AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH __ , 1997
Registration No. 333-20121
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pre-Effective Amendment No. 1
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
POWERTRADER, INC.
(Name of Small Business Issuer in Its Charter)
Delaware 7372 98-0163116
(State or Other Jurisdiction of (Primary Standard (I.R.S. Employer
Incorporation or Organization) Industrial Identification Number)
Classification
Code Number)
Douglas J. Bates, Esq.
Suite 591 Gallop, Johnson & Neuman, L.C. Suite 591
885 Dunsmuir Street 101 South Hanley Road 885 Dunsmuir Street
Vancouver, B.C. St. Louis, MO 63105 Vancouver, B.C.
V6C 1N5 (314) 862-1200 V6C 1N5
(604) 685-1529 (Name, Address and (Address of Principal
(Address and Telephone Telephone Number Place of Business or
Number of Principal of Agent for Service) Intended Principal
Executive Offices) Place of Business)
Approximate Date of Proposed Sale to the Public: As soon as practicable after
this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_| |X|
<PAGE>
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of each class of Proposed maximum Amount of
securities to be registered aggregate offering price (b) registration fee
<S> <C> <C>
Units, consisting of one share of Common Stock,
$0.01 par value per share, and one warrant to
purchase one additional share of Common Stock $5,525,000 $1,674.24
Common Stock, $0.01 par value per share,
included as part of the Units --- --- (c)
Warrant to purchase one share of Common Stock,
included as part of the Units --- --- (c)
Common Stock, $0.01 par value per share,
issuable upon exercise of the Warrants --- --- (c)
Common Stock, $0.01 par value per share $1,785,000 $540.91 (d)
<FN>
(a) Pursuant to Rule 416, this registration statement also covers such
indeterminable additional shares of Common Stock as may become
issuable as a result of any future antidilution adjustments made in
accordance with the terms of the Warrants.
(b) Calculated pursuant to Rule 457(o) under the Securities Act of 1933,
as amended.
(c) No separate registration fee required pursuant to Rule 457(i) under
the Securities Act of 1933, as amended.
(d) The applicable registration fee was paid with the original filing on
January 22, 1997.
[/FN]
</TABLE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
SUBJECT TO COMPLETION, DATED , 1997
PROSPECTUS [LOGO]
Information contained herein is subject to completion or amendment. A
registration statement relating to the securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of the securities in
any state in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of such state.
THIS OFFERING IS MADE ONLY TO RESIDENTS OF THE STATES OF CALIFORNIA, COLORADO,
CONNECTICUT, NEW JERSEY, AND NEW YORK. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY TO ANYONE IN ANY OTHER JURISDICTION. THE SECURITIES OFFERED
HEREBY HAVE NOT BEEN REGISTERED OR QUALIFIED FOR SALE IN ANY STATE OTHER THAN
THOSE SET FORTH ABOVE; ACCORDINGLY, SECURITIES PURCHASED IN THIS OFFERING MAY
NOT BE SOLD OR OTHERWISE TRANSFERRED TO THE RESIDENTS OF ANY OTHER STATE ABSENT
REGISTRATION UNDER SUCH STATES' LAW OR THE AVAILABILITY OF AN EXEMPTION
THEREFROM.
CALIFORNIA RESIDENTS: THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA HAS IMPOSED INVESTOR SUITABILITY STANDARDS OF A MINIMUM OF $65,000
ANNUAL GROSS INCOME AND $250,000 OF LIQUID NET WORTH (LIQUID NET WORTH EXCLUDES
PRINCIPAL RESIDENCE, HOME FURNISHINGS AND AUTOMOBILES) OR, IN THE ALTERNATIVE,
(A) MINIMUM LIQUID NET WORTH OF $500,000, OR (B) MINIMUM TOTAL NET WORTH OF
$1,000,000, OR (C) MINIMUM GROSS INCOME OF $200,000.
A minimum of 1,000,000 Units and a maximum of 1,700,000 Units (Each
Unit consisting of one share of Common Stock and
one Warrant to purchase one additional share of Common Stock)
595,000 Shares of Common Stock
POWERTRADER, INC.
--------------
PowerTrader, Inc. (the "Company") hereby offers a minimum of 1,000,000
and a maximum of 1,700,000 units (the "Units"), each consisting of one share of
the Company's common stock, $0.01 par value per share (the "Common Stock"), and
one warrant to purchase one additional share of Common Stock at an exercise
price of $3.50 per share at any time during the five-year period commencing on
the date of this Prospectus (each a "Warrant") at an initial offering price of
$3.25 per Unit. Although the Common Stock and the Warrants included in the Units
may not be separately purchased in this offering, such securities will be
separately transferable immediately after issuance. The Warrants are subject to
redemption by the Company, in whole but not in part, at a redemption price of
$0.01 per Warrant on 30 days prior written notice to the registered holder
thereof if the average closing bid price of the Common Stock as reported by the
principal market on which the Common Stock is traded equals or exceeds $4.50 per
share for any 20 trading days within a period of 30 consecutive trading days
ending on the fifth trading day prior to the notice of redemption. See
"DESCRIPTION OF SECURITIES."
1
<PAGE>
Certain stockholders of the Company (the "Selling Stockholders")
also offer hereby 595,000 shares of Common Stock at an offering price of $3.00
per share. Such shares will be offered for sale by the Selling Stockholders
concurrently with the offering of Units by the Company and the Selling
Stockholders may be deemed to be underwriters under the federal securities laws.
The Company will not receive any proceeds from the sale of Common Stock by the
Selling Stockholders. See "PRINCIPAL AND SELLING STOCKHOLDERS" and "PLAN OF
DISTRIBUTION."
Prior to this offering, there has been no public market for the
Units, Common Stock or Warrants and there can be no assurance that any such
market will develop after the closing of the offering or that, if developed, it
will be sustained. The offering price of the Units and the Common Stock was
arbitrarily determined by the Company and the Selling Stockholder and does not
necessarily bear any direct relationship to the Company's assets, earnings, book
value or other generally accepted criteria of value. It is intended that the
offering price of the Units will be $3.25 per Unit and that the offering price
of the Common Stock will be $3.00 per share. See "PLAN OF DISTRIBUTION" for
information relating to the determination of the offering price. Upon sale of
the minimum number of Units offered hereby, the Company intends to submit an
application to render the Common Stock and Warrants eligible for quotation on
the Nasdaq SmallCap Market under the symbols "PTSW" and "PTSWW."
The Company proposes to offer the Units to the public on a
minimum/maximum, best efforts basis directly through its directors and executive
officers; however, the Company may engage one or more registered brokers or
dealers to assist in the sale of the securities offered hereby. All of the
proceeds received in connection with the sale of Units by the Company will be
deposited and held in escrow until subscriptions for an aggregate of at least
1,000,000 Units have been received. If subscriptions for the purchase of at
least 1,000,000 Units have not been received on or before the first anniversary
of the effective date of this Prospectus, the offering of the Units will be
terminated and all subscription payments held in escrow will be promptly
returned to investors. See "SUMMARY OF ESCROW AGREEMENT" and "PLAN OF
DISTRIBUTION."
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK
AND IMMEDIATE SUBSTANTIAL DILUTION. ONLY INVESTORS WHO CAN BEAR THE RISK OF LOSS
OF THEIR ENTIRE INVESTMENT SHOULD PURCHASE THESE SECURITIES. SEE "RISK FACTORS"
BEGINNING ON PAGE 6 HEREOF, AND DILUTION ON PAGE 12.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
2
<PAGE>
<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts and Proceeds to the Selling
Public Commissions(1) Company(2) Stockholder(3)
<S> <C> <C> <C> <C>
Per Unit $3.25 $--- $3.25 $---
Total Minimum $3,250,000 $--- $3,250,000 $---
Total Maximum $5,525,000 $--- $5,525,000 $---
Per Share $3.00 $--- $--- $3.00
Total $1,785,000 $--- $--- $1,785,000
<FN>
(1) Although the Company intends to offer the Units directly to the public
through its directors and executive officers, it may engage and pay
compensation at customary rates to registered brokers or dealers. See
"PLAN OF DISTRIBUTION."
(2) Before deducting estimated expenses of $200,000 payable by the
Company.
(3) The Company will not receive any of the proceeds from the sale of the
shares of Common Stock by the Selling Stockholders.
</FN>
</TABLE>
The date of this Prospectus is , 1997
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial data, including the notes related
thereto, appearing elsewhere in this Prospectus. Except as otherwise indicated,
all information in this Prospectus (other than the historical consolidated
financial statements contained herein) reflects the organization of The Company
as a Delaware corporation and subsequent acquisition of all of the outstanding
shares of PowerTrader Software Inc., a corporation organized under the laws of
the Canadian Province of British Columbia ("PSI"), as if such transactions had
occurred on July 1, 1996. See "THE COMPANY." Unless the context otherwise
requires, all references to the Company include PowerTrader, Inc. and
PowerTrader Software Inc. To assist prospective investors, a glossary of
technical terms has been included beginning on page 5 of this Prospectus.
The Company
PowerTrader, Inc. designs, develops, markets and supports
informational and analytical desktop decision support and risk management
systems for both securities professionals (including securities brokerage firms,
investment advisors and trust companies) and individual investors. The Company's
products enable its customers to capture an incoming stream of market data
provided by Market Data Vendors, store such market data for future reference,
display selected data in tabular and graphic form and analyze the data to
discover trading opportunities. The Company's systems are modular, scalable and
allow clients to leverage their investments in existing systems. Individual
components of the Company's systems can function independently, giving clients
the ability to build their system over time to integrate existing software which
is meeting their current needs. The Company's systems have been licensed to more
than 200 investors. Marketed directly, as well as through distribution partners,
in the United States, Canada, Europe and the Asian/Pacific region, the Company's
products are believed to offer a combination of analytical capabilities and
trading information.
3
<PAGE>
Industry Background
To successfully compete in the securities industry which is
experiencing rapid demographic, instrumental and accounting changes, securities
professionals are expected to increasingly rely on information systems to lower
transaction costs, manage the exponentially increasing data flow and provide
value-added analysis services. Additionally, the Company believes that advances
in telecommunications and information technology, such as the Internet, will
prompt the individual investor to increasingly require analytical tools to
manage available data and uncover investment opportunities. Based upon
discussions with several leading Market Data Vendors, the Company believes that
existing systems lack the sophistication necessary to handle such changes and
advances and do not provide the tools which the Company believes are necessary
for securities professionals and individual investors to make effective
investment decisions. See "BUSINESS-Industry Background."
The PowerTrader Solution
The Company seeks to provide solutions to the informational and
analytical challenges of both securities professionals and individual investors.
The Company's products provide an efficient application capable of supporting
rapid deployment of data and analytical functionality. The Company's products
run in a Windows environment for ease of use. See "BUSINESS-The PowerTrader
Solution."
Business Strategy
The Company believes it can capitalize on the experience of its
management in the security industry to become a leading provider of analytical
and informational systems by employing a strategy that consists of the following
key elements (See "BUSINESS-Business Strategy"):
o Implement Dual Market Strategy. By serving both the securities
professional and the individual investor portions of the
market, the Company believes it will enhance its product by
using knowledge, methodologies and concepts normally reserved
for securities professionals for the benefit of the individual
investor and vice versa, thereby realizing additional benefits
not generally enjoyed by competitors.
o Expand Product Portfolio. To meet the evolving needs of its
clients, the Company intends to continually expand its product
line by internally developing and licensing products that
respond to regular evaluations of such need.
o Pursue Distribution Alliances. To extend the Company's market
presence, the Company intends to build distribution alliances
similar to the two arrangements it currently has with
securities market participants to distribute the Company's
products.
o Expanded Services. The Company intends to expand the products
and services distributed through its Financial Wire Internet
website and its client technical consulting services.
o Leverage Existing Customer Base. The Company intends to
continuously introduce products that complement the core
functionality of existing systems owned by its large customer
and distribution partner base.
The Company's executive offices are located at Suite 591, 885 Dunsmuir
Street, Vancouver, British Columbia V6C 1N5, and its telephone number is (604)
685-1529.
4
<PAGE>
The Offering
Securities offered hereby:
by the Company a minimum of 1,000,000 and a maximum of 1,700,000
Units, each consisting of one share of Common
Stock and a warrant to purchase one additional
share of Common Stock. See "DESCRIPTION OF
SECURITIES."
by the Selling
Stockholders 595,000 shares of Common Stock.
Terms of the Warrants,
included as part of
Units Each Warrant included as part of the Units
entitles the holder thereof to purchase, at any
time during the five-year period commencing on the
date of this Prospectus, one share of Common Stock
at a price of $3.50 per share, subject to
adjustment. The Warrants are subject to redemption
by the Company, in whole but not in part, at $0.01
per Warrant on 30 days prior written notice
provided that the average closing bid price of the
Common Stock as reported by the principal market
on which the Common Stock is traded equals or
exceeds $4.50 per share, subject to adjustment,
for any 20 trading days within a period of 30
consecutive trading days ending on the fifth
trading day prior to the date of the notice of
redemption. See "DESCRIPTION OF SECURITIES."
Use of Proceeds To fund (1) expansion of the Company's
marketing and sales efforts, (2) new product
development, (3) acquisitions and (4) working
capital and other general corporate purposes.
Securities Outstanding
Prior to Offering (a) 7,378,115 shares of Common Stock.
Securities to be Outstanding
After this Offering (a) 9,078,115 shares of Common
Stock, and 1,700,000 Warrants.
Risk Factors This offering involves a high degree of
risk. See "RISK FACTORS" beginning on page 6.
Proposed Trading Symbols:
Common Stock PTSW
Warrants PTSWW
- ----------
(a) Based on shares outstanding as of January 2, 1997 and assumes that the
maximum number of shares (1,700,000) are sold. Excludes shares
reserved for issuance under certain outstanding options and the
Company's 1996 Stock Option Plan. See "CAPITALIZATION."
--------------------
5
<PAGE>
This Prospectus contains trademarks and trade names of companies other
than the Company and PSI. These trademarks and trade names are the property of
their respective owners. PowerTrader(R) is a federally registered trademark of
the Company.
--------------------
Any forward looking statements set forth in this Prospectus are
necessarily subject to significant uncertainties and risks, including, but not
limited to those set forth in "RISK FACTORS." When used in this Prospectus, the
words "believes," "anticipates," "expects" and similar expressions are intended
to identify forward-looking statements. Actual results could be materially
different as a result of various possibilities, including the Company's ability
to continue as a going concern, the unavailability of needed additional capital,
difficulties or delays in the introduction of new products or enhancement to
existing products, rapid technological change, new product offerings by existing
competitors or new entrants into the Company's markets. Readers are cautioned
not to place undue reliance on forward-looking statements, which speak only as
of the date hereof. The Company undertakes no obligation to publicly release the
results of any revisions to these forward-looking statements which may be made
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
6
<PAGE>
SUMMARY FINANCIAL DATA
PowerTrader, Inc.
Period Commencing on
August 22, 1996 (date of
inception) through
December 31, 1996
Statement of ------------------
Operations Data:
Revenue $ -
Selling, General and Administrative Costs 261,032
---------
Net Loss $(261,032)
Net Loss per share $ (0.70)
December 31, 1996
------------------
Balance Sheet Data:
Working Capital deficit $ 314,254
Total Assets 531,618
Long-term debt, less current maturities -
Stockholders' Equity 531,404
<TABLE>
PowerTrader Software Inc.
<CAPTION>
29 December
Fiscal Year Ended Six Months Ended 1988
June 30, December 31, (inception) to
-------- ------------- 31 December
1996
Statements of 1996 1995 1996 1995 (cumulative)
---- ---- ---- ---- -----------
<S> <C> <C> <C> <C> <C>
Operations Data:
Sales $ 50,971 $ 44,026 $ 27,478 $ 36,720 $ 122,475
Cost of Sales 40,910 17,411 15,855 27,836 74,176
Selling, General and
Administrative costs 405,099 369,910 257,942 117,579 1,032,951
Development Costs 203,933 108,067 153,671 124,533 465,671
-------- -------- -------- -------- ----------
Net loss $(598,971) $(451,362) $(399,990) $(233,228) $(1,450,323)
-------- -------- -------- -------- ----------
Net loss per share $ (0.24) $(3,029.28) $ (0.10) $ (0.15)
-------- ---------- -------- --------
Weighted Average Number 2,475,258 149 4,174,597 1,548,187
of shares outstanding
</TABLE>
December 31,
1996
-----------
Balance Sheet Data:
Working Capital (deficiency) $(193,448)
Total Assets 325,424
Long-term debt, less current portion -
Stockholders' Deficit (803,992)
7
<PAGE>
GLOSSARY
API - Application Programming Interface. A standard way for third party
developers to create their own programs that will work with PowerTrader Analyst
and manipulate end-of-day market data.
BETA PRODUCT - An unfinished version of a computer program that is released to a
limited number of external users for testing and comment.
C + + - An object oriented computer programming language.
CLIENT/SERVER ARCHITECTURE - A computer system architecture in which two
independent processors communicate via an established protocol. The client is
typically a single user personal computer with a graphical user interface
operated by the end-user that makes requests to the server. The server typically
runs database software, maintains information and responds to one or more
clients.
CROSS PLATFORM APPLICATIONS - high level development tools that allow for the
development of applications that can be supported across a variety of operating
systems (for example, Windows NT and Unix).
CTA - Commodity Trading Advisor.
DATA BASE - collection of data organized especially for rapid search and
retrieval.
DATA FEED - A stream of market data coming from a Data Vendor. Usually delivered
by satellite, cable or data line.
DYNAMIC DATA EXCHANGE (DDE) - A method used to share data between application
programs in the Windows environment.
DECISION SUPPORT SYSTEM SOFTWARE (DSS) - Computer programs that analyze and
graphically display financial data.
DYNAMIC LINK LIBRARY (DLL) - A set of routines used by Windows software packages
as standard functions available for use by other software packages. These
functions are loaded when the programs are run.
FIREWALL - A system that controls the flow of data between an internal network
and the Internet or between internal network segments.
FRAME RELAY - A wide area communications interface.
GRAPHIC USER INTERFACE (GUI) - Interfacing with a computer by manipulating
graphical icons and windows (usually by pointing and clicking a mouse) rather
than using text commands.
8
<PAGE>
HYPERTEXT MARK-UP LANGUAGE (HTML) - A page description language used to convey
both content and formatting information about content to a Web browser.
IBS/DOS - IBS is a DOS product owned and marketed by North American Quotations
used to display quotation information from its data feed.
DOS - Disk Operating System. The operating system software used to run
IBM-compatible computers.
INTEROPERABILITY - The ability of software and hardware on multiple machines
from multiple vendors to communicate.
INTERNET - An open global network of interconnected commercial, educational and
governmental computer networks that utilize a common communications protocol.
INTERNET SERVICE PROVIDER - (ISP) A company which provides other companies or
individuals with access to, or presence on, the Internet. Most ISPs are also
Internet Access Providers; extra services include help with design, creation and
administration of world-wide Websites, training, and administration of
Intranets.
INTERNET PROTOCOL (IP) - IP is a connectionless, best-effort packet switching
protocol. It provides packet routing, fragmentation and re-assembly through the
data link layer.
INTRANET - An organization's private network of its local area networks that
utilizes Internet data formats and communications protocols and that may use the
Internet's facilities as the backbone for network communications.
LOCAL AREA NETWORK (LAN) - A group of one or more computers connected together
within a localized environment for the purpose of sharing data and networked
resources such as printers, modems or servers.
MARKET DATA VENDORS (MDVs) - Companies that collect and distribute data
associated with the trading of financial instruments.
MICROSOFT WINDOWS - Computer operating systems providing graphical user
interfaces and, in the case of Windows NT, that are optimized for use as a
network server.
MIS - Manager of Information Services for a business entity.
NETWORK ENABLED - A version of work station software that has been modified to
work as a node on a network.
NEURAL NETWORK - An adaptive computer program that is capable of limited
learning.
OPEN SYSTEM - A system based on standards that permits interoperability of
computer systems.
9
<PAGE>
RAPID APPLICATION DEVELOPMENT (RAD) - a technique for developing software
quickly that makes use of prototyping and reusable software components.
SERVER - A program that collects and stores financial market data and makes it
available to other programs.
SHRINK WRAP LICENSE - A printed agreement included in product packaging that
typically provides that opening the package indicates the user's acceptance of
its terms and conditions.
STRUCTURED QUERY LANGUAGE (SQL) - A standard way to retrieve data from a
relational database.
UNIVERSAL RESOURCE LOCATOR (URL) - A complete address to reach a site on the
World Wide Web specifying the protocol and fully qualified address.
VALUE-ADDED RESELLERS (VAR) - A third party service/marketing organization
offering products to its customers which include software developed by a
different Company.
VISUAL BASIC - A programming system that allows the user to create robust and
useful applications for Microsoft Windows operating systems by making full use
of the Graphical User Interface (GUI).
VIRUS - An executable file that replicates and attaches itself to other
executable programs in an unsolicited manner. Most viruses are designed to
damage data or other components within a computer system.
WEB BROWSER - Client programs that allow users to browse the Web.
WEB SERVER - A server process running at a website which sends out web pages in
response to requests from remote browsers. If one site runs more than one server
they must use different port numbers.
WEBSITE - Any computer on the Internet running a World Wide Web server process.
A particular website is identified by the host name part of a URL.
WIDE AREA NETWORK (WAN) - A communications network that uses commercial
transmission resources to connect geographically dispersed users or LANs.
WORLD WIDE WEB (Web or WWW) - A network of computer servers that uses a special
communications protocol to link different servers throughout the Internet,
allowing a user to move from document to related document, no matter where it is
stored on the Internet, and permits communication of graphics, video and sound.
10
<PAGE>
RISK FACTORS
Prospective investors should consider carefully the following factors,
in addition to the other information contained in this Prospectus, in evaluating
an investment in the Securities offered hereby. This Prospectus contains
forward-looking statements which involve risks and uncertainties. The Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set
forth in the following risk factors and elsewhere in this Prospectus.
Ability to Continue as a Going Concern
The Company's limited capital resources have caused the Company's
independent accountants to issue a report which indicates that substantial doubt
exists as to the Company's ability to continue as a going concern. The Company
anticipates that absent completion of this offering it would likely exhaust its
capital resources in early 1997. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-- Liquidity and Capital Resources"
for a discussion of management's analysis and plans concerning the matters
addressed in its accountant's report.
Operating History; Expectation of Future Operating Losses; Accumulated Deficit
Although PSI, which conducts all of the Company's operations, was
incorporated in December, 1988, it did not engage in any material business
activity until June, 1994, at which time it began development of its PowerTrader
suite of software products. Accordingly, PSI has been a development stage
company, has had virtually no operating history or record of operations for
investors to consider in making an investment decision regarding the purchase of
the securities offered hereby and is vulnerable to a variety of business risks
generally associated with an early stage company. During the fiscal years ended
June 30, 1995 and 1996, and the three months ended September 30, 1996, PSI
incurred net losses of $451,362, $598,971, and $172,069, respectively. At June
30, 1996 and September 30, 1996, PSI had an accumulated deficit of $1,050,333
and $1,222,402. Because of additional research and development expenses and the
additional personnel expenses which the Company believes will be necessary to
establish its competitive and market position and build the organizational
infrastructure required to support implementation of the Company's growth
strategy, the Company expects to incur further losses in the future. Such losses
will likely have a negative impact on the Company's results of operation,
particularly if sales of the Company's current products fall below expectations.
There can be no assurance that the Company will achieve profitable operations in
any future period.
Concurrent Offering of Common Stock by Selling Stockholders
Concurrently with the offering of Units by the Company, certain
Stockholders of the Company are offering hereby shares of the Company's Common
Stock. The Company will not receive any of the proceeds of the shares of
Common Stock sold by the Selling Stockholders. So long as the Selling
Stockholders are conducting such concurrent offering, the Company's ability to
successfully complete its offering of the Units may be adversely affected. If
funding from this offering is insufficient, the Company may be required to
delay, scale back or eliminate some or all of its research and development
programs or license third parties to commercialize products or technologies that
the Company would otherwise seek to develop iteslf.
11
<PAGE>
Possible Need for Additional Capital
The Company anticipates negative cash flow from operations will
continue through at least the end of fiscal 1997, because the Company will
utilize substantial funds to continue research and development, to conduct Beta
Product testing, and to establish quality control, marketing, sales and
administrative capabilities. In the event that the Company does not achieve its
product objectives or if its expectations with respect to product sales are not
fulfilled, the Company may need to seek additional funding through public or
private financing, including equity financing, and through collaborative
arrangements. Adequate funds for these purposes, whether obtained through
financial markets or from collaborative arrangements, may not be available when
needed or may not be available on terms favorable to the Company. If additional
funds are raised by issuing additional equity securities, dilution to existing
stockholders may result. If funding is insufficient, the Company may be required
to delay, scale back or eliminate some or all of its research and development
programs or license third parties to commercialize products or technologies that
the Company would otherwise seek to develop itself. The Company's future cash
requirements will be affected by the results of its research and development
program, Beta Product testing, acquisitions of products or technologies
(including software code and services complementary to PSI's existing products
and services), relationships with collaborators, competing technological and
marketing developments, the costs of commercialization activities and other
factors. Consistent with current policy, all future transactions between the
Company and its officers, directors, principal stockholders and affiliates, if
any, will be approved by a majority of the independent and disinterested outside
directors and must be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties under similar circumstances.
Quarterly Fluctuations in Operating Results
The Company's quarterly results of operations are expected to vary
in the future. Any shortfall in revenues recognized in any given period could
have a material adverse effect on the Company's business, results of operations
and financial condition for such period. Because approximately 60 to 75% of the
Company's total expenses are relatively fixed, variations in the timing of
product sales and installations can cause significant variations in operating
results from quarter to quarter and may magnify the adverse effect of any
shortfalls in revenues on the Company's results of operations. The Company
believes that period to period comparisons of revenues and results of operations
are not necessarily meaningful and should not be relied upon as indicators of
future performance. At some point in the future the Company's quarterly results
will likely be below those projected by market analysts. Quarterly fluctuations
in operating results and variations from projections could have a significant
impact on the market price of the Common Stock.
Technological Change; Dependence on New Product Development
The software industry is characterized by rapid technological change.
The Company's future success will depend largely upon its ability to continually
develop decision support and risk management applications that incorporate new
technologies and to enhance and expand its current products. There can be no
assurance that the Company's financial and technological resources will permit
it to develop or market new products successfully, or respond effectively to
technological changes. The Company anticipates that significant amounts of
future revenue will be derived from products and product enhancements which
either do not exist today or have not been sold in large enough quantities to
ensure market acceptance. The development of new software applications is a
12
<PAGE>
complex, expensive and uncertain process requiring technological innovation and
accurate anticipation of technological and market trends. The Company will need
to continue to attract and retain appropriately skilled employees to
successfully develop new products. There can be no assurance that the Company
will not experience difficulties that could delay or prevent the successful
development and introduction of product enhancements or new products, or that
such enhancements or new products will adequately meet the requirements of the
marketplace or achieve market acceptance. If the Company is unable to develop
and introduce product enhancements and new products in a timely and
cost-effective manner in response to changing market conditions or client
requirements, the Company's business, results of operations and financial
condition could be materially and adversely affected.
The software products offered by the Company may contain undetected
errors or failures when first introduced or as new versions are released. Errors
or failures that are not detected until after commencement of commercial
shipment of a product could result in loss of or delay in market acceptance of
the product and claims against the Company, which could have a material adverse
impact on the Company's business, results of operations and financial
conditions.
Intense Competition
The software industry is intensely competitive and rapidly evolving.
Most of the Company's revenues are derived from competitive procurement
processes managed by sophisticated purchasers that extensively investigate and
compare the software applications offered by the Company and its competitors.
The Company believes that the principal competitive factors influencing the
market for its products include vendor and product reputation, product
architecture, functionality and features, ease of use, rapidity of
implementation, quality of client support, product performance and price. There
can be no assurance that the Company will be able to compete successfully with
respect to any of such factors.
The Company competes directly with a large number of software vendors.
