expenses 235,238 917,860
------------ ------------
Operating loss (150,186) (814,977)
Other income (expense)
Other income 54,202 --
Loss on disposal of investment in security -- (142,885)
Provision for doubtful accounts -- (50,184)
Other expenses -- (21,964)
Interest expense (38,856) (44,721)
------------ ------------
Total other income (expense) 15,346 (259,754)
------------ ------------
Net loss before minority interest and taxes (134,840) (1,074,731)
Minority interest 62,058 44,443
Provision for income taxes (Note 5) -- --
------------ ------------
Loss from continuing operations (72,782) (1,030,288)
Discontinued operations
Loss on disposal of subsidiary -- (494,839)
------------ ------------
Loss from discontinued operations -- (494,839)
------------ ------------
Net loss $ (72,782) $(1,525,127)
============ ============
Loss per share
Continuing operations $ (0.02) $ (0.12)
Discontinued operations -- (0.06)
------------ ------------
$ (0.02) $ (0.18)
============ ============
Weighted average shares outstanding 4,670,411 8,484,339
============ ============
|
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
FINANCIAL TELECOM LIMITED (USA), INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
YEARS ENDED DECEMBER 31
ADDITIONAL
COMMON STOCK COMMON STOCK PAID-IN ACCUMULATED TREASURY
(SHARES) (AMOUNT) CAPITAL DEFICIT STOCK TOTAL
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 2001 8,484,339 $ 1,087,736 $ -- $(1,245,347) $ -- $ (157,611)
Net loss -- -- -- (1,525,127) -- (1,525,127)
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 2002 8,484,339 1,087,736 -- (2,770,474) -- (1,682,738)
Purchase of own shares (3,519,349) (451,198) 451,199 (1) --
Recapitalization:
Acquisition of Financial Telecom
Limited (USA), Inc. - net book value 100,000 100 (100) -- -- --
Retire old shares of Financial Telecom
Limited (4,964,990) (636,538) 636,537 -- 1 --
Issuance of common stock for forgiveness
of amounts due 15,000,000 15,000 682,566 -- -- 697,566
Net loss -- -- -- (72,782) (72,782)
------------ ------------ ------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 2003 15,100,000 $ 15,100 $ 1,770,202 $(2,843,256) $ -- $(1,057,954)
============ ============ ============ ============ ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-5
|
FINANCIAL TELECOM LIMITED (USA), INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31
2003 2002
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (72,782) $(1,525,127)
Adjustments to reconcile net loss to net cash flows used in
operating activities
Depreciation 8,272 421,270
Impairment loss -- 9,557
Minority interest (62,058) (44,443)
Loss on disposal of subsidiary -- 494,839
Loss on disposal of securities -- 142,885
Changes in assets and liabilities
(Increase) decrease in trade receivables (25,885) 174,369
(Increase) decrease in other current assets 1,850 24,650
Increase (decrease) in trade payables (30,673) 1,238
Increase (decrease) in deferred revenue (14,321) (54,231)
------------ ------------
Net cash used in operating activities (195,597) (354,993)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures -- (7,448)
Proceeds from the disposal of fixed assets -- 20,084
Proceeds from disposal of subsidiary -- 122,376
Proceeds on return of investment -- 60,097
------------ ------------
Net cash flows provided by investing activities -- 195,109
CASH FLOWS FROM FINANCING ACTIVITIES
Payments to reduce bank overdraft -- (1,381)
Payments on bank loans -- (6,511)
Advances from related parties 244,017 109,095
------------ ------------
Net cash flows provided by financing activities 244,017 101,203
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 48,420 (58,681)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 3,825 62,506
------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 52,245 $ 3,825
============ ============
CASH PAID FOR:
Interest $ -- $ 44,721
============ ============
Income taxes $ -- $ --
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-6
|
FINANCIAL TELECOM LIMITED (USA), INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE 1 - ORGANIZATION / SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND DESCRIPTION OF BUSINESS
Financial Telecom Limited (USA), Inc. (the "Company" or "FTL") was incorporated on April 28, 2003, under the laws of the State of Nevada, with an authorized capital of 500,000,000 shares of $0.001 par value common stock. Upon incorporation, 100% of the outstanding shares (100,000 shares) were held by The Hartcourt Companies, Inc. ("Hartcourt"), a public company incorporated and listed on the Over-The-Counter Bulletin Board ("OTCBB") in the United States of America.
Pursuant to an agreement dated September 1, 2003, between Hartcourt, Bowland
International Limited ("Bowland"), Mr. Tang Wing On ("Tang") and FTL, FTL
purchased from Hartcourt all the issued shares of Financial Telecom Limited
("FTL HK"), a private Hong Kong company organized in 1983, and assumed certain
obligations of FTL HK pertaining to Hartcourt, Bowland and Tang. As a result,
the amount due to Hartcourt and its subsidiaries were assumed by FTL, which in
turn waived such obligation from FTL HK for the issuance of 15,000,000 shares of
FTL common stock. As a result, Hartcourt became the sole shareholder of FTL.
Tang and Bowland were granted one-year options to purchase FTL common stock.
(See Note 3)
On September 10, 2003, FTL purchased from Hartcourt all of the outstanding shares of common stock of FTL HK and became a wholly-owned subsidiary of FTL. The transaction was accounted for as a reverse acquisition because the shareholders of the Company being acquired retained actual control of the resulting combined company. FTL HK is the continuing reporting entity for accounting purposes and FTL was the acquirer for legal purposes. The equity section reflects the recapitalization of the merger: retirement of old shares and issuance of new shares for the net equity of FTL. The Financial statements and financial information presented for both periods represent the financial data of FTL HK's operations. The effects of intercompany transactions and accounts have been eliminated in consolidation.
As a result of Hartcourt's spinoff of its subsidiary, FTL HK, the holders of record of Hartcourt's common stock at the close of business on October 17, 2003 ("record date"), will receive a distribution of .09232471 shares of the $0.001 par value common stock of FTL for each share of Hartcourt common stock outstanding as of the close of business on the record date. The distribution is expected to be effected during the second quarter of 2004, subject to approval for listing of FTL stock on the OTCBB exchange in the United States of America, and the shares will be freely transferable, except for shares received by persons deemed to be "affiliates" of the Company under the Securities Act of 1933, as amended, (the "Securities Act"). Individuals or entities that control, are controlled by or are under common control with the Company, including directors and principal executive officers and principal shareholders of FTL, will generally be considered as affiliates. Affiliates will be permitted to sell their shares of common stock only pursuant to an effective registration statement under the Securities Act or an exemption from the registration requirements of the Securities Act. As a result of the distribution, 100% of the outstanding shares of FTL will be distributed to Hartcourt shareholders on a pro rata basis. (See Note 7)
The Company, through its subsidiary, is principally engaged in the provision of telecommunication and financial quotation services and is headquartered in Hong Kong. The Company is subject to a number of business risks affecting companies at a similar stage of development, including competition from companies with greater resources and alternative technologies, the ability to obtain financing to fund future operations, dependence on new product introductions in a rapidly changing technological environment, dependence on a limited number of customers, dependence on key employees and the ability to attract and retain additional qualified personnel to manage the anticipated growth of the Company.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING METHOD - The Company uses the accrual method of accounting for financial statement and tax return purposes.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the accounts of the Company and its subsidiaries. The results of subsidiaries acquired or disposed of during the periods presented are consolidated from or to their effective dates of acquisition or disposal. All significant intercompany balances and transactions have been eliminated in consolidation.
USE OF ESTIMATES - The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS - For certain of the Company's financial instruments, including cash and cash equivalents, trade receivables and payables, prepaid expenses and other current assets, amounts due to / from related parties, and trade payables and other accruals, the carrying amounts approximate fair values due to their short maturities.
RELATED PARTY TRANSACTIONS - A related party is generally defined as (i) any person that holds 10% or more of the Company's securities and their immediate families, (ii) the Company's management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.
CASH AND CASH EQUIVALENTS - The Company considers all short-term, highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.
CONCENTRATION OF CREDIT RISK DUE TO GEOGRAPHIC SALES AND SERVICES - The Company's main operating unit derives revenues principally from quotation services in the Hong Kong market.
FIXED ASSETS - Fixed assets, stated at cost, are depreciated over the estimated useful lives of the assets using the straight-line method over periods ranging from three to ten years. Significant improvements and betterments are capitalized. Routine repairs and maintenance are expensed when incurred. Gains and losses on disposal of fixed assets are recognized in the statement of operations based on the net disposal proceeds less the carrying amount of the assets. Long-lived assets - Long-lived assets, such as fixed assets, are reviewed for impairment when circumstances indicate the carrying value of an asset may not be recoverable. For assets that are to be held and used, an impairment loss is recognized when the estimated undiscounted cash flows associated with the asset or group of assets is less than their carrying value. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value.
REVENUE RECOGNITION - Revenues are recognized when (i) the services are performed, (ii) collectibility is probable and (iii) such revenues are contractually nonrefundable.
Allowance for doubtful accounts - The Company presents accounts receivable, net of allowances for doubtful accounts and returns, to ensure accounts receivable are not overstated due to uncollectibility. The allowances are calculated based on detailed review of certain individual customer accounts, historical rates and an estimation of the overall economic conditions affecting the Company's customer base. The Company reviews a customer's credit history before extending credit. If the financial condition of its customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.
ADVERTISING COSTS - Advertising costs are expensed as incurred and amounted to $813 for 2003 (2002: $1,315).
INCOME TAXES - The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards ("SFAS" No. 109), "Accounting for Income Taxes," whereby deferred income tax assets and liabilities are computed for differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary, to reduce deferred income tax assets to the amount expected to be realized.
COMPREHENSIVE INCOME - The Company includes items of other comprehensive income by their nature in a financial statement and displays the accumulated balance of other comprehensive income separately in the equity section of the balance sheet. The Company discloses total comprehensive income (loss), its components and accumulated balances on its statement of stockholders' equity.
FOREIGN CURRENCY TRANSLATION - The reporting currency used in the preparation of these consolidated financial statements is U.S. dollars. Local currencies are the functional currencies for the Companies subsidiaries. For the purpose of consolidation, assets and liabilities of subsidiaries with functional currencies other than U.S. dollars are translated into U.S. dollars at the applicable rates of exchange in effect at the balance sheet date and income and expense items are translated into U.S. dollars at the average applicable rates during the year. Translation gains and losses resulting from fluctuations in exchange rates are recorded as a separate component of other comprehensive income within stockholders' equity as cumulative translation adjustments. Gains and losses resulting from foreign currency transactions are included in results of operations.
EARNINGS PER SHARE - Basic earnings per share ("EPS") are calculated using net earnings (loss) (numerator) divided by the weighted-average number of shares outstanding (denominator) during the reporting period. Diluted earnings or loss per share is based on the weighted average number of common shares outstanding divided by dilutive common stock equivalents. Basic earnings/loss per share excludes the dilutive effect of shares under option because to do so would be antidilutive. All per share and per share information are adjusted retroactively to reflect stock splits and changes in par value. All per share amounts in these financial statements are basic earnings or loss per share.
RECENT ACCOUNTING PRONOUNCEMENTS - The Financial Accounting Standards Board issued the following new accounting pronouncements during 2003:
Interpretation No. 46 "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51" (FIN 46). FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after June 15, 2003. FIN 46 does not have any impact on the financial position or results of operations of the Company.
In April 2003, the FASB issued SFAS No. 149, "Accounting for Amendment of Statement 133 on Derivative Instruments and Hedging Activities," which amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. This Statement is generally effective for contracts entered into or modified after June 30, 2003, and all provisions should be applied prospectively. This statement does not affect the Company.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity," which establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. It is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of the Statement and still existing at the beginning of the interim period of adoption. Restatement is not permitted. This statement does not affect the Company.
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplates continuation of the Company as a going concern. However, the Company has a negative working capital and a significant accumulated deficit resulting in a net stockholders' deficiency. In view of these matters, realization of a major portion of the assets in the accompanying balance sheet is dependent upon the continued operations of the Company, which in turn is dependent upon the Company's ability to meet its financing requirements, and the success of its future operations.
To meet these objectives, certain directors have agreed to provide adequate funds for the Company to meet its obligations as they become due. The Company may also seek additional equity and raise funds through private or public equity investment in order to support existing operations and expand the range and scope of its business. There is no assurance that such additional funds will be available for the Company on acceptable terms, if at all. Should the Company be unable to continue as a going concern, it may have to cease its operations.
Management believes that actions presently taken to revise the Company's operating and financial requirements provide the opportunity for the Company to continue as a going concern. The Company's ability to achieve these objectives cannot be determined at this time.
TREASURY STOCK. Pursuant to a special resolution passed at an extraordinary general meeting of the Company held on July 9, 2003, the following events took place: (i) the Company entered into an agreement with Bowland, the then shareholder of the Company, to purchase 3,427,349 shares of its $0.1282 par value common stock for nominal consideration of $0.1282; and (ii) the Company entered into an agreement with Tang, the then shareholder of the Company, to purchase 92,000 shares of its $0.1282 par value common stock for nominal consideration of $0.1282.
