U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Quarter Ended March 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from_________to__________
Commission file number 333-16451
---------------------------------------
SAC TECHNOLOGIES, INC.
(Exact name of small business Issuer as specified in its charter)
MINNESOTA 41-1741861
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
4444 West 76th Street, Suite 600, Edina, MN 55435
(Address of principal executive offices)
(612) 835-7080
(Issuer's telephone number)
--------------------------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes___ No_X_
Shares of the Registrant's Common Stock, par value $.01 per share, outstanding
as of May 9, 1997: 3,718,750.
SAC TECHNOLOGIES, INC.
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Balance sheets as of December 31, 1996 and March 31, 1997 3
Statements of operations for the three months ended March 31,
1996 and 1997, and January 7, 1993 (date of inception)
through March 31, 1997 4
Statements of cash flows for the three months ended March 31,
1996 and 1997, and January 7, 1993 (date of inception) through
March 31, 1997 5
Notes to interim financial statements 6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II. OTHER INFORMATION
Item 1 - Legal proceedings 13
Item 2 - Changes in securities 13
Item 3 - Defaults upon senior securities 13
Item 4 - Submission of matters to a vote of security holders 13
Item 5 - Other events 13
Item 6 - Exhibits and reports on Form 8-K 13
SAC Technologies, Inc.
(a Corporation in the Development Stage)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
----------- -----------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 89,133 $ 5,652,288
Accounts receivable, net - 52,410
Inventories 106,229 133,030
Prepaid expenses 10,487 25,024
----------- -----------
Total current assets 205,849 5,862,752
EQUIPMENT AND FURNITURE AND FIXTURES - AT COST, less
accumulated depreciation 41,936 41,179
OTHER ASSETS 157,478 15,636
----------- -----------
$ 405,263 $ 5,919,567
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Notes payable $ 330,000 $ -
Accounts payable 219,254 89,675
Accrued liabilities 12,180 153,819
----------- -----------
Total current liabilities 561,434 243,494
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock - authorized, 20,000,000 shares of $.01 par value;
issued and outstanding, 2,508,750 and 3,718,750 shares 25,088 37,188
Additional contributed capital 900,005 7,293,596
Deficit accumulated during the development stage (969,264) (1,404,211)
Unearned compensation (112,000) (250,500)
----------- -----------
(156,171) 5,676,073
----------- -----------
$ 405,263 $ 5,919,567
=========== ===========
</TABLE>
See accompanying notes to interim financial statements.
SAC Technologies, Inc.
(a Corporation in the Development Stage)
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
January 7,
1993 (date
Three months of inception)
ended March 31, through
------------------------------ March 31,
1996 1997 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenues
Product sales $ - $ 23,715 $ 23,715
Reimbursed research and development - 12,000 250,306
Technical support and other services - 77,438 224,189
----------- ----------- -----------
- 113,153 498,210
Costs and other expenses
Cost of product sales - 72,005 72,005
Cost of technical support and other services - 31,373 108,201
Selling, general and administrative 33,502 362,486 858,973
Research and development 46,272 96,531 828,709
----------- ----------- -----------
79,774 562,395 1,867,888
----------- ----------- -----------
Operating loss (79,774) (449,242) (1,369,678)
Other income (expense)
Interest and other income 18 18,192 22,480
Interest expense (758) (3,897) (39,504)
----------- ----------- -----------
(740) 14,295 (17,024)
----------- ----------- -----------
NET LOSS $ (80,514) $ (434,947) $(1,386,702)
=========== =========== ===========
Loss per common share $ (.03) $ (.15) $ (.53)
=========== =========== ===========
Weighted average number of shares outstanding 2,462,917 2,982,975 2,629,323
=========== =========== ===========
See accompanying notes to interim financial statements.
</TABLE>
SAC Technologies, Inc.