The Company also faces competition from internal management information systems
departments many of which have developed or may develop risk management and
other decision support systems. Many of the Company's current and potential
competitors have significantly greater financial, managerial, development,
technical, marketing and sales resources than the Company and may be able to
devote those resources to develop and introduce products more rapidly than the
Company or systems with significantly greater functionality than and superior
overall performance to, those offered by the Company. These competitors may also
be able to initiate and withstand significant price decreases more effectively
than the Company. In addition, current and potential competitors have
established or may establish cooperative relationships among themselves or with
third parties to increase their ability to offer products that address the needs
13
<PAGE>
of current and potential customers. New competitors or new alliances among
competitors may emerge and quickly acquire market share. Competition may
therefore result in significant price reductions, decreased gross revenues, loss
of market share and reduced acceptance of the Company's products. Failure of the
Company to effectively compete could have a material adverse impact on the
Company's business, results of operations and financial condition.
Limited Marketing Capabilities; Dependence on Strategic Relationships
The Company's strategy for commercialization of its products
contemplates the allocation of substantial resources to the expansion and
training of its marketing staff and direct sales force. To date, the Company has
conducted only limited sales, marketing and distribution activities. There can
be no assurance that the Company will be able to continue to attract and retain
the qualified marketing and sales personnel necessary to sustain growth in
revenues derived from sales of the Company's products or that the expansion and
training of such a marketing staff and sales force will prove to be economically
feasible. The Company also expects to market and sell its products through
licensing or other distribution arrangements with third parties. Although the
Company will seek to create significant economic incentive to motivate its
distribution partners to commercialize the products that they license from or
distribute on behalf of the Company, the level of resources and attention
devoted by the partner to a product is not expected to be within the Company's
sole control. Accordingly, any revenues received by the Company will be
dependent in large part, on the efforts of third parties, and no assurance can
be given that such efforts will be successful.
Dependence on a Limited Number of Products
The Company expects to derive a significant portion of its revenues in
fiscal 1997 and in future years from a limited number of products and services.
Most of this revenue is expected to be derived from subscriptions to the
Company's Financial Wire products and services and a limited number of other
products and services related thereto. As a result, the reduction, delay or
cancellation of subscriptions for these products and services could have a
material adverse effect on the Company's business, financial condition and
results of operation.
14
<PAGE>
Dependence on Internet
The Company's Financial Wire products and services, and the
marketing strategy related thereto, have been designed to capitalize on the
growing acceptance and use of the Internet. Accordingly, achievement of the
Company's growth and profitability objectives will be dependent in large part
upon the capacity, reliability, integrity and security of the Internet, and the
service providers and telecommunications vendors associated therewith. In
addition, implementation of the Company's strategy for its Financial Wire
products and services will require the Company to devote substantial financial,
operational and managerial resources to the expansion and adaptation of the
Company's Internet infrastructure. The Internet and the Company's Internet
infrastructure is vulnerable to computer viruses and interruptions in service
resulting from the accidental or intentional actions of Internet users. In an
effort to protect the Company's Internet infrastructure, it has installed
sophisticated firewall and anti-virus programming as well as arranged for
standby auxiliary power. However, if the Company is unable to expand or adapt
its Internet infrastructure to meet changing consumer demands or if
interruptions of service or other disruptive events affecting the Internet
cannot be minimized, the Company's business, results of operations and financial
condition could be materially and adversely affected.
Dependence on Proprietary Technology; Risk of Infringement
The Company's ability to compete effectively depends to a significant
extent on its ability to protect its proprietary information. The Company relies
primarily on copyright and trade secret laws, confidentiality procedures and
licensing arrangements to protect its intellectual property rights. The Company
generally enters into confidentiality agreements with its consultants and
employees and generally limits access to distribution of its technology,
software and other proprietary information. Although the Company intends to
defend its intellectual property, there can be no assurance that the steps taken
by the Company to protect its proprietary information will be adequate to
prevent misappropriation of its technology or that the Company's competitors
will not independently develop technologies that are substantially equivalent or
superior to the Company's technology. The Company is also subject to the risk of
alleged infringement by it of the intellectual property rights of others.
Although the Company is not currently aware of any pending or threatened
infringement claims with respect to the Company's current or future products,
there can be no assurance that third parties will not assert such claims. Any
such claims could require the Company to enter into license arrangements or
could result in protracted and costly litigation, regardless of the merits of
such claims. No assurance can be given that any necessary licenses will be
available or that if available such licenses can be obtained on commercially
15
<PAGE>
reasonable terms. Furthermore, litigation may be necessary to enforce the
Company's intellectual property rights, to protect the Company's trade secrets,
to determine the validity and scope of the proprietary rights of others or to
defend against claims of infringement. Such litigation could result in
substantial costs and diversion of resources and could have material adverse
affect on the Company's business, financial condition and results of operation.
Related Party Transactions
From time to time the Company has engaged in various transactions with
its directors, executive officers and other affiliated parties. The terms and
conditions of such transactions were not negotiated on an arms-length basis and
inherently involved conflicts of interests between the Company and the related
parties; however, all future transactions between the Company and its officers,
directors, principal stockholders and affiliates are required to be approved by
a majority of the independent and disinterested outside directors and must be on
terms no less favorable to the Company that could be obtained from unaffiliated
third parties under similar circumstances. In August 1995, Michael C. Withrow
converted a debt owed to him by PSI of approximately $58,736 into equity of
$1,857,645 shares of PSI's Common Stock and transferred those shares to 458468
BC, Ltd., a British Columbia corporation wholly owned by Mr. Withrow. PSI also
entered into a consulting agreement effective as of September 1, 1996 with No.
410 Taurus Ventures, Ltd., a British Columbia corporation wholly owned by Mr.
Withrow's spouse, Holly Withrow, under which the services of Mrs. Withrow will
be made available to PSI in exchange for an annual fee of approximately $31,111.
On October 24, 1996, PSI entered into a similar consulting agreement effective
as of October 24, 1996 with Peridot International Enterprises, Ltd., a British
Columbia corporation of which Mr. Furlonger is the controlling shareholder.
Pursuant to such agreement, Mr. Furlonger's services will be provided to PSI in
exchange for an annual fee of approximately $51,852, the right to receive
certain options to purchase a portion of the Company's Common Stock and 350,000
restricted shares of the Company's Common Stock. On January 2, 1997 the Company
acquired all of the issued and outstanding shares of PSI, in which Messrs.
Withrow and Furlonger are directors and Mr. Withrow held a substantial equity
interest. As a result of the transaction, Mr. Withrow became the beneficial
owner of 1,857,696 shares of the Company's Common Stock.
Dilution
The offering price per Unit will exceed the Company's net tangible book
value per share of Common Stock immediately following this offering. Based upon
the offering price of $3.25 per Unit and the proposed use of the net proceeds of
this offering, new investors will experience immediate dilution in per share net
tangible book value of approximately $2.92, or 90%. In addition, the exercise
price of the Warrants is substantially higher than the net tangible book value
per share of the Common Stock as of the date of this Prospectus. If the net
tangible book value per share has not substantially increased by the date of the
exercise of the Warrants, the holders of such Warrants, upon exercise thereof,
will incur substantial additional dilution from the exercised price.
16
<PAGE>
Need to Maintain Registration of Common Stock Issuable Upon Exercise of the
Warrants
A holder of the Warrants will have the right to exercise the holder's
rights to purchase Common Stock, only if an effective registration statement
(including a current prospectus) relating to the shares of Common Stock issuable
upon the exercise of the Warrants is on file with the Securities and Exchange
Commission and the securities officials of the State in which the holder
resides. The Company intends to file post-effective amendments as required to
keep this Prospectus, and the Registration Statement of which it is a part,
current and effective. There can be no assurance that the Company will be able
to keep this Prospectus and the Registration Statement of which this Prospectus
is a part, or any other Prospectus or Registration Statement covering such
shares of Common Stock current and effective. The inability of the Company to do
so would prevent the exercise of the Warrants, which could deprive the Warrants
of market value.
Listing on the Nasdaq SmallCap Market; Risk of Delisting
Upon sale of the minimum number of Units offered hereby, the Company
intends to apply for quotation of the Common Stock and Warrants on the Nasdaq
SmallCap Market. Admission and trading of the Company's securities on the Nasdaq
SmallCap Market is conditioned upon the Company meeting certain assets, capital
and surplus, and stock price tests. In order to receive initial approval for
quotation of such securities on the Nasdaq SmallCap Market, the Company must (i)
hold total assets in excess of $4,000,000, (ii) have a total stockholder's
equity of at least $2,000,000, (iii) have at least 100,000 shares of Common
Stock held by persons other than officers, directors or significant stockholders
of the Company, having a minimum market value of at least $1,000,000, (iv) have
at least 300 beneficial owners of the Common Stock, (v) have at least two
registered broker/dealers making a market in the Common Stock, and (vi) the
Common Stock must have a minimum bid price of at least $3.00 per share. To
maintain eligibility on the Nasdaq SmallCap Market the Company must maintain
total assets in excess of $2,000,000, stockholder's equity in excess of
$1,000,000 and (subject to certain exceptions) a bid price of $1.00 per share.
The Nasdaq Stock Market has recently announced its intention to propose changes
to these tests which could make approval of the Common Stock and Warrants
substantially more difficult. If the Company fails any of the current or
proposed tests, the Common Stock and Warrants may be prevented from trading on
the Nasdaq SmallCap Market. The effects of the failure to receive the necessary
approval include the limited release of the market prices of the Company's
securities and more limited news coverage of the Company. Such failure may
restrict investors interest in the Company's securities and materially adversely
effect the trading market and prices for such securities and the Company's
ability to issue additional securities or to secure additional financing. Low
price stocks are subject to additional risks of additional federal and state
regulatory requirements and the potential loss of effective trading markets. In
particular, if the Common Stock or Warrants were not admitted for trading, or
were delisted from trading on the Nasdaq SmallCap Market and the trading price
of the Common Stock was less than $5.00 per share, the Common Stock and Warrants
could be subject to Rule 15g-9 under the Securities Exchange Act of 1934, as
amended, which among other things, requires that broker/dealers satisfy special
sales practice requirements including making individualized written suitability
determinations and receiving a purchaser's written consent prior to any
transaction. If the Company's securities were not admitted for trading and the
trading price was less than $5.00 per share, the Company's securities could also
be deemed penny stocks under the Securities Enforcement and Penny Stock Reform
Act of 1990, which would require additional disclosure in connection with trades
in the Company's securities, including the delivery of a disclosure schedule
explaining the nature and risks of the penny stock market. Such requirements
could severely limit the liquidity of the Company's securities and the ability
of purchasers in this offering to sell the securities in the secondary
market.
17
<PAGE>
Absence of Prior Market for Securities; Arbitrary Offering Price
Prior to this offering, there has been no public market for the
Company's securities. Although the Company intends to apply for approval for
quotation of the Common Stock and Warrants on the Nasdaq SmallCap Market, there
can be no assurance that such approval will be received, or if received that an
active or liquid trading market will develop on completion of this offering or,
if developed, that it will be sustained. The offering price of the Units and
Common Stock was determined arbitrarily by the Company and the Selling
Stockholders and does not necessarily bear any relationship to the Company's
book value, assets, past operating results, financial condition or other
established criteria of value. See "PLAN OF DISTRIBUTION."
Shares Eligible for Future Sale; Registration Rights
None of the 7,378,115 shares of Common Stock outstanding on January 2,
1997 are currently eligible for sale to the public without restriction; however,
595,000 shares have been registered for sale pursuant to this Prospectus.
7,368,115 of such shares of Common Stock were issued in reliance on Regulation S
of the Securities Act of 1933, as amended, and may not be sold to a U.S. person
or in a U.S. securities market absent registration under the Act or the
applicability of an exemption therefrom. However, the period of restriction
applicable to such shares will expire and the shares will become eligible for
sale in early 1998. The remaining 10,000 shares were issued in reliance on
Section 4(2) of the Act and may not be sold absent registration under the Act or
the applicability of an exemption therefrom. Pursuant to authority granted by
its Certificate of Incorporation, the Company may issue additional shares of
Common Stock and shares of one or mores series of Preferred Stock. In addition,
the Company intends to file a Registration Statement under the Securities Act to
register an aggregate of approximately 1,200,000 shares of Common Stock issued
or reserved for issuance under the Company's 1996 Stock Option Plan and certain
outstanding options issued to consultants to the Company. No prediction can be
made as to the effect, if any, that future sales of Common Stock or the
availability of such shares for sale will have on the market price of the Common
Stock prevailing from time to time. Sales of substantial amounts of Common
Stock, or the perception that such sales might occur, could adversely effect the
prevailing market price of the Common Stock. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Liquidity and
Capital Resources," "MANAGEMENT - Certain Relationships and Related
Transactions," and "SHARES ELIGIBLE FOR FUTURE SALE."
Attraction and Retention of Key Employees
The Company's success will depend on its ability to attract and
retain qualified managerial and technical personnel. Competition for such
personnel is intense and there can be no assurance that the Company will be able
to attract and retain the personnel necessary for the full development of this
business. The Company has entered into consulting agreements which provide for
the services of Messrs. Withrow and Furlonger. See "MANAGEMENT." The Company
believes that the loss of no single executive or employee will have a material
adverse effect on the Company. Rather, the Company relies on a number of key
individuals for its continued success and the simultaneous loss of the services
of several such individuals could result in material adverse effect on the
Company's operations. Presently, the Company does not maintain "key man"
insurance on the lives of any of its officers; however, the Company intends to
reconsider the purchase of such insurance as its liquidity and capital resources
improve.
Adverse Affect of Possible Redemption of Warrants
The Warrants may be redeemed by the Company provided certain market
conditions are met. Redemption of the Warrants could force the holders to
exercise the Warrants at a time when it may be disadvantageous to the holders to
do so, to sell the Warrants at the then market price when they might otherwise
wish to hold the Warrants for possible additional appreciation, or to accept the
redemption price, which is likely to be substantially less than the market value
of the Warrants at the time of redemption.
18
<PAGE>
No Dividends With Respect to Common Stock
The Company currently anticipates that it will retain all of its future
earnings, if any, for use in the expansion and operation of its business, and
does not anticipate paying any cash dividends on its Common Stock in the
foreseeable future. There can be no assurance that the Company will pay cash
dividends at any time with respect to the Common Stock, or that the failure to
pay dividends for a period of time will not adversely affect the market price
for the Company's Common Stock. See "DIVIDEND POLICY."
Anti-Takeover Effects of Certificate of Incorporation and Bylaws
The Company's Board of Directors has authority to issue up to
2,000,000 shares of preferred stock and to determine the price, rights,
preferences, privileges and restrictions thereof, including voting rights,
without any further vote or action by the Company's stockholders. The voting and
the rights of the holders of Common Stock will be subject to and may be
adversely affected by, the rights of the holders of any preferred stock that may
be issued in the future. The issuance of preferred stock, while providing
desirable flexibility in connection with obtaining necessary capital resources
and other corporate purposes, could have the affect of delaying, deferring or
preventing a change in control of the Company. The Company has no current
arrangements to issue any additional shares of preferred stock. See "DESCRIPTION
OF SECURITIES." In addition, the Company's Certificate of Incorporation and
Bylaws include certain provisions providing for the staggered election of
directors and restrictions on the ability of stockholders to call special
meetings of stockholders. See "CERTAIN PROVISIONS OF THE CERTIFICATE OF
INCORPORATION AND BYLAWS." Such provisions could have the affect of delaying,
deferring or preventing a change in control of the Company.
USE OF PROCEEDS
After deducting the estimated expenses of this offering, the net
proceeds for the sale by the Company of the Units offered hereby are estimated
to be approximately $3,050,000 if the minimum offering of 1,000,000 Units are
sold, $4,268,750 if 1,350,000 Units are sold, and $5,325,000 if the maximum
offering of 1,700,000 Units are sold.
19
<PAGE>
The following table sets forth the Company's anticipated use of
proceeds at each level of Units sold. Each use of proceeds as a percentage of
gross proceeds is also shown.
<TABLE>
<CAPTION>
1,000,000 Units 1,375,000 Units 1,700,000 Units
Sold Sold Sold
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gross Proceeds $3,250,000 (100%) $4,468,750 (100%) $5,525,000 (100%)
Less: Offering Expenses 200,000 (6.2) 200,000 (4.5) 200,000 (3,6)
--------- --------- ---------
Net Proceeds $3,050,000 (93.8%) $4,268,750 (95.5%) $5,325,000 (96.4%)
Use of Proceeds:
Marketing and Sales 1,525,000 (46.9) 2,134,375 (47.8) 2,662,500 (48.2)
New Product Development 565,000 (17.4) 930,625 (20.8) 1,247,500 (22.6)
Acquisitions 350,000 (10.8) 350,000 (7.8) 350,000 (6.3)
Working capital and other
general corporate purposes 610,000 (18.7) 853,750 (19.1) 1,065,000 (19.3)
--------- --------- ---------
Total Use of Proceeds $3,050,000 (93.8%) $4,268,750 (95.5%) $5,325,000 (96.4%)
</TABLE>
20
<PAGE>
Pending the use of the net proceeds from the sale of the Units as
described above, such funds will be invested in short-term, interest bearing
securities or deposited in short-term interest bearing bank accounts. The
Company will not receive any of the net proceeds from the sale of the Common
Stock offered by the Selling Stockholders.
The foregoing represents the Company's present intentions for the use
of the proceeds of this offering based on its currently contemplated operations,
business plan and the currently prevailing economic and industry conditions. The
Company's business plan contemplates that the Company may acquire businesses or
additional products and services. Although the Company has had and will continue
to have discussions with potential acquisition candidates it does not have any
present agreements or understandings with respect to any acquisitions.
Consistent with current policy, all future transactions between the Company and
its officers, directors, principal stockholders and affiliates, if any, will be
approved by a majority of the independent and disinterested outside directors
and must be on terms no less favorable to the Company than could be obtained
from unaffiliated third parties under similar circumstances. Changes in the
proposed expenditures may be made in response to, among other things, changes in
the Company's plans and its future revenues and expenditures, as well as changes
in general industry conditions and technology.
The Company believes that the net proceeds of this offering, cash flow
from operations, and trade credit will be sufficient to meet its immediate cash
needs and finance its plans for expansion for not less than twelve months from
the date of this Prospectus. This belief is based upon certain assumptions
regarding the Company's business and cash flow as well as prevailing industry
and economic conditions. The Company's capital requirements may vary
significantly, depending on how rapidly management seeks to expand the business
and the expansion strategies elected. Accordingly, the Company may, in the
future, require additional financing to continue to expand its business. There
is no assurance that the Company will be successful in obtaining additional
financing, if required, on favorable terms, or at all. If the Company were
unable to obtain additional financing, its ability to continue to implement its
growth strategy could be materially and adversely affected. See
"CAPITALIZATION", "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" and "BUSINESS--Business Strategy".
DIVIDEND POLICY
During the last two years, the Company has not declared or paid any
cash dividends on its Common Stock. The Board of Directors presently intends to
retain all of its earnings, if any, for the development of the Company's
business for the foreseeable future. The declaration and payment of cash
dividends in the future will be at the discretion of the Company's Board of
Directors and will depend upon a number of factors, including among others,
future earnings, operations, capital requirements, the general financial
condition of the Company and such other factors that the Board of Directors may
deem relevant.
21
<PAGE>
DILUTION
At December 31, 1996, after giving retroactive effect to the
acquisition of the outstanding shares of PSI, the net tangible book value of the
Company was $225,400, or $0.03 per share of Common Stock. Assuming the sale by
the Company of the minimum 1,000,000 Units offered hereby and the receipt of the
estimated net proceeds therefrom (based upon the offering price of $3.25 per
Unit) as described in "Use of Proceeds", the pro forma net tangible book value
of the Company as of December 31, 1996, would have been $3,275,400, or $0.39 per
share. This represents an immediate increase in pro forma net tangible book
value of $0.36 per share to the existing stockholders and an immediate dilution
in pro forma net tangible book value of $2.86 per share to investors purchasing
Units in this offering. The following table illustrates this per share dilution:
Initial offering price per Unit(1). . . . . . . . . . . . . . . . . . . $ 3.25
Net tangible book value before this offering(2) . . . . . . . . . . .$ 0.03
Increase attributable to investors in this offering. . . . . . . . . $ 0.36
Adjusted pro forma net intangible book value after this offering. . . . $ 0.39
Dilution to investors in this offering. . . . . . . . . . . . . . . . . $ 2.86
The following table summarizes, as of January 2, 1997, the difference
between the number of shares of Common Stock purchased from the Company, the
total consideration paid and the average price per share paid by the existing
stockholders and the price per Unit paid by the investors in this offering (see
footnote(1)):
<TABLE>
<CAPTION>
Average
Shares Purchased Total Consideration Price Per
Number Percent Amount Percent Share
------ ------- ------ ------- -----
<S> <C> <C> <C> <C> <C>
Existing security holders. . 7,378,115 88% $1,642,739 34% $0.22
New investors. . . . . . . . 1,000,000 12 3,250,000 66 $3.25
--------- ---- --------- ---- ----
Total. . . . . . . . . . . 8,378,115 100% $4,892,739 100%
========= ===== ========= =====
</TABLE>
The tables above exclude the effect of the exercise of (i) the
Warrants, and (ii) the options outstanding on the date hereof. Exercise of the
aforementioned Warrants and options may result in further dilution to investors
purchasing Units in this offering. See "MANAGEMENT--Incentive Compensation Plan"
and "DESCRIPTION OF SECURITIES."
- ------------------------
(1) Before deduction of offering expenses payable by the Company.
(2) Net tangible book value per share is equal to the book value of
tangible assets of the Company, less total liabilities, divided by the
number of shares of Common Stock outstanding.
22
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of the
Company and PSI as of December 31, 1996. This table should be read in
conjunction with the consolidated financial statements of the Company,
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" and "DESCRIPTION OF SECURITIES" included elsewhere in this
Prospectus.
PowerTrader, Inc. December 31,
1996
Long-term debt................................................ $ -
Stockholders' deficiency:
Common Stock, par value $0.01 per share
914,001 shares outstanding actual........................ 92
Capital surplus.......................................... 792,344
Deficit accumulated during
development stage ....................................... (261,032)
Total stockholders' equity ..................... 531,404
Total capitalization ........................... 531,404
PowerTrader Software Inc.
Long-term debt................................................ $ 4,968
Stockholders' deficiency:
Class A Common Stock, no par value
4,174,513 shares outstanding actual...................... 646,270
Class B Common Stock, no par value
61 shares outstanding actual............................. 61
Deficit accumulated during
development stage .......................................(1,450,323)
Total stockholders' deficit..................... (803,992)
Total capitalization ........................... 799,024
23
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data as of and for the periods presented below
have been derived from the financial statements of the Company and PSI. The
financial statements of (1) the Company as of December 31, 1996 and for the
period commencing on August 22, 1996 (date of inception) through December 31,
1996, and (2) PSI as of and for the fiscal years ended June 30, 1995 and 1996,
have been audited by BDO Dunwoody, Chartered Accountants, and its report thereon
are included elsewhere herein. The selected financial data presented below as of
and for the six months ended December 31, 1995 and 1996 are derived from PSI's
unaudited consolidated financial statements. In the opinion of the Company's
management, such unaudited financial statements include all adjustments,
consisting of only normal recurring adjustments, necessary for a fair
presentation of financial position and results of operations. The operating
results for the six months ended December 31, 1996 are not necessarily
indicative of the operating results for the full year. The selected consolidated
financial data should be read in conjunction with the consolidated financial
statements, including the notes thereto, appearing elsewhere in this Prospectus
and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION."
PowerTrader, Inc.
Period Commencing on
August 22, 1996 (date of
inception) through
Statement of December 31, 1996
Operations Data: -----------------
Revenue $ -
Selling, General and Administrative Costs 261,032
--------
Net Loss $(261,032)
Net Loss per share $ (0.70)
December 31,
Balance Sheet Data: 1996
------------
Working Capital $ 314,254
Total Assets 531,618
Long-term debt, less current maturities -
Stockholders' Equity 531,404
24
<PAGE>
<TABLE>
PowerTrader Software Inc.
<CAPTION>
Fiscal Year Ended Six Months Ended 29 December 1988
June 30, December 31, inception) to
31 December 1996
1996 1995 1996 1995 (cumulative)
---- ---- ---- ---- ------------
<S> <C> <C> <C> <C> <C>
Statements of
Operations Data:
Sales $ 50,971 $ 44,026 $ 27,478 $ 36,720 $ 122,475
Cost of Sales 40,910 17,411 15,855 27,836 74,176
Selling, General and
Administrative costs 405,099 369,910 257,942 117,579 1,032,951
Development Costs 203,933 108,067 153,671 124,533 465,671
-------- -------- ------- -------- ----------
Net loss $(598,971) $(451,362) $(399,990) $(233,228) $(1,450,323)
-------- -------- -------- -------- ----------
Net loss per share $ (0.24) $(3,029.28) $ (0.10) $ (0.15)
------- ---------- -------- --------
Weighted Average Number 2,475,258 149 4,174,597 1,548,187
of shares outstanding
<CAPTION>
June 30, December 31,
1996 1995 1996
---- ---- ----------------
<S> <C> <C> <C>
Balance Sheet Data:
Working Capital (deficiency) $( 44,996) $(486,977) $(193,448)
Total Assets 186,718 44,344 325,424
Long-term debt, less current
portion - - -
Stockholders' Deficit (404,002) (451,253) (803,992)
</TABLE>
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with the Financial
Statements and Notes thereto appearing elsewhere in this Prospectus. When used
in this Prospectus, 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, including, but not limited to, those
set forth in "RISK FACTORS". Readers are cautioned not to place undue reliance
on forward-looking statements, which speak only as of the date hereof. The
Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Overview
PowerTrader, Inc. ("PowerTrader" or the "Company") was incorporated
under the laws of the State of Delaware on August 22, 1996 for the purpose of
acquiring the business of PowerTrader Software Inc. in a merger, exchange of
shares or other business combination. Its sole director, officer and shareholder
was Mr. Withrow. In January, 1997, PowerTrader consummated a transaction with
the shareholders of PowerTrader Software Inc. ("PSI") pursuant to which
PowerTrader became the holder of all of the issued and outstanding shares of
PSI's capital stock, issued an aggregate of 4,174,597 to the former shareholders
of PSI (including 1,857,969 shares to a corporation controlled by Mr. Withrow)
and assumed liabilities to issue an aggregate of 2,289,517 shares and options to
purchase an additional 149,999 shares of common stock to certain creditors of
PSI. Prior to such transactions, the Company had not engaged in any business
activity, other than with respect to organizational matters, and had no
predecessors.
Through its wholly owned subsidiary, PSI, the Company designs,
develops, markets and supports informational and analytical desktop decision
support and risk management systems for both securities professionals (including
securities brokerage firms, investment advisors and trust companies) and
individual investors. Substantially all of PSI's sales have resulted from the
distribution of Beta Products and product development work continues;
accordingly, PSI remains a development stage company.
Because of the Company's limited operating history, the Company's
results of operations to date are not necessarily indicative of future operating
results. Moreover, the Company believes that its developmental operations to
date render traditional accounting presentations meaningless.
Results of Operations
Sales. Sales decreased 25% during the six months ended 31 December
1996 from the same period in 1995. Sales during fiscal 1996, however, increased
15.8% from fiscal 1995. Sales during each of the periods compared have been
significantly impacted by the limited financial resources available to PSI for
allocation to advertising and Beta Product marketing. Sales in the first six
months of fiscal 1997 decreased primarily due to management's decision to modify
its products in response to data obtained from its Beta Product testing program.
26
<PAGE>
Cost of Sales. Cost of sales decreased by $11,981 (or 43%) in the six
months ended 31 December 1996 to $15,885.00 (or 57.7% of sales) from $27,836.00
(or 75.8% of sales) for the six months ended 31 December 1995. However, cost of
sales increased by $23,499 from $17,411 (or 39.5% of sales) in fiscal 1995 to
$40,910 (or 80.3% of sales) in fiscal 1996. The foregoing increases and
decreases in cost of sales resulted primarily from corresponding increases and
decreases in the level of sales.
Selling, General and Administrative Costs. Selling, General and
Administrative Costs ("SGA") increased by $140,363 (or 119.4%) from $117,579 (or
320.2% of sales) in the six months ended 31 December 1995 to $257,942 (or 938.7%
of sales) in the same period ended 31 December 1996. SGA similarly increased
$35,189 (or 9.5%) from $369,910 (or 8,402.1% of sales) in fiscal 1995 to
$405,099 (or 7,947.6% of sales) in fiscal 1996. Such expenses were incurred to
develop the necessary organizational infrastructure to support the
implementation of the Company's business plan. SGA includes salaries and
benefits for corporate management, administrative and sales personnel, as well
as rent expense for PSI's offices. Because the level of SGA which is required to
maintain adequate corporate infrastructure is relatively fixed in nature,
management anticipates that such expenses as a percentage of sales will decline
as total sales levels increase.