COMMON STOCK. Bowland and Tang have one-year options, expiring on September 1, 2004, to either (i) purchase a proportionate number of new shares of FTL common stock or (ii) the option of converting amounts owed to them in lieu of purchasing a proportionate number of new shares. At December 31, 2003, amounts due to Bowland and Tang are $645,405 and $20,513, respectively, (see Note 4), and each has a one-year option to convert a proportionate amount of its amounts due from FTL HK to 40.40% and 1.08%, respectively, of the issued and outstanding shares of FTL.
In exchange for the waiver of amounts due ($697,566) to Hartcourt, the Company issued 15,000,000 shares of common stock.
AMOUNTS DUE FROM / TO RELATED PARTIES ARE UNSECURED, INTEREST-FREE, HAVE NO FIXED TERMS OF REPAYMENT, AND CONSISTED OF THE FOLLOWING:
2003 2002
------------ ------------
AMOUNTS DUE FROM RELATED PARTIES:
Due from fellow subsidiaries [1] $ -- $ 25,187
=========== ============
AMOUNTS DUE TO RELATED PARTIES:
Due to related companies [2] $ 80,619 $ 5,725
Due to a minority shareholder [2] 23,077 23,077
Due to directors [2] 6,731 2,744
Due to former shareholders [3] 665,918 538,149
Due to ultimate holding company [1] -- 608,604
Due to fellow subsidiaries [1] -- 76,782
------------ ------------
$ 776,345 $ 1,255,081
============ ============
|
[1] The amounts were unsecured, interest-free and wholly written off during the year in accordance with an agreement with the ultimate holding company.
[2] The amounts were unsecured, interest-free and have no fixed terms of repayment.
[3] The loans are unsecured and have no fixed terms of repayment. Interest is charged on the outstanding balances at prime plus 3% per annum for the interest-bearing portion.
THE FOLLOWING IS A SUMMARY OF SIGNIFICANT RELATED PARTY PURCHASE TRANSACTIONS, WHICH WERE CARRIED OUT IN THE NORMAL COURSE OF THE COMPANY'S BUSINESS:
2003 2002
------------ ------------
BOWLAND INTERNATIONAL LIMITED
Loan interest expense [1] $ 38,856 $ 44,721
Proceeds on disposal of subsidiary -- 122,478
Rental charge for leased office space 24,615 25,330
Management fee 43,785 43,785
HARTCOURT CAPITAL ASIA LIMITED
(formerly known as Fintel International Limited) [2]
Rental charge of leased office space -- 1,456
Waiver of amount due from Hartcourt Capital Asia Limited -- 3,261
TOPOMEDIA INTERNATIONAL LIMITED [3]
Rental charge for leased office space 14,462 9,680
Waiver of amount due from Topomedia International Limited -- 1,115,963
HARTCOURT CAPITAL, INC. [4]
Disposal of fixed assets at net book value -- 20,084
THE HARTCOURT COMPANIES, INC. [5]
Waiver of amount due to The Hartcourt Companies, Inc. 697,566 --
|
[1] Bowland International Limited is a former shareholder of the Company. Loan interest was charged at prime rate plus 3% per annum.
[2] Fintel International Limited is a related company with common directors.
[3] Topomedia International Limited is a former subsidiary of the Group, which had been disposed of to Bowland International Limited during the year ended December 31, 2002.
[4] Harcourt Capital, Inc. is a fellow subsidiary.
[5] On September 1, 2003, Hartcourt, Bowland, Tang, and FTL entered into an agreement for the purchase of shares. Pursuant to the terms of the agreement, FTL purchased from Hartcourt all the issued shares of FTL HK and assumed certain obligations of FTL HK pertaining to Hartcourt, Bowland and Tang. As a result, the amount due to Hartcourt and its subsidiaries were assumed by FTL, which in turn waived such obligation from FTL HK.
Fixed assets consist of the following:
2003 2002
------------ ------------
Office equipment $ 352,395 $ 352,395
Leasehold improvements 14,628 14,628
Furniture and equipment 111,837 111,837
Computer and transmission equipment 1,742,028 1,742,028
------------ ------------
Total 2,220,888 2,220,888
Less accumulated depreciation 2,213,734 2,205,464
------------ ------------
Net book value $ 7,154 $ 15,426
============ ============
|
Depreciation expense charged to operations for 2003 was $8,272 (2002: $421,270).
No provision for U.S. federal income tax has been provided for in the financial statements as the parent company had no operations. No provision for Hong Kong profits tax has been provided for in the financial statements as the Company's subsidiary operations had no assessable profits for the year. Hong Kong Profits Tax is calculated at 17.5% (2002: 16%) of the estimable assessable profit for the year.
There is no current or deferred tax expense for the years ended December 31, 2003 and 2002, due to the Company's loss position. The Company has fully reserved for any benefits of these losses because the Company believes sufficient uncertainty exists regarding the realizability of the net operating loss carryforwards and other timing differences for the periods presented.
The deferred tax consequences of temporary differences in reporting items for financial statement and income tax purposes are recognized, as appropriate. Realization of the future tax benefits related to the deferred tax assets is dependent on many factors, including the Company's ability to generate taxable income within the net operating loss carryforward period. Management has considered these factors in reaching its conclusion as to the valuation allowance for financial reporting purposes. The income tax effect of temporary differences comprising the deferred tax assets on the accompanying consolidated balance sheets is a result of the following:
THE NET DEFERRED INCOME TAX ASSET CONSISTED OF THE FOLLOWING:
2003 2002
------------ ------------
Deferred tax assets
Net operating loss carryforwards $ 740,378 $ 660,421
Deductible temporary differences 4,590 7,630
------------ ------------
744,968 668,051
Less valuation allowance (744,968) (668,051)
Deferred tax liability -- --
------------ ------------
$ -- $ --
============ ============
|
The net increase in the valuation allowance for 2003 was approximately $77,000 (2002: $16,000). The Company net operating loss carryforwards have no expiration date. All of the deferred tax assets were generated by the Company's foreign wholly-owned subsidiary. The Company does not file a U.S. consolidated tax return because its subsidiary is a foreign corporation.
OPERATING LEASES - The Company is committed under various noncancelable
operating leases which expire through February 2006. Rent expense charged to
operations for 2003 was $40,423 (2002: $47,846). Future minimum rental
commitments under noncancelable leases through February 2006 are as follows:
2004: $28,244; 2005: $21,231; and 2006: $1,769.
DISTRIBUTION PAYABLE - See Note 1 to the financial statements re the Company's plan to effect a distribution of its common stock.
During the year ended December 31, 2002, FTL HK disposed of a subsidiary, Topomedia International Limited, to Bowland International Limited, for a consideration of $122,478 and a recorded a gain on disposal of $621,124. In addition, FTL HK agreed to waive the amount of $1,115,963 due from Topomedia International Limited subsequent to the disposal.
Net loss on disposal of the subsidiary was calculated as follows:
Total assets $ 773,576
Total liabilities (156,361)
Total stockholders' deficiency (122,376)
-------------
$ 494,839
=============
|
EXHIBIT 2.1
ARTICLES OF INCORPORATION
OF
FINANCIAL TELECOM LIMITED (USA), INC.
A Nevada Corporation
I
The name of the corporation is: FINANCIAL TELECOM LIMITED (USA), INC.
II
The principal office of the corporation in the County of Clark is 2915 W. Charleston Blvd., #7, Las Vegas, Nevada, 89012.
III
The corporation shall have a perpetual existence.
IV
The corporation may engage in any lawful activity, subject to express limitations, if any. A principal business activity of the corporation is Telecom sales.
V
The total authorized capital of the corporation is Five Hundred Million shares (500,000,000) of common stock, valued at Point zero zero One ($0.001) each share.
VI
The corporation is comprised of Three Directors. The number of Directors may be changed by the Board of Directors.
VII
The liabilities of the Directors of the corporation for monetary damages shall be eliminated to the fullest extent permissible under Nevada Law. (Nevada Revised Stat. 78.037)
VIII
The first Directors of the corporation are:
Stephen Tang, 2500 E. Colorado Blvd., Suite 301, Pasadena, CA 91107
Richard Yan, 2500 E. Colorado Blvd., Suite 301, Pasadena, CA 91107
John Furutani, 2500 E. Colorado Blvd., Suite 301, Pasadena, CA 91107
IX
The original incorporator is: L. H. Joseph Jr., 8344 Melrose Ave., #23, Los Angeles, CA 90069.
X
The resident agent of this corporation in the State of Nevada is: L. H. Joseph Jr. and Associates-Nevada, Inc., 2915 W. Charleston Blvd., #7, Las Vegas, Nevada, 89102.
XI
The Board of Directors shall have the power to make, alter, amend or repeal the bylaws of the corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and executed the ARTICLES OF INCORPORATION this 25th day of April 19 2003.
/S/ L. H. JOSEPH JR. ---------------------------------- L. H. Joseph Jr., Incorporator |
EXHIBIT 2.2
AMENDED AND RESTATED BYLAWS OF
FINANCIAL TELECOM LIMITED (USA), INC.
ARTICLE I
SHAREHOLDER'S MEETINGS
SECTION 1. TIME. An annual meeting for the election of directors and for the transaction of any other proper business and any special meeting shall be held on the date and at the time as the Board of Directors shall from time to time fix.
Time of Meeting: 10:00 o'clock A.M.
Date of Meeting: The 15th day of March, in each year starting 2004.
SECTION 2. PLACE. Annual meetings and special meetings shall be held at such place, within or without the State of Nevada as the Directors may from time to time fix. Whenever the Directors shall fail to fix such place, the meetings shall be held at the principal executive office of the corporation.
SECTION 3. CALL. Annual meetings may be called by the Directors, by the Chairperson of the Board, if any, Vice-Chairperson of the Board, if any, the President, if any, the Secretary, or by any officer instructed by the Directors to call the meeting. Special meetings may be called in like manner and by the holders of shares entitled to cast not less than Ten Per Cent (10%) of the votes at the meeting being called.
SECTION 4. NOTICE. Written notice stating the place, day and hour of each
meeting, and in the case of a Special Meeting, the general nature of the
business to be transacted or, in the case of an Annual Meeting, those matters
which the Board of Directors, at the time of mailing of the notice, intends to
present for action by the shareholders, shall by given not less than Ten (10)
days (or not less than any such other minimum period of days as may be
prescribed by the General Corporation Law of this State or more than Sixty days
(60) (or more than any such maximum period of days as may be prescribed by the
General Corporation Law of this State, before the date of the meeting, by mail,
personally, or by other means of written communication, charges prepaid by or at
the direction of the Directors, the President, if any, the Secretary or the
Officer or persons calling the meeting, addressed to each shareholder at his/her
address appearing on the books of the corporation or given by him/her to the
corporation for the purpose of notice or, if no such address appears or is
given, at the place where the principal executive office of the corporation is
located, or by publication at least once in a newspaper of general circulation
in the county in which the said principal executive office is located.
Such notice shall be deemed to be delivered when deposited in the United States mail with first class postage therein prepaid, or sent by other means of written communication addressed to the shareholder at his/her address as it appears on the stock transfer books of the corporation. The notice of any meeting at which
Directors are to be elected shall include the names of nominees intended at the time of notice to be presented by management for election. At an Annual Meeting of shareholders, any matter relating to the affairs of the corporation, whether or not stated in the notice of the meeting, may be brought up for action except matters which the General Corporation Law of this State requires to be stated in the notice of the meeting. The notice of any Annual or Special Meeting shall also include, or be accompanied by, any additional statements, information, or documents prescribed by the General Corporation Law. When a meeting is adjourned to another time or place, notice of the adjourned meeting need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken, provided that, if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting.
SECTION 5. CONSENT. The transaction of any meeting, however called and noticed, and wherever held, shall be as valid as though a meeting duly held after regular call and notice, if a quorum is present and if, either before or after the meeting, each of the shareholders or his/her proxy signs a written waiver of notice or a consent to the holding of the meeting or an approval of the Minutes thereof. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the Minutes of the meeting. Attendance of a person at a meeting constitutes a waiver of notice of such meeting, except when the person objects at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened, and except that attendance at a meeting shall not constitute a waiver of any right to object to the consideration of matters required by the General Corporation Law to be included in the notice if such objection is expressly made at the meeting. Except as otherwise provided by the laws of this State, neither the business to be transacted at nor the purpose of any regular or special meeting need be specified in any written waiver of notice.
SECTION 6. CONDUCT OF MEETING. Meetings of the shareholders shall be presided over by one of the following officers in the order of seniority and if present and acting: the Chairperson of the Board, if any; the Vice-Chairperson of the Board, if any; the President, if any; a Vice-President; or, if none of the foregoing is in office and present and acting, by a Chairperson to be chosen by the shareholders. The Secretary of the corporation, or in his/her absence, an Assistant Secretary, shall act as Secretary of every meeting, but, if neither the Secretary nor an Assistant Secretary is present, the Chairperson of the meeting shall appoint a Secretary of the meeting.
SECTION 7. PROXY REPRESENTATION. Every shareholder may authorize another person or persons to act as his/her proxy at a meeting or by written action. No proxy shall be valid after the expiration of Eleven (11) months from the date of its execution unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the person executing it prior to the vote or written action pursuant thereto, except as otherwise provided by the laws of this State. As used herein, a "proxy" shall be deemed to mean a written authorization signed by a shareholder or a shareholder's attorney in fact giving another person or persons power to vote or consent in writing with respect to the shares of such shareholder, and "Signed" as used herein shall be deemed to mean the placing of such shareholder's name on the proxy, whether by manual signature, typewriting, telegraphic transmission or otherwise by such shareholder or such shareholder's attorney in fact. Where applicable, the form of any proxy shall comply with the provisions of the laws of this State.