(a Corporation in the Development Stage)
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
January 7,
1993 (date
Three months of inception)
ended March 31, through
--------------------------- March 31,
1996 1997 1997
----------- ----------- -----------
<S> <C> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities
Net loss $ (80,514) $ (434,947) $(1,386,702)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 375 4,200 7,935
Amortization
Warrants - - 4,167
Unearned compensation - 8,400 21,400
Interest converted to common stock - - 1,841
Revenues realized due to offset of billings
against a stock repurchase - - (170,174)
Warrants issued for services - 27,500 27,500
Contribution of services - - 11,250
Change in assets and liabilities:
Accounts receivable (6,700) (52,410) (52,410)
Inventories 887 (26,801) (133,030)
Prepaid expenses 3,987 (14,537) (25,024)
Accounts payable (659) (129,579) 89,675
Accrued liabilities 2,528 152,599 164,779
----------- ----------- -----------
418 (30,628) (52,091)
----------- ----------- -----------
Net cash used in operating activities (80,096) (465,575) (1,438,793)
Cash flows from investing activities
Capital expenditures (2,588) (3,443) (49,114)
Security deposits - (6,219) (11,102)
Patents and trademarks - - (4,534)
----------- ----------- -----------
Net cash used for investing activities (2,588) (9,662) (64,750)
Cash flows from financing activities
Net borrowings (payments) under short-term borrowing
agreements 95,000 (330,000) -
Issuance of convertible bridge notes - - 175,000
Issuance of warrants - - 25,000
Sales of common stock - 6,368,392 7,241,892
Redemption of common stock - - (138,000)
Offering costs (7,851) - (148,061)
----------- ----------- -----------
Net cash provided by financing activities 87,149 6,038,392 7,155,831
----------- ----------- -----------
Net increase in cash and cash
equivalents 4,465 5,563,155 5,652,288
Cash and cash equivalents at beginning of period 5,221 89,133 -
----------- ----------- -----------
Cash and cash equivalents at end of period $ 9,686 $ 5,652,288 $ 5,652,288
=========== =========== ===========
See accompanying notes to interim financial statements.
</TABLE>
SAC Technologies, Inc.
(a Corporation in the Development Stage)
NOTES TO INTERIM FINANCIAL STATEMENTS
December 31, 1996 and
March 31, 1996 and 1997 (Unaudited)
1. Unaudited Statements
The accompanying unaudited interim financial statements have been prepared
by SAC Technologies, Inc. (the "Company") in accordance with generally
accepted accounting principles, pursuant to the rules and regulations of
the Securities and Exchange Commission. Pursuant to such rules and
regulations, certain financial information and footnote disclosures
normally included in the financial statements have been condensed or
omitted.
In the opinion of management, the accompanying unaudited interim financial
statements contain all necessary adjustments, consisting only of those of a
recurring nature, and disclosures to present fairly the financial position
and the results of its operations and cash flows for the periods presented.
It is suggested that these interim financial statements be read in
conjunction with the financial statements and the related notes thereto
included in the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1996.
2. Loss Per Share
Loss per common share is determined by dividing the net loss by the
weighted average number of shares of common stock and common stock
equivalents outstanding.
Under Securities and Exchange Commission rules for initial public
offerings, common stock equivalents for all periods presented include
shares sold or options or warrants granted within twelve months prior to
the effective date of the Company's initial public offering (February 14,
1997) at per share prices less than that of the initial public offering
(assumed to be $6.00 per share) even if the impact is antidilutive.
During February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings per Share." This pronouncement provides a different
method of calculating earnings per share than is currently used in
accordance with APB No. 15, "earnings per Share." SFAS 128 provides for the
calculation of basic and diluted earnings per share. Basic earnings per
share includes no dilution and is computed by dividing income available to
common shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the
potential dilution of securities that could share in the earnings of an
entity, similar to fully dilutive earnings per share.
SFAS is effective for financial statements for both interim and annual
periods ending after December 15, 1997 and early adoption is not permitted.
When adopted, the statement will require restatement of prior years'
earnings per share. The Company will adopt this statement for its fourth
quarter and year ending December 31, 1997. Assuming that SFAS 128 had been
implemented, basic and dilutive loss per share would have been the same as
that reported for the three months ended March 31, 1997 pursuant to the
existing Securities and Exchange Commission rules discussed above.