Development Costs. Development Costs increased by $29,138 (or 23.4%)
from $124,533 (or 339.1% of sales) in the six months ended 31 December 1995 to
$153,671 (or 559.3% of sales) for the period ended 31 December 1996. Similarly,
development costs increased $95,866 (or 88.7%) from $108,067 (or 245.5% of
sales) in fiscal 1995 to $203,933 (or 400.1% of sales) in fiscal 1996. Such
increases in development expense were primarily attributable to costs incurred
to support modifications and error corrections discovered during Beta Product
testing of the PowerTrader suite of products.
Net Loss. As a result of the foregoing, PSI experienced net losses of
$399,990 (or 1,455.7% of sales) and $233,228 (or 635.2% of sales) for the six
months ended 31 December 1996 and 1995, respectively. For fiscal years 1996 and
1995, PSI experienced net losses of $598,971 (or 1,175.1% of sales) and $451,362
(or 1,025.2% of sales), respectively. Such losses may be offset in part by the
use of net loss tax carryforwards in future years. Because of additional
research and development expenses and the additional personnel expenses which
the Company believes will be necessary to establish its competitive and market
position and build the organizational infrastructure required to support
implementation of the Company's growth strategy, the Company expects to incur
further losses in the future. Such losses will likely have a negative impact on
the Company's results of operation, particularly if sales of PSI's current
products fall below expectation.
Liquidity and Capital Resources
The principal source of funds to the Company and PSI since their
respective formation has been derived from the net proceeds of certain private
offerings of securities which, together with the proceeds of sales, have been
used to fund continued research and development expenses as well as necessary
SGA costs. Although the Company believes that the proceeds of this offering and,
to a lesser extent, cash generated from operations, will be sufficient to fund
its operations and planned capital expenditures for at least the next twelve
months, there can be no assurance that the Company will not require additional
financing during that time or thereafter. The Company has no plans to secure any
such additional financing. The inability of the Company to obtain additional
financing, if necessary, on acceptable terms, could have a material adverse
effect on the Company's business, financial condition and results of operations.
If additional funds were raised by the issuance of equity securities, further
dilution to existing stockholders could result.
27
<PAGE>
The Company's limited capital resources have caused the Company's
independent accountants to issue a report which indicates that substantial doubt
exists as to the Company's ability to continue as a going concern. The Company
believes that the net proceeds of this offering will significantly improve the
capital resources of the Company and thereby address certain of the going
concern conditions. Accordingly, the Company considers the conditions which
resulted in questions about the Company's ability to continue as a going concern
will be substantially alleviated through this offering.
Income Taxes
PSI did not have any material current or deferred income tax
liabilities at June 30, 1996 and June 30, 1995. However, PSI did have available
tax benefits of loss carry-forwards for 1996 and 1995 totalling $1,052,800 and
tax benefits related to depreciation for 1996 and 1995 totalling $41,900. The
Company did not record these tax benefits in the Financial Statements because
the Company believes that it is more likely than not that the tax benefits would
not be realized. Accordingly, the tax benefits have been reduced by a valuation
allowance of $281,900 in 1996 and $210,300 in 1995.
THE COMPANY
The Company was incorporated under the laws of the State of Delaware on
August 22, 1996, and acquired all of the issued and outstanding shares of the
common stock of PowerTrader Software Inc. on January 2, 1997 in a series of
transactions with the holders of such shares conducted in reliance upon
Regulation S and Section 4(2) of the Securities Act of 1933, as amended.
PowerTrader Software Inc., which conducts all of the Company's operations, was
incorporated under the laws of the Canadian Province of British Columbia on
December 29, 1988, under the original corporate name "Corporate Media Solutions,
Inc."
28
<PAGE>
BUSINESS
PowerTrader, Inc., through its wholly-owned subsidiary PowerTrader
Software Inc., designs, develops, markets and supports informational and
analytical desktop decision support and risk management systems for both
securities professionals (including securities brokerage firms, investment
advisors and trust companies) and individual investors. The Company's products
enable its clients to capture an incoming stream of market data provided by
Market Data Vendors, store such market data for future reference, display
selected data in tabular and graphic form and analyze the data to discover
trading opportunities. The Company's systems are modular, scalable and allow
clients to leverage their investments in existing systems. Individual components
of the Company's systems can function independently, giving clients the ability
to build their system over time to integrate existing software which is meeting
their current needs. The Company's systems have been licensed to more than 200
investors. Marketed directly, as well as through distribution partners, in the
United States, Canada, Europe and the Asian/Pacific region, the Company's
products are believed to offer a unique combination of analytical capabilities
and trading information.
Industry Background
The worldwide securities industry is undergoing rapid change.
Significant increases in trading volumes, driven by demand for financial
investment services from an increasing number of persons in the 40-65 year old
age group, widespread use of complex derivative and other financial instruments,
and increased use of "marked-to-market" accounting and "value at risk"
methodologies, have imposed heavy demands on the system infrastructures of many
securities firms and institutional investors. Concurrently, the growth of global
financial markets has attracted new providers of financial services, including
discount brokerages, insurance companies, banks and trust companies, and changed
the manner in which financial services are provided, such as the adoption of
online trading systems. To successfully compete in this evolving environment,
securities professionals are expected to increasingly rely on information
systems to lower transaction costs, manage the exponentially increasing data
flow and provide value-added analysis services.
As demographic, instrumental and accounting changes have changed the
means by which securities professionals compete, advances in telecommunications
and information technology have fundamentally altered the way individuals
invest. The emergence of the Internet as a tool for accessing detailed, current
information has given individual investors the capability to take charge of
their investments and raised their level of sophistication. As a result, the
Company believes that individual investors will increasingly require analytical
tools to manage available data and uncover investment opportunities.
The existing information systems installed by most investors were
typically designed to function within the limits of the then available
telecommunication and information technology. Accordingly, existing systems are
limited in their ability to collect and rapidly process incoming data flow. In
addition, such systems are generally inflexible and lack the ability to display
proprietary trading indicators or other analytic methodologies. Because existing
systems lack such sophistication, they do not provide the tools which the
Company believes are required for securities professionals and individual
investors to make effective investment decisions.
29
<PAGE>
The PowerTrader Solution
The Company seeks to provide solutions to the informational and
analytical challenges of both securities professionals and individual investors.
The Company's products provide an efficient application capable of supporting
rapid deployment of data and analytical functionality. The Company's products
run in a Windows environment for ease of use.
Business Strategy
The Company's objective is to capitalize on the experience of its
management in the securities industry to become a leading provider of analytical
and informational systems to both securities professionals and individual
investors. The Company's strategy for achieving this objective includes the
following elements:
Implement Dual Market Strategy. The Company intends to aggressively
pursue both the securities professional and individual investor portions of the
market for decision support and risk management systems. The Company believes
that its service to both portions of the market results in additional benefits
not generally enjoyed by competitors serving one portion of the market or the
other. Because the Company deals with more technically oriented securities
professionals, the Company's personnel are required to have a sophisticated
knowledge of analytical and risk management methodologies. The Company has found
that such knowledge enhances the Company's ability to tailor products and
services to meet the needs of individual investors. Further, the Company has
found that the more progressive marketing concepts utilized by it in the
individual investor portion of its business can be applied to enhance demand
from securities professionals for the Company's products and services.
Expand Product Portfolio. The Company intends to expand its product
line to meet the evolving needs of its clients. The Company continually
evaluates its offerings to determine what additional products or enhancements
are required by the securities industry and the Company develops and enhances
products internally to meet clients' needs. If the Company has the opportunity
to purchase or license proven products at a reasonable cost, it will do so in
order to avoid the time and expense involved in developing new products.
Pursue Distribution Alliances. The Company has entered into two
arrangements with securities market participants to distribute the Company's
products to their respective clients under private labels. The Company intends
to focus on building similar distribution alliances that will extend the
Company's market presence.
Expanded Services. The Company intends to expand the products and
services distributed through its Financial Wire Internet website to include
additional news, end-of-day trading data, charting applications, investment
newsletters, articles of general or educational interest, and advertising. In
addition, the Company intends to expand its consulting services to design and
configure the architecture of a clients' systems including networking, systems
integration and data conversion.
30
<PAGE>
Leverage Existing Customer Base. With a licensed customer base of more
than 200 users and two distribution partners, the Company believes significant
opportunities exist to license additional products to its existing customer
base. The Company's strategic plan envisions continuing introduction of new
products that will complement the core functionality of existing systems,
thereby allowing PowerTrader to leverage its existing customer base by offering
new modules and products, platform conversions and value added consulting
services.
Products
The Company has developed a comprehensive suite of products to manage
and analyze information available to securities professionals and private
investors. A client can purchase a comprehensive system or can buy modules
separately to match its individual needs. The Company's systems facilitate
effective decision making and delivery of high quality services.
Number of
Product Licenses Issued Product Description
- ------- --------------- -------------------
Server 135 Decodes data feeds and
arranges the resulting data
into an accessible data base.
PowerTrader Pro-Vision 135 Displays a continually
refreshed data base created by
PowerTrader in a customizable
and searchable tabular format.
PowerTrader Analyst 225 Displays data base created by
Server in a charting package
facilitating technical
securities analysis and
custom/proprietary indicators
using Microsoft Excel and
Visual Basic.
Data Manager 225 A data retrieval helper
application for use with
Netscape Navigator and
Microsoft Explorer to replace
data which may have been lost
in the creation of the
customer's data base. Data
Manager permits the customer
to retrieve data from the
Company's Internet website.
Formula One 225 A series of dynamic data
exchange links to four custom
spreadsheet templates.
31
<PAGE>
In addition to the foregoing products, which have been designed
primarily for the securities professional, the Company has developed and markets
on a subscription basis its Financial Wire products and services. Through its
Financial Wire Internet website, the Company offers the individual investor the
opportunity to use PowerTrader Analyst and Data Manager in conjunction with an
end-of-day data file retrieved through the Company's Internet server.
Services and Support
Client service is an important component of the Company's operations.
The Company's client/service team generally provides implementation, application
and support, education and consulting services to the Company's clients.
Additional client services are provided through computer-based training or
formal instructor-led, Company sponsored educational courses and seminars.
Through its Registered Associate Members Plan ("RAMP"), the Company offers a
pre-paid maintenance program covering software upgrades and toll-free telephone
technical support service.
The Company intends to opportunistically expand the range of client
support services it provides in order to strengthen relationships with its
clients. Such services may include customized programming, private product
labeling and collaborative website maintenance.
Product Development
The Company is dedicated to providing state-of-the-art, integrated
systems for the securities industry. The cornerstone of the Company's
development efforts is its commitment to open client/server architecture and
Internet technology.
The Company's current project development efforts use object orientated
program methodologies. This allows the Company to develop applications based on
reusable libraries of code that the Company believes results in more cost
effective and rapid product development cycles. The Company extensively employs
Microsoft tool sets and standards in its product development efforts. The
Company believes that use of these standards and tools facilitates interfacing
with other systems and products.
The Company plans to expand its product line to meet the evolving needs
of its clients. The Company currently evaluates its offerings to determine what
additional products or enhancements are required by the securities industry and
develops or enhances products internally to meet clients' needs. However, if the
Company can purchase or license proven products at reasonable costs, it will do
so in order to avoid the time and expense involved in developing products.
Currently, the Company's product development team is focused on the following
projects:
Data Mill. An open client/server architecture system which permits
securities professionals to consolidate two or more data feeds for distribution
to terminals on a local area network or the Internet.
32
<PAGE>
I-Deal. A fully-integrated cross-platform system facilitating third
party institutional customers to place brokerage orders, access their accounts
and other on-line resources through Internet technology. I-Deal will be fully
integratable with the leading "back office" brokerage operations software
support systems.
For the fiscal years ended June 30, 1995 and 1996, the Company invested
$108,067 and $203,933, respectively on research and development. For the three
month period ended September 30, 1996, the Company invested $59,015 on research
and development. The Company expects to continue to make significant investments
in research and development, however, there can be no assurance that the
Company's financial and technological resources will permit it to develop or
market new products successfully or respond effectively to technological
changes.
Sales and Marketing
The Company's existing customers include a broad range of securities
professionals and institutional investors in the United States and around the
world. The Company's products are licensed for use at more than 200 customer
terminals. The Company's installed customer base includes:
Canaccord Capital Corporation, Ltd. Yorkton Securities, Inc.
Mohawk Oil Marleau Lamier Securities
Bank of Montreal RAS Securities
Merrill-Lynch Robert Thomas Securities
North American Quotations Hong Kong Bank Discount
Fidelity Investments, Inc. Trading Corp.
The Company markets its products in the United States, Canada, Europe,
the United Kingdom and the Far East directly through its sales force and
indirectly through its distribution partners. The Company's current direct sales
force is located in the Company's Vancouver, British Columbia headquarters, from
which the Company's products are marketed primarily through telemarketing and
electronic means. In addition, the Company uses direct-mail, press releases,
customer referrals and tradeshow participation to generate sales leads. The
Company plans to expand its direct sales force by adding field sales personnel
in the future to increase market exposure and penetration.
The Company's sales and marketing efforts are significantly augmented
by its strategic relationships with distribution partners which generally offer
related products and services. To date, the Company has entered into a joint
marketing arrangement with North American Quotations under which such MDV will
provide product information and demonstration versions of the Company's products
to their customers. In addition, the Company has entered into a distribution
alliance with Hong Kong Bank Discount Trading Corp. under which the Company's
PowerTrader Analyst product will be distributed to each of such brokerage's 2000
customers under the name PowerCharts. The Company believes that such
arrangements will significantly increase the Company's market presence and
permit its distribution partners to offer a complete data feed, information
storage and analysis system.
Products are generally shipped as orders are received, and,
accordingly, the Company has historically operated with virtually no backlog.
Because of the generally short cycle between order and shipment, the Company
does not believe that its backlog as of any particular date is meaningful.
33
<PAGE>
Competition
The market for informational and analytical systems applicable to the
securities industry is intensely competitive and rapidly evolving. Most of the
Company's revenues are derived from lengthy, competition procurement processes
managed by sophisticated purchasers that extensively investigate and compare the
products offered by the Company and its competitors. The Company competes
directly with other vendors of similar systems and faces further competition
from internal management information systems departments of large securities
brokerages, many of which have developed functionally competitive proprietary
systems. The Company believes that the principal competitive factors influencing
the market for its products include vendor and product reputation, product
architecture, functionality and features, ease of use, rapidity of
implementation, quality of client support, product performance and price. The
Company has formulated and intends to implement a pricing strategy which
provides potential consumers with a basic suite of products and current
end-of-day data on a monthly subscription basis. The Company believes that this
pricing structure will differentiate it from its competitors which principally
charge for the software package and supply end-of-day market data on a
transaction based fee. There can be no assurance that the Company will be able
to compete successfully with respect to any of such factors.
Many of the Company's current and potential competitors have
significantly greater financial, managerial, developmental, technical, marketing
and sales resources than the Company and may be able to devote those resources
to develop and introduce systems more rapidly than the Company, or systems with
significantly greater functionality than and superior overall performance to
those offered by the Company. These competitors may also be able to initiate and
withstand significant price decreases more effectively than the Company. In
addition, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase
their ability to offer products that address the needs of current and potential
customers. New competitors or new alliances among competitors may emerge and
quickly acquire market share. Competition may, therefore, result in significant
price reductions, decreased gross revenues, loss of market share and reduced
acceptance of the Company's products.
The Company competes with a large number of system vendors, some of
which sell comprehensive systems and some of which sell products which compete
with only one or more modules of the Company's products. The Company's believes
that it is, and will be, competitive in the market place as a result of its
current and future products' functional compatibility, sophistication, open
client/server architecture and price; the ability of each of its users to
customize the systems to meet their unique needs; and the high level of service
the Company provides to all clients.
Intellectual Property
The Company's ability to compete effectively depends to a significant
extent on its ability to protect its proprietary information. The Company relies
primarily on trade secret laws, confidentiality procedures and licensing
arrangements to protect its intellectual property rights.
34
<PAGE>
The Company generally enters into confidentiality agreements with its
consultants, key employees and sales representatives and generally controls
access to and distribution of its software and other proprietary information.
Despite these precautions, it may be possible for a third party to copy or
otherwise obtain and use the Company's products or technology without
authorization or to develop similar technology independently. Although the
Company intends to defend its intellectual property rights, there can be no
assurance that the steps taken by the Company to protect its proprietary
information will be adequate to prevent misappropriation of its intellectual
property or that the Company's competitors will not independently develop
software that is substantially equivalent or superior to the Company's software.
The Company is subject to the risk of alleged infringement by it of the
intellectual property rights of others. Although the Company is not currently
aware of any pending or threatened infringement claims with respect to the
Company's current or future products, there can be no assurance that third
parties will not assert such claims or that any such claims will not require the
Company to enter into licensing agreements or result in protracted and costly
litigation, regardless of the merits of such claims. No assurance can be given
that any necessary licenses will be available or that, if available, such
licenses can be obtained on commercially reasonable terms. Furthermore,
litigation may be necessary to enforce the Company's intellectual property
rights, to protect the Company's trade secrets, to determine the validity and
scope of the proprietary rights of others or to defend against claims of
infringement. Such litigation could result in substantial costs and diversion of
resources and could have a material adverse affect on the Company's business,
financial condition and results of operations.
Employees
As of September 30, 1996, the Company employed twelve persons, all of
whom serve on a full-time basis. The Company's employees are not represented by
a labor union and the Company's management believes that its relationships with
its employees are good.
The Company believes its future success will depend in large part, upon
the continued service of its key technical and senior management personnel and
upon the Company's continued ability to attract and retain highly qualified
technical and managerial personnel. Competition for highly qualified personnel
is intense and there can be no assurance that the Company will be able to retain
its key managerial and technical employees or that it will be able to attract
and retain additional highly qualified technical and managerial personnel in the
future.
35
<PAGE>
Facilities
The Company's principal offices occupy approximately 3068 square feet
in Vancouver, British Columbia under a lease expiring in 1999. The Company
believes that its existing facilities will be adequate to meet its current
anticipated requirements and that, if additional space is needed, such space
will be available on acceptable terms.
Legal Proceedings
As of the date of this Prospectus, the Company is not a party to any
material legal proceedings.
MANAGEMENT
The following table sets forth certain information concerning the
directors and executive officers of the Company:
Name Age Position
Michael C. Withrow 34 Director, Chairman, President and Chief
Executive Officer
David C. Furlonger 35 Director, Secretary and Chief Financial
Officer
The services of each of the foregoing persons is provided under an
agreement with corporations wholly owned by such persons. Set forth below are
descriptions of the backgrounds of the executive officers and directors of the
Company:
Michael C. Withrow has been a director, Chairman and President of the Company
since its inception in August 1996. Also, Mr. Withrow has served as a director
of PSI, since its inception in 1988 and in August, 1994, became President. In
September 1996, he was named Chairman of the Board of PSI. From 1990 to 1992,
Mr. Withrow was engaged as an account executive with Merisel, Canada, a
multinational distributor of computer equipment, from 1992 to 1993 as a private
professional securities trader, and from 1993 to 1994 as an institutional
securities trader with Canaccord Capital Corporation, Ltd., Vancouver, British
Columbia.
36
<PAGE>
David C. Furlonger has been a director, Secretary and Chief Financial Officer of
the Company since its inception in August 1996. In September 1996, Mr. Furlonger
was named a director of PSI. From April, 1995 to March, 1996, Mr. Furlonger
served as Senior Proprietary Trader for Commerzbank AG, London, United Kingdom.
For more than five years prior thereto, he was employed by Baring Brothers & Co.
serving most recently as manager within the treasury and trading operations.
The Board of Directors of the Company consists of two members. The
Company's Certificate and Bylaws provide that the Board of Directors will
consist of three classes serving staggered three year terms, so that
approximately one-third of the directors will be elected at each annual meeting.
The number of directors comprising the Board of Directors may be increased or
decreased by resolution adopted by the affirmative vote of a majority of the
Board of Directors.
Executive Compensation
The following table summarizes information concerning cash and non-cash
compensation paid to or accrued for the benefit of the chief executive officer
of the Company for all services rendered in all capacities to the Company and
its predecessors. No other officers of the Company earned compensation of more
than $100,000 during the fiscal year ended June 30, 1996.
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation
<CAPTION>
Name of Principal Other Annual
Position Year Salary Bonus Compensation
-------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Michael C. Withrow 1996 $62,963 - -
Chairman, President
and CEO of the Company
Don Farrell 1996 $ - - -
CEO of PSI
</TABLE>
PSI has entered into an employment agreement with 458468 BC Ltd., a
British Columbia corporation wholly owned by Michael C. Withrow ("458468"), the
Company's Chairman and President. Pursuant to that agreement, 458468 will
provide the services of Mr. Withrow to manage PSI's operations. The agreement
with 458468 will expire in September, 1999, subject to renewal, at the option of
PSI, for an additional three year term. The agreement with 458468 contains
non-competition clauses that provide, in pertinent part, that during the term of
the agreements, as they may be extended, and for a period of one year
thereafter, 458468 will not engage in any activity competitive with the business
of PSI, will not solicit or attempt to solicit customers or employees of PSI,
and will not otherwise interfere with PSI's business relationships.
37
<PAGE>
Director Compensation
Under the Company's present policy, no director of the Company is
entitled to receive compensation for services rendered to the Company as a
director. Directors are entitled to be reimbursed for expenses incurred by them
in attending meetings of the Board of Directors and its committees.
Incentive Compensation Plan
In December, 1996, the Company's Board of Directors adopted the
PowerTrader, Inc., 1996 Stock Option Plan (the "Plan"), pursuant to which
officers, key employees, advisers and consultants, of the Company may receive
stock options to purchase up to an aggregate of 750,000 shares of the Company's
Common Stock. Under the Plan, stock options awarded under the Plan may not have
a term of more than 10 years or provide for an exercise price of less than the
fair market value of the Common Stock on the date of grant. As of December 31,
1996, no awards had been made under the Plan.
Certain Relationships and Related Transactions.
From time to time, the Company and its wholly owned subsidiary, PSI,
have engaged in various transactions with its directors, executive officers and
other affiliated parties. The following paragraphs summarize certain information
concerning such transactions and relationships which have occurred during the
past two fiscal years or which are presently proposed.
On August 1, 1995, Michael C. Withrow converted a debt owed to him by
PSI of approximately $58,736 incurred to fund working capital into equity of
1,857,645 shares of PSI's common stock and transferred those shares to 458468.
The debt was payable on demand and did not provide for the payment of interest.
The conversion ratio was determined by reference to the recent sale prices of
PSI's common stock to unaffiliated parties.
PSI entered into a consultant arrangement, effective as of September
1, 1996, with No. 410 Taurus Ventures, Ltd. ("Taurus"), a British Columbia
corporation wholly owned by Holly Withrow, wife of the Company's chief executive
officer. Pursuant to such agreement, Taurus provides the service of Mrs. Withrow
to perform certain sales, marketing and administrative duties on behalf of PSI
in exchange for an annual fee of approximately $31,111.
38
<PAGE>
On October 24, 1996, PSI entered into a similar agreement, effective
as of October 24, 1996, with Peridot International Enterprises, Ltd., a British
Columbia corporation of which Mr. Furlonger is the controlling shareholder
("Peridot"). Pursuant to such agreement, Peridot provides the services of
Furlonger to act as principal accounting manager to PSI in exchange for an
annual fee of approximately $51,852, the right to receive certain options to
purchase a portion of the Company's common stock, and 350,000 restricted shares
of the Company's common stock.
On January 2, 1997, the Company acquired all of the issued and
outstanding shares of PSI, in which David C. Furlonger and Mr. Withrow are
directors and Mr. Withrow held a substantial equity interest. As a result of the
transaction, Mr. Withrow became the beneficial owner of 1,857,696 shares of the
Company's Common Stock.
The terms and conditions of the foregoing transactions were not
negotiated on an arms-length basis and inherently involved conflicts of
interests between the Company and the related parties. All future transactions
between the Company and its officers, directors, principal stockholders and
affiliates are required to be approved by a majority of the independent and
disinterested outside directors and must be on terms no less favorable to the
Company than could be obtained from unaffiliated third parties under similar
circumstances.
39
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information as of January 31,
1997, concerning the beneficial ownership of the Company's Common Stock by: (i)
each person known by the Company to be the beneficial owner of more than five
percent of the outstanding Common Stock, (ii) each director and each executive
officer named in the Summary Compensation Table contained in this Prospectus,
(iii) each Selling Stockholder and (iv) all directors and executive officers of
the Company as a group. The Selling Stockholders may be deemed to be
underwriters under the federal securities laws. Each person named has sole
voting and investment power with respect to the shares indicated, except as
otherwise stated in the notes to the table:
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Prior to Offering After the Offering
----------------- ------------------
Number
Name and Address of Shares
of Beneficial Owner Amount Percent Offered Amount Percent
- ------------------- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Michael C. Withrow 1,467,697(1) 19.9% - 1,467,697 16.2%
12-1850 Argue Street
Port Coquitlam,
British Columbia
Chartwell International, Inc. 370,000 5.0 100,000 270,000 3.0
No. 2 Commercial Center Sq.
P. O. Box 71
Alofi, Nille
David C. Furlonger 350,000(2) 4.7 - 350,000 3.8
11837 190th Street
Pitt Meadows,
British Columbia
Rozel International Holdings, Ltd. 350,000 4.7 75,000 275,000 3.0
P. O. Box 3151
Road Town Tortola
BVI
Lotus Development Corp. 350,000 4.7 50,000 300,000 3.3
P.O. Box N-8424
Nassau, Bahamas
Bryn Investments Ltd. 300,000 4.1 100,000 200,000 2.2
c/o Lines Overseas Mgmt. Ltd.
73 Front Street
P.O. Box HM 2908
Hamilton HMLX, Bermuda
Gino Punzo 278,333(3) 3.8 33,333 245,000 2.7
1398 Preston Court
Burnaby, British Columbia
40
<PAGE>
Bradshaw Holdings, Ltd. 246,666 3.3 86,667 159,999 1.8
P. O. Box North 7521
Nassau, Bahamas
533202 BC Ltd. 221,000 3.0 25,000 196,000 2.2
Suite 200
853 Richards St.
Vancouver, British Columbia
Don Farrell 200,000 2.7 100,000 100,000 1.1
#2201-1275 Pacific St.
Vancouver,
British Columbia
Ricardo Reqena 100,000 1.4 25,000 75,000 *
25 DeMayo 444, Piso
MonteVideo, Uruguay
All directors and 1,817,697 24.6 - 1,817,697 20.0
executive officers
as a group (2 persons)
- -------------------------------
<FN>
* Less than 1%.
(1) The stated number of shares are held of record by 458468 BC Ltd. of
which Mr. Withrow is the sole shareholder.
(2) The stated number of shares are held of record by Peridot
International Enterprises, Ltd. of which Mr. Furlonger is the
controlling shareholder.
(3) The stated number of shares includes 133,333 shares held of record by
Punzo Partnership of which Mr. Punzo is the controlling partner.
</FN>
</TABLE>
DESCRIPTION OF SECURITIES
Authorized and Outstanding Capital Stock
The Company's Certificate of Incorporation (the "Certificate") provides
for an authorized capital of 25,000,000 shares, $0.01 par value per share,
23,000,000 of which are designated as shares of Common Stock, and the remaining
2,000,000 of which are designated as preferred stock. Prior to consummation of
this offering, 7,378,115 shares of Common Stock were outstanding. The following
summary description of the capital stock of the Company is qualified in its
entirety by reference to the Certificate.
Units
Each Unit consists of one share of Common Stock and one warrant to
purchase an additional share of Common Stock. The Common Stock and the Warrant
included in the Units will be separately transferable immediately after
issuance.
41
<PAGE>
Common Stock
The holders of Common Stock are entitled to cast one vote for each
share of record on all matters to be voted on by stockholders, including the
election of directors except to the extent voting rights are established for
holders of preferred stock by the Board of Directors. The holders of Common
Stock are entitled to receive dividends when and if declared by the Board of
Directors out of legally available funds. In the event of liquidation,
dissolution or winding up of the affairs of the Company, the holders of the
Common Stock are entitled to share ratably in all remaining assets available for
distribution to them after the payment of liabilities. Holders of shares of
Common Stock, as such, have no conversion, preemptive or other subscription
rights, and there are no redemption provisions applicable to the Common Stock.