SECTION 8. INSPECTORS - APPOINTMENT. In advance of any meeting, the Board of Directors may appoint inspectors of election to act at the meeting and any adjournment thereof. If inspectors of election are not so appointed, or, if any person so appointed fails to appear or refuse to act, the Chairperson of any meeting of shareholders may, and on the request of any shareholder or a shareholder's proxy shall, appoint inspectors of election, or persons to replace any of those who so fail or refuse to act, at the meeting. The number of inspectors shall be either One (1) or Three (3). If appointed at a meeting on the request of one or more shareholders or proxies, the majority of shares represented shall determine whether one or three inspectors are to be appointed.
The inspectors of election shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the authenticity, validity, and effect of proxies, receive votes, ballots, if any, or consents, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes or consents, determine when the polls shall close, determine the result, and do such acts as may be proper to conduct the election or vote with fairness to all shareholders. If there are Three (3) inspectors of election, the decision, act, or certificate of a majority shall be effective in all respects as the decision, act, or certificate of all.
SECTION 9. SUBSIDIARY CORPORATIONS. Shares of this corporation owned by a subsidiary shall not be entitled to vote on any matter. A subsidiary for these purposes is defined as a corporation, the shares of which possessing more than 25 % of the total combined voting power of all classes of shares entitled to vote, are owned directly or indirectly through one or more subsidiaries.
SECTION 10. QUORUM; VOTE: WRITTEN CONSENT. The holders of a majority of the voting shares shall constitute a quorum at a meeting of shareholders for the transaction of any business. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum if any action taken, other than adjournment, is approved by at least a majority of the shares required to constitute a quorum. In the absence of a quorum, any meeting of shareholders may be adjourned from time to time by the vote of a majority of the shares represented thereat, but no other business may be transacted except as hereinbefore provided.
In the election of Directors, a plurality of the votes cast shall elect. No shareholder shall be entitled to exercise the right of cumulative voting at a meeting for the election of Directors unless the candidate's name or the candidates' names have been placed in nomination prior to the voting, and the shareholder has given notice at the meeting prior to the voting of the shareholder's intention to cumulate the shareholder's votes. If anyone shareholder has given such notice, all shareholders may cumulate their votes for such candidates in nomination.
Except as otherwise provided by the laws of this State, the Articles of Incorporation or these Bylaws, any action required or permitted to be taken at a meeting at which a quorum is present shall be authorized by the affirmative vote of a majority of the shares represented at the meeting.
Except in the election of Directors by written consent in lieu of a meeting, and except as may otherwise be provided by the laws of this State, the Articles of Incorporation or these Bylaws, any action which may be taken at any Annual or Special Meeting may be taken without a meeting and without prior notice, if a consent in writing setting forth the action so taken shall be signed by holders of shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Directors may not be elected by written consent except by unanimous written consent of all shares entitled to vote for the election of Directors. Notice of any shareholder approval pursuant to the laws of this State without a meeting by less than unanimous written consent shall be given at least Ten (10) days before the consummation of the action authorized by such approval, and prompt notice shall be given of the taking of any other corporate action approved by shareholders without a meeting by less than unanimous written consent, to those shareholders entitled to vote who have not consented in writing.
SECTION 11. BALLOT. Elections of Directors at a meeting need not be by ballot unless a shareholder demands election by ballot at the election and before the voting begins. In all other matters, voting need not be by ballot.
SECTION 12. SHAREHOLDERS AGREEMENTS. Notwithstanding the above provisions in the event this corporation elects to become a close corporation, an agreement between two or more shareholders thereof, if in writing and signed by the parties thereof, may provide that in exercising any voting rights the shares held by them shall be voted as provided therein, or under the laws of this State, and may otherwise modify these provisions as to shareholders meetings and actions.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. FUNCTIONS. The business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of its Board of Directors. The Board of Directors may delegate the management of the day-to-day operation of the business of the corporation to a management company or other person, provided that the business and affairs of the corporation shall be managed and all corporate powers shall be exercised under the ultimate direction of the Board of Directors. The Board of Directors shall have authority to fix the compensation of Directors for services in any lawful capacity.
Each Director shall exercise such powers and otherwise perform such duties in good faith, in the manner such Director believes to be in the best interests of the corporation, and with care, including reasonable inquiry, using ordinary prudence, as a person in a like position would use under similar circumstances and under the laws of this State.
SECTION 2. EXCEPTION FOR CLOSE CORPORATION. Notwithstanding the provisions of
Section 1, in the event that this corporation shall elect to become a close
corporation as defined in Section 186, its shareholders may enter into a
Shareholders' Agreement as provided by the laws of this State. Said Agreement
may provide for the exercise of corporate powers and the management of the
business and affairs of this corporation by the shareholders, provided however
such Agreement shall, to the extent and so long as the discretion or the powers
of the Board in its management of corporate affairs is controlled by such
Agreement, impose upon each shareholder who is a party thereof, liability for
managerial acts performed or omitted by such person pursuant thereto otherwise
imposed upon Directors as provided under the laws of this State.
SECTION 3. QUALIFICATIONS AND NUMBER. A Director need not be a shareholder of the corporation, a citizen of the United States, or a resident of the State of Nevada. The authorized number of Directors constituting the Board of Directors until further changed shall be Three (3). Thereafter, the authorized number of Directors constituting the Board shall be at least Three (3) provided that whenever the corporation shall have only Two (2) shareholders, the number of Directors may be at least Two (2), and, whenever the corporation shall have only One (1) shareholder, the number of Directors may be at least One (1). Subject to the foregoing provisions, the number of Directors may be changed from time to time by an amendment of these Bylaws adopted by the shareholders. Any such amendment reducing the number of Directors to fewer than Five (5) cannot be adopted if the votes cast against its adoption at a meeting or the shares not consenting in writing in the case of action by written consent are equal to more than Sixteen and Two-Thirds Per Cent (16 2/3 %) of the outstanding shares. No decrease in the authorized number of Directors shall have the effect of shortening the term of any incumbent Director.
SECTION 4. ELECTION AND TERM. The initial Board of Directors shall consist of the persons elected at the meeting of the incorporator, all of whom shall hold office until the first Annual Meeting of shareholders and until their successors have been elected and qualified, or until their earlier resignation or removal from office. Thereafter, Directors who are elected to replace any or all of the members of the initial Board of Directors or who are elected at an Annual Meeting of shareholders, and Directors who are elected in the interim to fill vacancies, shall hold office until the next Annual Meeting of shareholders and until their successors have been elected and qualified, or until their earlier resignation, removal from office, or death. In the interim between Annual Meetings of shareholders or of Special Meetings of shareholders called for the election of Directors, any vacancies in the Board of Directors, including vacancies resulting from an increase in the authorized number of Directors which have not been filled by the shareholders, including any other vacancies which the laws of this State authorize Directors to fill, and including vacancies resulting from the removal of Directors which are not filled at the meeting of shareholders at which any such removal has been effected, if the Articles of Incorporation or a Bylaw adopted by the shareholders so provides, may be filled by the vote of a majority of the Directors then in office or of the sole remaining Director, although less than a quorum exists. Any Director may resign effective upon giving written notice to the Chairperson of the Board, if any, the President, the Secretary or the Board of Directors, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to the office when the resignation becomes effective.
The shareholders may elect a Director at any time to fill any vacancy which the Directors are entitled to fill, but which they have not filled. Any such election by written consent shall require the consent of a majority of the shares.
SECTION 5. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. The corporation may indemnify any Director, Officer, agent or employee as to those liabilities and on those terms and conditions as are specified by the laws of this State. In any event, the corporation shall have the right to purchase and maintain insurance on behalf of any such persons whether or not the corporation would have the power to indemnify such person against the liability insured against.
SECTION 6. MEETINGS. TIME. Meetings shall be held at such time as the Board shall fix, except that the first meeting of a newly elected Board shall be held as soon after its election as the Directors may conveniently assemble.
PLACE. Meetings may be held at any place, within or without the State of Nevada which has been designated in any notice of the meeting, or if not stated in said notice, or if there is no notice given, at the place designated by resolution of the Board of Directors.
CALL. Meetings may be called by the Chairperson of the Board, if any and acting; by the Vice-Chairperson of the Board, if any; by the President, if any; by any Vice-President or Secretary; or by any two Directors.
NOTICE AND WAIVER THEREOF. No notice shall be required for regular meetings for which the time and place have been fixed by the Board of Directors. Special meetings shall be held upon at least Four (4) days notice by mail or upon at least Forty- Eight (48) hours notice delivered personally or by telephone or telegraph. Notice of a meeting need not be given to any Director who signs a waiver of notice, whether before or after the meeting, or who attends the meeting without protesting prior thereto or at its commencement, the lack of notice to such Director. A notice or waiver of notice need not specify the purpose of any regular or special meeting of the Board of Directors.
SECTION 7. SOLE DIRECTOR PROVIDED BY ARTICLES OF INCORPORATION. In the event only One (1) Director is required by the Bylaws or Articles of Incorporation, then any reference herein to notices, waivers, consents, meetings or other actions by a majority or quorum of the Directors shall be deemed to refer to such notice, waiver, etc., by such sole Director, who shall have all the rights and duties and shall be entitled to exercise all of the powers and shall assume all the responsibilities otherwise herein described as given to a Board of Directors.
SECTION 8. QUORUM AND ACTION. A majority of the authorized number of Directors shall constitute a quorum except when a vacancy or vacancies prevents such majority, whereupon a majority of the Directors in office shall constitute a quorum, provided such majority shall constitute at least either One-Third (1/3) of the authorized number of Directors or at least Two (2) Directors, whichever is larger, or unless the authorized number of Directors is only One (1). A majority of the Directors present, whether or not a quorum is present, may adjourn any meeting to another time and place. If the meeting is adjourned for
more than Twenty-Four (24) hours, notice of any adjournment to another time or place shall be given prior to the time of the adjourned meeting to the Directors, if any, who were not present at the time of the adjournment. Except as the Articles of Incorporation, these Bylaws and the laws of this State may otherwise provide, the act or decision done or made by a majority of the Directors present at a meeting duly held at which a quorum is present shall be the act of the Board of Directors. Members of the Board of Directors may participate in a meeting through use of conference telephone or similar communications equipment, as long as all members participating in such meeting can hear one another, and participation by such use shall be deemed to constitute presence in person at any such meeting.
A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of Directors, provided that any action which may be taken is approved by at least a majority of the required quorum for such meeting.
SECTION 9. CHAIRPERSON OF THE MEETING. The Chairperson of the Board, if any, and if present and acting; the Vice-Chairperson of the Board, if any and if present and acting; shall preside at all meetings. Otherwise, the President, if any and present and acting, or any Director chosen by the Board, shall preside.
SECTION 10. REMOVAL OF DIRECTORS. The entire Board of Directors or any individual Director may be removed from office without cause by approval of the holders of at least a majority of the shares provided, that unless the entire Board is removed, an individual Director shall not be removed when the votes cast against such removal, or not consenting in writing to such removal, would be sufficient to elect such Director if voted cumulatively at an election of Directors at which the same total number of votes were cast, or, if such action is taken by written consent, in lieu of a meeting, all shares entitled to vote were voted, and the entire number of Directors authorized at the time of the Director's most recent election were then being elected. If any or all Directors are so removed, new Directors may be elected at the same meeting or by such written consent. The Board of Directors may declare vacant the office of any Director who has been declared of unsound mind by an order of court or convicted of a felony.
SECTION 11. COMMITTEES. The Board of Directors, by resolution adopted by a majority of the authorized number of Directors, may designate one or more committees, each consisting of Two (2) or more Directors to serve at the pleasure of the Board of Directors. The Board of Directors may designate one or more Directors as alternate members of any such committee, who may replace any absent member at any meeting of such committee. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have all the authority of the Board of Directors except such authority as may not be delegated by the provisions of the laws of this State.
SECTION 12. INFORMAL ACTION. The transactions of any meeting of the Board of Directors, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice if a quorum is present, and if either before or after the meeting each of the Directors not present signs a written waiver of notice, a consent to holding the meeting, or an approval of the Minutes thereof. All such waivers, consents, or approvals shall be filed with the corporate records or made a part of the Minutes of the meeting.
SECTION 13 . WRITTEN ACTION. Any action required or permitted to be taken may be taken without a meeting if all of the members of the Board of Directors shall individually or collectively consent in writing to such action. Any such written consent or consents shall be filed with the Minutes of the proceedings of the Board. Such action by written consent shall have the same force and effect as a unanimous vote of such Directors.
ARTICLE III
OFFICERS
SECTION 1. OFFICERS. The Officers of the corporation shall be a Chairperson of the Board or a President or both, a Secretary and a Treasurer (CFO). The corporation may also have, at the discretion of the Board of Directors, one or more Vice-Presidents, one or more Assistant Secretaries, and such other Officers as may be appointed in accordance with the provisions of Section 3 of this Article. One person may hold Two (2) or more offices.
SECTION 2. ELECTION. The Officers of the corporation, except such Officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this Article shall be chosen annually by the Board of Directors, and each shall hold his/her office until he/she shall resign or shall be removed or otherwise disqualified to serve, or his/her successor shall be elected and qualified.