3. Other Assets
December 31, March 31,
1996 1997
-------- --------
Deferred offering costs $148,061 $ -
Security deposits 4,883 11,102
Patents 4,534 4,534
-------- --------
$157,478 $ 15,636
======== ========
Deferred offering costs consist of legal fees and related expenses in
connection with the Company's initial public offering of common stock. Such
amounts were reflected as an offset to the gross proceeds received from
this offering (see note 5).
4. Accrued Liabilities
December 31, March 31,
1996 1997
-------- --------
Compensation $ 1,000 $ 65,000
Employee moving allowance - 40,000
Professional fees - 40,000
Interest and other 11,180 8,819
-------- --------
$ 12,180 $153,819
======== ========
5. Stockholders' Equity
During February 1997, the Company completed an initial public offering of
1,210,000 shares of its common stock at $6.00 per share resulting in net
proceeds of $6,220,331 after deduction of offering expenses. The proceeds
from the offering were used to repay all outstanding notes payable of
$442,000, including $117,000 of notes payable to a shareholder/director.
The following non-statutory options have been granted since December 31,
1996:
<TABLE>
<CAPTION>
Date of Exercise
Grant Number Price Vesting Expiration Issued to
----- ------ -------- ----------------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
March 1997 130,000 $6.43 Ratably through March 2002 March 2004 New Chief Operating Officer
April 1997 20,000 8.87 Ratably through April 2002 April 2004 New Vice President
of Finance
April 1997 30,000 8.87 Ratably through April 2002 April 2004 New Director of Product Marketing
</TABLE>
The difference between the option exercise price and estimated fair value
of common stock at the date of grant for the options to purchase 130,000
shares of common stock is $146,900 and has been reflected as unearned
compensation in the Company's financial statements to be recognized as
expense over the five year vesting term of the stock option agreement. An
additional $78,500 will be reflected as unearned compensation in the
Company's financial statements for the quarter ending June 30, 1997 for the
options to purchase 50,000 shares of common stock. The $78,500 will also be
recognized as expense over the five year vesting term of the related stock
option agreements.
5. Stockholders' Equity (continued)
In connection with the Company's initial public offering, the Agent for the
offering received a five-year warrant to purchase 44,469 shares of common
stock at an exercise price of $7.20 per share. The warrant is exercisable
from February 1998 through February 2002. Effective March 1997, the
Company issued warrants to a consultant to purchase 12,500 shares of common
stock at $6.00 per share. The warrants are exercisable for seven years.
6. Related Party Transactions
Included in accounts receivable are $20,340 of amounts due from
Inter-Con/PC, Inc. During the three months ended March 30, 1997, $74,520 of
revenues were recognized from transactions with Inter-Con/PC, Inc. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for further information regarding the Company's relationship
with Inter-Con/PC, Inc.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THIS FORM 10-QSB CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS. FOR THIS PURPOSE,
ANY STATEMENTS CONTAINED IN THIS FORM 10-QSB THAT ARE NOT STATEMENTS OF
HISTORICAL FACT MAY BE DEEMED TO BE FORWARD- LOOKING STATEMENTS. WITHOUT
LIMITING THE FOREGOING, WORDS SUCH AS "MAY," "WILL," "EXPECT," "BELIEVE,"
ANTICIPATE," OR "CONTINUE" OR THE NEGATIVE OR OTHER VARIATION THEREOF OR
COMPARABLE TERMINOLOGY ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.
THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES,
AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING ON A VARIETY OF FACTORS
INCLUDING, WITHOUT LIMITATION, THE RISK FACTORS SET FORTH IN THE "RISK FACTORS"
SECTION OF THE COMPANY'S REGISTRATION STATEMENT ON FORM SB-2 (FILE NO.
333-16451) FILED PURSUANT TO RULE 424(b) DATED FEBRUARY 14, 1997 AND ANY FUTURE
SUPPLEMENTS OR AMENDMENTS TO THIS FILING.
OVERVIEW
The Company was incorporated in 1993 to develop real-time, stand-alone systems
capable of identifying individuals through automated fingerprint analysis for
use in controlling access to resources, information and facilities. From
inception through most of 1996 the Company's development efforts, which by
agreement were to be funded by Jasper Consulting, Inc. ("Jasper"), were
principally focused on the development of its fingerprint identification and
analysis products. In the second half of 1996, the Company shifted its principal
focus from development to marketing and sales of its products.