All of the outstanding shares of Common Stock are validly issued, fully
paid and non-assessable.
Warrants
General. Each of the Units offered hereby will include a warrant to
purchase one share of Common Stock at an exercise price equal to $3.50 per
share, subject to adjustment. All Warrants not exercised will expire at 5:00
p.m., New York time, on the fifth anniversary of the date of this Prospectus.
After issuance, the Warrants shall be transferable separately from the Common
Stock. Holders of the Warrants as such will not have any of the rights or
privileges of stockholders of the Company prior to the exercise of the Warrants.
Exercise. The holder of a Warrant may exercise the Warrant at any time
after issuance by surrender of the Warrant certificate to the American Stock
Transfer and Trust Company (the "Warrant Agent"), with the form of "Election to
Purchase" appearing on the reverse side of the Warrant certificate duly
completed and executed, accompanied by payment by certified or official bank
check of the full exercise price for the number of shares being purchased.
In order for warrant holders to exercise the Warrants, the Company must
have an effective registration statement (including a current prospectus)
relating to the shares of Common Stock issuable upon the exercise of the
Warrants on file with the Commission and the securities officials of the states
in which the holders reside. The Company has agreed to file post-effective
amendments, as required, to keep this Prospectus and the Registration Statement
of which it is a part, current and effective. See, however, "RISK FACTORS--Need
to Maintain Registration of Common Stock Issuable Upon Exercise of the
Warrants."
42
<PAGE>
Dilution. The number, price and kind of securities or other property
for which the Warrants are exercisable are subject to adjustment in certain
events, such as mergers, stock splits, stock dividends and recapitalizations.
Preferred Stock
The Certificate authorizes the Board of Directors of the Company to
establish one or more series of Preferred Stock and to determine, with respect
to any series of Preferred Stock, the terms, rights and preferences of each such
series, including voting, dividend, liquidation, conversion and other rights.
The authorized shares of Preferred Stock will be available for issuance without
further action by the Company's stockholders, unless such action is required by
applicable law or the rules of any stock exchange or automated quotation system
on which the Company's securities may be listed or traded. Although the Company
has no present intent of so doing, it could issue a series of Preferred Stock
that could discourage, impede, delay or prevent a transaction which would result
in a change in control of the Company, regardless of whether some of the
Company's stockholders might believe such a transaction to be in their best
interests. See "RISK FACTORS--Anti-Takeover Effects of Certificate of
Incorporation and Bylaws."
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Common Stock and Warrants is
the American Stock Transfer and Trust Company.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following general discussion of the federal income tax consequences
of the purchase of Units is based on the Internal Revenue Code of 1986, as
amended (the "Code"), applicable Treasury Regulations, judicial authority and
current administrative rulings and practices as in effect on the date of this
Prospectus. The discussion herein is for general information only and does not
discuss the tax consequences which may apply to special classes of taxpayers
(e.g., nonresident aliens, broker-dealers or insurance companies). Investors are
urged to consult their own tax advisors to determine the particular tax
consequences to them.
An investor must allocate the cost of each Unit between each of its
elements (one share of Common Stock and one Warrant) in accordance with their
relative fair market values for the purpose of determining the adjusted basis of
each such element for federal income tax purposes. For this purpose, if the
elements of the Units become separately tradeable after purchase, the cost basis
of the previously purchased Units will, in general, be allocated to the shares
of Common Stock and the Warrants in the same proportion as the fair market value
of these securities bears to the sum of such values on the first date the shares
of Common Stock and the Warrants are separately tradeable.
The sale of shares of Common Stock or the sale of a Warrant will result
in the recognition of gain or loss to the holder in an amount equal to the
difference, if any, between the amount realized and his adjusted basis therein.
Such a sale of shares of Common Stock will result in capital gain or loss,
provided the shares are a capital asset in the hands of the holder. The sale of
Warrants (other than a sale to the Company) will likewise result in capital gain
or loss, provided that the Warrants are a capital asset in the hands of the
holder and the shares of Common Stock issuable upon exercise of the Warrants
would be a capital asset to the holder if acquired by him.
43
<PAGE>
Under Section 305 of the Code, certain actual or constructive
distributions of stock (including warrants to purchase stock) may be taxable to
a stockholder of the Company. Adjustments in the exercise price of the Warrants,
or the number of shares of Common Stock purchasable upon exercise of the
Warrants, in each case made pursuant to the anti-dilution provisions of the
Warrants, may result in a distribution which is taxable as a dividend under the
Code to the holders of the Warrants.
No gain or loss will be recognized to the holder of Warrants on his
purchase of shares of Common Stock for cash upon exercise of the Warrants. The
adjusted basis of the shares of Common Stock so acquired would be equal to the
adjusted basis of the Warrants plus the exercise price. For tax purposes, the
holding period of the shares of Common Stock acquired upon the exercise of the
Warrants will not include the holding period of the Warrants exercised.
If the Warrants are not exercised and are allowed to expire, the
Warrants will be deemed to have been sold or exchanged on the expiration date.
Any loss to the Warrant holder will be a capital loss if the Warrants were held
as a capital asset and whether such capital loss will be classified as
short-term or long-term will depend upon the date the Warrants were acquired and
the length of time the Warrants were held.
No gain or loss will be recognized by the Company upon the exercise or
expiration of the Warrants.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS
The Certificate of Incorporation and Bylaws of the Company contain
certain provisions regarding the rights and privileges of stockholders, some of
which may have the effect of discouraging certain types of transactions that
involve an actual or threatened change of control of the Company, diminishing
the opportunities for a stockholder to participate in tender offers, including
tender offers at a price above the then current market value of the Common Stock
or over a stockholder's cost basis in the Common Stock, and inhibiting
fluctuations in the market price of the Common Stock that could result from
takeover attempts. These provisions of the Certificate and Bylaws are summarized
below.
Size of Board and Election of Directors
The Certificate provides that the number of Directors shall be fixed
from time to time as provided in the Bylaws. The Bylaws provide for a minimum of
three and a maximum of nine persons to serve on the Board, with an initial board
of three directors. The number of Directors may be increased or decreased by a
resolution adopted by the affirmative vote of a majority of the Board. The
Certificate further provides that the Board may amend the Bylaws by action taken
in accordance with such Bylaws, except to the extent that any matters under the
Certificate or applicable law are specifically reserved to the stockholders.
44
<PAGE>
The Bylaws provide that the Board will be divided into three classes
of Directors, with the classes to be as nearly equal in number as possible, and
one of each such classes shall be elected each year to serve for a three-year
term. At any meeting called for such purpose, Directors may be removed with or
without cause upon the affirmative vote of the holders of a majority of the
Company's outstanding shares of Common Stock.
Stockholder Nominations and Proposals
The Company's Bylaws provide for advance notice requirements for
stockholder nominations and proposals at annual meetings of the Company.
Stockholders may nominate Directors or submit other proposals only upon written
notice to the Company not less than 120 days nor more than 150 days prior to the
date of the notice to stockholders of the previous year's annual meeting. A
stockholder's notice also must contain certain additional information, as
specified in the Bylaws. The Board may reject any proposals that are not made in
accordance with the procedures set forth in the Bylaws or that are not proper
subjects of stockholder action in accordance with the provisions of applicable
law.
Calling Stockholder Meetings; Action by Stockholders Without a Meeting
Matters to be acted upon by the stockholders at special meetings are
limited to those which are specified in the notice thereof. A special meeting of
stockholders may be called by the Board of Directors, or the President of the
Company, or at the written request of the holders of at least 10% of the
Company's outstanding shares of Common Stock. As required by Delaware law, the
Bylaws provide that any action by written consent of stockholders in lieu of a
meeting must be signed by the holders of outstanding stock 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 be voted were present and
voted.
The foregoing provisions contained in the Certificate and Bylaws are
designed, in part, to make it more difficult and time consuming to obtain
majority control of the Board of Directors or otherwise to bring a matter before
stockholders without the Board's consent, and therefore to reduce the
vulnerability of the Company to an unsolicited takeover proposal. These
provisions are designed to enable the Company to develop its business in a
manner which will foster its long-term growth without the threat of a takeover
not deemed by the Board to be in the best interests of the Company and its
stockholders and to reduce, to the extent practicable, the potential disruption
entailed by such a threat. However, these provisions may have an adverse effect
on the ability of stockholders to influence the Governance of the Company and
the possibility of stockholders receiving a premium above the market price for
their securities from a potential acquirer who is unfriendly to management. See
"RISK FACTORS--Anti-Takeover Effects of Certificate of Incorporation and
Bylaws."
45
<PAGE>
Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware
permits indemnification by a corporation of certain officers, directors,
employees and agents. Consistent therewith, Article VIII of the Company's Bylaws
requires that the Company indemnify all persons whom it may indemnify pursuant
thereto to the fullest extent permitted by Section 145. Article VIII also
provides that expenses incurred by an officer or director of the Company or any
of its direct or indirect wholly-owned subsidiaries, in defending a civil or
criminal action, suit or proceeding, will be paid by the Company in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such officer, director, employee or agent to
repay such amount, if it shall ultimately be determined that he is not entitled
to be indemnified by the Company as authorized. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate.
In addition, Article 6 of the Certificate provides that directors of
the Company shall not be personally liable for monetary damages to the Company
or its stockholders for a breach of fiduciary duty as a director, except for
liability as a result of (i) a breach of the director's duty of loyalty to the
Company or its stockholders; (ii) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; (iii) an act
related to the unlawful stock repurchase or payment of a dividend under Section
174 of Delaware General Corporation Law; and (iv) transactions from which the
director derived an improper personal benefit.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have outstanding
9,078,115 shares of Common Stock. All of such shares of Common Stock, other than
those sold pursuant to this Prospectus, are "restricted" shares within the
meaning of the Securities Act and may not be sold in the absence of registration
under the Securities Act or an exemption therefrom.
46
<PAGE>
In general, a person acquiring securities issued in reliance on
Regulation S from a company which does not have a class of securities registered
under Section 12 of the Securities Exchange Act of 1934, as amended, is
prohibited from reselling such securities to a "U.S. Person" for a period of one
year after purchase. For these purposes, a "U.S. Person" is defined to generally
include all residents of the United States and all business organizations
incorporated under the laws of the United States or any state or a majority of
which is owned by a U.S. Person or group of U.S. Persons.
Prior to this offering, there has been no market for the Units, the
Common Stock or the Warrants. Trading of the Common Stock and the Warrants is
expected to commence following completion of this offering. No predictions can
be made of the effect, if any, that future market sales of shares of Common
Stock or the availability of such shares for sale will have on the market price
prevailing from time to time. Sales of substantial amounts of Common Stock, or
the perception that such sales might occur, could adversely affect prevailing
market prices. See "RISK FACTORS--Shares Eligible for Future Sale; Registration
Rights."
PLAN OF DISTRIBUTION
As soon as practicable after the Registration Statement of which
this Prospectus is a part is declared effective by the Securities and Exchange
Commission, the Company intends to commence this offering. If subscriptions for
the purchase of at least 1,000,000 Units have not been received on or before the
first anniversary of the effective date of this Prospectus, the offering of the
Units will be terminated and all subscription payments will be promptly returned
to investors. Subject to the provisions of applicable federal and state
securities law, the Company proposes to offer the Units to the public on a
minimum/maximum, best efforts basis through its directors and executive
officers, Messrs. Withrow and Furlonger. Such persons will not receive any
underwriting discount, commission or other form of remuneration in connection
with this offering. Although the Company has made no arrangements with any
brokerage or dealers concerning the distribution of the securities offered
hereby, it may do so in the future and pay a selling commission or allow a
discount in customary amounts. In an offering conducted on a best-efforts basis,
such as the one made pursuant to this Prospectus, the selling parties are
committed to devote their time and attention to the sale of the offered
securities, but have no commitment to sell any securities or to purchase any
securities if there is insufficient investment interest from the public.
47
<PAGE>
The Selling Stockholders propose to offer shares of the Company's
Common Stock directly to the public concurrently with the offering of Units by
the Company. The Company has agreed to perform certain ministerial acts
necessary to facilitate such offering in an efficient manner. There is no
minimum purchase requirement with respect to the Common Stock offered by the
Selling Stockholders and no arrangements have been made to escrow any portion of
the proceeds from such sale. Immediately upon receipt of a subscription for the
Common Stock offered by the Selling Stockholders, such transaction will be
executed by the Company's Transfer Agent, and a certificate representing the
purchased shares will be mailed by first class mail to the subscriber and the
proceeds of the sale distributed to the Selling Stockholder.
All securities offered hereby will be sold only for cash. The Company
and the Selling Stockholders intend to solicit potential purchasers of Units and
Common Stock primarily through announcements designed to comply with Rule 134,
each of which will contain a hyperlink connection to a readable and downloadable
electronic version of this Prospectus. Prior to actually receiving access to
this Prospectus, each potential investor must confirm his status as a non-U.S.
Person or as a resident of a state in which the offering is being made. The
potential investor may electronically submit non-binding indication of interest
prepared in compliance with Rule 134(a). At such time as the registration
statement of which this Prospectus is a part is declared effective, a written
confirmation will be physically mailed, together with a copy of this Prospectus,
to each person who previously submitted an indication of interest, directing
such person to complete, date, sign and return two copies of the subscription
agreement (together with the applicable subscription payment) to the Escrow
Agent.
Within five days of its receipt of a subscription agreement and
subscription payment, a written confirmation will be sent by either E-Mail or by
first class mail to notify the subscriber of the extent, if any, to which, such
subscription has been accepted. Not more than thirty days after the minimum
offering of 1,000,000 Units has been sold a subscriber's Common Stock
certificate and Warrant certificate will be mailed by first class mail. The
Company shall not use the proceeds paid by any investor until the Common Stock
certificate evidencing such investment has been mailed.
SUMMARY OF ESCROW AGREEMENT
The Company intends to enter into an Escrow Agreement with American
Stock Transfer and Trust Company. The following is a summary of certain
provisions of the Escrow Agreement and is not necessarily complete. References
are made to the copy of the Escrow Agreement filed as an exhibit to the
Registration Statement and the following summary is qualified in all respects by
such reference.
48
<PAGE>
The Escrow Agreement will be entered into for the express purpose of
complying with the provisions of Rule 10b-9 of the Exchange Act. Promptly
following its receipt thereof, the Company will deposit with the Escrow Agent
all of the proceeds received by the Company with respect to the Offering until
the minimum offering is sold. Until the minimum offering is sold, all offering
proceeds will be deposited by the Escrow Agent into a separate bank account
established and maintained by the Escrow Agent for the sole and exclusive
benefit of the purchasers of the Units offered hereby.
All Units held under the Escrow Agreement will be treated as authorized
but unissued shares of the Common Stock and Warrants of the Company. Purchasers
will not have any rights as stockholders of the Company until the conditions of
the escrow are fulfilled. While held under the Escrow Agreement, no transfer or
other disposition of the Units or any interest relating thereto, is permitted
other than by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Internal Revenue Code of
1986, as amended, or Title I of the Employee Retirement Income Security act, or
the rules thereunder.
All offering proceeds held in the Escrow Account will be released by
the Escrow Agent to the Company and certificates representing the shares of
Common Stock and Warrants will be issued and delivered to the persons entitled
thereto immediately upon the receipt by the Escrow Agent of a signed
representation from the Company together with such other evidence acceptable to
the Escrow Agent that the minimum offering has completed.
LEGAL MATTERS
The validity of the Securities offered hereby and certain other legal
matters in connection with the sale of the Units offered hereby will be passed
upon for the Company by Gallop, Johnson & Neuman, L.C., St. Louis, Missouri.
EXPERTS
The financial statements of the Company as of December 31, 1996, and
the financial statements of PSI for the fiscal years ending June 30, 1996 and
1995, included in the Prospectus and the Registration Statement have been so
included in reliance on the reports, which contain an explanatory paragraph
regarding a going concern uncertainty, of BDO Dunwoody, Chartered Accountants,
independent auditors given on the authority of said Firm as experts in
accounting and auditing.
49
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 under the Securities Act
with respect to the Units offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits and
schedules filed therewith. For further information with respect to the Company
and the Units offered hereby, reference is hereby made to such Registration
Statement and to the financial statements, exhibits and schedules filed
therewith. Statements contained in this Prospectus regarding the contents of any
contract or other document referred to are not necessarily complete and, in each
instance, reference is made to the copy of such contract or the document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference. The Registration Statement, including the
exhibits thereto, may be inspected without charge at the principal office of the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and the
regional offices of the Commission at Room 1400, 7 World Trade Center, New York,
New York 10048, and Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Chicago, Illinois 60661-2511. Copies of such material may be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at its public reference facilities in New York, New
York, and Chicago, Illinois, upon the payment of the prescribed fees. The
Commission also maintains an Internet website at http://www.sec.gov from which
such material may be obtained.
The Company will furnish its stockholders with annual reports
containing audited financial statements and an opinion thereon expressed by the
Company's independent accountants and such other periodic reports as the Company
may determine to be appropriate or as may be required by law.
50
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PowerTrader, Inc.
As of 31 December 1996 and for the period from 22 August 1996 (inception) to 31
December 1996
Independent Auditors' report
Balance sheet
Statement of loss
Statement of cash flow
Statement of shareholder's deficit
Summary of significant accounting policies
Notes to financial statements
PowerTrader Software Inc.
As of and for the three six months ending 31 December 1996 and 31 December 1995
(unaudited)
Interim Balance sheet
Interim Statement of loss and deficit
Interim Statement of cash flow
Notes to Interim Financial Statement
As of and for the fiscal years ending 30 June 1996 and 30 June 1995
Independent Auditors' report
Balance sheets
Statements of loss
Statements of cash flow
Statements of shareholders' deficit
Summary of significant accounting policies
Notes to financial statements
Pro Forma Financial Statements
Pro forma consolidated balance sheet
Pro forma consolidated statement of loss and deficit
Notes and assumptions to pro forma consolidated statements
F-1
<PAGE>
Independent Auditors' Report
To the Directors
PowerTrader, Inc.
We have audited the Balance Sheet of PowerTrader, Inc. (a development stage
company) as of 31 December 1996 and the Statements of Loss, Cash Flow, and
Changes in Shareholders' Deficit for the period from 22 August 1996 (inception)
to 31 December 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance 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 audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PowerTrader, Inc. as of 31
December 1996 and the results of its operations and its cash flows for the
period from 22 August 1996 (inception) to 31 December 1996 in accordance with
generally accepted accounting principles in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note 1 to the
financial statements, the Company has incurred recurring losses, has an
accumulated deficit and is a development stage Company which raises substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
14 March 1997 /s/ BDO Dunwoody
Vancouver, British Columbia CHARTERED ACOUNTANTS
(Internationally BDO Binder)
F-2
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Balance Sheet
(Expressed in U.S. Dollars)
31 December
1996
----
Assets
Current
Cash $ 2,568
Due from PowerTrader Software Inc. $311,900
--------
314,468
Deferred compensation expense 217,150
--------
$531,618
- --------------------------------------------------------------------------------
Liabilities
Current
Due to shareholder, note 4 $ 214
-----
Shareholder's deficit
Share capital, note 5
Authorized
The Company is authorized to issue 23,000,000 common shares and
2,000,000 preferred shares with a $.01 par value per share
Issued and outstanding, 914,001 common shares 92
Capital surplus 792,344
Deficit accumulated during development stage (261,032)
--------
531,404
========
$531,618
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-3
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Statement of Loss
For the Period From 22 August 1996
(inception) to 31 December 1996
(Expressed in U.S. Dollars)
31 December 1996
Revenue $ -
Selling, general and administrative expenses
Compensation expense for stock awards 261,000
Other 32
-------
Net loss for the period $(261,032)
--------
Net loss per share $ (0.70)
--------
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-4
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Statement of Cash Flow
For the Period From 22 August 1996
(inception) to 31 December 1996
(Expressed in U.S. Dollars)
31 December 1996
Operating Activity
Net loss for the period $(261,032)
Item not involving cash
Amortization of deferred compensation expense 261,000
-------
(32)
---
Financing activities
Received from shareholders (285)
Advances from shareholders 499
Share issuances 314,286
-------
314,500
-------
Investing Activity
Advance to PowerTrader Software, Inc. (314,500)
-------
Increase in cash and cash end of period $ 2,568
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-5
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Statement of Changes in Shareholders' Deficit
For the Period From 22 August 1996
(inception) to 31 December 1996
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Share Capital Deficit Accumulated
Capital During the
Shares Amount Surplus Development Stage
------ ------ -------- -----------------
<S> <C> <C> <C> <C>
Balance, beginning of period - $ - $ - $ -
Issuance of shares
For cash on incorporation 1 1 - -
For cash 314,000 31 313,969 -
For cash on exercise
of options 250,000 25 225 -
For services 350,000 35 - -
Deferred compensation expense
recorded upon granting
options and issuance of
shares - - 478,150 -
Net loss for the period - - - (261,032)
------- ------ ------- --------
Balance, end of period 914,001 $ 92 $792,344 $(261,032)
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
</TABLE>
F-6
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Summary of Significant Accounting Policies
(Expressed in U.S. Dollars)
31 December 1996
Revenue Recognition The Company will record revenue from the
sale of computer software upon shipment of
products.
Research and Development
Costs Research and development costs will be
charged to expense as incurred.
Capitalized Software Costs Software development and production costs
will be capitalized upon a product's reaching
technological feasibility. The capitalization
of these costs will stop when a product is
ready for sale. Technological feasibility is
considered to be attained when the Company
has completed all planning, designing, coding
and testing activities that are necessary to
establish that the product can be produced to
meet its design specifications including
functions, features and technical performance
requirements.
Estimates and Assumptions The preparation of financial statements in
conformity with 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. Actual results could differ from
those estimates.
Fair Value of Financial
Instruments The respective carrying value of certain
on-balance-sheet financial instruments
approximated their fair values. These
financial instruments include cash, due from
PowerTrader Software Inc. and amounts due to
shareholder. Fair values were assumed to
approximate carrying values for these
financial instruments since they are short
term in nature and their carrying amounts
approximate fair values.
Loss Per Share Loss Per Share is calculated based on the
weighted average number of shares
outstanding.
F-7
<PAGE>
New Accounting
Pronouncements Statement of Financial Accounting
Standards No. 121, "accounting for the
impairment of long-lived assets and for
long-lived assets to be disposed of" (SFAS
No. 121) issued by the Financial Accounting
Standards Board (FASB) is effective for
financial statements for fiscal years
beginning after 15 December 1995. The new
standard establishes new guidelines regarding
when impairment losses on long-lived assets,
which include plant and equipment, certain
identifiable intangible assets and goodwill,
should be recognized and how impairment
losses should be measured. Adoption did not
have a material effect on the Company's
financial position or results of
operations.
Statement of Financial Accounting
Standards No. 123, "Accounting for stock
based compensation" (SFAS No. 123). SFAS No.
123 encourages entities to adopt the fair
value method in place of the provisions of
Accounting Principles Board Opinion No. 25,
"Accounting for stock issued to employees"
(APB No. 25) for all arrangements under which
employees receive shares of stock or other
equity instruments of the employer or the
employer incurs liabilities to employees in
amounts based on the price of its stock. The
Company has elected to continue an account
for stock options issued to employees in
accordance with APB No. 25 but will disclose
the effects of stock options in accordance
with SFAS No. 123. The adoption did not have
a material effect on the Company's financial
position or results of operations.
F-8
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
31 December 1996
1. Nature of Business and Continued Operations
PowerTrader, Inc., through its wholly-owned subsidiary PowerTrader
Software Inc., designs, develops, markets and supports informational
and analytical desktop decision support and risk management systems.
The Company was incorporated under the laws of the State of Delaware on
22 August 1996 and is a development stage company.
These financial statements are stated in U.S. dollars and have been
prepared in accordance with United States generally accepted accounting
principles, on a going concern basis. The Company was recently
incorporated and has not yet been sufficiently capitalized to carry out
its business plans. These factors among others, raise substantial doubt
about the Company's ability to be able to continue as a going concern.
The ability of the company to continue as a going concern is dependent
on the Company obtaining additional financing through private or public
share offerings. The financial statements do not include any
adjustments related to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities
that may be necessary should the Company be unable to continue as a
going concern.
Management's plans in this regard are to obtain financing from private
or public share offerings until such time that sufficient revenue can
be generated to sustain continuing operations.
2. Acquisition of PowerTrader Software Inc.
On 2 January 1997, the Company entered into an agreement with the
shareholders of PowerTrader Software Inc. ("Software") whereby it
acquired all of the outstanding shares of Software in exchange for
4,174,597 common shares. The transaction will be accounted for as a
reverse acquisition, utilizing historical costs. Software is in the
same business as the Company. The financial position of Software as of
30 June 1996, its fiscal year end is summarized as follows:
Tangible assets $ 186,718
Liabilities (590,720)
----------
Shareholders' deficiency $(404,002)
----------
The following is a summary of pro-forma sales, pro-forma net loss and
pro-forma loss per share for the Company under the assumption that the
Software acquisition was completed on 1 July 1996.
1 July 1996 (Unaudited)
Pro-forma sales $ 27,478
----------
Pro-forma net loss $(661,022)
----------
Pro-forma loss per share $ (.15)
----------
F-9
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
31 December 1996
3. Due from PowerTrader Software Inc.
Amounts due from PowerTrader Software Inc. are unsecured, non-interest
bearing, have no specific terms of repayment and are disclosed as an
investing activity in the Statement of Cash Flow.
4. Due to Shareholder
Amounts advanced from shareholder are unsecured, non-interest bearing,
have no specific terms of repayment and are disclosed as a financing
activity in the statement of cash flow.
5. Share Capital
All of the outstanding common shares are restricted shares and may not
be sold in the absence of registration under the Securities Act of 1933
(United States) or an exemption therefrom.
Subsequent to 31 December 1996, the Company
(i) issued 2,289,517 shares to subscribers of shares of Software
to settle $715,138 in Software's liabilities; and
(ii) plans to file a prospectus with the Securities and Exchange
Commission for the issuance of a minimum of 1,000,000 Units
and a maximum of 1,700,000 Units, with each Unit consisting of
one share of the Company's Common Stock, $0.01 par value per
share, and one Warrant to purchase one additional share of
common stock at an exercise price of $3.50 per share for a
five year period. The Warrants are subject to redemption by
the Company, at a redemption price of $0.01 per Warrant on 30
days prior written notice to the registered holder thereof if
the average closing bid price of the Common Stock as reported
by the principal market on which the Common Stock is traded
equals or exceeds $4.50 per share for any 20 trading days
within a period of 30 consecutive trading days ending on the
fifth trading day prior to the notice of redemption.
F-10
<PAGE>
6. Share Options and Share Compensation
The granting and issuance of Company stock options during the period ended 31
December 1996 is summarized as follows:
Deferred
Exercise Expiry Compensation
Amount Price Date Expense
------ -------- ------ ------------
Beginning balance
Granted - - - -
149,999 $0.37 Dec. 1998 $ 96,700
100,000 1.00 Feb. 1999 3,900
100,000 3.00 Feb. 1999 -
250,000 .001 - 249,750
Exercised (250,000) $.001
------- ----- --------
Ending balance 349,999 $350,350
======= =======
Fair Value Assumptions:
As a result of the short time between the date the 250,000 options were
granted and exercised, they have been recorded at the value based on
the price at which shares were being sold to third parties at the date
of exercise.
The fair value of the other stock options granted has been determined
using the Black Scholes Method based on the following assumptions:
(i) The risk free interest rate for up to one year has been
based upon Canadian Treasury Bill yields at 30 November,
1996 and interest rates over one year are based on the
average yield of one to three year Government of Canada
bonds at 30 November, 1996;
(ii) The expected life has been based on the option expiry
dates noted above;
(iii) The expected volatility factor was nil; and
(iv) The expected dividend yield was nil.
F-11
<PAGE>
Shares Issued to Director:
During the period ended 31 December 1996, the Company also issued
350,000 shares to a director for proceeds of $35. The shares are
subject to an agreement which contains certain restrictions on transfer
over a three year period and provisions for forfeiture upon the
occurrence of certain events.
Vesting of these shares occurs as follows:
Number of Shares Date
---------------- ----
100,000 24 October, 1997
150,000 24 October, 1998
100,000 24 October, 1999
-------
350,000
The Company recorded the issuance of these shares at estimated fair
value and recorded $127,000 in deferred compensation expense upon the
issuance of these shares. The agreement providing for the issuance of
these shares was negotiated prior to the incorporation of the Company.