SECTION 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may appoint such other Officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in the Bylaws or as the Board of Directors may from time to time determine.
SECTION 4. REMOVAL AND RESIGNATION. Any Officer may be removed, either with or
without cause, by a majority of the Directors at the time in office, at any
regular or special meeting of the Board, or, except in case of an Officer chosen
by the Board of Directors, by any Officer upon whom such power of removal may be
conferred by the Board of Directors.
Any Officer may resign at any time by giving written notice to the Board of
Directors, or to the President, or to the Secretary of the corporation. Any such
resignation shall take effect at the date of the receipt of such notice or at
any later time specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 5. VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in the Bylaws for regular appointments to such office.
SECTION 6. CHAIRPERSON OF THE BOARD. The Chairperson of the Board, if there shall be such an Officer, shall, if present, preside at all meetings of the Board of Directors, and exercise and perform such other powers and duties as may be from time to time assigned to him/her by the Board of Directors or prescribed by the Bylaws.
SECTION 7. PRESIDENT. Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairperson of the Board, if there be such an Officer the President shall be the Chief Executive Officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and Officers of the corporation. He/she shall preside at all meetings of the shareholders and in the absence of the Chairperson of the Board, or if there be none, at all meetings of the Board of Directors. He/she shall be ex officio a member of all the standing committees, including the Executive Committee, if any, and shall have the general powers and duties of management usually vested in the office of President of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or the Bylaws.
SECTION 8. VICE-PRESIDENT. In the absence or disability of the President, the Vice- Presidents, in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice-President designated by the Board of Directors, shall perform all the duties of the President, and when so acting shall have all the powers of, and be subject to, all the restrictions upon, the President. The Vice-Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors or the Bylaws.
SECTION 9. SECRETARY. The Secretary shall keep, or cause to be kept, a book of minutes at the principal office or such other place as the Board of Directors may order, of all meetings of Directors and Shareholders, with the time and place of holding, whether regular or special, and if special, how authorized, the notice thereof given, the names of those present at Directors' meetings, the number of shares present or represented at Shareholders' meetings and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office or at the office of the corporation's transfer agent, a share register, or duplicate share register, showing the names of the shareholders and their addresses; the number and classes of shares held by each; the number and date of certificates issued for the same; and the number and date of cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the meetings of the shareholders and of the Board of Directors required by the Bylaws or by law to be given, and he/she shall keep the seal of the corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the laws of this State, or by the Bylaws.
SECTION 10. TREASURER (CFO). This Officer shall keep and maintain, or cause to be kept and maintained in accordance with generally accepted accounting principles, adequate and correct accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, earnings (or surplus) and shares. The books of account shall at all reasonable times be open to inspection by any Director.
This officer shall deposit all monies and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the Board of Directors. He/she shall disburse the funds of the corporation as may be ordered by the Board of Directors, shall render to the President and Directors, whenever they request it, an account of all his/her transactions and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or the Bylaws.
ARTICLE IV
CERTIFICATES AND TRANSFERS OF SHARES
SECTION 1. CERTIFICATES FOR SHARES. Each certificate for shares of the corporation shall set forth therein the name of the record holder of the shares represented thereby, the number of shares and the class or series of shares owned by said holder, the par value, if any, of the shares represented thereby, and such other statements, as applicable, prescribed by the laws of this State, and such other statements, as applicable, which may be prescribed by the Corporate Securities Law of this State. Each such certificate issued shall be signed in the name of the corporation by the Chairperson of the Board of Directors, if any; or the Vice-Chairperson of the Board of Directors, if any; the President, if any; or a Vice-President, if any; and by the Chief Financial Officer or an Assistant Treasurer or the Secretary or an Assistant Secretary. Any or all of the signatures on a certificate for shares may be a facsimile. In case any Officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate for shares shall have ceased to be such Officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue.
In the event that the corporation shall issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor, any such certificate for shares shall set forth thereon the statements prescribed by the laws of this State.
SECTION 2. LOST OR DESTROYED CERTIFICATES FOR SHARES. The corporation may issue a new certificate for shares or for any other security in the place of any other certificate theretofore issued by it, which is alleged to have been lost, stolen or destroyed. As a condition to such issuance, the corporation may require any such owner of the allegedly lost, stolen or destroyed certificate or any such owner's legal representative to give the corporation a bond, or other adequate security, sufficient to indemnify it against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.
SECTION 3. SHARE TRANSFERS. Upon compliance with any provisions of the laws of this State and/or the Corporate Securities Law which may restrict the transferability of shares, transfers of shares of the corporation shall be made only on the record of shareholders of the corporation by the registered holder thereof, or by his/her attorney thereunto authorized by Power of Attorney duly executed and filed with the Secretary of the corporation or with a transfer agent or a registrar, if any, and on surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes, if any, due thereon.
SECTION 4. RECORD DATE FOR SHAREHOLDERS. In order that the corporation may determine the shareholders entitled to notice of any meeting or to vote or be entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action, the Board of Directors may fix in advance a record date, which shall not be more than Sixty (60) days or fewer than Ten (10) days prior to the date of such meeting or more than Sixty (60) days prior to any other action.
If the Board of Directors shall not have fixed a record date as aforesaid, the
record date for determining shareholders entitled to notice of or to vote at a
meeting of shareholders shall be at the close of business on the business day
next preceding the day on which notice is given or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held; the record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors has been taken, shall be the day on which the first
written consent is given; and the record date for determining shareholders for
any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto, or the Sixtieth
(60th) day prior to the day of such other action, whichever is later.
A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting unless the Board of Directors fixes a new record date for the adjourned meeting, but the Board of Directors shall fix a new record date if the meeting is adjourned for more than Forty-Five (45) days from the date set for the original meeting.
Except as may be otherwise provided by the General Corporation Law, shareholders on the record date shall be entitled to notice and to vote or to receive any dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date.
SECTION 5. REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Shares of other corporations standing in the name of this corporation may be voted or represented and all incidents thereto may be exercised on behalf of the corporation by the Chairperson of the Board, the President or any Vice-President or any other person authorized by resolution of the Board of Directors.
SECTION 6. MEANING OF CERTAIN TERMS. As used in these Bylaws, the term "share"
or "shares" or "shareholder" or "shareholders" refers to an outstanding share or
shares, and to a holder or holders of record of outstanding shares. Said
reference is also intended to include any outstanding share or shares and any
holder or holders of record of outstanding shares of any class upon which or
upon whom the Articles of Incorporation confer such rights where there are Two
(2) or more classes or series of shares.
SECTION 7. CLOSE CORPORATION CERTIFICATES. All certificates representing shares of this corporation, in the event it shall elect to become a close corporation, shall contain the legend required by the laws of this State.
ARTICLE V
EFFECT OF SHAREHOLDERS AGREEMENT - CLOSE CORPORATION
Any Shareholders Agreement authorized by the laws of this State shall only be effective to modify the terms of these Bylaws if this corporation elects to become a close corporation with appropriate filing of or amendment to its Articles as required by the laws of this State, and shall terminate when this corporation ceases to be a close corporation.
ARTICLE VI
CORPORATE CONTRACTS AND INSTRUMENTS - HOW EXECUTED
The Board of Directors, except as in the Bylaws otherwise provided, may authorize any officer or Officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation. Such authority may be general or confined to specific instances. Unless so authorized by the Board of Directors, no Officer, agent or employee shall have any power or authority to bind the corporation by any contract or agreement, or to pledge its credit, or to render it liable for any purposes or any amount, except as provided by the laws of this State.
ARTICLE VII
CONTROL OVER BYLAWS
After the initial Bylaws of the corporation shall have been adopted by the Incorporator or Incorporators of the corporation, the Bylaws may be amended or repealed or new Bylaws may be adopted by the shareholders entitled to exercise a majority of the voting power or by the Board of Directors; provided, however, that the Board of Directors shall have no control over any Bylaw which fixes or changes the authorized number of Directors of the corporation; provided, further, that any control over the Bylaws herein vested in the Board of Directors shall be subject to the authority of the aforesaid shareholders to amend or repeal the Bylaws or to adopt new Bylaws; and provided further that any Bylaw amendment or new Bylaw which changes the minimum number of Directors to fewer than Three (3) shall require authorization by the greater proportion of voting power of the shareholders as hereinbefore set forth.
ARTICLE VIII
BOOKS AND RECORDS
SECTION 1. RECORDS: STORAGE AND INSPECTION. The corporation shall keep at its principal executive office in the State of Nevada, or, if its principal executive office is not in the State of Nevada, the original or a copy of the Bylaws as amended to date, which shall be open to inspection by the shareholders
at all reasonable times during office hours. If the principal executive office of the corporation is outside the State of Nevada, and, if the corporation has no principal business office in this State, it shall upon request of any shareholder furnish a copy of the Bylaws as amended to date.
The corporation shall keep adequate and correct books and records of account and shall keep Minutes of the proceedings of its shareholders, Board of Directors and committees, if any, of the Board of Directors. The corporation shall keep at its principal executive office, or at the office of its transfer agent or registrar, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of shares held by each. Such Minutes shall be in written form. Such other books and records shall be kept either in written form or in any other form capable of being converted into written form.
SECTION 2. RECORD OF PAYMENTS. All checks, drafts or other orders or payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the corporation, shall be signed or endorsed by such person or persons and in such manner as shall be determined from time to time by resolution of the Board of Directors.
SECTION 3. ANNUAL REPORT. Whenever the corporation shall have fewer than One Hundred (100) shareholders, the Board of Directors shall not be required to cause to be sent to the shareholders of the corporation the annual report prescribed by the laws of this State unless it shall determine that a useful purpose would be served by causing the same to be sent or unless the laws of this State should otherwise direct the sending of the same.
SECTION 4. The corporation shall at all times have a Registered Agent/Office. The name of the initial Registered Agent is: L.H. Joseph Jr. and Associates -Nevada, Inc.
EXHIBIT 6.1
THIS AGREEMENT is made on 24 NOVEMBER 1997
BETWEEN:
(1) HONG KONG FUTURES EXCHANGE LIMITED whose registered office is situated at 605-8 Asia Pacific Finance Tower, Citibank Plaza, 3 Garden Road, Hong Kong ("HKFE"); and
(2) FINANCIAL TELECOM LIMITED whose registered office is situated at Room
1205, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong
("THE VENDOR")
WHEREAS:
(A) HKFE has available a high speed real time composite signal ( "THE COMPOSITE SIGNAL") providing information in respect of contract prices traded on the exchange operated by HKFE ("THE EXCHANGE").
(B) The Vendor wishes to receive the composite signal directly (or indirectly through another information vendor) from HKFE for the purpose of using, processing, or disseminating the information contained in the composite signal through the Vendor's own or any other information systems for reception by the persons who subscribe for such information through the Vendor ("THE VENDOR'S SUBSCRIBERS").
IT IS AGREED AS FOLLOWS:-
1. TERM OF THE AGREEMENT
This Agreement shall take effect upon the date specified in the First Schedule as the effective date ("THE EFFECTIVE DATE") and shall (subject to prior termination by operation of law or in accordance with clause 9) continue until terminated:
(1) by HKFE upon not less than 30 days written notice to the Vendor in the event that HKFE's right to receive the composite signal is terminated (or notice to terminate such right has been given to HKFE);
(2) by either party upon not less than six months written notice to the other to expire on the last day of a calendar month; or
(3) by the Vendor pursuant to clause 3.2 or 3.3.
2. THE COMPOSITE SIGNAL
2.1 HKFE will throughout the term of this Agreement, subject to clause 2.4, make the composite signal available to the Vendor during the normal trading hours of the Exchange on a non exclusive basis for the sole purpose of entitling the Vendor to use, process or disseminate the information contained therein through the Vendor's own or any other information systems for reception by the Vendor's subscribers. The Vendor has the right to receive the composite signal on the terms set oat in this Agreement.
2.2 The composite signal will have the specifications which are set out in the Second Schedule, which specifications HKFE may change on not less than 30 days notice to the Vendor save that HKFE may make such change on less than 30 days notice with the agreement of the Vendor, which agreement the Vendor shall not unreasonably withhold. Where modification of the Vendor's equipment is necessary to accommodate a change to the specifications, the Vendor shall effect that modification within the notice period.
2.3 HKFE reserves the right to, without notice, withdraw from the composite signal the contract prices of any contract that ceases trading. In addition, HKFE may upon reasonable notice and after consultation with the Vendor, withdraw either temporarily or permanently the contract prices of any contract if, in HKFE's reasonable opinion, the trading of that contract is being carried on at such a reduced rate that making the relevant contract prices available in the composite signal is no longer justified. Subject to the foregoing, and subject to clause 2.4 the content of the composite signal will remain substantially the same throughout the term of this Agreement.
2.4 HKFE shall not be liable for any failure to make the composite signal, or any part thereof, available to the Vendor if such failure arises out of causes beyond its control. Such causes include, but are not limited to, computer malfunction, interruption of telecommunications facilities and unavailability of energy supplies. The occurrence of any event contemplated herein shall not affect the Vendor's obligations under clause 3.
2.5 The Vendor may not sub-licence or otherwise assign the right to use, process or disseminate the information contained in the composite signal or otherwise make the composite signal available to any third party save that the Vendor may sub-licence such right to its subsidiaries, to its holding company, to another subsidiary of its holding company and, subject to clause 2.7, to other third parties approved in writing by HKFE. For the purposes of this clause 2.5, the terms "holding company" and "subsidiary" have the meaning they have in the Companies Ordinance (Cap. 32 of the Laws of Hong Kong).