During March 1997, the Company hired a Chief Operating Officer with a marketing
background. During April 1997, the Company hired a Director of Product Marketing
and a Vice President of Finance. The Company's focus in the near term is to
market its products primarily in the following application areas: controlled
access to appliances, information resources, computers, computer networks, as
well as apartments, offices and other facilities.
During the quarter ended March 31, 1997, the Company began shipping its
SACMan products to customers (see below). The Company continues its development
of SAC_Remote and SAC_ Encrypt and anticipates release of such products during
mid 1997 and late 1997, respectively.
The Company is considered a development stage enterprise for accounting
purposes. Results achieved to date are not indicative of future results
primarily because the Company has shifted its focus from the development of its
products to the marketing and selling of its products. Broad commercial
acceptance of the Company's products by customers and end users is critical to
the Company's success and ability to generate revenues. The Company has limited
sales to date and has a limited operating history upon which an evaluation of
the Company and its prospects can be based. The Company's prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in the early stage of development. The Company may
continue to sustain operating losses for the foreseeable future.
The Company had also completed development of a Set Top Box, which provides for
basic personal computer functions and Internet access via a wireless keyboard
and a conventional television set. However, the Company did not believe that the
promotion and marketing of the Set Top Box was within its focus and,
accordingly, conveyed the technology to Inter-Con/PC, Inc. ("Inter-Con") in
exchange for an initial 50% ownership interest (48.6% as of March 31, 1997) in
Inter-Con, a development stage Company. The Company has a technical support
agreement with Inter-Con which provides for Inter-Con to pay technical support
fees to the Company of up to $20,000 per month. The agreement expires in October
1999 and is subject to three successive one-year renewal options at the option
of Inter-Con.
By agreement, Jasper is obligated to pay a royalty to the Company for sales of
certain products and the Company has the exclusive right to manufacture products
sold by Jasper, subject to a predetermined pricing structure. However, the
Company is not relying on these potential sources of revenue from Jasper or its
interest in Inter-Con to significantly impact its results of operation.
The Company anticipates adding approximately 14 employees through 1998. The
Company anticipates ongoing research and development expenses during 1997 at a
level greater than that experienced for the year ended December 31, 1996. The
Company anticipates accounts receivable and inventory levels, and selling,
general and administrative expenses will increase significantly in connection
with its transition to marketing and selling its products.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AS COMPARED TO MARCH 31, 1997:
Revenues from SACMan product sales were $23,715 during the three months ended
March 31, 1997. These revenues were primarily from single unit sales to original
equipment manufacturers and others developing or intending to develop
applications which may utilize the Company's products. Revenues from reimbursed
research and development were $12,000 during the three months ended March 31,
1997 and relate to collection of previously unrecognized research and
development billings to Jasper, as discussed below.
Revenues from technical support and other services were $77,438 during the three
months ended March 31, 1997, $48,000 of which relates to three months
billings under the technical services agreement with Inter-Con (see "Overview").
Additionally, the Company realized $29,438 of revenues from development
activities for Inter-Con and Jasper.
As more fully discussed in the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1996, the Company has recognized revenue from
Jasper on the cash method, as collection of amounts billed is not assured. As of
March 31, 1997 there were $394,481 of billings outstanding from Jasper which
have not yet been recognized for financial reporting purposes. Jasper has agreed
to allow the Company to offset future product royalties due to Jasper, if any,
against these unrecognized receivables. In addition, the Company may also charge
an additional $800 for each product manufactured by the Company for Jasper in
order to accelerate payment of the outstanding balance. No assurance can be
given that future sales subject to payment of royalty to Jasper or orders to
manufacture products on behalf of Jasper will occur in amounts sufficient to
offset the uncollected billings above, if at all.
Cost of product sales exceeded revenues from product sales by $48,290 during the
three months ended March 31, 1997, principally resulting from costs associated
with establishing a production line, hiring production personnel and training
production personnel on the operation of the production equipment.