As a result, management estimated the fair value of these shares based
upon the selling price of shares in Software at the date the Agreement
providing for the issuance of these shares was negotiated.
7. Stock Option Plan
In December, 1996, the Company's Board of Directors adopted the
PowerTrader, Inc., 1996 Stock Option Plan (the "Plan"), pursuant to
which officers, key employees, advisers and consultants, of the Company
may receive stock options to purchase up to an aggregate of 750,000
shares of the Company's Common Stock. Under the Plan, stock options
awarded under the Plan may not have a term of more than 10 years or
provide for an exercise price of less than the fair market value of the
Common Stock on the date of grant. As of December 31, 1996, no awards
had been made under the Plan. However, the Company is committed to
issue 100,000 stock options under the Plan.
F-12
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Interim Balance Sheet
(Expressed in U.S. Dollars)
31 December 30 June
1996 1996
(unaudited)
- --------------------------------------------------------------------------------
Assets
Current
Cash $202,781 $127,077
Deposits and prepaids 11,081 2,392
-------- --------
213,862 129,469
Fixed assets 111,562 57,249
-------- -------
$325,424 $186,718
- --------------------------------------------------------------------------------
Liabilities
Current
Account payable and accrued
liabilities $ 91,126 $ 168,655
Current portion of capital lease
obligations 6,284 5,810
Due to PowerTrader, Inc. 311,900 -
--------- ---------
407,310 174,465
Share subscriptions 715,138 408,089
Capital lease obligations 4,968 8,166
--------- ---------
1,129,416 590,720
--------- ---------
Shareholders' deficit
Share capital
Authorized
The Company is authorized to issue
100,000,000 (1995 - 5,000) Class "A"
Common shares without par value and
5,000 Class "B" common shares without
par value
Issued and outstanding
4,174,513 Class "A" common 646,270 646,270
84 Class "B" common 61 61
------- -------
646,331 646,331
Deficit accumulated during
development stage (1,450,323) (1,050,333)
----------- -----------
(803,992) 404,002
--------- ----------
$ 325,424 $ 186,718
The accompanying notes form an integral part of these financial statements.
F-13
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Interim Statement of Loss and Deficit
(Expressed in U.S. Dollars)
29 December
Six Six 1988
Months Months (inception) to
Ended Ended 31 December
31 December 31 December 1996
1996 1995 (cumulative)
(unaudited) (unaudited) (unaudited)
Revenue $ 27,478 $ 36,720 $ 122,475
Cost of sales 15,855 27,836 74,176
---------- --------- ----------
11,623 8,884 48,299
---------- --------- ----------
Selling, general and
administrative costs 257,942 117,579 1,032,951
Development costs 153,671 124,533 465,671
---------- --------- ----------
Net loss (399,990) (233,228) (1,450,323)
Deficit, beginning of period (1,050,333) (451,362) -
----------- ---------- ----------
Deficit, end of period $(1,450,323) $(684,590) $(1,450,323)
----------- ---------- -----------
Loss per share $ (0.10) $ (0.15)
------- -------
The accompanying notes form an integral part of these financial statements.
F-14
<PAGE>
<TABLE>
PowerTrader Software Inc.
(A Development Stage Company)
Interim Statement of Cash Flow
(Expressed in U.S. Dollars)
<CAPTION>
29 December
Six Six 1988
Months Months (inception) to
Ended Ended 31 December
31 December 31 December 1996
1996 1995 (cumulative)
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Cash provided (used) by:
Operating activities
Operations
Net loss for the period $(399,990) $(233,228) $(1,450,323)
Item not involving cash
Amortization 17,220 13,295 59,066
Increase (decrease) in:
Deposits and prepaids (8,689) (3,934) (11,081)
Accounts payable and accrued
liabilities (77,529) 84,141 91,126
---------- --------- -----------
(468,988) (139,726) (1,311,212)
---------- --------- -----------
Financing activities
Advances from PowerTrader, Inc. 311,900 - 311,900
Share subscriptions 307,049 51,320 715,138
Lease financing received - - 18,790
Repayment of obligations under
capital lease (2,724) (1,244) (7,538)
Shareholders' advances - 49,810 -
Issuance of share capital - 58,736 646,331
---------- -------- ----------
616,225 158,622 1,684,621
---------- -------- ----------
Investing activity
Investment in fixed assets (71,533) (19,361) (170,628)
---------- --------- ----------
Increase (decrease) in cash 75,704) (465) 202,781
Cash, beginning of period 127,077 2,424 -
---------- --------- ----------
Cash, end of period $ 202,781 $ 1,959 $ 202,781
---------- --------- ----------
</TABLE>
The accompanying notes form an integral part of these financial statements.
F-15
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Notes to Interim Financial Statements
(Expressed in U.S. Dollars)
31 December 1996 (unaudited)
1. Nature of Operations
PowerTrader Software Inc. ("the Company") designs, develops, markets
and supports informational and analytical desktop decision support and
risk management systems.
2. Revenue Recognition and Interim Accounting Adjustments
The Company records revenue from the sale of computer software upon
shipment.
The interim financial statements reflect all adjustments which are, in
the opinion of management, necessary to a fair statement of the
results for the interim periods presented. All adjustments recorded in
the interim financial statements are of a normal recurring nature.
The results of operations for interim periods are not necessarily
indicative of results of operations for a full year.
3. Exchange Rates
Exchange rates between the United States dollar and the Canadian
dollar for the periods reported in these financial statements are as
follows:
1996 1995
---- ----
Average 1.3602 1.3558
As of 31 December 1.3696 1.3640
F-16
<PAGE>
Independent Auditors' Report
To The Directors
PowerTrader Software Inc.
We have audited the Balance Sheets of PowerTrader Software Inc. (a development
stage company) as of 30 June 1996 and 1995 and the Statements of Loss, Cash
Flow, and Changes in Shareholders' Deficit for the years then ended. We have
also audited the Statements of Loss, Cash Flow and Changes in Shareholders'
Deficit for the period from 29 December 1988 (inception) to 30 June 1996
(cumulative). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform an 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 financial position of PowerTrader Software Inc. as of
30 June 1996 and 1995 and the results of its operations and its cash flows for
the years then ended and the period from 29 December 1988 (inception) to 30 June
1996 (cumulative) in accordance with generally accepted accounting principles in
the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note 1 to the
financial statements, the Company has incurred recurring losses, has an
accumulated deficit and is a development stage Company which raises substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
17 January 1997 /s/ BDO Dunwoody
Vancouver, British Columbia Chartered Accountants
(Internationally BDO Binder)
F-17
<PAGE>
<TABLE>
PowerTrader Software Inc.
(A Development Stage Company)
Balance Sheets
(Expressed in U.S. Dollars)
<CAPTION>
30 June 1996 1995
Assets
<S> <C> <C>
Current
Cash $127,077 $ 2,424
Deposits and prepaids 2,392 1,772
------------------------------
Fixed Assets, note 2 129,469 4,196
57,249 40,148
------------------------------
$186,718 $44,344
Liabilities
Current
Accounts payable and accrued liabilities $168,655 $96,657
Due to shareholder, note 3 - 392,305
Current portion of capital lease obligations 5,810 2,211
------------------------------
174,465 491,173
Share subscriptions, note 4 408,089 -
Capital lease obligations, note 5 8,166 4,424
------------------------------
590,720 495,597
------------------------------
Shareholders' deficit
Share capital, note 6
Authorization
The company is authorized to issue
100,000,000 (1995 - 5,000)
Class "A" common shares
without par value and 5,000 Class "B"
common shares without par value
Issued and outstanding
4,174,513 Class "A" common (1995 - 65) 646,270 48
84 Class "B" common (1995 - 84) 61 61
------- ------
646,331 109
Deficit accumulated during
development stage (1,050,333) (451,362)
-------------------------------
(404,002) (451,253)
-------------------------------
$ 186,718 $ 44,344
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-18
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Statements of Loss
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
29 December 1988
Year Ended Year Ended (inception) to
30 June 30 June 30 June 1996
1996 1995 (cumulative)
---- ---- ------------
<S> <C> <C> <C>
Revenue $ 50,971 $ 44,026 $ 94,997
Cost of sales 40,910 17,411 58,321
------------------------------------------------------
10,061 26,615 36,676
------------------------------------------------------
Selling, general and
administrative costs 405,099 369,910 755,009
Development costs 203,933 108,067 312,000
------------------------------------------------------
Net loss $(598,971) $ (451,362) $(1,050,333)
Loss per share $ (0.24) $(3,029.28)
------------ ------------
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-19
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Statements of Cash Flow
(in U.S. Dollars)
<TABLE>
<CAPTION>
29 December 1988
Year Ended Year Ended (inception) to
30 June 30 June 30 June 1996
1996 1995 (cumulative)
---- ---- ------------
<S> <C> <C> <C>
Operating activities
Operations
Net loss $ (598,971) $ (451,362) $(1,050,333)
Items not involving cash
Amortization 26,589 15,257 41,846
Increase (decrease) from changes in
Deposits and prepaids (620) (1,772) (2,392)
Accounts payable and
accrued liabilities 71,997 96,657 168,654
-------------------------------------------------------
(501,005) (341,220) (842,225)
-------------------------------------------------------
Financing activities
Share subscriptions 408,089 - 408,089
Lease financing received 11,074 7,716 18,790
Repayment of obligations
under capital lease (3,732) (1,081) (4,813)
Shareholders' advances 253,917 392,305 646,222
Issuance of share capital - - 109
-------------------------------------------------------
669,348 398,940 1,068,397
-------------------------------------------------------
Investing activities
Investment in fixed assets (43,690) (55,405) (99,095)
-------------------------------------------------------
Increase in cash 124,653 2,315 127,077
Cash, beginning of period 2,424 109 -
-------------------------------------------------------
Cash, end of period $ 127,077 $ 2,424 $127,077
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-20
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Statements of Changes in Shareholders' Deficit
For the Years Ended 30 June 1996 and 1995
and the Period From 29 December 1988
(inception) to 30 June 1996 (cumulative)
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Deficit
Accumulated
Class "A" Class "B" During the
Common Common Share Development
Shares Amount Shares Amount Total Stage
------ ------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Shares issued for cash
29 December 1988 100* 70 - - - -
Shares redeemed
and cancelled
12 September 1989 (100) (70) - - - -
Shares issued
12 September 1989 100 72 100 73 - -
Shares redeemed
and cancelled
12 July 1990 35 (24) 16 (12) - -
---- ---- ---- ---- ---- --------
Balance at
1 July 1994 65 48 84 61 109 -
Net loss - - - - - (451,362)
---- ---- ---- ---- ---- --------
Balance at
30 June 1995 65 48 84 61 109 (451,362)
Shares issued
for debt 4,174,448 646,222 - - 646,222 -
Net loss - - - - - (598,971)
------- ------ ------ ------ ------ --------
Balance at
30 June 1996 4,174,513 $646,270 84 $61 $646,331 $(1,050,333)
*Stated shares were common shares not class "A" common shares.
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-21
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Summary of Significant Accounting Policies
30 June 1996
Foreign Currency Foreign monetary assets and liabilities are
Translation translated into U.S. dollars at the rates of
exchange in effect at the balance sheet
dates. Monetary assets are translated at
historical rates. Revenue and expense items
are translated at average exchange rates
prevailing during the period, except for
amortization which is translated at the same
rate as the assets to which it applies.
Foreign currency translation adjustments are
included in income.
Exchange ratios between the Canadian and U.S.
dollar as of 30 June 1996 and 1995, with
bracketed figures reflecting the average rate
for the period are:
30 June 1996 US$1.00: CDN$1.3836 (1.3600)
30 June 1995 US$1.00: CDN$1.3725 (1.3793)
Fixed Assets Fixed assets are recorded at cost.
Amortization is provided at the following
annual rates:
Computer equipment 30% declining balance
Computer software 100% declining balance
Revenue Recognition The Company records revenue from
the sale of computer software upon shipment
of products.
Research and Development Research and development costs are charged to
Costs expense as incurred.
Capitalized Software Certain software development and production
Costs costs are capitalized upon a product's
reaching technological feasibility. The
capitalization of these costs will stop when
a product is ready for sale. Technological
feasibility is considered to be attained when
the Company has completed all planning,
designing, coding and testing activities that
are necessary to establish that the product
can be produced to meet its design
specifications including functions, features
and technical performance requirements. The
Company has attained technological
feasibility on one product; however, it has
not incurred any capitalizable costs with
respect to this product.
F-22
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Summary of Significant Accounting Policies
Estimates and Assumptions The preparation of financial statements in
conformity with 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. Actual results could differ from
those estimates.
Fair Value of Financial The respective carrying value of certain
Instruments on-balance-sheet financial instruments
approximated their fair values. These
financial instruments include cash, accounts
receivable, accounts payable and accrued
liabilities. Fair values were assumed to
approximate carrying values for these
financial instruments since they are short
term in nature and their carrying amounts
approximate fair values or they are
receivable or payable on demand.
Earnings Per Share Earnings Per Share is calculated based on the
weighted average number of shares
outstanding.
New Accounting Statement of Financial Accounting Standards
Pronouncements No. 121, "accounting for the impairment of
long-lived assets and for long-lived assets
to be disposed of" (SFAS No. 121) issued by
the Financial Accounting Standards Board
(FASB) is effective for financial statements
for fiscal years beginning after 15 December
1995. The new standard establishes new
guidelines regarding when impairment losses
on long-lived assets, which include plant and
equipment, certain identifiable intangible
assets and goodwill, should be recognized and
how impairment losses should be measured. The
Company does not expect adoption to have a
material effect on its financial position or
results of operations.
Statement of Financial Accounting Standards
No. 123, "Accounting for stock based
compensation" (SFAS No. 123). SFAS No. 123
encourages entities to adopt the fair value
method in place of the provisions of
Accounting Principles Board Opinion No. 25,
"Accounting for stock issued to employees"
(APB No. 25) for all arrangements under which
employees receive shares of stock or other
equity instruments of the employer or the
employer incurs liabilities to employees in
amounts based on the price of its stock. The
Company has not determined whether it will
adopt the Fair Value Method encouraged by
SFAS No. 123 or to account for such
transactions in accordance with APB No. 25
for US GAAP purposes. However, the Company
will provide additional disclosures beginning
in 1997 providing pro-forma effects as if the
Company had elected to adopt SFAS No. 123
should the Company elect not to adopt APB No.
25.
F-23
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Notes to Financial Statements
(In U.S. Dollars)
30 June 1996
1. Nature of Business and Continued Operations
PowerTrader Software Inc. designs, develops, markets and supports
informational and analytical desktop decision support and risk
management systems. The Company was originally incorporated on 29
December 1988 under the name Corporate Media Solutions, Inc. On 6
November 1989, the Company changed its name to Precision Investment
Services, Inc. On 16 April 1996 the Company changed its name from
Precision Investment Services, Inc. to PowerTrader Software Inc. The
Company was inactive until July 1994 when it commenced development of
its current suite of software products.
To date, since the Company has only sold Beta product and support
services, major product development work continues and the Company has
not yet recorded significant sales, accordingly, the Company is still a
development stage company with its principal business and assets in
Canada and its revenue earned in Canada.
These financial statements are stated in U.S. dollars and have been
prepared in accordance with generally accepted accounting principles,
on a going concern basis. As reflected in these financial statements,
the Company has at 30 June 1996 a deficit of $1,050,333 and a working
capital deficiency of $44,996. In addition, the Company has incurred
operating losses in each of the last two years. These factors among
others, raise substantial doubt about the Company's ability to be able
to continue as a going concern. The ability of the Company to continue
as a going concern is dependent on the Company obtaining additional
financing through private or public share offerings or debt. The
financial statements do not include any adjustments related to the
recoverability and classification of recorded asset amounts or the
amounts and classification of liabilities that may be necessary should
the Company be unable to continue as a going concern. However, it is
reasonably possible, based on existing knowledge, that changes in
future conditions in the near term could require a material change in
the recognized amounts for the assets and liabilities.
Management's plans in this regard are to obtain financing from private
or public share offerings or debt until such time that sufficient
revenue can be generated to sustain continuing operations.
2. Fixed Assets
<TABLE>
<CAPTION>
Accumulated 1996 1995
Cost Amortization Net Net
<S> <C> <C> <C> <C>
Computer equipment $73,726 $19,120 $54,606 $30,224
Computer software 25,370 22,727 2,643 9,924
-------------------------------------------------------------------------
$99,096 $41,847 $57,249 $40,148
</TABLE>
The estimated useful life of the fixed assets varies between 1 and 5
years.
F-24
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Notes to Financial Statements
(in U.S. Dollars)
3. Due to Shareholders
Amounts advanced from shareholders are unsecured, non-interest bearing
and have no specific terms of repayment.
4. Share Subscriptions
As at 30 June 1996, the Company has received a total of $408,089 with
respect to subscriptions for 1,599,880 Class "A" common shares of the
Company. The Company received a further $307,049 with respect to
subscriptions for 689,637 Class "A" common shares subsequent to 30 June
1996. Shares have not been issued for these share subscriptions,
accordingly the amounts are recorded as a liability at 30 June 1996.
Subsequent to 30 June 1996, these liabilities were settled through the
issuance of 2,289,517 shares in a company which subsequent to year-end
acquired control of the Company.
5. Capital Lease Obligations
The Company has two capital leases for computer equipment. Future
minimum lease payments are as follows:
1997 $ 5,810
1998 6,633
1999 2,290
--------
14,733
Interest component (757)
--------
$13,976
========
6. Share Capital
<TABLE>
<CAPTION>
Class "A" Class "B"
Common Common
Shares Amount Shares Amount Total
<S> <C> <C> <C> <C> <C>
Balance, 1 July 1994 and
30 June 1995 65 $ 48 84 $ 61 $ 109
Issued, shares for debt 4,174,448 646,222 - - 646,222
--------- ------- --- --- -------
Balance, end of year 4,174,513 $646,270 84 $61 $646,331
</TABLE>
During the year, shareholders entered into share for debt agreements for
repayment of $646,222 in debts owed.
The number of shares issued in connection with the Share for Debt Agreements was
determined based on management's estimate of the value of the Company at the
date the Agreements were entered into.
F-25
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
7. Share Options
The number of shares under option and the exercise price thereof is
summarized as follows:
1996 1995
Outstanding, beginning of year - -
Granted (per share) $0.37 149,999 -
------- -----
Outstanding, end of year 149,999 -
At the date of issuance of the share options, the exercisable price of
the options was equal to the price share subscriptions were being
offered to third parties. Accordingly, no compensation was recorded in
connection with the issuance of these options. Subsequent to year end,
the options were cancelled.
8. Related Party Transactions
During 1996, the Company paid consulting and leasing fees totalling
approximately $11,800 (1995 nil) to a director and a company controlled
by a director of the Company. As of 30 June 1996, included in accounts
payable were $3,491 (1995 - $530) in amounts owing to directors.
9. Income Taxes
The Company has income tax loss carry-forwards of approximately
$1,094,000 available to reduce future taxable income, the tax effect of
which has not been recorded in these financial statements. These losses
will expire during 2002 and 2003.
A summary of deferred tax assets at 30 June 1996 and 1995 is as
follows:
<TABLE>
<CAPTION>
Deferred
Tax Valuation Tax
Rate Amount Allowance Asset
<S> <C> <C> <C> <C> <C>
1996 tax benefit
of loss carry
forward $599,700 .45 $269,900
Tax benefit related
to depreciation $ 26,600 .45 $ 12,000 -
--------
$281,900 (281,900)
1995 tax benefit
of loss carry
forward $452,100 .45 $203,400
Tax benefit related
to depreciation $ 15,300 .45 $ 6,900
--------
$210,300 (210,300) -
</TABLE>
Since in management's opinion, it is more likely than not that the tax
benefits would not be realized, they have been reduced by a valuation
allowance of $281,900 (1995 - $210,300).
Deferred tax liabilities were not material at 30 June 1996 and 1995.
F-26
<PAGE>
PowerTrader Software Inc.
(A Development Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
30 June 1996
10. Commitments
The Company has entered compensation contracts requiring minimum
payments as follows:
1997 $166,664
1998 203,996
1999 121,165
2000 24,694
--------
$516,519
In November, 1996, the Company entered into a Lease Agreement for its
premises requiring minimum lease payments of $31,786, with required
lease payments as follows:
1997 $ 8,476
1998 12,715
1999 10,595
--------
$ 31,786
During 1996 and 1995, the Company had rent expenses for its premises of
$8,770 and $23,795, respectively.
11. Subsequent events
On 2 January 1997, the Company acquired from a shareholder various
office equipment for $7,100.
F-27
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Pro-Forma Consolidated Balance Sheet
31 December 1996 (unaudited)
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
PowerTrader
Software PowerTrader, Pro-Forma Pro-Forma
Inc. Inc. Adjustments Consolidated
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Assets
Current
Cash $202,781 $ 2,568 $ - $ 205,349
Deposits and prepaids 11,081 - - 11,081
-------- -------- ----------- ----------
213,862 2,568 - 216,430
Fixed assets 111,562 - - 111,562
Deferred compensation expense - 217,150 - 217,150
-------- -------- ----------- ----------
$325,424 $219,718 $ - $ 545,142
-------- -------- ----------- ----------
Liabilities
Current
Account payable and
accrued liabilities $ 91,126 $ 214 - $ 91,340
Current portion of
capital lease
obligations 6,284 - - 6,284
Due to PowerTrader, Inc. 311,900 (311,900) - -
------- -------- --------- --------
409,310 (311,686) - 97,624
Share subscriptions 715,138 - (715,138) -
Capital lease obligations 4,968 - - 4,968
-------- ------- --------- -------
1,129,416 (311,686) 102,592
--------- ------- -------
Shareholders' equity (deficit)
Share capital 646,331 92 1,507,482 2,153,905
Capital Surplus - 792,344 (792,344) -
Deficit (1,450,323) (261,032) - (1,711,355)
----------- -------- ---------- -----------
(803,992) 531,404 715,138 442,550
----------- -------- ---------- -----------
$ 325,424 $219,718 $ - $ 545,142
----------- -------- ---------- -----------
</TABLE>
The accompanying notes form an integral part of these financial statements.
F-28
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Pro Form Consolidated Statement of Loss and Deficit
31 December 1996
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
PowerTrader Pro-Forma Pro-Forma
Software PowerTrader Pro-Forma Consolidated Consolidated
Inc. Inc. Adjustments 31 Dec. 1996 30 June 1996
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $ 27,478 $ - $ - $ 27,478 $ 50,971
Cost of Sales 15,855 - - 15,855 40,910
--------- --------- -------- --------- --------
11,623 11,623 10,061
Selling General and
Administrative
Costs 257,942 261,032 - 518,974 405,099
Development costs 153,671 - - 153,671 203,933
--------- -------- -------- ---------
Net Loss (399,990) (261,032) - 661,022 598,971
Deficit beginning (1,050,333) - - (1,050,333) (451,362)
Deficit ending (1,450,323) (261,032) - (1,711,355) (1,050,333)
Loss per share $ (0.10) $ - (0.05) (0.15) (0.14)
---------- -------- -------- --------- --------
Weighted Average
Shares Outstanding 4,174,597 - 310,667 4,485,264 4,174,597
---------- -------- -------- ----------
The accompanying notes are an integral part of these Financial Statements.
</TABLE>
F-29
<PAGE>
PowerTrader, Inc.
Notes and Assumptions to
Pro-Forma Consolidated Statements
1. Basis of Presentation
The Pro-Forma Consolidated Balance Sheet and Statement of Loss have
been prepared to give effect as of 31 December to the acquisition of
PowerTrader Software Inc. ("Software") by PowerTrader, Inc. ("Inc.").
The above noted transaction was completed in January 1997.
The Pro-Forma Consolidated Statements have been prepared from the
interim financial statements of Software for the three month period
ended 30 September 1996 and the interim financial statements of Inc.
for the period from 22 August 1996 (date of inception) to 30 September
1996. The Pro-Forma Consolidated Statement of Loss and Deficit for the
year ended 30 June 1996 has been prepared from the audited Financial
Statements of Software for that same period. Inc. was not incorporated
until 22 August 1996.
2. Pro-Forma Assumption
The Pro-Forma Consolidated Statements have been prepared based upon
the assumptions that the exchange of all the outstanding shares of
Software by its shareholders to Inc. was complete as of 1 July
1995.
3. Acquisition of PowerTrader Software Inc.
The Company has entered into agreements with the shareholders of
PowerTrader Software Inc. ("Software") whereby it acquired all of the
outstanding shares of Software in exchange for 4,174,597 common
shares. The acquisition has been accounted for in these pro-forma
financial statements as a reverse acquisition.
F-30
<PAGE>
4. Pro-Forma Adjustments
The following pro-forma adjustments have been recorded:
Share Subscriptions $715,138
Share Capital 715,138
To record the assumption that the Software share subscription
liability, which was settled in January 1997 through the issuance of
PowerTrader, Inc. shares, was settled on 1 July 1996.
Capital Surplus $792,344
Share Capital Deficit $792,344
To properly consolidate the Shareholders' equity of PowerTrader, Inc.
F-31
<PAGE>
No underwriter, dealer, salesperson or
other person has been authorized to give
any information or to make any POWERTRADER, INC.
representations other than those
contained in this prospectus and, if
given or made, such other information or
representations must not be relied upon
as having been authorized by the Company
or any Underwriter. Neither the delivery
of this Prospectus nor any sale made
hereunder shall, under any
circumstances, create any implication
that there has been no change in the
affairs of the Company since the date
hereof or that the information contained
herein is correct as of any date
subsequent to the date hereof. This
Prospectus does not constitute an offer
to sell or a solicitation of an offer to
buy any securities offered hereby by
anyone in any jurisdiction in which such
offer or solicitation is not authorized
or in which the person making such offer
or solicitation is not qualified to do
so or to anyone to whom it is unlawful
to make such offer or solicitation.
-------------
TABLE OF CONTENTS -----------------
Page PROSPECTUS
-----------------
Prospectus Summary......................
Risk Factors............................
Use of Proceeds.........................
Dividend Policy.........................
Dilution................................
Capitalization..........................
Selected Financial Data.................
Management's Discussion and Analysis
of Financial Conditions and Results
of Operations.........................
The Company.............................
Business................................
Management..............................
Principal and Selling StockholderS......
Description of Securities...............
Certain Federal Income Tax Consequences , 1997
Certain Provisions of the Certificate
of Incorporation and Bylaws...........
Shares Eligible for Future Sale.........
Plan of Distribution....................
Summary of Escrow Agreement.............
Legal Matters...........................
Experts.................................
Available Information...................
Index to Financial Statements...........
----------------------
Until , 1997, all dealers effecting
transactions in the registered
securities, whether or not participating
in this distribution, may be required to
deliver a Prospectus. This is in
addition to the obligation of dealers to
deliver a Prospectus when acting as
Underwriters and with respect to their
unsold allotments or subscriptions.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware
permits indemnification by a corporation of certain officers, directors,
employees and agents. Consistent therewith, Article VIII of the Company's Bylaws
requires that the Company indemnify all persons whom it may indemnify pursuant
thereto to the fullest extent permitted by Section 145. Article VIII also
provides that expenses incurred by an officer or director of the Company or any
of its direct or indirect wholly-owned subsidiaries, in defending a civil or
criminal action, suit or proceeding, will be paid by the Company in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such officer, director, employee or agent or
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Company as authorized. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate.
In addition, Article 6 of the Company's Certificate of Incorporation
provides that directors of the Company shall not be personally liable for
monetary damages to the Company or its stockholders for a breach of fiduciary
duty as a director, except for liability as a result of (i) a breach of the
director's duty of loyalty to the Company or its stockholders; (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) an act related to the unlawful stock repurchase or
payment of a dividend under Section 174 of Delaware General Corporation Law; and
(iv) transactions from which the director derived an improper personal benefit.
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses in connection with
the issuance and distribution of the securities offered hereby, all of which
will be paid by the Company:
SEC Registration fee .................................. $2,200
State securities law compliance........................ $12,000
Transfer agent fees and expenses....................... $15,000
Printing and engraving................................. $18,000
Legal fees and expenses................................ $75,000
Accounting fees and expenses........................... $50,000
Miscellaneous.......................................... $27,800
--------
Total.............................................. $200,000
II-1
<PAGE>
Item 26. Recent Sales of Unregistered Securities
In connection with the organization of the registrant, Michael C.
Withrow, Chairman, President and a director of the Company, purchased one share
of Common Stock for a purchase price of $0.10.