2.6 The use, processing and dissemination by the Vendor of any additional information contained in the composite signal relating to information other than contract prices traded on the Exchange shall be subject to the Vendor obtaining a licence to do so from HKFE or other relevant party providing the additional information and to any other restrictions which may from time to time be notified in writing by HKFE to the Vendor.
2.7 Notwithstanding clause 2.1, the Vendor may make the composite signal available to a third party other than one of the Vendor's subscribers or for a purpose other than the Vendor's or the Vendor's subscribers own use, provided that:
(1) the Vendor has notified HKFE that the third party wishes to have the composite signal made available to that third party; and
(2) the third party has entered into an agreement directly with HKFE on substantially the same terms and conditions as this Agreement.
3. FEES
3.1 Subject to any discounts which HKFE may from time to time determine, the Vendor shall pay to HKFE the fees set out in the Third Schedule, as revised from time to time in accordance with this clause 3 (together "THE FEES").
3.2 If HKFE wishes to include in the composite signal information in respect of contracts traded on the Exchange in addition to those set out in the Fourth Schedule it shall give notice to the Vendor specifying:
(1) the date on which such revised composite signal will be available;
(2) the additional contracts to be made available; and
(3) the increased Fees (if any) to be payable in respect of the revised composite signal.
HKFE shall give to the Vendor not less than 60 days notice of any increase in the Fees payable in respect of the revised composite signal. Upon receipt of such a notice from HKFE the Vendor may elect, by notice in writing to HKFE (which notice must be received before the day on which the revised composite signal becomes available) to terminate this Agreement with effect from the day on which the revised composite signal becomes available. If the Vendor does not so notify the HKFE the Vendor shall be deemed to have agreed to accept the revised composite signal at the Fees specified in HKFE's notice.
3.3 The Fees may be reviewed by HKFE at intervals of not less than six months. HKFE shall give to the Vendor , not less than 60 days notice before any revised Fees shall take effect. Such revised Fees shall take effect on the date specified in the notice given by HKFE. Upon receipt of such a notice from HKFE the Vendor may elect, by notice in writing to HKFE (which notice must be received by HKFE before the day on which such revised fees shall take effect) to terminate this Agreement with effect from the last day of the calendar month preceding the calendar month in which the revised Fees are to take effect. If the Vendor does not so notify the HKFE, the Vendor shall be deemed to have agreed to the revised Fees specified in HKFE's notice.
3.4 The Vendor shall be responsible for the payment of all costs and expenses of installing, maintaining and operating its telephone lines and other equipment used by the Vendor and necessary in order to enable the Vendor to take the composite signal from HKFE's distribution unit and the Vendor shall indemnify and keep indemnified HKFE upon demand against all such costs and expenses.
3.5 The Vendor shall pay all Fees accrued during each calendar month by no later than the last day of the next calendar month and each payment shall be accompanied by a statement detailing:
(1) the amount paid in respect of the Standard Fee (as defined in the Third Schedule);
(2) the amount paid in respect of the Back up line Fee (as defined in the Third Schedule);
(3) the number of subscriptions by interactive workstations and (where applicable) the number of pagers;
(4) the name of the Vendor's subscribers and the number of declared subscriptions specified in any declaration by the Vendor's subscribers under paragraph 3 of the Third Schedule; and
(5) the amount paid in respect of the Subscription Fee (as defined in the Third Schedule),
provided that if that last day is not a business day (being a day on which banks in Hong Kong are open for business), then the business day immediately preceding it.
4. WARRANTIES, INDEMNITIES AND INFORMATION
4.1 While HKFE will take all reasonable care in respect of the composite signal, it gives the Vendor no covenants, representations or warranties of any kind whatsoever (whether express or implied, statutory or otherwise) relating thereto and accordingly accepts no responsibility of any kind whatsoever (save in respect of its own wilful default) for any claim, demand, damages, liabilities, losses and expenses suffered by the Vendor by reason directly or indirectly of the supply of the composite signal to the Vendor.
4.2 HKFE gives the Vendor no covenants, representations or warranties of any kind whatsoever (whether express or implied, statutory or otherwise) relating to the content of the composite signal or its accuracy in respect of the contract prices traded on the Exchange and accordingly accepts no responsibility of any kind whatsoever (save in respect of its own wilful default) for any claim, demand, damages, liabilities, losses and expenses suffered by the Vendor by reason of any errors or inaccuracies in the composite signal.
4.3 The Vendor shall indemnify and keep indemnified HKFE upon demand from all claims, demands, damages, liabilities, losses and expenses of HKFE suffered directly or indirectly (save in respect of wilful default of HKFE and save in respect of normal trading losses and expenses of HKFE which are not incurred as a result of any default by the Vendor) by reason of the use of the composite signal by the Vendor or the supply of the composite signal to, or the use of the composite signal by, the Vendor's subscribers.
4.4 The Vendor warrants to HKFE that all equipment used by the Vendor for the purpose of utilising the composite signal made available by HKFE is, and will at all times during the continuance of this Agreement be, compatible with the equipment used by HKFE. The Vendor agrees to indemnify and to keep indemnified HKFE upon demand against all costs, damages, or expenses incurred by HKFE and arising from the incompatibility of the Vendor's equipment except where such incompatibility is due to an alteration in the composite signal by HKFE and the Vendor has been unable to modify its equipment within the time limit provided in clause 2.2 and such inability has been notified in writing to HKFE.
4.5 The Vendor will, forthwith upon a request in writing by HKFE, provide to HKFE such information within the Vendor's possession or under its control as HKFE shall reasonably require as to the use made by the Vendor of the composite signal. HKFE shall keep such information confidential and shall not disclose the same except to the extent that HKFE is required to do so by law or other regulatory authority or is necessary in connection with legal proceedings.
5. VERIFICATION OF FEE PAYMENT
5.1 Upon receipt of reasonable notice from HKFE, the Vendor shall grant HKFE and its auditors access during normal business hours to the Vendor's accounting records which are relevant to the calculation and payment of the Fees to review those records for the purposes of determining whether the statements provided by the Vendor to HKFE pursuant to clause 3.5 are complete and accurate and whether all Fees have been paid by the Vendor.
5.2 If HKFE considers (in its absolute discretion) that there is an error in any statements provided by the Vendor pursuant to clause 3.5 the Vendor must immediately pay to HKFE any Fees which have not been paid (together with interest calculated under clause 7) and, if required by HKFE, must indemnify HKFE for the costs and expenses incurred by HKFE and its auditors in connection with the relevant audit.
5.3 HKFE shall, and shall procure that its auditors shall, conduct any review under this clause 5 in a manner which does not unreasonably disrupt the Vendor's ordinary business operations and have regard to the Vendor's reasonable security and confidentiality requirements.
6. COPYRIGHT
This Agreement shall not constitute an assignment of any copyright in the composite signal but a licence granted by HKFE to the Vendor to use, process and disseminate the information contained in the composite signal in accordance with this Agreement.
7. LATE PAYMENT
If any payment due from the Vendor under this Agreement is not paid to HKFE when due, the Vendor shall pay (both before and after judgment) interest on all such overdue amounts from the date on which the same became due until the date of payment thereof in full at the rate of 4% over the prime rate from time to time of the Hong Kong and Shanghai Banking Corporation Limited.
8. AGREEMENT PERSONAL TO THE VENDOR
8.1 This Agreement is personal to the Vendor who, subject to clause 2.5, shall not without the previous written consent of HKFE assign, transfer, sub-contract, delegate, mortgage, charge or otherwise dispose of or purport to assign, transfer, sub-contract, delegate, mortgage charge or otherwise dispose of this Agreement or its rights hereunder. If the Vendor grants a sub-licence under clause 2.5, the Vendor shall continue to be responsible to HKFE for compliance with the terms of this Agreement by any such sub-licensee.
8.2 Where the Vendor is a body corporate, the Vendor shall notify HKFE in writing of any material change in control of the Vendor.
9. TERMINATION
9.1 Either party may terminate this Agreement by giving notice in writing to the other if the other party:
(a) commits any material breach of its obligations under this Agreement and (if the breach is capable of remedy) fails to remedy the breach to the reasonable satisfaction of the non offending party within 30 days of receipt of notice in writing served on it by the non offending party requiring it to make good the breach; or
(b) goes into liquidation (except a bona fide voluntary liquidation for the purpose of reconstruction or amalgamation) or becomes unable to pay its debts, or commits an act of bankruptcy or if a receiver is appointed of any of its assets or if there are any similar proceedings arising from the other party's inability to meet its financial obligations issued in its jurisdiction of incorporation.
9.2 Any termination of this Agreement under this clause 9 or clause 1 shall be without prejudice to the accrued rights of either party under this Agreement.
10. NOTICES
Any notice given by one party to this Agreement to the other shall be in writing and made by facsimile or letter addressed to the other party at the address set out above (or such other address as may be notified by either party to the other party from time to time). Any notice given by letter shall (whether or not actually received) be deemed to have been received in the case of delivery by hand, when delivered, or in the case of delivery by post, upon the expiry of 48 hours after the time of post addressed to the recipient at the address set out above or such other address as may from time to time be notified by the parties as their principal place of business for the time being. Any notice given by either party to the other by facsimile shall be deemed to have been given upon actual receipt.
11. WAIVER
Any waiver by one party to this Agreement of any breach by the other party of any provision of this Agreement shall not have effect unless such waiver is in writing and signed by an authorised representative of the party waiving the breach and any such waiver shall be without prejudice to that party's rights with respect to future breaches.
12. VARIATIONS
No variations or modification of any of the terms of this Agreement shall be valid unless in writing and signed by or on behalf of the parties.
13. FORCE MAJEURE
"FORCE MAJEURE" means, in relation to either party, any circumstances beyond the reasonable control of that party including, without limitation, any act of God, act or regulation of any governmental or supra national authority, war or national emergency, accident, epidemic, fire, riot, strike, lock out, or other form of industrial action.
Neither of the parties to this Agreement shall have any liability whatsoever or be in default for any delays or failures in performance under this Agreement resulting from any occurrence of an event of Force Majeure provided that this shall not apply to relieve the Vendor of any payment obligation where the occurrence or event consists of non payment or late payment by a Vendor's subscriber or otherwise consists of or results in a shortage of funds. The occurrence or existence of any event of Force Majeure shall be immediately notified by the party affected thereby to the other. The affected party shall use all reasonable endeavours to remedy as quickly as possible the effect of any event of Force Majeure.
14. ENTIRE AGREEMENT AND SEVERANCE
14.1 This Agreement represents the entire understanding, and constitutes the
whole agreement, in relation to its subject matter and supersedes any
previous agreement between the parties with respect to the subject
matter and without limiting the generality of the foregoing, excludes
any warranty, condition or other undertaking implied at law or by
custom.
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14.2 Each party confirms that, except as provided in this Agreement and
without prejudice to any liability for fraudulent misrepresentation, no
party has relied on any representation or warranty or undertaking which
is not contained in the Agreement or which was made by any other party
who is not a party to this Agreement and no party shall have any remedy
in respect of misrepresentation or untrue statement made by any other
party unless and to the extent that a claim lies under this Agreement.
14.3 In the event that any provision of this Agreement shall be void or
unenforceable by reason of any provision of applicable law, it shall be
deleted and the remaining provisions of this Agreement shall continue
in full force and effect and if necessary, be so amended as shall be
necessary to give effect to the spirit of this Agreement so far as
possible.
15. GOVERNING LAW AND JURISDICTION
15.1 This Agreement shall be governed by, and construed in accordance with
Hong Kong law.
15.2 Each party irrevocably agrees for the benefit of the HKFE that the
Courts of Hong Kong shall have exclusive jurisdiction in relation to
any claim, dispute or difference concerning this Agreement and any
matter arising therefrom.
15.3 Each party irrevocably waives any right that it may have to object to
an action being brought in those Courts, to claim that the action has
been brought in an inconvenient forum, or to claim that those Courts do
not have jurisdiction.
15.4 The submission to the jurisdiction of the Courts of Hong Kong shall not
(and shall not be construed so as to) limit the right of the HKFE to
bring legal proceedings in any other court of competent jurisdiction
including without limitation the courts having jurisdiction by reason
of the Vendor's domicile. Legal proceedings by HKFE in any one or more
jurisdictions shall not preclude legal proceedings by it in any other
jurisdiction, whether by way of substantive action, ancillary relief,
enforcement or otherwise.
16. HEADINGS
The headings of the clauses of this Agreement being for convenience
only shall not affect the construction of this Agreement.
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EXECUTED as an agreement.