Selling, general and administrative expense increased $328,984 to $362,486
during the three months ended March 31, 1997, as compared to $33,502 for the
same period in 1996. Of the increase, $97,309 was due to additional salaries and
wages and incentive compensation for marketing and administrative personnel,
$90,100 was due to recruiting and relocation costs for the new chief operating
officer, $62,929 was due to increased professional fees and the remainder of the
increase was principally due to certain marketing and travel activities.
Research and development expense increased $50,259 to $96,531 during the three
months ended March 31, 1997 as compared to $46,272 for 1996. The increase is
attributable to increased development activity to commercialize certain of its
products.
LIQUIDITY AND CAPITAL RESOURCES
Since January 7, 1993 (date of inception), the Company's capital needs have been
principally met by a February 1997 initial public offering of 1,210,000 shares
of common stock at $6.00 per share which resulted in net proceeds of $6,220,331
after deduction of offering expenses, a July 1996 $700,000 private placement of
common stock and a May 1996 sale of $200,000 of convertible bridge notes. The
bridge notes were converted to common stock during mid 1996.
Net cash used in operating activities during the three months ended March 31,
1997 was $465,575 and was principally due to operating losses. Net cash used for
investing activities during 1997 was $9,662. Net cash provided by financing
activities during 1997 was $6,038,392 and was principally from the proceeds
received from the initial public offering discussed above.
The Company believes the funds raised from its recent initial public offering
will be adequate to last through mid 1998. No assurance can be given that events
and circumstances won't change and require additional capital at an earlier
date. No assurance can be given that any additional financing, when needed, will
be available on acceptable terms, if at all, and such financing may only be
available on terms dilutive to existing stockholders.
Working capital increased $5,974,843 during the three months ended March 31,
1997 to $5,619,258, as compared to a deficit of $355,585 as of December 31,
1996. This increase is principally due to the proceeds received from the initial
public offering. Additionally, during the three months ended March 31, 1997,
there was a $79,211 increase in inventories and accounts receivable, a $12,060
increase in accounts payable and accrued expenses, a $213,000 reduction in
borrowings under a revolving note payable to a bank and the Company repaid a
$117,000 note payable to an officer/director. The inventory and accounts
receivable increases are attributable to sales of the Company's products and
purchasing component parts for its SACMan and related products for future
production.
During March 1997, the Company entered into a five year employment agreement
with its new Chief Operating Officer. The agreement provides for certain base
salary and incentive payments. In the event of constructive termination, as
defined, this individual is entitled to one year severance pay, as defined (two
years in case of merger or acquisition). Additionally, the Company awarded this
individual options to purchase 130,000 shares of common stock at $6.43 per
share. The options vest five percent on June 30, 1997 and five percent each
quarter thereafter, such that on March 31, 2002, one-hundred percent of such
options are vested. The options expire during March 2004.
During April 1997, the Company hired a vice president of finance and a director
of sales and marketing. The Company issued these individuals options to purchase
a total of 50,000 shares of common stock at $8.87 per share. The options vest
five percent on July 17, 1997 and five percent each quarter thereafter, such
that on April 17, 2002, one-hundred percent of such options are vested. The
options expires April 2004.
The difference between the option exercise price and estimated fair value of
common stock at the date of grant for the options to purchase 130,000 shares of
common stock is $146,900 and has been reflected as unearned compensation in the
Company's financial statements, to be recognized as expense over the five year
vesting term of the stock option agreement. An additional $78,500 will be
reflected as unearned compensation in the Company's financial statements for the
quarter ending June 30, 1997 for the options to purchase 50,000 shares of common
stock. The $78,500 will also be recognized as expense over the five year vesting
term of the related stock option agreements. (See note 5 of the notes to interim
financial statements).
RECENTLY ISSUED ACCOUNTING STANDARD
See note 2 of notes to interim financial statements for information regarding
SFAS 128 "Earnings per Share."
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Events
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(I) Those exhibits required to be furnished in response to this
item, other than parts of Exhibit 10 and all of Exhibit 27,
were furnished in connection with the Company's Registration
Statement on Form SB-2, File No. 33-16451 as filed with the
Securities Exchange Commission on November 20, 1996, and as
amended by Amendment No. 1 thereto filed on January 10,
1997, Amendment No. 2 thereto filed February 7, 1997 and
Amendment No. 3 thereto filed February 14, 1997 and as
supplemented by supplement dated April 9, 1997, all of which
are incorporated herein by reference.