In October, 1996, the Company issued to David C. Furlonger, vice
president, chief financial officer and a director of the Company, an aggregate
of 350,000 shares of Common Stock for an aggregate purchase price of $35.00.
Such shares are subject to an agreement which contains certain restrictions on
transfer and provisions for forfeiture upon the occurrence of certain events.
In November and December, 1996, the Company sold an aggregate of
314,000 shares of its Common Stock to certain individuals for an aggregate
purchase price of $314,000.
In December, 1996, a consultant to the Company exercised a previously
granted option to purchase an aggregate of 250,000 shares of Common Stock for an
aggregate purchase price equivalent to $250.
In December, 1996, the Company issued options to purchase its Common
Stock to certain financial consultants to the Company, each of which expire in
February, 1999. The first of such options permits the optionee to acquire
100,000 shares of Common Stock at an exercise price of $1.00 per share and the
second of such options permits the optionee to purchase an additional 100,000
shares of Common Stock at an exercise price of $3.00 per share.
In January, 1997, the Company consummated an acquisition of PSI, and in
connection therewith, issued 4,174,597 shares of its Common Stock to the former
shareholders of PSI, issued 2,289,517 shares of its Common Stock to certain
persons who had previously subscribed for PSI Common Stock and granted options
to purchase 149,999 shares of its Common Stock to certain optionees of PSI.
II-2
<PAGE>
As part of the acquisition of PSI, the Company issued 10,000 shares to
one individual in reliance on Section 4(2) of the Securities Act of 1933, as
amended ("Act").
All of the other foregoing transactions were conducted in reliance on
the exemptive provisions of Regulation S of the Act.
Item 27. Exhibits
2.1 Stock Acquisition Agreement
3.1 Restated Certificate of Incorporation of the Registrant
3.2 Bylaws of the Registrant
4.1 Form of Subscription Agreement
4.2 Escrow Agreement with American Stock Transfer and
Trust Company
4.3 Warrant Agreement with American Stock Transfer and Trust Company
4.4 Form of Common Stock Certificate
4.5 Form of Warrant Certificate
5.1 Opinion of Gallop, Johnson & Neuman, L.C.
10.1 Consultant Agreement with 458468 B.C. Ltd.
10.2 Consultant Agreement with Peridot International Enterprises, Ltd.
10.3 Restricted Stock Agreement with Peridot International
Enterprises, Ltd.
10.4 Consultant Agreement with No. 410 Taurus Ventures, Ltd.
10.5 License Agreement with North American Quotations, Inc.
10.6 License Agreement with Hong Kong Bank Discount Trading Corp.
10.7 PowerTrader, Inc. 1996 Stock Option Plan
21.1 Subsidiaries of the Registrant
23.1 Consents of BDO Dunwoody, Chartered Accountants
23.2 Consent of Gallop, Johnson & Neuman, L.C. (included in Exhibit 5.1)
24.1 Power of Attorney (set forth on signature page)
27.1 Financial Data Schedule
II-3
<PAGE>
Item 28. Undertakings
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(b) The undersigned will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the undersigned under Rule 424(b)(1), or (4), or 497(h)
under the Securities Act as part of this registration statement as of the time
the Commission declared it effective.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at the time as the initial bona fide
offering of those securities.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has authorized this Amendment to
Registration Statement to be signed on its behalf by the undersigned, in the
City of Vancouver, Province of British Columbia, Canada on the 13th day of
March, 1997.
POWERTRADER, INC.
By: /s/ Michael C. Withrow
----------------------------
Michael C. Withrow
Chairman and President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Michael W. Withrow Director, Chairman March 13, 1997
- ---------------------- and President
Michael W. Withrow (principal executive
officer)
/s/ David C. Furlonger Director, Secretary March 13, 1997
- ---------------------- and Vice-President
David C. Furlonger (principal financial
and accounting officer)
II-5
<PAGE>
EXHIBIT INDEX
Exhibit Number Description Page
2.1 Stock Acquisition Agreement.....................................
3.1 Restated Certificate of Incorporation of the Registrant.........
3.2* Bylaws of the Registrant........................................
4.1* Form of Subscription Agreement..................................
4.2* Escrow Agreement with American Stock Transfer and
Trust Company...................................................
4.3* Warrant Agreement with American Stock Transfer and Trust
Company.........................................................
4.4* Form of Common Stock Certificate................................
4.5* Form of Warrant Certificate.....................................
5.1* Opinion of Gallop, Johnson & Neuman, L.C........................
10.1 Consultant Agreement with 458468 B.C. Ltd.......................
10.2 Consultant Agreement with Peridot International
Enterprises, Ltd................................................
10.3 Restricted Stock Agreement with Peridot International
Enterprises, Ltd................................................
10.4 Consultant Agreement with No. 410 Taurus Ventures, Ltd..........
10.5 License Agreement with North American Quotations, Inc...........
10.6* License Agreement with Hong Kong Bank Discount Trading Corp.....
10.7 PowerTrader, Inc. 1996 Stock Option Plan........................
21.1 Subsidiaries of the Registrant..................................
23.1* Consents of BDO Dunwoody, Chartered Accountants.................
23.2 Consent of Gallop, Johnson & Neuman, L.C.,
(included in Exhibit 5.1).......................................
24.1 Power of Attorney (set forth on signature page
of original filing).............................................
27.1* Financial Data Schedule.........................................
* Filed herewith
E-1
BY-LAWS Exhibit 3.2
OF
POWERTRADER, INC.
* * * * *
ARTICLE I
OFFICES
Section 1. The registered office of the Corporation shall be in the
City of Wilmington, County of New Castle, State of Delaware.
Section 2. The Corporation may also have offices at such other places,
both within and without the State of Delaware, as the Board of Directors may
from time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year
1997, shall be held on the second Tuesday of May if not a legal holiday, and if
a legal holiday, then on the next business day following, at 10:00 a.m., or at
such other date and time as shall be designated from time to time by the Board
of Directors and stated in the notice of the meeting, at which the stockholders
shall elect one or more directors and transact such other business as may
properly be brought before the meeting.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be: (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (b) otherwise brought before the meeting by or at the direction of
the Board of Directors, or (c) otherwise properly brought before the meeting by
a stockholder. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the secretary of the Corporation. To be timely, a stockholder's notice must be
<PAGE>
received at the principal executive offices of the Corporation not less than 120
days nor more than 150 days prior to the date of the notice to stockholders of
the previous year's annual meeting. A stockholder's notice to the secretary
shall set forth as to each matter the stockholder proposes to bring before the
annual meeting: (a) a brief description of the proposal or business desired to
be brought before the annual meeting and the reasons for presenting the proposal
or conducting such business at the annual meeting, (b) the name and address, as
they appear on the Corporation's books, of the stockholder proposing such
business, (c) the class and number of shares of the Corporation which are
beneficially owned by the stockholder, and (d) any material interest of the
stockholder in such proposal or business. Notwithstanding anything in these
ByLaws to the contrary, no business shall be conducted at any annual meeting
except in accordance with the procedures set forth in this Section 2. The
chairman of the annual meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 2, and if he should so
determine and declare to the meeting, any such business not properly brought
before the meeting shall not be transacted.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten (10) days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders entitled to vote, for
any purpose or purposes, may be called by the president or the Board of
Directors at the request in writing of stockholders holding at least ten percent
(10%) of the outstanding shares entitled to vote at such meeting. Such request
shall state the purpose of the proposed meeting.
Section 6. Written notice of a special meeting of the stockholders
entitled to vote, stating the place, date and hour of the meeting and the
purpose or purposes for which the meeting is called, shall be given not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at the meeting.
2
<PAGE>
Section 7. Business transacted at a special meeting of the stockholders
entitled to vote shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the issued and outstanding
stock which is entitled to vote, whether present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business. If, however, such a quorum shall not be present or
represented at a meeting, except as otherwise provided in Article VI, Section 5,
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting in accordance with the original notice thereof. If the adjournment
is for more than thirty (30) days, or 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 stockholder of record entitled to vote at the meeting in
accordance with Section 3 and/or Section 6 of this Article II.
Section 9. When a quorum is present at any meeting, the affirmative
vote of a majority of the votes cast shall decide any question brought before
the meeting, unless the question is one upon which, by the express provision of
statute, the Certificate of Incorporation of the Corporation or these By-Laws, a
different vote is required in which case such express provision shall govern and
control the decision of such question.
Section 10. When determining the presence of a quorum at any meeting,
all shares held by (a) any stockholder, or represented by a holder of a proxy
therefor, who is present but voluntarily decides not to vote, or (b) a broker or
nominee who lacks authority to vote such shares, shall be deemed present.
However, such shares shall not be deemed cast on any matter unless properly
voted and, therefore, shall have no effect on the outcome of the matter in
question.
Section 11. Unless otherwise provided in the Certificate of
Incorporation of the Corporation, each stockholder shall at every meeting of the
stockholders be entitled to cast one vote in person or by proxy for each share
of the capital stock having voting power held by such stockholder, but no proxy
shall be voted on after eleven (11) months from its date, unless the proxy
provides for a longer period.
Section 12. Any action required or permitted to be taken at any annual
or special meeting of stockholders of the Corporation, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken,
3
<PAGE>
is signed by the holders of outstanding stock 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 be voted were present and voted, and is
delivered to the Corporation to its registered office in this State, its
principal place of business, or to an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to a Corporation's registered office shall be by hand or
by certified or registered mail, return receipt requested.
ARTICLE III
DIRECTORS
Section 1. (a) The number of directors constituting the entire Board
shall be not less than three (3) nor more than nine (9) as fixed from time to
time by vote of a majority of the entire Board, provided, however, that the
number of directors shall not be reduced so as to shorten the term of any
director then in office, and provided further, that the number of directors
constituting the entire Board shall be three (3) until otherwise fixed by a
majority of the entire Board.
(b) The Board of Directors shall be divided into three
classes. Directors shall be elected and/or appointed to one of the
following classes:
CLASS EXPIRATION OF TERM
I Annual meeting date of the
stockholders in 1997 and every
3 years thereafter
II Annual meeting date of the
stockholders in 1998 and every
3 years thereafter
III Annual meeting date of the
stockholders in 1999 and every
3 years thereafter
Directors shall be elected and/or appointed to classes so that the total number
of directors shall be divided as equally as possible between the three classes
of directors. Any vacancies in the Board of Directors for any reason, and any
created directorships resulting from any increase in the directors, may be
filled by the Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen shall hold
office until the next election of the class for which such directors shall have
been chosen and until their successors
4
<PAGE>
shall be elected and qualified. No decrease in the number of directors shall
shorten the term of any incumbent director. Notwithstanding the foregoing, and
except as otherwise required by law, whenever the holders of any one or more
series of Preferred Stock shall have the right, voting separately as a class, to
elect one or more directors of the Corporation, the terms of the director or
directors elected by such holders shall expire at the next succeeding annual
meeting of stockholders. Subject to the foregoing, at each annual meeting of
stockholders the successors to the class of directors whose term shall then
expire shall be elected to hold office for a term expiring at the third
succeeding annual meeting.
(c) Notwithstanding any other provisions of the Certificate of
Incorporation of the Corporation or these By-Laws (and notwithstanding the fact
that some lesser percentage may be specified or permitted by law, the
Certificate of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the Corporation may be removed with or without
cause by the affirmative vote of the holders of a majority of the outstanding
shares of capital stock of the Corporation entitled to vote generally in the
election of directors cast at a meeting of the stockholders called for that
purpose. Notwithstanding the foregoing, and except as otherwise required by law,
whenever the holders of any one or more series of Preferred Stock shall have the
right, voting separately as a class, to elect one or more directors of the
Corporation, the provisions of this subsection (c) shall not apply with respect
to the director or directors elected by such holders of Preferred Stock.
Section 2. The business of the Corporation shall be managed by or under
the direction of its Board of Directors, which may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by statute or
by the Certificate of Incorporation of the Corporation or by these By-Laws
directed or required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 3. The Board of Directors of the Corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 4. The annual meeting of the Board of Directors shall be held
immediately following the annual meeting of stockholders at the place at which
the meeting of the stockholders is held, and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum of the Board of Directors is present.
5
<PAGE>
Section 5. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board of Directors.
Section 6. Special meetings of the Board of Directors may be called by
the president on three (3) days' notice to each director, either personally or
by mail or by facsimile; special meetings shall be called by the president or
secretary in like manner and on like notice on the written request of two or
more directors unless the Board of Directors consists of only one director.
Section 7. At all meetings of the Board of Directors, a majority of
directors shall constitute a quorum for the transaction of business and the vote
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present.
Section 8. Any action required or permitted to be taken at any meeting
of the Board of Directors or of any committee thereof may be taken without a
meeting, without prior notice and without a meeting, if all members of the Board
of Directors or committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
of Directors or committee.
Section 9. Members of the Board of Directors, or any committee
designated by the Board of Directors, may participate in a meeting of the Board
of Directors, or any committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 10. The Board of Directors may, by resolution passed by a
majority of the whole Board of Directors, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he, she or they constitute a quorum, may unanimously
6
<PAGE>
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member.
Any such committee, to the extent provided in resolutions of the Board
of Directors, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority to amend the Certificate of Incorporation of the Corporation (except
that a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of Directors,
as provided in Section 151(a) of the General Corporation Law of Delaware, fix
any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the Corporation, or the
conversion into, or the exchange of such shares for, shares of any other class
or classes or any other series of the same or any other class or classes of
stock of the Corporation), to adopt an agreement of merger or consolidation, to
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, to recommend to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or to amend the By-Laws of the Corporation; and, unless the resolution of the
Board of Directors or the Certificate of Incorporation of the Corporation
expressly so provides, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock or to adopt a
certificate of ownership and merger. Such committee or committees shall have
such name or names as may be determined from time to time by resolution adopted
by the Board of Directors.
Section 11. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors.
COMPENSATION OF DIRECTORS
Section 12. The Board of Directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors or committee thereof and
may be paid, either in cash or in securities of the Corporation, a fixed sum for
attendance at each meeting of the Board of Directors or committee thereof or a
stated salary as director or committee member. No such payment shall preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor.
7
<PAGE>
ARTICLE IV
NOTICES
Section 1. Whenever notice is required or permitted to be given to any
director or stockholder, it shall not be construed to require personal notice,
but such notice may be given in writing, by mail, addressed to such director or
stockholder, at his or her address as it appears on the records of the
Corporation, with first class postage thereon prepaid, and such notice shall be
deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given personally, by facsimile or
by next business day courier delivery and shall be deemed to be given when
personally given or so sent.
Section 2. Whenever any notice is required to be given, a waiver
thereof in writing, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent
thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the Corporation shall be chosen by the Board
of Directors at its first meeting after each annual meeting of stockholders and
shall be a chairman of the Board of Directors, president, one or more
vice-presidents (who may have further descriptive designations thereof, such as
executive vice-president, senior vice-president, vice-president, finance, etc.),
a secretary and a treasurer. The Board of Directors may also choose additional
vice-presidents, and one or more assistant secretaries and assistant treasurers.
Any number of offices may be held by the same person, unless the Certificate of
Incorporation or these By-Laws otherwise provide.
Section 2. The Board of Directors may appoint such other officers and
agents as it shall deem necessary, who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board of Directors.
Section 3. The salaries of all executive officers of the Corporation
shall be fixed by the Board of Directors.
Section 4. The officers of the Corporation shall hold office until
their successors are chosen and qualified. Any officer elected or appointed by
the Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
Corporation may be filled by the Board of Directors.
8
<PAGE>
THE CHAIRMAN OF THE BOARD OF DIRECTORS
Section 5. The chairman of the Board of Directors shall be the chief
executive officer of the Corporation and shall have general supervision over the
policies, affairs and finances of the Corporation. He shall keep the Board of
Directors fully informed and shall freely consult with the Board of Directors
concerning the business of the Corporation and shall perform such other duties
as are incident to his office and are properly required of him by the Board of
Directors. The chairman of the Board of Directors shall preside at all meetings
of the stockholders and the Board of Directors. Except where by law the
signature of the president is required and except as otherwise provided by the
Board of Directors, the chairman may sign all certificates, contracts, documents
and other instruments on behalf of the Corporation. Unless otherwise provided by
resolution of the Board of Directors, the chairman of the Board of Directors
also shall be entitled to vote all stock and other interests having voting
rights which are owned by the Corporation; in the absence of a contrary
resolution adopted by the Board of Directors, the chairman of the Board of
Directors shall vote such stock and other interests in a manner which he deems
appropriate.
THE PRESIDENT
Section 6. The president shall be the chief operating and
administrative officer of the Corporation and shall have general supervision
over the day-to-day operating affairs of the Corporation. The president shall
keep the Board of Directors fully informed, shall freely consult with the Board
of Directors concerning the business of the Corporation and shall perform such
other duties and have such other powers as the Board of Directors may from time
to time prescribe. In the absence of the chairman of the Board of Directors or
in the event of the chairman's inability or refusal to act, the president shall
perform all the duties of the chairman of the Board of Directors, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the chairman. The president may sign all certificates, deeds, mortgages, bonds,
contracts, documents and other instruments on behalf of the Corporation, except
where by law the signature of another officer or agent of the Corporation is
required, and except as otherwise provided by the Board of Directors.
THE VICE-PRESIDENTS
Section 7. In the absence of the president or in the event of the
president's inability or refusal to act, the vice-president (or in the event
there is more than one vice-president, the vice-presidents in the order
designated by the directors, or in the absence of any designation, then in the
order of their election) shall perform the duties of the president, and when so
9
<PAGE>
acting, shall have all the powers of and be subject to all the restrictions upon
the president. The vice-presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 8. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
such meetings in a book to be kept for that purpose and shall perform like
duties for the standing committees when required. The secretary shall give, or
cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other duties as may
be prescribed by the Board of Directors or chairman of the Board of Directors.
The secretary shall have custody of the corporate seal of the Corporation and
shall have authority to affix the same to any instrument requiring it and, when
so affixed, it may be attested by the secretary's signature. The Board of
Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by the secretary's signature.
Section 9. The assistant secretary, if any, or if there be more than
one, the assistant secretaries in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the secretary and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 10. The treasurer shall be the chief financial officer of the
Corporation and shall have the custody of the corporate funds and securities and
shall keep or cause to be kept full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors.
Section 11. The treasurer shall disburse the funds of the Corporation
as may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and upon request shall render to the chairman of the Board of
Directors and the Board of Directors, an account of all transactions as
treasurer and of the financial condition of the Corporation.
Section 12. If required by the Board of Directors, the treasurer shall
give the Corporation and maintain in effect a bond in such sum and with such
10
<PAGE>
surety or sureties as shall be satisfactory to the Board of Directors for the
faithful performance of the duties of the office of treasurer and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in the possession or under the control of the treasurer belonging
to the Corporation.
Section 13. The assistant treasurer, if any, or if there shall be more
than one, the assistant treasurers in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the treasurer or in the event of the
inability or refusal to act of the treasurer, perform the duties and exercise
the powers of the treasurer and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. The shares of the Corporation shall be represented by one or
more certificates. Certificates shall be signed, in the name of the Corporation,
by the chairman of the Board of Directors, the president or a vice-president and
the treasurer or an assistant treasurer or the secretary or an assistant
secretary of the Corporation.
Upon the face or back of each stock certificate issued to represent any
partly paid shares shall be set forth the total amount of the consideration to
be paid therefor and the amount paid thereon.
If the Corporation is authorized to issue more than one class of stock
or more than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized or referenced
on the face or back of the certificate which the Corporation shall issue to
represent such class or series of stock, provided that, if summarized or
referenced, there shall also be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock, a
statement that the Corporation will furnish without charge to each stockholder
thereof who so requests a copy of the powers, designations, preferences and
relative, participating, optional or other special rights of the class of stock
or series and the qualifications, limitations or restrictions of such
preferences and/or rights.
11
<PAGE>
Section 2. Any of or all the signatures on a certificate may be
facsimile. If any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate 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 he or she were such
officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his or
her legal representative, to advertise the same in such manner as it shall
require and/or to give the Corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the Corporation or the transfer agent of
the Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books,
subject, however to restrictions imposed either by applicable federal or state
securities laws or by agreements by or among the stockholders.
FIXING RECORD DATE
Section 5. In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders, or to express
consent to corporate action in writing without a meeting, or 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 change, conversion or exchange
of stock or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty (60) nor
less than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action. A determination of stockholders of record
12
<PAGE>
entitled to notice of or to vote at a meeting ofstockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, to vote as such owner, and to hold liable for calls and assessments,
and shall not be bound to recognize any equitable or other claim to or interest
in such shares on the part of any other person, whether or not the Corporation
shall have express or other notice thereof.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the Corporation may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock of the Corporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such other purpose as the
directors shall think conducive to the interest of the Corporation, and the
directors may modify or abolish any such reserve in the manner in which it was
created.
CHECKS
Section 3. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
13
<PAGE>
SEAL
Section 5. The corporate seal shall have inscribed thereon the name of
the Corporation and the words "Corporate Seal, Delaware". The seal may be used
by causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS
Section 1. (a) The Corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
or investigative (other than an action by or in the right of the Corporation) by
reason of the fact that such person is or was a director or officer of the
Corporation, or is or was serving at the request of the Corporation as a
director or officer of another Corporation, partnership, joint venture, trust,
or other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement, actually and reasonably incurred by such
person in connection with such action, suit, or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such conduct
was unlawful. The termination of any action, suit, or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which such person reasonably believed to be in
or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that such
conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director or officer of the Corporation, or is or was serving at the request of
the Corporation, as a director or officer of another Corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit if such person acted in good faith
and in a manner such person reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
14
<PAGE>
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
(c) To the extent that a director or officer of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subparagraphs (a) and (b), or in
defense of any claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred in
connection therewith.
(d) Any indemnification under subparagraphs (a) and (b)
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director
or officer is proper in the circumstances because such person has met the
applicable standard of conduct set forth in subparagraphs (a) and (b). Such
determination shall be made (i) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (iii) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an
officer or director in defending a civil, criminal, administrative or
investigative action, suit, or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit, or proceeding upon
receipt of an undertaking by or on behalf of the director or officer to repay
such amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the Corporation as authorized herein.
(f) The indemnification and advancement of expenses provided
by, or granted pursuant to, other subsections of this section shall not be
deemed exclusive of any other rights to which officers or directors seeking
indemnification or advancement of expenses may be entitled under any by-law,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his or her official capacity and as to action in another capacity
while holding such office.
(g) The Corporation also shall have the authority to indemnify
employees and agents of the Corporation, but only to the extent provided by a
majority vote of disinterested directors on a case-by-case basis, after full
disclosure to the directors of all relevant facts and circumstances.
(h) The Corporation shall have the power to purchase and
15
<PAGE>
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of his or her status as such, whether or not the Corporation
would have the power to indemnify such person against such liability under the
provisions of this section.
(i) For the purposes of this section, references to "the
Corporation" include all constituent corporations (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had the power and authority to indemnify its
directors, officers, employees or agents, as well as the resulting or surviving
corporation, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this section with
respect to the resulting or surviving corporation as such person would have with
respect to such constituent corporation if its separate existence had continued.
(j) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director or officer of the Corporation which
imposes duties on, or involves services by, such director or officer with
respect to an employee benefit plan, its participants, or beneficiaries; and a
person who acted in good faith and in a manner such person reasonably believed
to be in the interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this section.
(k) The indemnification and advancement of expenses provided
by, or granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent, including, but not limited to, a person who ceases
to be a director, officer, employee or agent due to the resignation of such
person prior to the initiation of any action, suit or proceeding referred to in
subparagraphs (a) and (b), and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 2. The Corporation shall, to the fullest extent permitted by
16
<PAGE>
Section 145 of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented from time to time, indemnify all officers and
directors whom it shall have the power to indemnify under said section from and
against any and all of the expenses, liabilities or other matters referred to in
or covered by said section, or any successor section thereto.
ARTICLE IX
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed or new
By-Laws may be adopted by the stockholders or by the Board of Directors (when
such power is conferred upon the Board of Directors by the Certificate of
Incorporation), at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
By-Laws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal By-Laws is conferred upon the Board of Directors by the
Certificate of Incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal By-Laws.
17
INVESTOR SUBSCRIPTION AGREEMENT for
POWERTRADER, INC.
The undersigned, intending to be legally bound, hereby irrevocably subscribes to
purchase from PowerTrader, Inc., a Delaware corporation (the "Company"), the
number of units set forth below, each unit consisting of one share of the
Company's common stock, $0.01 par value ("Share") and one warrant to purchase
one additional Share ("Warrant")(Warrant and Share are collectively referred to
herein as "Unit") for a purchase price of $3.25 per Unit, and/or to purchase
from certain stockholders of the Company, the number of Shares set forth below
(the "Stockholder Shares") for a purchase price of $3.00 per Share. This
Subscription Agreement along with payment payable to the order of "PowerTrader,
Inc. - Special Account" should be returned to: "PowerTrader, Inc., 885 Dunsmuir
Street, Suite 591, Vancouver, B.C. Canada V6C 1N5.
If this subscription is accepted by the Company, in whole or in part, the
Company shall deliver to American Stock Transfer and Trust Company (the "Escrow
Agent") the subscription payment to be held for the benefit of the undersigned
in accordance with the terms and conditions of a certain Escrow Agreement.
The undersigned hereby represents and warrants to, and agrees with, the Company
as follows:
a. The undersigned, if a natural person, is a bona fide resident of the
State of __________________.
b. The undersigned, if an entity, is duly authorized to execute this
Agreement which constitutes a binding obligation of the undersigned
enforceable against the undersigned.
c. CALIFORNIA RESIDENTS ONLY: The undersigned has (check at least one):
1) a liquid net worht (which is exclusive of home, home furnishings
and automobile of not less than $250,000 and at least $65,000 in gross
annual income _____; 2) not less than $500,000 in liquid net worth
_____; 3) not less than $1,000,000 in total net worth _____; or 4) not
less than $200,000 in gross annual income _____.
d. The undersigned has received, read carefully and is familiar with this
Agreement and the Prospectus, dated March _____, 1996 (the
"Prospectus"), as it may be supplemented and amended.
e. It has never been represented by any agent of the Company that the
undersigned's investment will be profitable or in any way predictable
based on past performance or experience.
f. The representations, warranties, consents and agreements made by the
undersigned herein shall survive the execution and delivery of this
Agreement and the purchase of Units and/or Stockholder Shares.
g. The undersigned shall indemnify and hold harmless the Company and its
agents, from and against any and all loss, damage or liability due to
or arising out of a breach of any representation or warranty made by
the undersigned and contained herein.
h. The undersigned hereby consents to delivery of prospectuses required
to be delivered in connection with offerings under the Securities Act
of 1933 and annual reports to security holders and proxy or
information statements required to be furnished pursuant to Section 14
of the Securities and Exchange Act of 1934 by e-mail or, if preceded
by e-mail notice, Internet delivery.
<PAGE>
Number of Units being purchased:_________
Number of Stockholder Shares being purchased: _________
o Name as it should appear on the certificate:
o As (check one):
|_| Individual |_| Tenants-in-Common |_| Existing Partnership |_| Joint
Tenants |_| Corporation |_| Trust |_| Minor with adult custodian under the
Uniform Gift to Minors Act
o For the person(s) who will be registered stockholder(s):
- ------------------------------------- ------------------ ----------------------
Name Telephone E-Mail Address
- ------------------------------------- ----------------------------------------
Street address Social Security or Taxpayer ID number
- ------------------------------------- ----------------------------------------
City State Zip Date of Birth
- -------------------------------------- ----------------------------------------
Signature Date
ACCEPTED BY POWERTRADER, INC.
By:----------------------------------- Date:-----------------------------------
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is entered into and effective as of March __,
1997, by and between PowerTrader, Inc. (the "Company") and American Stock
Transfer and Trust Company. (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Company is conducting an offering of a minimum of
1,000,000 and a maximum of 1,700,000 units, each consisting of one share of the
Company's common stock, $0.01 par value per share (the "Common Stock"), and one
warrant to purchase one additional share of Common Stock at an exercise price of
$3.50 per share (individually a "Unit" and collectively, the "Units") at an
offering price of $3.25 per Unit, along with an aggregate of up to 595,000
shares of Common Stock to be sold by certain stockholders of the Company (the
"Stockholder Shares") at an offering price of $3.00 (the "Offering"); and
WHEREAS, the Company has filed a Registration Statement on Form SB-2 to
register the Offering under the Securities Act of 1933, as amended (the "Act")
and has made the required "Blue Sky" filing to register the Offering in those
states in which the Offering is being made; and
WHEREAS, the Company proposes to establish an Escrow Account with the
Escrow Agent for the benefit of those persons subscribing for the Units in the
Offering (the "Subscribers") to be designated as the "PowerTrader, Inc. -
Special Account" (the "Escrow Account").