SIGNED BY Ivers Whitman Riley )
)
for and on behalf of )
)
HONG KONG FUTURES EXCHANGE LIMITED )
)
in the presence of:- Lourdes Yau )
)
)
SIGNED BY Alex Pang, Stephen Tang )
)
for and on behalf of )
)
FINANCIAL TELECOM LIMITED )
)
in the presence of:- Regina Tang )
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THE FIRST SCHEDULE
EFFECTIVE DATE
The Effective Date is January 1, 1998
THE SECOND SCHEDULE
SPECIFICATIONS OF THE COMPOSITE SIGNAL
(AS PER ATTACHED)
THE THIRD SCHEDULE
FEES
1. FEES
For the purposes of, and subject to, this Agreement, the following Fees apply:
(1) A fee of HK$11,500 per month for receipt of the composite signal relating to the contracts set out in the Fourth Schedule ("STANDARD FEE"); and
(2) A fee of HK$3,000 per month for stand by back up facilities ("BACK UP LINE FEE"); and
(3) A fee of:
(a) HK$25 and HK$5 per month for every interactive workstation and pager respectively which receives the composite signal pursuant to this Agreement or pursuant to any subscription arrangements between the Vendor and its subscribers at least 7 times per Exchange trading day;
(b) HK$5,000 per month if the Vendor broadcasts the composite signal to its subscribers through interactive workstations on a half an hour or more delay basis; and
(c) such other amount determined by HKFE in respect of information disseminated by the Vendor to its subscribers other than through interactive workstations or pagers,
(together the "SUBSCRIPTION FEE").
2. NEW SUBSCRIPTIONS
The Vendor must choose one of the following methods to calculate the Subscription Fees payable in respect of a new subscription by the Vendor's subscribers and must apply the chosen method consistently for all new subscriptions, unless the Vendor obtains the consent of HKFE to use the other method:
METHOD A
If:-
(1) a subscription is made on or before the 15th day of a calendar month, the Vendor shall pay to HKFE one half of the Subscription Fee in respect of that month; and
(2) a subscription is made after the 15th day of a calendar month, the Vendor shall not be obliged to pay any Subscription Fee for that month.
For the month in which a new subscription is made, the Subscription Fee payable in respect of that subscription will be reduced proportionally according to the number of days remaining in that month.
3. SUBSCRIBER'S DECLARATION
Where the Vendor collects a fee from its subscribers based on the number of subscriptions declared by its subscribers then, subject to obtaining the prior written approval of HKFE, the Subscription Fee shall be calculated based on the number of subscriptions specified in the declarations.
4. VOLUME DISCOUNTS
The Vendor will receive the following discount on the Subscription Fee (excluding the fee specified in paragraph 1(3)(b) of this Schedule) based on the number of interactive workstations and pagers:
NUMBER OF WORKSTATIONS/PAGERS DISCOUNT RATE
----------------------------- -------------
Up to and including 30 Full Subscription Fee
31-60 (inclusive) 10% discount
61-90 (inclusive) 15% discount
more than 90 20% discount
5. PROMOTIONS
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HKFE may (by giving notice in writing to the Vendor) waive the Subscription Fee in connection with any promotion of a particular HKFE product.
6. SUBSIDIARIES
If the information contained in the composite signal is disseminated by the Vendor directly to a subsidiary of the Vendor, to the holding company of the Vendor or to another subsidiary of that holding company, the Standard Fee and the Back up line Fee will be waived in respect of that subsidiary's or that holding company's subscription.
THE FOURTH SCHEDULE
CONTRACTS
Hang Seng Index Futures
Hang Seng Index Options
Hang Seng Commerce & Industry Sub-Index Futures
Hang Seng Finance Sub-Index Futures
Hang Seng Properties Sub-Index Futures
Hang Seng Utilities Sub-Index Futures
Hang Seng China-Affiliated Corporations Index Futures
Hang Seng China-Affiliated Corporations Index Options
Stock Futures
Rolling Forex
3-Month Hong Kong Inter-Bank Offered Rate Futures
Gold Futures
EXHIBIT 6.2
MARKET DATAFEED SERVICE AGREEMENT
AN AGREEMENT dated the 1st day of April 1998
BETWEEN:-
(1) STOCK EXCHANGE INFORMATION SERVICES LIMITED whose registered office is at 1st Floor, 1 and 2 Exchange Square, Hong Kong ("SEIS"); and
(2) The person whose name and address is set out in Schedule 1 Part A hereto ("THE LICENSEE").
WHEREAS:-
(A) SEIS is a wholly owned subsidiary of The Stock Exchange of Hong Kong Limited.
(B) It has been agreed that SEIS will grant to the Licensee a non-exclusive licence to use certain information, for the period and upon the terms and conditions hereinafter appearing.
IT IS HEREBY AGREED as follows:
1 INTERPRETATION
In this Agreement, unless otherwise expressed or required by the context, the following expressions shall have the following meanings:-
EXPRESSIONS MEANINGS
"AGREEMENT" this agreement together with any subsequent
modifications thereto agreed in writing by
the parties.
"COMMENCEMENT DATE" the date on which the Licensee is connected
to the Exchange for the purpose of receiving
information as specified in Schedule 1 Part
A.
"EXCHANGE" The Stock Exchange of Hong Kong Limited
whose registered office is at 1st Floor, 1
and 2 Exchange Square, Hong Kong.
"HONG KONG" the island of Hong Kong, Kowloon and the New
Territories.
"INFORMATION" information compiled by the Exchange and/or
provided by SEIS pursuant to this Agreement,
including without limitation information
within any categories described by SEIS from
time to time pursuant to clause 2.3.
"INITIAL TRANSMISSION METHOD" the method of transmission of the
Information as notified in writing to the
Licensee by SEIS prior to the Commencement
Date.
"LAO STATEMENT" a statement in response to requests for
information made by SEIS of its licensees,
as further provided for at clause 5.7.
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"LICENCE FEES" the fees to be paid by the Licensee to SEIS
pursuant to clause 5 of this Agreement.
"NEWS" information concerning announcements of the
Exchange and companies listed on the Stock
Exchange, and other information of general
interest originating from the Exchange.
"OFF MARKET" a trading floor or dealing service
where (a) trading in Securities listed on
the Stock Exchange or of a type capable of
being so listed or (b) any other Securities
relating to Securities described at (a)
above is being undertaken otherwise than at
or through the Stock Exchange.
"PERMITTED PURPOSE" the purposes for which Licensee may
use the Information, as described in this
Agreement, and as more particularly set cut
at Schedule I Part A under the heading
"Memorandum of Permitted Purpose" or as
defined in any revised Memorandum of
Permitted Purpose issued by SEIS pursuant to
clause 2.4.
"QUARTER" the quarters of each year ending on 31st
March, 30th June, 30th September and 31st
December.
"RELATED COMPANY" shall mean, in relation to any
company, any other company which is for the
time being a holding company of such company
or a subsidiary company of such company or a
subsidiary of a holding company of such
company. For this purpose the expressions
"subsidiary" and "holding company" shall
have the meanings ascribed to them by
Section 2 of the Companies Ordinance of Hong
Kong.
"SECURITIES" the same meaning as defined in Section 2(l)
of the Securities Ordinance (Cap. 333).
"STOCK EXCHANGE" the stock market established, operated and
maintained by the Exchange pursuant to
Section 27 of the Stock Exchanges
Unification Ordinance (Cap. 361).
"SUBSCRIBER" a person to whom Information is provided by
the Licensee in accordance with clause 4.1
and with whom the Licensee has a subsisting
contract for the supply of inter alia,
Information.
"SUBSCRIBER REPORT" a statement as defined at clause 5.4.
"SUBSCRIBER UNIT" the meaning set out at paragraph 6 of
Schedule 1 Part B.
2 LICENCE
2.1 SEIS hereby grants to the Licensee a non-exclusive licence to use the
Information for the Permitted Purpose and according to the terms set
out in this Agreement.
2.2 The Agreement shall commence on the Commencement Date.
2.3 The categories of Information initially provided to the Licensee
hereunder shall be those categories notified in writing to the Licensee
by SEIS prior to the Commencement Date ("THE CATEGORIES NOTICE"). SEIS
shall have the right at any time to alter the presentation or substance
of the Information (unless the alteration involves the deletion of one
or more categories of Information described in the Categories Notice in
which case the notice period shall be a minimum of 30 days and, in that
event, Licensee shall be entitled at any time during the 21 days
following service of such notice to terminate this Agreement with
effect from the date when the alteration is to be implemented, by
giving written notice to SEIS). Notwithstanding the above SEIS shall
have the right to alter the presentation or substance of the
Information without prior notice to the Licensee if required to do so
by reasons outside its control.
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2.4 SEIS acknowledges and agrees that the Licensee may under and for the
purposes of this Agreement provide the Information to Subscribers in
the form or format in which the Information is supplied to Licensee
hereunder or in any other form or format including for use in composite
information systems provided always that (a) the Information is
acknowledged as being derived from the Exchange and its format or
editing is in no way misleading as to the nature or content of the
Information and (b) the Licensee shall not remove, displace or alter
any copyright, confidentiality or other proprietary notices or any
disclaimer notice of the Exchange and (c) whenever Licensee wishes to
provide the Information in a different form or manner, whether to
constitute a new service to, or to modify, an existing service
specified in the Memorandum of Permitted Purpose, Licensee will first
give SEIS no less than one month's prior written notice of its
intention, and shall provide such further details as SEIS may
reasonably request. For the avoidance of doubt, nothing in this clause
2.4 shall entitle Licensee to do anything outside the scope of the
Permitted Purpose without first obtaining SEIS' written consent, (such
consent not to be unreasonably withheld). SEIS may, at any time after
receiving such notice, issue a revised Memorandum of Permitted Purpose
to re-define and/or re-classify the services in question, which
Memorandum shall form a part of this Agreement and shall replace any
then existing Memorandum of Permitted Purpose with effect from its date
of issue by SEIS or from the date when the modified services are
introduced, if later. (For the avoidance of doubt, this clause is
without prejudice and subject to clause 5.8.)
2.5 Licensee will incorporate the following disclaimer notice (or a
disclaimer notice to equivalent effect) into all contracts with
Subscribers:
"THE STOCK EXCHANGE OF HONG KONG LIMITED ENDEAVOURS TO ENSURE THE
ACCURACY AND RELIABILITY OF THE INFORMATION PROVIDED BUT DOES NOT
GUARANTEE ITS ACCURACY OR RELIABILITY AND ACCEPTS NO LIABILITY (WHETHER
IN TORT OR CONTRACT OR OTHERWISE) FOR ANY LOSS OR DAMAGE ARISING FROM
ANY INACCURACIES OR OMISSIONS"
2.6 Licensee will ensure that, so long as it is technically possible to do
so, a disclaimer notice as described in clause 2.5 above shall be
transmitted to Subscribers so that it is conspicuously perceptible
during or immediately prior to each continuous period throughout which
the relevant Subscriber has access to the Information.
3 TRANSMISSION OF INFORMATION
3.1 During the currency of this Agreement SEIS will procure the supply of
the Information to the Licensee in the form of electronic signals
generated by the computer system for the time being used by the
Exchange. Licensee shall effect (complying promptly with SEIS'
requirements for such connection) two connections to the Exchange's
primary computer information system, and one connection to the
Exchange's, backup computer information system, and shall bear the
costs of so connecting Licensee and of maintaining each such connection
(including without limitation the Port Fees set out at Schedule 1 Part
B and any other connection and/or maintenance charges levied in this
respect by SEIS or the Exchange). The connection equipment and
communication lines to be installed on the Exchange's premises must be
approved in advance by the Exchange.
3.2 The Information shall initially be supplied in accordance with the
Initial Transmission Method but the method of transmission may be
changed at any time upon SEIS giving the Licensee not less than thirty
days written notice thereof. Notwithstanding the above, SEIS shall have
the right to alter the method of transmission without prior notice to
the Licensee if required to do so by reasons outside its control.
3.3 SEIS shall use its best endeavours to ensure that the Information is
provided to the Licensee on a continuous basis during the trading hours
of the Stock Exchange.
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3.4 Licensee shall be responsible for complying with all relevant
regulations, governmental or otherwise, and the obtaining of all
relevant licences, governmental or otherwise, relating to its use of
the Information.
4 PERMITTED USE OF INFORMATION
4.1 The Licensee may use the Information for dissemination to Subscribers
provided that it pays to SEIS all applicable Licence Fees. It may not
disseminate the Information to any other person except as permitted by
clause 4.6 below.
4.2 The Licensee shall use reasonable endeavours to ensure that:
4.2.1 any equipment or software used to process the Information are
arranged;
4.2.2 other suitable procedures are in place so that no unauthorized
person or device can obtain access to the Information.
so that no unauthorized person or device can obtain access to the
information.
4.3 The Licensee shall ensure and procure that all and any dissemination of
the Information to any Subscriber shall be on terms that:
4.3.1 no Subscriber shall, without the prior written approval of
SEIS (such approval not to be unreasonably withheld)
disseminate the Information or any part thereof to any other
person;
4.3.2 no Subscriber shall use or permit the use of the Information
or any part thereof for any illegal purpose;
4.3.3 no Subscriber shall use the Information or any part thereof
other than in the ordinary course of its own business (which
shall not include dissemination to third parties); and
4.3.4 no Subscriber shall use the Information or any part thereof to
establish, maintain or provide or to assist in establishing,
maintaining or providing an Off Market.
4.4 The Licensee shall us6 best endeavours to assist SEIS in ensuring that
no Subscriber is using the Information or any part thereof contrary to
the provisions of this clause 4 and shall promptly supply to SEIS the
names and addresses of any Subscriber whom the Licensee or SEIS
suspects is in breach of such provisions.