(ii) Exhibit 10 - Material Contracts
Noncompetition and nondisclosure agreement
(standard employee agreement) dated April 17, 1997 with
Ronald Burgmeier, Vice President of Finance
(iii) Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K
None.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SAC Technologies, Inc.
(the "Registrant")
Date: May 15, 1997 /s/ Barry Wendt
----------------
Barry Wendt, Chief Executive Officer
/s/ Gary Wendt
----------------
Gary Wendt, Chief Financial Officer
SAC TECHNOLOGIES, INC.
NONCOMPETITION AND NONDISCLOSURE AGREEMENT
(Standard Employee Agreement)
AGREEMENT entered into as of the 17th day of April, 1997, by and
between SAC TECHNOLOGIES, INC., a Minnesota corporation (the "Company"), and Ron
Burgmeier (the "Employee");
WHEREAS, the Employee desires to be employed by the Company commencing
on April 17, 1997; and
WHEREAS, the Company will employ the Employee only under and pursuant
to the terms of this Agreement and subsequent to the execution of this Agreement
by the Employee;
NOW, THEREFORE, in consideration of the premises, in consideration of
the employment of the Employee by the Company, in consideration of the mutual
promises of the parties hereto, and for other good, valuable and sufficient
consideration,
IT IS HEREBY AGREED:
1. EMPLOYMENT. The employment of the Employee pursuant to this Agreement shall
commence on the date set forth above and shall be an employment at will. The
Employee hereby accepts such employment and understands that, because the
Employee's employment is at will, the Employee's employment may be terminated at
any time without notice and without reason or cause.
2. RELATIONSHIP BETWEEN PARTIES. The relationship between the Company
and the Employee shall be that of employer and employee, and the Employee shall
be entitled to participate, to the extent deemed reasonable by the Board of
Directors of the Company, in any plans, arrangements or distributions by the
Company pertaining to, or in connection with, any pension, bonus,
profit-sharing, medical reimbursement, group life insurance, medical and
hospitalization insurance, disability insurance, vacation policy or other
benefit made available to employees. All benefits will be made available in
accordance with then existing Company policy and may be changed, altered or
eliminated by the Company without the Employee's consent. Nothing contained
herein shall be construed to give the Employee any interest in the assets of the
Company. All of the records of any and all business ventures in which the
Company from time to time may become involved, and all of the records and files
pertaining to the Company's suppliers, strategic allies, licensers, licensees
and customers are herein specifically acknowledged to be the property of the
Company and not that of the Employee.
3. COMPENSATION; DUTIES. The Employee's duties and responsibilities,
and initial compensation and benefits are described on Exhibit A attached
hereto.
4. PROTECTION OF TRADE SECRETS AND RELATED MATTERS.
a. Nondisclosure Agreement. The Employee shall not during the
term of the Employee's employment or at any time thereafter divulge,
furnish or make accessible to anyone or use in any way other than for
the benefit of the Company in the ordinary course of business of the
Company any trade secrets or confidential information of the Company or
of any strategic ally, licensee, licenser, vendor, or any other person
or entity with which or with whom the Company has or has had any
business relationship which the Employee has acquired or has become
acquainted with or will acquire or become acquainted with during the
term of the Employee's employment, whether developed by the Employee or
by others. Confidential information includes any information or
compilation of information that derives independent economic value from
not being generally known or readily ascertainable by proper means by
other persons and which relates to any aspect of the Company's
business, or the business of any other person or entity with whom the
Company has or has had a business relationship as aforesaid, including,
but not limited to, trade secret information relating to the Company's
scientific technology, processes, systems and products; the Company's
research and development; the Company's philosophies and strategies;
the Company's vendor and customer lists; all information with respect
to "Inventions" described in Subparagraph b. of this Paragraph 4; and
any such similar confidential information of a strategic ally, vendor,
licensor, licensee or other person or entity with whom or with which
the Company has or has had a business relationship which has been
divulged to the Company by such individuals or entities. All
information disclosed to the Employee, or to which the Employee obtains
access, whether originated by him or her or by others, during the
period of this employment, which the Employee has reasonable basis to
believe to be confidential information, or which is treated by the
Company as being confidential information, shall be presumed to be
confidential information.
b. Patent and Related Matters.