NOW, THEREFORE, in consideration of the mutual obligations hereunder,
the parties hereto agree as follows:
1.0 Appointment of Escrow Agent; Establishment of Account. The Company
hereby appoints the Escrow Agent to act as escrow agent in accordance with and
subject to the terms and conditions of this Agreement for the sole and exclusive
benefit of the Subscribers, and the Escrow Agent hereby accepts such appointment
and agrees to act in accordance with and subject to the terms and conditions
hereof. Escrow Agent further agrees to establish the Escrow Account.
2.0 Deposit of Proceeds. Upon its receipt of an acceptable subscription
for the Units in the form of a duly completed subscription agreement accompanied
by payment in full of the applicable purchase price in the form of a certified
or official bank check payable to the order of "PowerTrader, Inc. - Special
Account", the Company will promptly deliver to the Escrow Agent the subscription
amount received and the name and address of the Subscriber. Upon receipt of any
subscription amount represented by a check, the Escrow Agent shall enter the
check for collection and hold the proceeds thereof in escrow subject to the
<PAGE>
terms and conditions of this Agreement. All subscription amounts held by the
Escrow Agent shall be deemed the assets of the Subscribers, and not those of the
Company, until disbursement in accordance with Section 4. Subscription amounts
may also be sent by wire transfer directly to the Escrow Account, which payments
the Escrow Agent shall hold subject to the terms and conditions of this
Agreement.
3.0 Investment of Subscription Amounts. The Escrow Agent shall hold all
subscription amounts in the Escrow Account, which shall be a separate bank
account constituting a "deposit" (as that term is defined in Section 3(1) of the
Federal Deposit Insurance Act) established and maintained by the Escrow Agent in
accordance with the terms and conditions of this Agreement. The Escrow Agent
shall establish and maintain books and records indicating the name, address and
interest in the account of each Subscriber and all other records specified in
Section 25145 of the California Corporations Code. All interest earned on the
subscription amounts, if any, shall be held in the Escrow Account until the
subscription amounts are released in accordance with the provisions of Section
4.
4.0 Release of Subscription Amounts and Securities.
4.1 If, on or before March __, 1998 (the "Termination Date"),
the Company has received, pursuant to the Offering, acceptable subscriptions for
an aggregate of not less than 1,000,000 Units ($3,250,000 in cash), then the
Company will deliver to the Escrow Agent (i) a certificate to that effect in
substantially the form of Exhibit A hereto, (ii) a letter from the Company's
legal counsel confirming the same (the "Letter") and (iii) a written order from
the California Department of Corporations authorizing disbursement
(collectively, the "Disbursement Authorizations"). Upon, and only upon, receipt
of the aforementioned instructions, the Escrow Agent will release from escrow
and deliver to the Company all of the subscription amounts in the form of a
check payable to the order of the Company or by other transfer to or for the
account of the Company, as the Company may designate. Any income earned thereon
shall be retained by the Escrow Agent as set forth in Section 7.0 of this
Agreement.
4.2 If, within five (5) business days after the Termination
Date, the Escrow Agent has not received the Disbursement Authorizations, then
all subscription amounts then held in escrow hereunder shall be disbursed by the
Escrow Agent to each Subscriber in the form of a check for such subscription
amount. Any income earned thereon shall be retained by the Escrow Agent as set
forth in Section 7.0 of this Agreement.
4.3 If after the release of funds as set forth in Section 4.0,
the Company has received, pursuant to the Offering, additional acceptable
subscriptions for Units, the Company will deliver to the Escrow Agent the
2
<PAGE>
Certificate and the Letter. Upon receipt of the aforementioned Certificate and
Letter, the Escrow Agent will release from escrow and deliver to the Company at
such time as determined by the Board of Directors of the Company, all of the
additional subscription amounts in the form of a check payable to the order of
the Company or by other transfer to or for the account of the Company, as the
Company may designate.
5.0 Limitations of Escrow Agent's Capacity.
5.1 This Agreement expressly and exclusively sets forth the
duties of the Escrow Agent with respect to any and all matters pertinent hereto
and no implied duties or obligations or any fiduciary relationship shall be read
into this Agreement against the Escrow Agent.
5.2 The Escrow Agent shall act hereunder as a depository only,
and is not responsible or liable in any manner whatsoever for the sufficiency,
correctness, genuineness or validity of the subject matter of this Agreement or
any part thereof, whether in form or substance, or for the form of execution
thereof, or for any endorsement or lack of endorsement thereon or for any
description therein. It shall be sufficient if a writing purporting to be such
instrument, document, certificate, statement or notice is delivered to the
Escrow Agent and purports on its face to be correct in form and signed or
otherwise executed by the party or parties required to sign or execute the same
under this Agreement. The Escrow Agent shall not be required in any way to
determine the identity or authority of any person executing the same or the
genuineness of such signature.
5.3 This Agreement as it presently exists or may hereafter be
amended constitutes the entire agreement between the Escrow Agent and any other
parties hereto in connection with the subject matter hereof, and no other
agreement entered into between the parties or any of them, shall be considered
as adopted or binding, in whole or in part, upon the Escrow Agent
notwithstanding that any other agreement may be deposited with the Escrow Agent
or the Escrow Agent may have knowledge thereof.
5.4 The Escrow Agent shall have no liability or obligation to
notify any party hereto or any other party interested in this Agreement of any
payment required or maturity occurring under this Agreement or under the terms
of any instrument deposited herewith unless such notice is explicitly provided
for in this Agreement.
5.5 The Escrow Agent shall not be charged with notice or
knowledge of any fact or information not herein set forth.
3
<PAGE>
6.0 Authority of Escrow Agent.
6.1 The Escrow Agent is hereby authorized and directed by the
undersigned to deliver the subject matter of this Agreement only in accordance
with the provisions of Section 4 above.
6.2 The Escrow Agent shall be protected in acting upon any
written notice, request, waiver, consent, certificate, receipt, authorization,
power of attorney or other paper or document which the Escrow Agent in good
faith believes to be genuine and what it purports to be, including but not
limited to items directing investment or non-investment of funds, items
requesting or authorizing release, disbursement or retainage of the subject
matter of this Agreement and the items amending the terms of this Agreement.
6.3 The Escrow Agent may consult with legal counsel in the
event of any dispute or question as to the construction of any of the provisions
hereof or its duties hereunder, and shall incur no liability and shall be fully
protected in act and in accordance with the advise of such counsel.
6.4 In the event of any disagreement between any of the
parties to this Agreement, or between any of them and any other person,
resulting in adverse claims or demands being made in connection with the matters
covered by this Agreement, or in the event that the Escrow Agent, in good faith,
shall be in doubt as to what action it should take, the Escrow Agent may, at its
option, refuse to comply with any claims or demands on it, or refuse to take any
other action hereunder, so long as such disagreement continues or such doubt
exists and in any such event the Escrow Agent shall not be or become liable in
any way or to any person for its failure or refusal to act, and the Escrow Agent
shall be entitled to continue to refrain from acting until (i) the rights of all
interested parties shall have been fully and finally adjudicated by a court of
competent jurisdiction, or (ii) all differences shall have been adjudged and all
doubt resolved by agreement among all the interested persons, and the Escrow
Agent shall have been notified thereof in writing signed by all such persons.
Notwithstanding the preceding, the Escrow Agent may in its discretion obey the
order or judgment, decree or levy of any court, whether with or without
jurisdiction, and the Escrow Agent is hereby authorized in its sole discretion,
to comply with and obey (and shall have no liability to any person or party so
doing) any such orders, judgments, decrees or levies which the Escrow Agent is
advised by legal counsel of its own choosing is binding upon it. The rights of
the Escrow Agent under this subsection are cumulative with all other rights
which it may have by law or otherwise.
6.5 The Escrow Agent shall have no liability for any loss
arising from any cause beyond its control, including but not limited to the
4
<PAGE>
following (i) the act, failure or negligence of any agent or correspondent
selected by the Escrow Agent for the remittance of funds (ii) any delay, error
omission or default of any mail, telegraph, cable or wireless agency or operator
(iii) the acts or edicts of any government or governmental agency or other group
or entity exercising governmental powers.
6.6 Without in any way limiting any other provision of this
Agreement as expressly understood and agreed that the Escrow Agent shall be
under no duty or obligation to give any notice or to do or to omit the doing of
any action or anything with respect to the subject matter hereof except to
receive, hold and deliver the same in accordance with the terms hereof. The
Escrow Agent shall not be liable for any error in judgment, or act or omission,
or any mistake of law or fact or for doing anything it may do or refrain from
doing in connection herewith, except for its own willful misconduct or gross
negligence.
6.7 The Escrow Agent shall be indemnified and held harmless by
the Company from anything which the Escrow Agent may do or refrain from doing in
connection herewith or for any claims, demands or losses or for any damages made
or suffered by any party to this Agreement including any legal expenses incurred
by the Escrow Agent in defending any claim of liability in connection herewith
except such as may arise through or be caused by the Escrow Agent's willful
misconduct or gross negligence. The Company's obligation to indemnify the Escrow
Agent as set forth in this section 6.7 shall survive the termination of this
Escrow Agreement.
6.8 In the event that any controversy should arise among the
parties with respect to this Agreement, or should the Escrow Agent resign and
the parties fail to select another escrow agent to act in its stead, the Escrow
Agent shall have the right to institute a bill of interpleader in any court of
competent jurisdiction to determine the rights of the parties.
6.9 The Escrow Agent is hereby authorized, without further
permission of the Company, to make the Escrow Account and all records maintained
pursuant to this Agreement available for inspection by the Commissioner of the
California Department of Corporations.
7.0 Compensation. The Escrow Agent shall be entitled to any and all
income earned on the subscription amounts held in the Escrow Account as well as
reimbursement for its reasonable costs and expenses incurred in connection with
the performance by it of services under this Agreement (including reasonable
fees and expenses of Escrow Agent's counsel). The Company binds and obligates
itself to pay to the Escrow Agent on demand compensation to which it is
5
<PAGE>
entitled. The Escrow Agent's compensation hereunder during the term of this
Escrow Agreement shall be not more than the Escrow Agent's normal fee for
similar services.
8.0 Resignation. Provided that it shall have first received the consent
of the Commissioner of the California Department of Corporations, the Escrow
Agent may resign at any time by giving written notice to the parties hereto
whereupon the parties hereto will appoint a successor Escrow Agent within thirty
(30) days thereafter. Until a successor Escrow Agent has been named and accepted
its appointment or until another disposition of the subject matter of this
Agreement has been agreed upon by all the parties hereto, the Escrow Agent shall
be discharged of all of its duties hereunder save to keep the subject matter
whole.
9.0 General Provisions.
9.1 Unless this Agreement is terminated earlier by the
complete disbursement of the subject matter of this Agreement, the duties of
Escrow Agent shall terminate December 31, 1998 (unless any party has sent notice
to all other parties that a dispute exists regarding any part of the subject
matter hereof) and upon such termination, the Escrow Agent is hereby directed to
deliver any subscription amounts then held in escrow to the Company.
9.2 The Escrow Agent upon the first to occur of the fixed
termination date set out in subsection 9.1 above, or the release of all of the
subject matter pursuant to the terms of this Agreement, shall be discharged from
any further obligation hereunder.
9.3 Where directions or instructions from more than one of the
undersigned are required, such directions or instructions may be given by
separate instruments of similar tenor. Any of the undersigned may act hereunder
through an agent or attorney-in-fact, provided satisfactory written evidence of
authority is first furnished to any party relying on such authority.
9.4 Any payment, notice, request for consent, report, or any
other communication required or permitted in this Agreement shall be in writing
and shall be deemed to have been given when personally delivered to the party
hereunder specified against receipt therefor or when placed in the United States
Postal Service, registered or certified, with return receipt requested, postage
prepaid or by facsimile transmission (provided a copy is mailed by certified or
registered mail, return receipt requested) and addressed as follows:
6
<PAGE>
If to the Escrow Agent:
American Stock Transfer and Trust Co.
40 Wall Street
46th Floor
New York, New York 10005
Fax: (718)921-8209
If to the Company:
PowerTrader, Inc.
Suite 591, 885 Dunsmuir Street
Vancouver, British Columbia
V6C 1N5
Attn: Michael C. Withrow, President
Fax: (604) 685-1513
With copy to:
Gallop, Johnson & Neuman, L.C.
101 South Hanley
St. Louis, Missouri 63105
Attn: Douglas J. Bates, Esq.
Fax: (314) 862-1219
Any party may unilaterally designate a different address by
giving notice of each such change in the manner specified above to the other
party.
9.5 This Agreement is being made in and is intended to be
construed according to the internal substantive laws of the State of Delaware
applicable to contracts executed, delivered and performed wholly within the
State of Delaware. It shall inure to and be binding upon the parties hereto and
their respective successors, receivers, personal representatives, trustees and
assigns.
9.6 Words used in the singular number may include the plural
and the plural may include the singular. The section headings appearing in this
instrument have been inserted for convenience only and shall be given no
substantive meaning or significance whatsoever in construing the terms and
conditions of this Agreement.
9.7 The terms of this Agreement may be altered, amended,
modified or revoked only by an instrument in writing signed by all the parties
hereto and each of the Purchasers.
9.8 If one or more of the provisions hereof shall for any
reason be held to be invalid, illegal or unenforceable in any respect under
applicable law, such invalidity, illegality or unenforceability shall not affect
7
<PAGE>
any other provisions hereof and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
The parties below execute this Agreement on this ____ day of March,
1997.
POWERTRADER, INC.
By:______________________________
Michael C. Withrow, President,
Chairman and Chief Executive
Officer
AMERICAN STOCK TRANSFER AND TRUST CO.
By: _______________________________
Printed
Name:_______________________________
Title:______________________________
8
<PAGE>
EXHIBIT A
American Stock Transfer and Trust Company
_________________________________________
_________________________________________
Re: PowerTrader, Inc.
Ladies and Gentlemen:
We hereby refer to the Escrow Agreement between PowerTrader, Inc. (the
"Company") and American Stock Transfer and Trust Company, dated as of
______________, 199__ (the "Agreement"). In accordance with Section 4 of the
Agreement, we hereby certify to you that the Company has received acceptable
subscriptions for an aggregate of not less than 1,000,000 Units and you have
received cash related thereto of not less than $3,250,000. Accordingly, you are
instructed to deliver the entire amount held by you under the Agreement to
PowerTrader, Inc., Suite 591 885 Dunsmuir Street, Vancouver, B.C. VGC 1N5,
attention David C. Furlonger, for deposit to such accounts as the Company
instructs _______________.
Very truly yours,
POWERTRADER, INC.,
a Delaware corporation
By:__________________________________
Michael C. Withrow, President,
Chairman and Chief Executive
Officer
Date:________________________________
WARRANT AGREEMENT
AGREEMENT, dated this _______ day of March, 1997, between POWERTRADER,
INC., a Delaware corporation (the "Company"), and AMERICAN STOCK TRANSFER AND
TRUST COMPANY, as Warrant Agent (the "Warrant Agent").
W I T N E S S E T H:
WHEREAS, in connection with the offering to the public of units (the
"Units"), each Unit consisting of one share of the Company's common stock, $0.01
par value per share (the "Common Stock"), and one warrant to purchase one
additional share of Common Stock at an exercise price of $3.50 per share (the
"Warrants") at an offering price of $3.25 per Unit, the Company will issue up to
1,700,000 Warrants; and
WHEREAS, the Company desires to provide for the issuance of
certificates representing the Warrants; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer and exchange of certificates representing the
Warrants and the exercise of the Warrants;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights and obligations thereunder of the Company, the Warrant
Agent and the holders of the certificates representing the Warrants, the parties
hereto agree as follows:
SECTION 1 Definitions. As used herein, the following terms shall have
the following meanings, unless the context shall otherwise require:
a. "Business Day" shall mean each day on which the principal
securities exchange on which the Common Stock is listed is open for trading, or
if the Common Stock is not so listed, then each day on which The Nasdaq Stock
Market is open for trading.
b. "Common Stock" shall mean the common stock, $0.01 par value
per share heretofore and hereafter issued by the Company and any other capital
stock of the Company into which such common stock may be converted.
c. "Corporate Office" shall mean the office of the Warrant
Agent (or its successor) at which at any particular time its principal business
in New York, New York, shall be administered, which office is located on the
date hereof at 40 Wall Street, 46th Floor, New York, New York 10005.
<PAGE>
d. "Exercise Date" shall mean, subject to the provisions of
Section 5(b) hereof, as to any Warrant, the date on which the Warrant Agent
shall have received both (i) the Warrant Certificate representing such Warrant,
with the exercise form thereon duly completed and executed by the Registered
Holder thereof or his attorney duly authorized in writing, and (ii) payment in
cash or by check made payable to the Warrant Agent for the account of the
Company, of the amount in lawful money of the United States of America equal to
the applicable Purchase Price.
e. "Market Price" shall mean, for any Business Day, an amount
determined as follows: (i) if the Common Stock is listed for trading on a
national or regional stock exchange or is included on the Nasdaq National Market
or Small Cap Market, the closing bid price quoted on such exchange or the Nasdaq
National Market or Small Cap Market; or (ii) if the shares are not so listed,
admitted to trading or included, the average of the highest reported bid price
and the lowest reported ask price as quoted in the Nasdaq OTC Bulletin Board for
such Business Day.
f. "Purchase Price" shall mean, subject to modification and
adjustment as provided in Section 8, Three Dollars and Fifty Cents ($3.50) in
the case of the Warrants, and further subject to Company's right, in its sole
discretion, to decrease the Purchase Price for a period of not less than 30 days
on not less than 30 days' prior written notice to the Registered Holders.
g. "Redemption Date" shall mean the date fixed for
redemption of the Warrants pursuant to Section 9.
h. "Registered Holder" shall mean the person in whose
name any certificate representing the Warrants shall be registered
on the books maintained by the Warrant Agent pursuant to Section 6.
i. "Subsidiary" or "Subsidiaries" shall mean any corporation
or corporations, as the case may be, of which stock having ordinary power to
elect a majority of the Board of Directors of such corporation (regardless of
whether or not at the time stock of any other class or classes of such
corporation shall have or may have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned by the Company or
by one or more Subsidiaries, or by the Company and one or more Subsidiaries.
j. "Transfer Agent" shall mean American Stock Transfer and
Trust Company, or its authorized successor.
k. "Warrant Certificate" shall mean a certificate representing
a Warrant.
l. "Initial Warrant Exercise Date" shall mean the effective
date of the Registration Statement or such earlier date as the Company may
determine.
2
<PAGE>
m. "Warrant Agent" shall mean American Stock Transfer and
Trust Company, or its authorized successor.
n. "Warrant Expiration Date" shall mean 5:00 p.m. (New York
City time), on the earlier of: (i) the Business Day immediately preceding the
Redemption Date; or (ii) March __, 2002, the date which is 60 months after the
effective date of the Registration Statement, or, if such date shall in the
State of New York be a holiday or a day on which banks are authorized to close,
then 5:00 p.m. (New York City time) on the next following day which in the State
of New York is not a holiday or a day on which banks are authorized to close,
subject to the Company's right, prior to the Warrant Expiration Date determined
pursuant to this clause (ii), in its sole discretion, to extend such Warrant
Expiration Date on five business days' prior written notice to the Registered
Holders.
SECTION 2 Warrants and Issuance of Warrant Certificates.
a. One Warrant shall initially entitle the Registered Holder
of the Warrant Certificate representing such Warrant to purchase at the Purchase
Price therefor from the Initial Warrant Exercise Date until the Warrant
Expiration Date one share of Common Stock upon the exercise thereof, subject to:
(i) modification and adjustment as provided in Section 8; and (ii) the Company's
right to redeem the Warrants pursuant to Section 9.
b. Upon execution of this Agreement, Warrant Certificates
representing 1,700,000 Warrants to purchase up to an aggregate of 1,700,000
shares of Common Stock (subject to modification and adjustment as provided in
Section 8) shall be executed by the Company and delivered to the Warrant Agent.
c. From time to time, up to the Warrant Expiration Date, the
Warrant Agent shall countersign and deliver Warrant Certificates in required
denominations of one or whole number multiples thereof to the person entitled
thereto in connection with any issuance, transfer or exchange permitted under
this Agreement. Except as provided in Section 7 hereof, no Warrant Certificates
shall be issued except (i) Warrant Certificates initially issued hereunder, (ii)
Warrant Certificates issued upon any transfer or exchange of Warrants, (iii)
Warrant Certificates issued in replacement of lost, stolen, destroyed or
mutilated Warrant Certificates pursuant to Section 7, and (iv) at the option of
the Company, Warrant Certificates in such form as may be approved by its Board
of Directors, to reflect any adjustment or change in the Purchase Price, the
number of shares of Common Stock purchasable upon exercise of the Warrants
therefor made pursuant to Section 8 hereof.
3
<PAGE>
SECTION 3. Form and Execution of Warrant Certificates.
a. The Warrant Certificates shall be substantially in the form
annexed hereto as Exhibit A (the provisions of which are hereby incorporated
herein) and may have such letters, numbers or other marks of identification or
designation and such legends, summaries or endorsements printed, lithographed or
engraved thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
law or with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange or association on which the Warrants may be
listed or quoted, or to conform to usage. The Warrant Certificates shall be
dated the date of issuance thereof (whether upon initial issuance, transfer,
exchange or in lieu of mutilated, lost, stolen or destroyed Warrant
Certificates).
b. Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, President or any Vice President and by its
Treasurer or an Assistant Treasurer or its Secretary or an Assistant Secretary,
by manual signatures or by facsimile signatures printed thereon, and shall have
imprinted thereon a facsimile of the Company's seal. Warrant Certificates shall
be manually countersigned by the Warrant Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Warrant Certificates shall cease to be such officer of
the Company before the date of issuance of the Warrant Certificates or before
countersignature by the Warrant Agent and issue and delivery thereof, such
Warrant Certificates, nevertheless, may be countersigned by the Warrant Agent,
issued and delivered with the same force and effect as though the person who
signed such Warrant Certificates had not ceased to be such officer of the
Company.
SECTION 4. Exercise.
a. Warrants in denominations of one or whole number multiples
thereof may be exercised commencing at any time on or after the Initial Warrant
Exercise Date, but not after the Warrant Expiration Date, upon the terms and
subject to the conditions set forth herein (including the provisions set forth
in Sections 5 and 9 hereof) and in the applicable Warrant Certificate. A Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the Exercise Date, provided that the Warrant Certificate
representing such Warrant, with the exercise form thereon duly completed and
executed by the Registered Holder thereof or his attorney duly authorized in
writing, together with payment in cash or by check made payable to the Warrant
Agent for the account of the Company, of an amount in lawful money of the United
States of America equal to the applicable Purchase Price has been received in
good funds by the Warrant Agent. The person entitled to receive the securities
4
<PAGE>
deliverable upon such exercise shall be treated for all purposes as the holder
of such securities as of the close of business on the Exercise Date. As soon as
practicable on or after the Exercise Date and in any event within five business
days after such date, if two or more Warrants have been exercised, the Warrant
Agent on behalf of the Company shall cause to be issued to the person or persons
entitled to receive the same a Common Stock certificate or certificates for the
shares of Common Stock deliverable upon such exercise, and the Warrant Agent
shall deliver the same to the person or persons entitled thereto. Upon the
exercise of any Warrant, the Warrant Agent shall promptly notify the Company in
writing of such fact and of the number of securities delivered upon such
exercise and shall cause all payments of an amount in cash or by check made
payable to the order of the Company, equal to the Purchase Price, to be
deposited promptly in the Company's bank account.
b. The Company shall not be obligated to issue any fractional
share interests or fractional warrant interests upon the exercise of any Warrant
or Warrants, nor shall it be obligated to issue scrip or pay cash in lieu of
fractional interests. Any fraction equal to or greater than one-half shall be
rounded up to the next full share or Warrant, as the case may be, any fraction
less than one-half shall be eliminated.
SECTION 5. Reservation of Shares; Listings; Payment of Taxes; etc.
a. The Company covenants that it will at all times reserve and
keep available out of its authorized Common Stock, solely for the purpose of
issue upon exercise of Warrants, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be issuable upon exercise
of the Warrants shall, at the time of delivery thereof, be duly and validly
issued and fully paid and nonassessable and free from all preemptive or similar
rights, taxes, liens and charges with respect to the issue thereof, and that
upon issuance such shares shall be listed on each securities exchange or
association, if any, on which the other shares of outstanding Common Stock of
the Company are then listed or quoted.
b. The Company covenants that if any securities to be reserved
for the purpose of exercise of Warrants hereunder require registration with, or
approval of, any governmental authority under any federal securities law before
such securities may be validly issued or delivered upon such exercise, then the
Company will file a registration statement under the federal securities laws or
a post-effective amendment, use its best efforts to cause the same to become
effective, keep such registration statement current while any of the Warrants
are outstanding and deliver a prospectus which complies with Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Act"), to the Registered Holder
5
<PAGE>
exercising the Warrant (except, if in the opinion of counsel to the Company,
such registration is not required under the federal securities law or if the
Company receives a letter from the staff of the Securities and Exchange
Commission (the "Commission") stating that it would not take any enforcement
action if such registration is not effected). The Company will use best efforts
to obtain appropriate approvals or registrations under state "blue sky"
securities laws of those states where the offer and sale of the Units is to be
registered. With respect to any such securities, however, Warrants may not be
exercised by, or shares of Common Stock issued to, any Registered Holder in any
state in which such exercise would be unlawful.
c. The Company shall pay all documentary, stamp or similar
taxes and other governmental charges that may be imposed with respect to the
issuance of Warrants, or the issuance or delivery of any shares of Common Stock
upon exercise of the Warrants; provided, however, that if shares of Common Stock
are to be delivered in a name other than the name of the Registered Holder of
the Warrant Certificate representing any Warrant being exercised, then no such
delivery shall be made unless the person requesting the same has paid to the
Warrant Agent the amount of transfer taxes or charges incident thereto, if any.
d. The Warrant Agent is hereby irrevocably authorized as the
Transfer Agent to requisition from time to time certificates representing shares
of Common Stock or other securities required upon exercise of the Warrants, and
the Company will comply with all such requisitions.
SECTION 6. Exchange and Registration of Transfer.
a. Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants or may be
transferred in whole or in part. Warrant Certificates to be so exchanged shall
be surrendered to the Warrant Agent at its Corporate Office, and the Company
shall execute and the Warrant Agent shall countersign, issue and deliver in
exchange therefor the Warrant Certificate or Certificates which the Registered
Holder making the exchange shall be entitled to receive.
b. The Warrant Agent shall keep, at such office, books in
which, subject to such reasonable regulations as it may prescribe, it shall
register Warrant Certificates and the transfer thereof. Upon due presentment for
registration of transfer of any Warrant Certificate at such office, the Company
shall execute and the Warrant Agent shall issue and deliver to the transferee or
transferees a new Warrant Certificate or Certificates representing an equal
aggregate number of Warrants.
6
<PAGE>
c. With respect to any Warrant Certificates presented for
registration or transfer, or for exchange or exercise, the subscription or
exercise form, as the case may be, on the reverse thereof shall be duly
completed and endorsed or be accompanied by a written instrument or instruments
of transfer and subscription, in form satisfactory to the Company and the
Warrant Agent, duly completed and executed by the Registered Holder thereof or
his attorney duly authorized in writing.
d. No service charge shall be made for any exchange or
registration of transfer of Warrant Certificates. However, the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith.
f. All Warrant Certificates surrendered for exercise or
for exchange shall be promptly cancelled by the Warrant Agent.
g. Prior to due presentment for registration or transfer
thereof, the Company and the Warrant Agent may deem and treat the Registered
Holder of any Warrant Certificate as the absolute owner thereof of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than the Company or the Warrant Agent) for all
purposes and shall not be affected by any notice to the contrary.
SECTION 7. Loss or Mutilation. Upon receipt by the Company and the
Warrant Agent of evidence satisfactory to them of the ownership of and the loss,
theft, destruction or mutilation of any Warrant Certificate and (in the case of
loss, theft or destruction) of indemnity satisfactory to them, and (in case of
mutilation) upon surrender and cancellation thereof, the Company shall execute
and the Warrant Agent shall countersign and deliver in lieu thereof a new
Warrant Certificate representing an equal aggregate number of Warrants.