4.5 If SEIS suspects that a Subscriber is using the Information or any part
thereof contrary to the provisions of this clause 4, SEIS may serve a
written notice on the Licensee specifying the name of such Subscriber
and the nature of the suspected misuse and requiring the Licensee to
notify that Subscriber in writing that it must forthwith cease such
misuse and must provide such proof as SEIS may reasonably require that
it has ceased (or never committed) such misuse. The Licensee shall
immediately comply with such a notice on receipt. If the Subscriber
fails to comply with Licensee's notice within such period as SEIS may
specify the Licensee shall forthwith at SEIS' further written direction
cease to supply the Information to that Subscriber or reduce the supply
to a level specified by SEIS.
4.6 The Licensee may not assign or sub-license the right to disseminate the
Information except as follows:
4.6.1 the Licensee may sub-licence the right to disseminate the
Information to a Related Company, provided that
(i) the Licensee gives SEIS prior notice of the
sub-licensing together with evidence, to the
satisfaction of SEIS, that the sub licensee is a
Related Company,
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(ii) the sub-licence shall terminate upon its ceasing to be a Related Company,
(iii) the sub-licence shall impose on the Related Company
all the restrictions and obligations imposed on
Licensee by this Agreement relating to the use of the
Information except that no Related Company shall be
liable to pay any Licence Fees in addition to those
payable by the Licensee pursuant to sub clause (v)
below,
(iv) Licensee shall be personally liable hereunder for any
breach by such Related Company of such restrictions
or obligations, so that such breach shall be treated
as a breach of this Agreement,
(v) Licensee shall, as part of its obligations under
clause 5, be directly responsible for providing
payments and statements on behalf of any such Related
Companies as well as for itself, by way of a single
consolidated statement which consolidated statement
shall nevertheless also provide a breakdown of
relevant payments and other information ascribable to
each Related Company.
4.6.2 the Licensee may sub-licence the right to disseminate the
Information to such other third parties as are approved in
advance in writing by SEIS. SEIS shall have complete
discretion as to the terms on which it agrees such
sub-licence. Without prejudice to the foregoing, unless
expressly otherwise agreed by SEIS:
(i) the sub-licence shall impose on the third party all
the restrictions and obligations imposed on Licensee
by this Agreement relating to the use of the
Information,
(ii) Licensee shall be personally liable hereunder for any
breach by such third party of such restrictions or
obligations, so that such breach shall be treated as
a breach of this Agreement,
(iii) without prejudice to (i) and (ii), the third party
sub-licensee shall render a Subscriber Statement and
payment in accordance with clause 5 direct to SEIS.
4.6.3 SEIS may, in respect of any sub-licence granted pursuant to
sub clause 4.6.2 of this clause, at any time by notice in
writing given to the Licensee either require the Licensee to
terminate such sub-licence or impose further conditions in
respect of such sub-licence or require that the sub licensee
enter into a direct licence with SEIS.
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4.7 The Licensee shall not knowingly use the Information or any part thereof to establish, maintain or provide, or assist in establishing, maintaining or providing an Off Market nor shall the Licensee provide a Securities dealing service in Hong Kong without obtaining the prior written consent of SEIS (such consent not to be unreasonably withheld).
4.8 The Licensee shall comply with such directions as SEIS may reasonably require from time to time concerning permitted use of the information, provided that
4.8.1 such directions are incorporated in the Memorandum of
Permitted Purpose or are otherwise given in writing by not
less than 3 months notice; and
4.8.2 at any time during the 30 days following service of such
notice Licensee shall be entitled to terminate this Agreement
with effect from the date when the direction is to be
implemented, by giving written notice to SEIS.
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5 LICENCE FEES AND PAYMENTS
5.1 During the currency of the Licence the Licensee shall pay the Licence
Fees calculated and payable to SEIS in accordance with the provisions
of Schedule 1 Part A and Schedule 1 Part B hereto.
5.2 SEIS shall have the right to amend the Licence Fees or any element of
them at any time upon giving the Licensee not less than three months
notice in writing thereof. At any time during the 30 days following
service of such notice Licensee shall be entitled, to terminate. this
Agreement with effect from the date when the amendment is to be
implemented. by giving written notice to SEIS. For the avoidance of
doubt, SEIS's right to amend the Licence Fees includes without
limitation the right to introduce additional Licence Fees to cover any
new or existing types of service, to modify the basis for calculating
any Licence Fees and to change the classification of any service so
that an amended Licence Fee becomes payable.
5.3 No part of the Licence Fees will be refundable to the Licensee if this
Agreement terminates, for whatever reason, during a month for which the
Licence Fees or any part thereof have been paid in advance.
5.4 The Licensee shall provide a statement (`the Subscriber Report') to
SEIS within 15 days of the end of each month (unless the Subscriber
Report relates to Subscribers outside Hong Kong, in which case it shall
be provided within 30 days of the end of the month) as to: -
5.4.1 the names of the Subscribers to whom it has disseminated the
Information during the preceding month and stating the name or
nature of the service by which each received the Information,
the number and type of Subscriber Units for each Subscriber
within Hong Kong and outside Hong Kong; and
5.4.2 the Licence Fees payable for that month.
The Subscriber Report shall contain such further information and shall
be provided in such format as SEIS may reasonably require (by not less
than 90 days' written notice) from time to time.
5.5 The Licensee shall maintain complete and accurate records of how the
Licence Fees specified in each Subscriber Report have been calculated
and shall make such records available to SEIS within 30 days of
receiving SEIS' written request. SEIS shall have the right not more
than once in each Quarter during and also once in the Quarter following
termination of this Agreement to inspect all documents pertaining to
such records covering the period of the preceding Quarter (and, if not
yet so inspected, previous Quarters) either itself or by its authorized
agents. The Licensee shall, upon receiving SEIS' written request,
permit and/or (if so requested) procure that SEIS may inspect promptly
thereafter the premises and records of the Licensee and any
sub-licensee, for the purpose of satisfying SEIS by whatever proofs
SEIS may reasonably require that the Licence Fees are being properly
accounted for and/or that the Licensee and/or its sub-licensees are
using the Information for the Permitted Purpose only and are not using
Information contrary to the provisions of clause 4, provided always
that Licensee shall not be obliged to make and/or procure such
inspection to take place more than once in any Quarter. SEIS shall bear
its costs (including internal management time and expenses) of each
inspection, unless the inspection establishes that SEIS has been
underpaid by 5% or more of the amount actually paid in respect of
Licence Fees for that Quarter in which case Licensee shall bear such
costs. For the avoidance of doubt, such underpayment shall be deemed to
have been payable with effect from the due date for providing the
Subscriber Report relevant to such underpayment.
5.6 The Licensee shall, upon receiving SEIS' written request, inspect
and/or (if so requested) procure that SEIS may inspect promptly
thereafter the premises and records of any Subscriber specified by
SEIS, for the purpose of satisfying SEIS by whatever proofs SEIS may
reasonably require that the Licence Fees in respect of that Subscriber
are being properly accounted for and/or that the Subscriber is not
using Information contrary to the provisions of clause 4, provided
always that Licensee shall not be obliged to make and/or procure such
inspection (in respect of any one Subscriber) to take place more than
once in any Quarter.
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5.7 The Licensee shall provide SEIS with a statement (`the LAQ Statement')
by its auditors in such form and at such times as SEIS may reasonably
require, and initially in response to a Licensee's auditor
questionnaire compiled by SEIS and in accordance with the procedures
provided for by Schedule 2. SEIS shall notify any change in its
requirements by not less than 90 days' written notice unless SEIS is
compelled to make such change on shorter or without any notice for
reasons. which are beyond its control.
5.8 If SEIS establishes, by whatever means, that Information is being or
has been used to provide services (a) outside the scope of the
Permitted Purpose or (b) within the scope of the Permitted Purpose but
in a manner materially different to the manner in which Licensee had
previously represented to SEIS that those services would be provided,
then SEIS shall be entitled to issue a revised Memorandum of Permitted
Purpose to re define and/or re classify the services. If SEIS does so
re classify any services:
(i) Licensee shall be liable to pay Licence Fees in
accordance with such re classification as if those
services had been so classified from the date when
they were first so provided; and
(ii) Licensee shall pay promptly to SEIS or SEIS shall re
pay promptly to Licensee, as the case may be, the
balance of any monies thereby due.
5.9 If Licensee is late in paying any sums due to SEIS under this Agreement
by more than 30 days, interest shall be payable on such sums calculated
from the date such sums first become due in respect of each month or
part thereof for which they are not paid at a rate of 40% per annum.
5.10 Where an inspection is made pursuant to clauses 5.5 or 5.6 and SEIS in
consequence is of the opinion that SEIS has been underpaid by 5% or
more of the relevant Licence Fees, Licensee shall, upon receiving SEIS'
written request, permit and/or if so requested procure such further
inspections by SEIS as SEIS considers necessary to determine the proper
basis on which those Licence Fees should have been accounted.
6 TERMINATION
6.1 Either party shall be entitled without stating a reason to terminate
this Agreement by giving not less than six complete calendar months
prior notice of termination in writing to the other party.
6.2 Either party shall be entitled to terminate this Agreement forthwith by
written notice (and thereupon the provision of the Information to
Licensee may cease) upon the occurrence of any of the following
events:-
6.2.1 in the case of the other party being an individual or a
partnership, the death or bankruptcy of the other party or any
partner thereof, or a receiving order or judgment or levy
being made against any assets of the other party or any
partner thereof, or the other party or any partner thereof
having entered into any composition with any of his or her
creditors or the dissolution of the partnership; or
6.2.2 in the case of the other party being a corporation, the
commencement of winding-up of the other party, or a receiver
having been appointed over or judgment or levy being made
against any assets of the other party, or the other party
having entered into any scheme, arrangement or composition
with any of its creditors; or
6.2.3 the other party having committed any irremediable breach of
this Agreement or, the terminating party having given written
notice to the other party to remedy any breach or default, the
other party shall have failed to do so within 30 days of such
notice.
6.3 The Licensee shall be entitled to terminate this Agreement forthwith by
written notice if for any reason Information is not supplied to
Licensee for a period in excess of 10 consecutive working days on which
the Stock Exchange is open for the business of trading in Securities.
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6.4 Upon termination of this Agreement, SEIS shall have the absolute right
to terminate the transmission of the Information with immediate effect,
and all sums due hereunder from Licensee shall become payable forthwith
to SEIS.
7 EXCLUSION OF LIABILITY AND INDEMNITY
7.1 Nothing in this clause shall restrict or exclude liability of SEIS or
the Licensee in respect of death or personal injury resulting from
negligence. Further, if Information is not transmitted to the Licensee
for a continuous period of not less than 10 consecutive working days,
SEIS shall be liable to compensate the Licensee for loss arising from
such non transmission, but its liability shall be limited to the amount
of the Licence Fees payable in respect of that period (reduced prorata
when the fees are payable in respect of a longer period).
7.2 Subject to the foregoing neither SEIS nor the Exchange shall be liable
to the Licensee or any person claiming through Licensee in respect of
consequential, economic or any other loss or damage arising from any
act or omission, mistake, delay, interruption, whether wilful,
negligent or otherwise, arising from or in connection with (a) the
collection, use or transmission of the Information by or to the
Licensee or (b) the Information being inaccurate, incomplete or
otherwise misleading or (c) any other services to be provided by them
pursuant to this Agreement. Further the Licensee undertakes not to
institute or attempt or threaten to institute any proceedings in any
jurisdiction in or outside Hong Kong against SEIS or the Exchange for
recovery of any of the aforesaid loss suffered by the Licensee or by
any other person or otherwise to maintain any claim against SEIS or the
Exchange for or in respect of any of the aforesaid loss.
7.3 Subject to clause 7.1 the Licensee will at all times hereafter
indemnify and keep SEIS and the Exchange effectively indemnified
against and in respect of all liabilities, economic or other losses,
damages, costs, claims, suits, demands, fees and expenses of whatsoever
nature which may be incurred by SEIS or the Exchange towards or in
relation to any person or which may be taken, made or claimed agai6st
SEIS or the Exchange by any person as a result of or in connection with
or arising out of any act, omission, mistake, delay or interruption, on
the part of Licensee, SEIS or the Exchange, whether wilful, negligent
or otherwise, in relation to this Agreement, including (without
prejudice to the generality of the foregoing) acts or omissions in
respect of or in connection with or arising out of the collection, use
or transmission of the Information by or to the Licensee or arising
from the Information being inaccurate, incomplete or otherwise
misleading.
7.4 For the purposes of this clause, SEIS contracts as agent for the
Exchange, and Licensee agrees to said exclusion of liability and
indemnity in favour of the Exchange in consideration of the Exchange
consenting to SEIS entering into this Agreement.
8 FREE SUBSCRIPTION FOR SEIS
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To enable SEIS to monitor the service provided by Licensee under the Licence, Licensee shall for the duration of this Agreement and free of charge allow SEIS access to the Information by supplying to SEIS all services of Licensee and any relevant equipment by means of which it transmits the Information to its Subscribers as if SEIS were a subscriber thereto.
9 NOTICES
9.1 Any notice or other document to be given or served hereunder may be
delivered by hand or sent by pre-paid post, telex, telecopier or
facsimile transmission to the party to be served at its address stated
herein or at such other address as that party shall have notified the
other in accordance with this Agreement.
9.2 Any such notice or document shall be deemed to have been served:-
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9.2.1 if delivered, at the time of delivery; or
9.2.2 if posted, at the expiration of seven days after the postage
pre-paid envelope containing the same shall have been put into
the post; or
9.2.3 if sent by telex, telecopied or facsimile transmission, at the
expiration of 12 hours after the same shall have been
despatched.