(1) Disclosure and Assignment. The Employee will
promptly disclose in writing to the Company complete
information concerning each and every invention, discovery,
improvement, idea, device, design, apparatus, practice,
process, method or product, whether patentable or not and
including those which may be subject to copyright protection,
made, developed, perfected, devised, conceived or first
reduced to practice by the Employee, either solely or in
collaboration with others, during the term of the Employee's
employment, whether or not during regular working hours
(hereinafter referred to as "Inventions"). The Employee, to
the extent that the Employee has the legal right to do so,
hereby acknowledges that any and all of said Inventions are
the property of the Company and hereby assigns and agrees to
assign to the Company any and all of the Employee's right,
title and interest in and to any and all of said Inventions.
(2) Limitation. It is further agreed and the Employee
is hereby notified that the above agreement to assign
Inventions to the Company does not apply to an Invention for
which no equipment, supplies, facility or confidential
information of the Company was used and which was developed
entirely on the Employee's own time, and
(i) which does not relate (aa) directly to
the business of the Company or (bb) to the Company's
actual or demonstrably anticipated research and
development, or
(ii) which does not result from any work
performed by the Employee for the Company.
(3) Assistance. Upon request and without further
compensation therefor, but at no expense to the Employee, and
whether during the term of this Agreement or thereafter, the
Employee will do all lawful acts, including, but not limited
to, the execution of documents and instruments and the giving
of testimony, that in the opinion of the Company, its
successors and assigns, may be necessary or desirable in
obtaining, sustaining, reissuing, extending and enforcing
United States and foreign copyrights and Letters Patent,
including, but not limited to, design patents, on any and all
of said Inventions, and for perfecting, affirming and
recording the Company's complete ownership and title thereto,
and to cooperate otherwise in all proceedings and matters
relating thereto.
(4) Records. The Employee will keep complete,
accurate and authentic accounts, notes, data and records of
all of said Inventions in the manner and form requested by the
Company. Such accounts, notes, data and records shall be the
property of the Company, and, upon its request, the Employee
will promptly surrender the same to it.
(5) Patents Filed After Termination of Employment.
For purposes of this Agreement, any Invention relating to the
business of the Company on which the Employee files a patent
application within one (1) year after termination of
employment with the Company shall be presumed to cover
Inventions conceived by the Employee during the term of the
Employee's employment, subject to proof to the contrary by
good faith, written and duly corroborated records establishing
that such Invention was conceived and made following
termination of employment.
c. Return of Confidential Information Upon Termination of
Employment. Upon the termination of the Employee's employment, the
Employee agrees to deliver promptly to the Company all records,
manuals, books, blank forms, documents, letters, memoranda, notes,
notebooks, reports, data, tables, accounts, calculations and copies
thereof, which are the property of the Company or which relate in any
way to the business, products, customers, practices or techniques of
the Company, and all other property, trade secrets and confidential
information of the Company, including, but not limited to, all
documents which in whole or in part contain any trade secrets or
confidential information of the Company, which in any of these cases
are in the Employee's possession or under the Employee's control.
d. Injunctive Relief. The parties to this Agreement agree that
the confidential information of the Company is unique, the unauthorized
use or disclosure of which would confer irreparable harm on the
Company, which irreparable harm may not be compensable entirely with
monetary damages. The parties agree that injunctive relief is an
appropriate remedy for breach of the provisions of this Section. Such
injunctive relief shall be in addition to and not in limitation of any
monetary relief or other remedies or rights to which Company is or may
be entitled to at law, in equity or under this Agreement.
e. Continuing Obligations. It is intended that the obligation
of the Employee to perform pursuant to the terms of this Paragraph 4 is
unconditional and does not depend on the performance or nonperformance
of any agreements, duties or obligations between the Company and the
Employee not specifically contained in this Agreement. This Paragraph 4
shall survive the termination of this Agreement and this termination of
the Employee's employment with the Company.