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9.3 In proving such service it shall be sufficient to prove that delivery was made or that the envelope containing such notice or document was properly addressed and posted or that the telex, telecopier or facsimile transmission was properly addressed and despatched as the case may be.
10 PROPRIETARY RIGHTS
10.1 Licensee hereby acknowledges that it has no entitlement to any
proprietary rights including without limitation rights of copyright in
and to the Information or the presentation of the Information, which
rights are owned by the Exchange or by other third parties. As regards
rights owned by the Exchange, Licensee acknowledges that the Exchange
has authorized SEIS only to supply the Information by way of this
Agreement and SEIS warrants that it has obtained such authorization.
10.2 Licensee may represent that it is supplying Information derived from
the Exchange under licence from SEIS but shall not make any other use
save as required by clause 2.4 of the Exchange's or SEIS' name nor of
any logos or other marks used by them. Upon termination of this
Agreement, Licensee shall cease forthwith so to represent itself and
shall not make any other commercial use of such marks.
10.3 Licensee shall at all times treat the Information and any information
ancillary thereto obtained pursuant to this Agreement as confidential
and shall not disclose such Information to any third party other than
to a Subscriber, irrespective of whether it is in the same format as
supplied to Licensee by the Exchange.
10.4 Licensee shall forthwith upon suspecting any infringement of such
rights as are described in this clause notify SEIS and thereafter
provide such assistance as SEIS or the Exchange may reasonably request
to protect such rights.
10.5 This clause shall continue to have effect notwithstanding termination
of the rest of this Agreement.
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SCHEDULE 1
PART A
THE LICENSEE
NAME ADDRESS
Financial Telecom Ltd 1205 China Resources Building
26 Harbour Road
Wanchai
Hong Kong
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COMMENCEMENT DATE
1 December 1997
11 AMENDMENTS, WAIVERS AND ENFORCEABILITY
11.1 A provision of this Agreement may be amended only if the parties agree
in writing.
11.2 No waiver or indulgence by any party to this Agreement shall be binding
unless in writing and in any event no waiver of one breach of any term
or condition of this Agreement shall operate as a continuing waiver
unless so expressed nor operate as a waiver of another breach of the
same or any other term or condition of this Agreement.
11.3 In the event that any provision in this Agreement is for any reason
held to be unenforceable, illegal or otherwise invalid, this shall not
affect any other provisions of this Agreement, and the provision in
question shall be construed in such reasonable manner as achieves the
intention of the parties without being invalid.
12 ENTIRE AGREEMENT
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This Agreement sets out the entire agreement of the parties concerning the subject matter hereof and supersedes all prior agreements, negotiations, representations and proposals, whether written or oral.
13 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the Laws of Hong Kong whose courts shall have non-exclusive jurisdiction in relation thereto.
IN WITNESS whereof the parties have entered into this Agreement the day and year first above written.
Signed by )
for and on behalf of ) Anthony Yeung, Director
STOCK EXCHANGE INFORMATION SERVICES LIMITED )
in the presence of:- )
Signed by ) Winnie Poon
for and on behalf of ) For and on behalf of
FINANCIAL TELECOM LIMITED ) FINANCIAL TELECOM LIMITED
in the presence of:- Regina Tang )
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Alex Pang Stephen Tang Director Director
SCHEDULE 1
PART A (CONTINUED)
MEMORANDUM OF PERMITTED PURPOSE
(CROSS REFERENCE CLAUSE 2)
------------------------------------ ----------------------------- ---------------------------- ----------------------
DESCRIPTION OF SERVICE/PERMITTED
PURPOSE CLASSIFICATION LICENSE FEES START DATE OF SERVICE
------------------------------------ ----------------------------- ---------------------------- ----------------------
1. SPIDER LINK Continuous Access II (all Standard Fee: 1 January 1998
- Dedicated terminal with stocks) with speed above HK$96,000/quarter
leased line / dial-up line 6250 pbs Subscriber Fee:
HK$200/subscriber
unit/month
------------------------------------ ----------------------------- ---------------------------- ----------------------
2. FINTEL SERVICE Continuous Access II (all Standard Fee:
- Dedicated terminal with stocks) with speed above HK$96,000/quarter
leased line / dial-up line 6250 bps Subscriber Fee:
HK$200/subscriber
unit/month
------------------------------------ ----------------------------- ---------------------------- ----------------------
3. CHINNET SERVICE Continuous Access II (all Standard Fee:
- Chinese version of Fintel stocks) with speed above HK$96,000/quarter
Service 6250 bps Subscriber Fee:
- Dedicated terminal with HK$200/subscriber
leased line / dial-up line unit/month
------------------------------------ ----------------------------- ---------------------------- ----------------------
4. FINTEL VOICE Continuous Access II with Standard Fee:
- Voice Response System speed above 6250 bps HK$96,000/quarter
Subscriber Fee:
HK$120/concurrent
access/month
------------------------------------ ----------------------------- ---------------------------- ----------------------
5. FINTEL VOICE FOR Continuous Access II with Standard Fee:
o INTERNATIONAL BANK OF ASIA transmission speed above HK$96,000/quarter
o THE BELGIAN BANK 6250 bps Subscriber Fee:
o THE FIRST PACIFIC BANK HK$120/concurrent
- Voice Response System access/month
------------------------------------ ----------------------------- ---------------------------- ----------------------
6. FINANCIAL PAGER Continuous Access II (all Standard Fee:
stocks) with speed above HK$96,000/quarter
6250 bps Subscriber Fee:
HK$120/subscriber
unit/month
------------------------------------ ----------------------------- ---------------------------- ----------------------
7. FINTREND Continuous Access II (all Standard Fee:
- PC with a receiver box stocks) with speed above HK$96,000/quarter
- realtime broadcast of stock 6250 bps Subscriber Fee:
information via radio paging HK$120/subscriber
network at 512 bps. unit/month
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------------------------------------ ----------------------------- ---------------------------- ----------------------
8. TRADESTATION Continuous Access II (all Standard Fee:
- PC installed with proprietary stocks) with speed above HK$96,000/quarter
software an connected with 6250 bps Subscriber Fee:
leased line HK$200/subscriber
- Provision of trading unit/month
analysis, charting and price
alert functions on PC
------------------------------------ ----------------------------- ---------------------------- ----------------------
9. ASIANETVEST ON INTERNET Continuous Access II (all Standard Fee:
stocks) with speed above HK$96,000/quarter
6250 bps unit/month Subscriber Fee:
HK$200/subscriber
------------------------------------ ----------------------------- ---------------------------- ----------------------
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Notes
(1) News may only be disseminated as part of a Continuous Access Service.
SCHEDULE1
PART B
LICENCE FEES
1 TYPES OF LICENCE FEE PAYABLE
The types of Licence Fee and their basis for computation include those set out in the Memorandum of Permitted Purpose which are payable by reference to the terms `Standard Fee' and `Subscriber Fee', in which context these terms appear elsewhere in this Schedule and/or Agreement.
2 STANDARD FEE AND MINIMUM SUBSCRIBER FEE
If Licensee offers more than one type of service during any month, only one Standard Fee shall be payable in relation to that month, being the Standard Fee of greatest amount, and only one minimum Subscriber Fee of HK$6,000 shall be payable in relation to that month.
3 DISCRETION TO INTRODUCE ADDITIONAL LICENCE FEES
Subject to clause 5.2 of this Agreement, SEIS shall have sole discretion to determine the different types of service in relation to which Licence Fees are payable and reserves the right to introduce additional Licence Fees for any types of service, including without limitation services for which no Licence Fees are for the time being payable.
4 PORT FEES
In addition to the Licence Fees payable pursuant to 1 to 3 above, an annual Port Fee shall be payable as part of the Licence Fees in the sum of HK$24,000 per annum for the 3 connections referred to at clause 3.1 of this Agreement. This assumes that only one of the connections to the Exchange's primary computer system is providing live production data at any one time. If at any time during any Quarter, both connections at the primary system are simultaneously providing the same live production data, an additional Port Fee is payable of HK$70,000 per Quarter. Such additional Port Fee shall not be reduced on a pro rata or any other basis if the provision of live production data is not maintained by both connections throughout the Quarter in question.
5 SEIS DECISION IS FINAL
Subject to clause 5.2 of this Agreement, SEIS shall have sole discretion to determine from time to time without giving reasons the classification of the types of service provided by the Licensee and, pursuant thereto, the amount of Licence Fees payable by the Licensee. SEIS' decision shall be final.
6 SUBSCRIBER UNITS
6.1 For the purpose of calculating Subscriber Fees, the number of
Subscriber Units shall, in relation to any single Subscriber during any
one month, be the number of end user receptors on the Specified Date
(or if the number is variable on that date, the maximum number)
permitted to access the Information by means of Licensee derived
authorization. Such authorization shall include but shall not be
limited to passwords, user ID logons, access codes or security codes or
any more general means of authorization such as those granted `en bloc'
to a specified maximum number of individual users and/or regulated by
remote on line audit tools without using passwords or the like. `End
user receptor' shall for this purpose mean any person or point to which
Licensee derived Information is imparted so that the Information may be
perceived or processed otherwise than for the sole purpose of re
disseminating the Information and shall include, without limitation
6.1.1 any device by means of which the Information can be perceived
by humans, including but not limited to dedicated terminals,
portable computers, wallboards, paging devices and mobile
phones; and
6.1.2 any other type of device by means of which the Information is
processed; and
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6.1.3 any individual employed or otherwise directly controlled by
the Subscriber who has authorization to access the Information
otherwise than by means of an authorized device of the type
described at 6.1.1 or 6.1.2 above and each end user receptor
shall count as one Subscriber Unit.
and each end-user receptor shall count as one Subscriber Unit.
6.2 For the purpose of 6.1, the Specified Date means the last day of the
month (or such other date as SEIS may from time to time substitute by
written notice on either a one off, occasional or recurring basis).
7 DISCOUNTS AND DELAYED DATA
7.1 Where there are more than 30 Subscriber Units (excluding unauthorized
end user receptors) in relation to any one Subscriber each of which
units receives the same classification of service throughout a
particular month, the Subscriber Fee for that month in respect of those
Subscriber Units shall be discounted as follows:
NO. OF SUBSCRIBER UNITS DISCOUNT
31 to 60 10%
61 to 90 15%
91 to 500 20%
501 to 1000 40%
1001 or more 65%
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7.2 Discounts must be claimed no later than the time due for submitting the relevant Subscriber Report.
7.3 No Subscriber Fee shall be payable in relation to Licensee's making Information available to Subscriber where a delay of at least 60 minutes has occurred after the Information is first made available to the Licensee.
8 NEWS SERVICES
Subject to 3 above, no fee is payable for the dissemination of Information which is in the nature of News.
9 TIMES WHEN PAYMENTS ARE DUE
9.1 The Standard Fee for the first Quarter shall become payable as soon as
Licensee begins disseminating the Information to Subscribers or, if
sooner, at the expiry of two months from the Commencement Date
irrespective of whether Licensee has begun disseminating the
Information to Subscribers provided that where the Standard Fee becomes
payable for the first Quarter other than at the commencement of the
relevant Quarter the Standard Fee will be reduced by one third for each
complete month elapsed; and thereafter each Standard Fee shall be
payable on or prior to commencement of the Quarter to which that
Standard Fee relates.
9.2 Licensee's first Subscriber Fee shall become payable at the expiry of
the first month during which it begins disseminating the Information to
Subscribers or, if sooner, at the expiry of four months from the
Commencement Date irrespective of whether Licensee has begun
disseminating the Information to Subscribers. Thereafter Subscriber
Fees shall become payable from the date when the Subscriber Report
describing those Subscriber Fees is due to be provided pursuant to
clause 5.4 of the Agreement.
9.3 The annual Port Fee shall be payable on the first business day of each
year or, in the first year of the connection to which the Port Fee
relates, the date when such connection is first made Subject to a pro
rata reduction of HK$1,000 for each complete calendar month elapsed.
Any additional Port Fee shall be payable on or prior to commencement of
the Quarter (or, if later, commencement during that Quarter of the live
feed) to which that additional Port Fee relates.
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SCHEDULE 2
(REFERENCE CLAUSE 5.7)
1 The Licensee shall, within 30 days of the date of any formal report
made by its auditors in relation to its audited annual financial
accounting statement for any of its accounting years, submit to SEIS a
LAQ Statement signed by those same auditors giving answers to such
questions in writing as SEIS may reasonably specify to the Licensee
from time to time but in each case no later than 30 days after the
accounting year end date for the annual financial accounting statement
in question.
2 Upon signing of This Agreement, the Licensee shall promptly notify SEIS
in writing of the date of its current accounting year end and the
expected date of the report of its auditors in relation thereto.
3 The Licensee shall thereafter promptly notify SEIS from time to time of
any changes in such dates, in relation to that accounting year or any
subsequent accounting year.
4 If requested by SEIS, the Licensee shall procure its auditors to
provide prompt clarification to SEIS of any answers given in the said
LAQ Statement, such clarification to be provided either orally or in
writing or both.
5 Where the Licensee makes audited financial accounting statements other
than on an accounting year basis, the obligation to make LAQ Statements
to SEIS hereunder shall be satisfied if the LAQ Statement is submitted
to SEIS within 30 days of the date on which the corresponding formal
auditor's report is actually made
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