5. NON-COMPETE. In consideration of the Company's employment of the
Employee as aforesaid, the Employee agrees that during the Employee's employment
with the Company and for a period of two (2) years after the termination of the
Employee's employment with the Company for any reason or for no reason, the
Employee agrees that the Employee shall not, directly or indirectly, for himself
or herself, or through, on behalf of, or in conjunction with any person, persons
or entity:
a. own any interest in, manage, operate, join, consult with,
be employed by, or in any other manner participate in or be connected
with, any person or entity which now is, or in the future intends to
be, engaged in the research, development, marketing or selling of
fingerprint identification systems; or
b. attempt to induce any persons or entities to discontinue
doing business with the Company; or solicit or induce any employee or
consultant of the Company to discontinue his or her or its employment
or consultancy with the Company, or compete with the Company for
himself, herself, or itself, or for others.
6. REPRESENTATION. The Employee represents and warrants that the
Employee has fully disclosed to the Company every contract, agreement or
arrangement, written or oral, with respect to any other employment or consulting
relationship, which would interfere or conflict with the performance of the
Employee's duties or obligations under this Agreement, or which would involve
the disclosure of the Company's confidential information.
7. MISCELLANEOUS.
a. The rights and obligations of the Company hereunder may be
transferred to its successors and assigns. The Employee may not,
however, transfer or assign the Employee's rights or obligations
contained in this Agreement.
b. The Employee agrees that the provisions of this Agreement,
particularly the provisions of Paragraphs 4 and 5, are reasonable.
Notwithstanding the foregoing, however, to the extent any provision of
this Agreement shall be invalid or unenforceable, it shall be
considered deleted herefrom and the remainder of such provision and of
this Agreement shall be unaffected and shall continue in full force and
effect. Notwithstanding the foregoing, in the event that any provision
of this Agreement is unenforceable because it is overbroad, then such
provision shall be limited to the extent necessary to make it
enforceable under applicable law and enforced as so limited. The
Employee acknowledges the uncertainty of the law in this respect and
expressly stipulates that this Agreement be given the construction
which renders its provisions valid and enforceable to the maximum
extent (not exceeding its express terms) possible under applicable law.
c. This Agreement shall be construed and enforced in
accordance with the laws of the State of Minnesota.
d. The waiver by any party hereto of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by either party.
e. This Agreement supersedes any prior employment agreements
between the parties and contains the entire Agreement of the parties
with respect to employment and employment issues. There are no terms
other than those contained herein and therein. No amendment or
modification of this Agreement shall be deemed effective unless or
until executed in writing by the parties hereto with the same formality
attending execution of this Agreement.
f. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and sent by registered or
certified mail to the Company at the Company's main headquarters, or to
the Employee at the address indicated below.
g. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs,
representatives, successors and assigns.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officers and the Employee has signed this
Agreement as of the day and year first above written.
/s/ Ronald Burgmeier SAC TECHNOLOGIES, INC.
- --------------------------------
(Employee)
4620 Valley View Blvd., Suite A1 By /s/ Barry M. Wendt
- -------------------------------- --------------------------------
Its Chief Executive Officer
Las Vegas, NV 89103 ----------------------------
- --------------------------------
(Address)
###-##-####
- --------------------------------
(Social Security Number)
EXHIBIT A
TO
SAC TECHNOLOGIES, INC.
NONCOMPETITION AND NONDISCLOSURE AGREEMENT
WITH
Ron Burgmeier
--------------
(Employee)
1. Duties; Responsibilities: Vice President of Finance
------------------------ ----------------------------------
----------------------------------
----------------------------------
2. Starting Salary: $70,000
------------------------ ----------------------------------
3. Initial benefits:
------------------------
(a) Vacation: 3 weeks
----------------- ----------------------------------
$100,000 Term Life
(b) Life Insurance: Insurance Policy
----------------- ----------------------------------
(c) Health Insurance: Standard Health Insurance
----------------- ----------------------------------
Option to Purchase 20,000
shares over 5 years.
4. Stock Options: Options vest quarterly
------------------------ ----------------------------------