Applicants for a substitute Warrant Certificate shall also comply with such
other reasonable regulations and pay such other reasonable charges as the
Warrant Agent may prescribe.
SECTION 8. Adjustment of Purchase Price and Number of Shares
of Common Stock Deliverable.
a. Adjustment of Exercise Price. Subject to the
provisions of this Section 8, the exercise price in effect from
time to time shall be subject to adjustment, as follows:
(i) In case the Company shall at any time after the date
hereof (i) declare a dividend on the outstanding Common Stock payable
in shares of its capital stock, (ii) subdivide the outstanding Common
Stock, (iii) combine the outstanding Common Stock into a smaller number
of shares, or (iv) issue any shares of its capital stock by
reclassification of the Common Stock (including any such
7
<PAGE>
reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), then, in each case, the
exercise price, and the number of shares of Common Stock issuable upon
exercise of the Warrants in effect at the time of the record date for
such dividend or of the effective date of such subdivision,
combination, or reclassification, shall be proportionately adjusted so
that the holders of the Warrants after such time shall be entitled to
receive the aggregate number and kind of shares which, if such Warrants
had been exercised immediately prior to such time, such holders would
have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or reclassification. Such
adjustment shall be made successively whenever any event listed above
shall occur.
(ii) In case the Company shall issue or fix a record date for
the issuance to all holders of Common Stock of rights, options, or
warrants to subscribe for or purchase Common Stock (or securities
convertible into or exchangeable for Common Stock) at a price per share
(or having a conversion or exchange price per share, if a security
convertible into or exchangeable for Common Stock) less than the
exercise price per share of Common Stock on such record date, then, in
each case, the exercise price shall be adjusted by multiplying the
exercise price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of shares of
Common Stock outstanding on such record date plus the number of shares
of Common Stock which the aggregate offering price of the total number
of shares of Common Stock so to be offered (or the aggregate initial
conversion or exchange price of the convertible or exchangeable
securities so to be offered) would purchase at such exercise price and
the denominator of which shall be the number of shares of Common Stock
outstanding on such record date plus the number of additional shares of
Common Stock to be offered for subscription or purchase (or into which
the convertible or exchangeable securities so to be offered are
initially convertible or exchangeable). Such adjustment shall become
effective at the close of business on such record date; provided,
however, that, to the extent the shares of Common Stock (or securities
convertible into or exchangeable for shares of Common Stock) are not
delivered, the exercise price shall be readjusted after the expiration
of such rights, options, or warrants (but only with respect to Warrants
exercised after such expiration), to the exercise price which would
then be in effect had the adjustments made upon the issuance of such
rights, options, or warrants been made upon the basis of delivery of
only the number of shares of Common Stock (or securities convertible
into or exchangeable for shares of Common Stock) actually issued. In
case any subscription price may be paid in a consideration part or all
8
<PAGE>
of which shall be in a form other than cash, the value of such
consideration shall be as determined in good faith by the board of
directors of the Company, whose determination shall be conclusive
absent manifest error. Shares of Common Stock owned by or held for the
account of the Company or any majority-owned subsidiary shall not be
deemed outstanding for the purpose of any such computation.
(iii) In case the Company shall distribute to all holders of
Common Stock (including any such distribution made to the stockholders
of the Company in connection with a consolidation or merger in which
the Company is the continuing corporation) evidences of its
indebtedness, cash (other than any cash dividend which, together with
any cash dividends paid within the 12 months prior to the record date
for such distribution, does not exceed 5% of the exercise price at the
record date for such distribution) or assets (other than distributions
and dividends payable in shares of Common Stock), or rights, options,
or warrants to subscribe for or purchase Common Stock, or securities
convertible into or exchangeable for shares of Common Stock (excluding
those with respect to the issuance of which an adjustment of the
exercise price is provided pursuant to Section 8(a)(i) hereof), then,
in each case, the exercise price shall be adjusted by multiplying the
exercise price in effect immediately prior to the record date for the
determination of the stockholders entitled to receive such distribution
by a fraction, the numerator of which shall be the exercise price per
share of Common Stock on such record date, less the fair market value
(as determined in good faith by the board of directors of the Company,
whose determination shall be conclusive absent manifest error) of the
portion of the evidences of indebtedness or assets so to be
distributed, or of such rights, options, or warrants or convertible or
exchangeable securities, or the amount of such cash, applicable to one
share, and the denominator of which shall be such exercise price per
share of Common Stock. Such adjustment shall become effective at the
close of business on such record date.
(b) No Adjustments to exercise price. No adjustment in the
exercise price shall be required if such adjustment is less than $.10; provided,
however, that any adjustments which by reason of this Section 8 are not required
to be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 8 shall be made to the nearest
cent or to the nearest one thousandth of a share, as the case may be.
(c) Deferral of Adjustments to exercise price. In any case in
which this Section 8 shall require that an adjustment in the exercise price be
made effective as of a record date for a specified event, the Company may elect
to defer, until the occurrence of such event, issuing to the holders of the
9
<PAGE>
Warrants, if any holder has exercised a Warrant after such record date, the
shares of Common Stock, if any, issuable upon such exercise over and above the
shares of Common Stock, if any, issuable upon such exercise on the basis of the
exercise price in effect prior to such adjustment; provided, however, that the
Company shall deliver to such exercising holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares upon
the occurrence of the event requiring such adjustment.
(d) Adjustment to Number of Shares. Upon each adjustment of
the exercise price as a result of the calculations made in Sections 8.a(ii) or
8.a(iii) hereof, the Warrants shall thereafter evidence the right to purchase,
at the adjusted exercise price, that number of shares (calculated to the nearest
thousandth) obtained by dividing (A) the product obtained by multiplying the
number of shares purchasable upon exercise of the Warrants prior to adjustment
of the number of shares by the exercise price in effect prior to adjustment of
the exercise price by (B) the exercise price in effect after such adjustment of
the exercise price.
(e) Reorganization. In case of any capital reorganization,
other than in the cases referred to in Section 8(a) hereof, or the consolidation
or merger of the company with or into another corporation (other than a merger
or consolidation in which the Company is the continuing corporation and which
does not result in any reclassification of the outstanding shares of Common
Stock or the conversion of such outstanding shares of Common Stock into shares
of other stock or other securities or property), or the sale of the property of
the Company as an entirety or substantially as an entirety (collectively such
actions being hereinafter referred to as "Reorganizations"), there shall
thereafter be deliverable upon exercise of any Warrant (in lieu of the number of
shares of Common Stock theretofore deliverable) the number of shares of stock or
other securities or property to which a holder of the number of shares of Common
Stock which would otherwise have been deliverable upon the exercise of such
Warrant would have been entitled upon such Reorganization if such warrant had
been exercised in full immediately prior to such Reorganization. In case of any
Reorganization, appropriate adjustment, as determined in good faith by the Board
of Directors of the Company, shall be made in the application of the provisions
herein set forth with respect to the rights and interests of Warrant holders so
that the provisions set forth herein shall thereafter be applicable, as nearly
as possible, in relation to any shares or other property thereafter deliverable
upon exercise of Warrants. Any such adjustment shall be made by and set forth in
a supplemental agreement between the Company, or any successor thereto, and the
Warrant Agent and shall for all purposes hereof conclusively be deemed to be an
appropriate adjustment. The Company shall not effect any such Reorganization,
unless upon or prior to the consummation thereof the successor corporation, or
if the Company shall be the surviving corporation in any such Reorganization and
is not the issuer of the shares of stock or other securities or property to be
10
<PAGE>
delivered to holders of shares of the Common Stock outstanding at the effective
time thereof, then such issuer, shall assume by written instrument the
obligation to deliver to the registered holder of any Warrant Certificate such
shares of stock, securities, cash or other property as such holder shall be
entitled to purchase in accordance with the foregoing provisions. In the event
of sale or conveyance or other transfer of all or substantially all of the
assets of the Company as a part of a plan for liquidation of the Company, all
rights to exercise any Warrant shall terminate 30 days after the Company gives
written notice to each registered holder of a Warrant Certificate that such sale
or conveyance of other transfer has been consummated.
(f) Reclassifications. In case of any reclassification or
change of the shares of Common Stock issuable upon exercise of the Warrants
(other than a change in par value or from no par value to a specified par value,
or as a result of a subdivision or combination, but including any change in the
shares into two or more classes or series of shares), the holders of the
Warrants shall have the right thereafter to receive upon exercise of the
Warrants solely the kind and amount of shares of stock and other securities,
property, cash, or any combination thereof receivable upon such reclassification
or change by a holder of the number of shares of Common Stock for which the
Warrants might have been exercised immediately prior to such reclassification or
change. Thereafter, appropriate provision shall be as nearly equivalent as
practicable to the adjustments in Section 8. The above provisions of this
paragraph (f) shall similarly apply to successive reclassifications and changes
of shares of Common Stock.
(g) Verification of Computations. Whenever the exercise price
is adjusted as provided in this Section 8, the Corporation will promptly obtain
a certificate of a firm of independent public accountants of recognized standing
selected by the Board of Directors (who may be the regular auditors of the
Corporation) setting forth the exercise price as so adjusted and a brief
statement of the facts accounting for such adjustment, and will make available a
brief summary thereof to the Warrant Agent and to the holders of the Warrant
Certificates, at their addresses listed on the register maintained for the
purpose by the Warrant Agent.
(h) Notice of Certain Actions. In case at any time the
Company shall propose:
(i) to pay any dividend or make any distribution on shares of
Common Stock in shares of Common Stock or make any other distribution
(other than regularly scheduled cash dividends which are not in a
greater amount per share than the most recent such cash dividend) to
all holders of Common Stock; or
(ii) to issue any rights, warrants, or other securities
11
<PAGE>
to all holders of Common Stock entitling them to purchase any
additional shares of Common Stock or any other rights, warrants, or
other securities; or
(iii) to effect any reclassification or change of outstanding
shares of Common Stock, or any consolidation, merger, sale, lease, or
conveyance of property, described in Section 8(f); or
(iv) to effect any liquidation, dissolution, or winding-
up of the Company; or
(v) to take any other action which would cause an
adjustment to the exercise price;
then, in each such case, the Company shall cause notice of such proposed action
to be mailed to the Warrant Agent. Such notice shall specify the date on which
the books of the Company shall close, or a record be taken, for determining
holders of Common Stock entitled to receive such stock dividend or other
distribution of such rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, lease, other disposition,
liquidation, dissolution, winding-up or exchange or other action shall take
place or commence, as the case may be, and the date as of which it is expected
that holders of record of Common Stock shall be entitled to receive securities
or other property deliverable upon such action, if any such date has been fixed.
The Company shall cause copies of such notice to be mailed to each registered
holder of a Warrant Certificate. Such notice shall be mailed, in the case of any
action covered by Section 8(h)(i) or 8(h)(ii) above, at least ten (10) days
prior to the record date for determining holders of the Common Stock for
purposes of receiving such payment or offer; in the case of any action covered
by Section 8(h)(iii) or 8(h)(iv) above, at least ten (10) days prior to the
earlier of the date upon which such action is to take place or any record date
to determine holders of Common Stock entitled to receive such securities or
other property; and in the case of any action covered by Section 8(h) above, no
more than thirty (30) days after such action.
(i) Warrant Certificate Amendments. Irrespective of any
adjustments pursuant to this Section 8, Warrant Certificates theretofore or
thereafter issued need not be amended or replaced, but certificates thereafter
issued shall bear an appropriate legend or other notice of any adjustments.
(j) Fractional Shares. The Company shall not be required upon
the exercise of any Warrant to issue fractional shares of Common Stock which may
result from adjustments in accordance with this Section 8 to the exercise price
or number of shares of Common Stock purchasable under each Warrant. If more than
12
<PAGE>
one Warrant is exercised at one time by the same registered holder, the number
of full shares of Common Stock which shall be deliverable shall be computed
based on the number of shares deliverable in exchange for the aggregate number
of Warrants exercised.
SECTION 9. Redemption of Warrants.
a. If the Market Price of the Common Stock shall equal or
exceed $4.50 for any 20 Business Days during any period of 30 consecutive
Business Days ending on the fifth trading day prior to the date of notice of
redemption, the Company may, at its option, and prior to the Warrant Expiration
Date, redeem all but not less than all, of the Warrants, in each case at the
redemption price of $0.01 (the "Redemption Price").
b. In case the Company shall desire to exercise such right to
redeem the Warrants in accordance with the right reserved so to do, it shall
give notice of such redemption to the Warrant Agent within 30 days after the end
of the 30 Business Day period referred to in Section 9(a). Such notice shall be
signed by the Company's Chairman of the Board, President or a Vice President and
by its Treasurer or an Assistant Treasurer or its Secretary or an Assistant
Secretary, and shall set forth in reasonable detail the Market Prices and
respective Business Days which satisfy the condition precedent in Section 9(a).
The Company also shall cause notice of redemption to be given to the
holders of Warrants by mailing by first-class mail, with postage prepaid, not
less than 30 days prior to the date fixed for redemption, to their last
addresses as they shall appear upon the Warrant register, but failure to give
such notice by mail to the holder of any Warrant, or any defect therein, shall
not affect the validity of the proceedings for the redemption of any other
Warrants. Any notice which is mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the holder
received the notice.
Each such notice of redemption shall specify the Redemption Date and
the Redemption Price, and shall state that payment of the Redemption Price of
the Warrants be made at the office or agency of the Company for such purpose in
Vancouver, Canada, or at such other locations as the Company shall determine
upon presentation and surrender of such Warrant. Each such notice of redemption
shall also specify the last date when the Warrants may be exercised, and the
Purchase Price then in effect.
c. If the giving of notice of redemption shall have been
completed as provided in Section 9(b), from and after the Redemption Date upon
presentation and surrender of the Warrants at said place of payment specified in
said notice, the same Warrants shall be redeemed by the Company at the
Redemption Price.
13
<PAGE>
d. All Warrants surrendered to the Warrant Agent pursuant to
the provisions of this Section 9 shall be forthwith cancelled by it.
e. Anything contained in this Warrant Agreement to the
contrary notwithstanding, if the giving of the notice of redemption shall have
been completed as provided in Section 9(b) hereof, or if provision satisfactory
to the Warrant Agent for the giving of such notice shall have been made, and if
the Company shall have deposited with the Warrant Agent funds (to be immediately
due and payable) sufficient to redeem the Warrants on the Redemption Date, at
the Redemption Price, then on the Redemption Date all obligations of the Company
in respect of such Warrants, shall cease and be discharged, and the holders of
such Warrants shall thereafter be restricted exclusively to such funds, for any
and all claims of whatsoever nature on their part under this Warrant Agreement,
or in respect of such Warrants.
SECTION 10. Concerning the Warrant Agent.
a. The Warrant Agent acts hereunder as agent and in a
ministerial capacity for the Company and the underwriters, and its duties shall
be determined solely by the provisions hereof. The Warrant Agent shall not, by
issuing and delivering Warrant Certificates or by any other act hereunder, be
deemed to make any representations as to the validity or value or authorization
of the Warrant Certificates or the Warrants represented thereby or of any
securities or other property delivered upon exercise of any Warrant or whether
any stock issued upon exercise of any Warrant is fully paid and nonassessable.
b. The Warrant Agent shall not at any time be under any duty
or responsibility to any holder of Warrant Certificates to make or cause to be
made any adjustment of the Purchase Price provided in this Agreement, or to
determine whether any fact exists which may require any such adjustment, or with
to the nature or extent of any such adjustment, when made, or with respect to
the method employed in making the same. It shall not (i) be liable for any
recital or statement of fact contained herein or for any action taken, suffered
or omitted by it in reliance on any Warrant Certificate or other document or
instrument believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties, (ii) be responsible for any failure on
the part of the Company to comply with any of its covenants and obligations
contained in this Agreement or in any Warrant Certificate, or (iii) be liable
for any act or omission in connection with this Agreement except for its own
gross negligence or willful misconduct.
c. The Warrant Agent may at any time consult with counsel
satisfactory to it (who may be counsel for the Company) and shall incur no
liability or responsibility for any action taken, suffered or omitted by it in
good faith in accordance with the opinion or advice of such counsel.
14
<PAGE>
d. Any notice, statement, instruction, request, direction,
order or demand of the Company shall be sufficiently evidenced by an instrument
signed by the Chairman of Board of Directors, President or any Vice President
(unless other evidence in respect thereof is herein specifically prescribed).
The Warrant Agent shall not be liable for any action taken, suffered or omitted
by it in accordance with such notice, statement, instruction, request,
direction, order or demand.
e. The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse it for its reasonable
expenses hereunder; the Company further agrees to indemnify the Warrant Agent
and save it harmless against any and all losses, expenses and liabilities,
including judgments, costs and counsel fees, for anything done or omitted by the
Warrant Agent in the execution of its duties and powers hereunder except losses,
expenses and liabilities arising as a result of the Warrant Agent's gross
negligence or willful misconduct.
f. The Warrant Agent may resign its duties and be discharged
from all further duties and liabilities hereunder (except liabilities arising as
a result of the Warrant Agent's own gross negligence or willful misconduct),
after giving at least 30 days' prior written notice to the Company. At least 15
days prior to the date such resignation is to become effective, the Warrant
Agent shall cause a copy of such notice of resignation to be mailed to the
Registered Holder of each Warrant Certificate at the Company's expense. Upon
such resignation the Company shall appoint in writing a warrant agent. If the
Company shall fail to make such appointment within a period of 30 days after it
has been notified in writing of such resignation by the resigning Warrant Agent,
then the Registered Holder of any Warrant Certificate may apply to any court of
competent jurisdiction for the appointment of a warrant agent. Any warrant
agent, whether appointed by the Company or by such a court, shall be a bank or
trust company having a capital and surplus, as shown by its last published
report to its stockholders, of not less than $10,000,000 or a stock transfer
company registered with the U.S. Securities and Exchange Commission in New York,
New York. After acceptance in writing of such appointment by the warrant agent
is received by the Company, such warrant agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
herein as the warrant agent, without any further assurance, conveyance, act or
deed; but if for any reason it shall be necessary or expedient to execute and
deliver any further assurance, conveyance, act or deed, the same shall be done
at the expense of the Company and shall be legally and validly executed and
delivered by the resigning Warrant Agent. Not later than the effective date of
any such appointment the Company shall file notice thereof with the resigning
Warrant Agent and shall forthwith cause a copy of such notice to be mailed to
the Registered Holder of each Warrant Certificate.
15
<PAGE>
g. Any corporation into which the Warrant Agent or any warrant
agent may be converted or merged, any corporation resulting from any
consolidation to which the Warrant Agent or any warrant agent shall be a party,
or any corporation succeeding to the corporate trust business of the Warrant
Agent or any warrant agent shall be a successor warrant agent under this
Agreement without any further act, provided that such corporation is eligible
for appointment as successor to the Warrant Agent under the provisions of the
preceding paragraph. Any such successor warrant agent shall promptly cause
notice of its succession as warrant agent to be mailed to the Company and to the
Registered Holders of each Warrant Certificate.
j. The Warrant Agent, its subsidiaries and affiliates, and any
of its or their officers or directors, may buy and hold or sell Warrants or
other securities of the Company and otherwise deal with the Company in the same
manner and to the same extent and with like effect as though it were not Warrant
Agent. Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
k. Warrant Agent shall retain for a period of at least two
years from the date of exercise any Warrant Certificate received by it upon such
exercise.
SECTION 11. Modification of Agreement.
The Warrant Agent and the Company may by supplemental agreement make
any changes or corrections in this Agreement (i) that they shall deem
appropriate to cure, any ambiguity or to correct any defective or inconsistent
provision or manifest mistake or error herein contained; or (ii) that they may
deem necessary or desirable and which shall not adversely affect the interests
of the holders of Warrant Certificates; provided, however, that this Agreement
shall not otherwise be modified, supplemented or altered in any respect except
with the consent in writing of the Registered Holders representing not less than
50% of the Warrants then outstanding; provided, further, that no change in the
number or nature of the securities purchasable upon the exercise of any Warrant,
or to increase the Purchase Price therefor, shall be made without the consent in
writing of the affected Registered Holders, other than such changes as are
presently specifically prescribed by this Agreement as originally executed.
SECTION 12. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered or
16
<PAGE>
mailed first-class postage prepaid, or delivered to a telegraph office for
transmission if to the Registered Holder of a Warrant Certificate at the address
of such holder as shown on the registry books maintained by the Warrant Agent;
if to the Company at Suite 591, 885 Dunsmuir Street, Vancouver, British Columbia
V6C 1N5, Attention: President, or at such other address as may have been
furnished to the Warrant Agent in writing by the Company; and if to the Warrant
Agent, at its Corporate Office.
SECTION 13. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without giving effect to conflicts of laws.
SECTION 14. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
Company, the Warrant Agent and their respective successors and assigns and the
holders from time to time of Warrant Certificates or any of them. Except as
hereinafter stated, nothing in this Agreement is intended or shall be construed
to confer upon any other person any right, remedy or claim or to impose upon any
other person any duty, liability or obligation.
SECTION 15. Counterparts.
This Agreement may be executed in several counterparts, which taken
together shall constitute a single document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the first date first above written.
[SEAL]
POWERTRADER, INC. AMERICAN STOCK TRANSFER AND
TRUST COMPANY
By: By:
Name: Michael C. Withrow Name:
Title: President Title:
By:
Assistant Secretary
17
<PAGE>
EXHIBIT A
No. W VOID AFTER ____________, 2002
WARRANTS
COMMON STOCK PURCHASE WARRANT CERTIFICATE TO
PURCHASE ONE SHARE OF COMMON STOCK
THIS WARRANT IS TRANSFERRABLE IN NEW YORK, NEW YORK
POWERTRADER, INC.
CUSIP 738909 11 8
THIS CERTIFIES THAT, FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number of
Common Stock Purchase Warrants (the "Warrants") specified above. Each Warrant
initially entitles the Registered Holder to purchase, subject to the terms and
conditions set forth in this Certificate and the Warrant Agreement (as
hereinafter defined), one fully paid and nonassessable share of Common Stock,
$0.01 par value, of PowerTrader, Inc., a Delaware corporation (the "Company"),
at any time after the effective date of the Registration Statement on Form SB-2
(File no. 333-20121) or such earlier date as the Company may determine (the
"Initial Warrant Exercise Date"), and prior to the Expiration Date (as
hereinafter defined) upon the presentation and surrender of this Warrant
Certificate with the Subscription Form on the reverse hereof duly completed and
executed, at the corporate office of American Stock Transfer and Trust Company,
40 Wall Street, 46th Floor, New York, New York 10005, as Warrant Agent, or its
successor (the "Warrant Agent"), accompanied by payment of $3.50, subject to
adjustment (the "Purchase Price"), in lawful money of the United States of
America in cash or by check made payable to the Warrant Agent for the account of
the Company.
This Warrant Certificate and each Warrant represented hereby
are issued pursuant to and are subject in all respects to the terms and
conditions set forth in the Warrant Agreement, dated _____________, 1997, by and
between the Company and the Warrant Agent (the "Warrant Agreement"). In the
event of a conflict between the terms and conditions hereof and the terms and
conditions of the Warrant Agreement, the terms and conditions of the Warrant
Agreement will control. Copies of the Warrant Agreement are on file at the
corporate office of the Warrant Agent and are obtainable without charge from the
Warrant Agent.
In the event of certain contingencies provided for in the
Warrant Agreement, the Purchase Price and the number of shares of Common Stock
subject to purchase upon the exercise of each Warrant represented hereby are
subject to modification or adjustment.
A-1
<PAGE>
Each Warrant represented hereby is exercisable at the option
of the Registered Holder, but no fractional interests will be issued. In the
case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
The term "Expiration Date" shall mean 5:00 p.m. (New York City
time) on the earlier of: (i) the Business Day (as defined in the Warrant
Agreement) immediately preceding the Redemption Date (as defined in the Warrant
Agreement), or (ii) March _____, 2002, the date which is 60 months after the
Initial Warrant Exercise Date. If each such date shall in the State of New York
be a holiday or a day on which the banks are authorized to close, then the
Expiration Date shall mean 5:00 p.m. (New York City time) the next following day
which in the State of New York is not a holiday or a day on which banks are
authorized to close.
The Warrants may be redeemed at the election of the Company
upon 30 days' written notice to the holders, at a Redemption Price (as defined
in the Warrant Agreement) equal to $.01 per Warrant, if the Market Price (as
defined in the Warrant Agreement) of the Common Stock is at least $4.50 per
share for at least 20 Business Days out of any period of 30 consecutive Business
Days ending on the fifth Business Day prior to the date of notice of redemption.
The Company shall not be obligated to deliver any securities
pursuant to the exercise of this Warrant unless a registration statement under
the Securities Act of 1933, as amended (the "Act"), with respect to such
securities is effective or an exemption thereunder is available. The Company has
covenanted and agreed that it will file a registration statement under the
Federal securities laws, use its best efforts to cause the same to become
effective, to keep such registration statement current, if required under the
Act, while any of the Warrants are outstanding, and deliver a prospectus which
complies with Section 10(a)(3) of the Act to the Registered Holder exercising
this Warrant. This Warrant shall not be exercisable by a Registered Holder in
any state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender
hereof by the Registered Holder at the corporate office of the Warrant Agent,
for a new Warrant Certificate or Warrant Certificates of like tenor representing
an equal aggregate number of Warrants, each of such new Warrant Certificates to
represent such number of Warrants as shall be designated by such Registered
Holder at the time of such surrender. Upon due presentment and payment of any
tax or other charge imposed in connection therewith or incident thereto, for
registration of transfer of this Warrant Certificate at such office, a new
Warrant Certificate of Warrant Certificates representing an equal aggregate
number of Warrants will be issued to the transferee in exchange therefor,
subject to the limitations provided in the Warrant Agreement.
A-2
<PAGE>
Prior to the exercise of any Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
Prior to due presentment for registration of transfer hereof,
the Company and the Warrant Agent may deem and treat the Registered Holder as
the absolute owner hereof and of each Warrant represented hereby
(notwithstanding any notations of ownership or writing hereon made by anyone
other than a duly authorized officer of the Company or the Warrant Agent) for
all purposes and shall not be affected by any notice to the contrary, except as
provided in the Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to
conflicts of laws.
This Warrant Certificate is not valid unless countersigned by
the Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed, manually or in facsimile by two of its officers
thereunto duly authorized and a facsimile of its corporate seal to be imprinted
hereon.
POWERTRADER, INC. Dated: ______________, 1997
By: COUNTERSIGNED:
President AMERICAN STOCK TRANSFER AND
TRUST COMPANY
[SEAL] as Warrant Agent
By: By:
Secretary Authorized Officer
A-3
<PAGE>
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned hereby irrevocably elects to exercise
________________ of the Warrants represented by this Warrant Certificate and to
purchase the shares of Common Stock issuable upon the exercise of such Warrants,
and requests that certificates for such shares be issued and delivered as
follows:
issue to:_______________________________________________________________________
(NAME)
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
________________________________________________________________________________
(SOCIAL SECURITY OR OTHER TAX IDENTIFYING NUMBER)
delivered to:___________________________________________________________________
(NAME)
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
If such number of Warrants shall not be all the Warrants
evidenced by this Warrant Certificate, the undersigned requests that a new
Warrant Certificate representing the number of full Warrants not exercised be
issued in the name of, and delivered to the Registered Holder at the address
stated below.
In full payment of the purchase price with respect to the
Warrants exercised and transfer taxes, if any, the undersigned hereby tenders
payment of $________ by certified check or money order payable in United States
currency to the order of the Company.
Dated:_____________________ X____________________________________
____________________________________
____________________________________
Address
____________________________________
Social Security or Taxpayer
Identification Number
____________________________________
Signature Guaranteed
A-4
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto the Assignee named below all of the rights of the undersigned
represented by the within Warrant Certificate, with respect to the number of
Warrants set forth below:
Name of Assignee Address No. of Warrants
- ---------------- ------- ---------------
and does hereby irrevocably constitute and appoint
_________________________________________________________Attorney
to make such transfer of the books of Powertrader, Inc. maintained
for that purpose, with full power of substitution in the premises.
Dated:______________________ X______________________________
Signature Guaranteed
______________________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE
GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE,
MIDWEST STOCK EXCHANGE OR BOSTON STOCK EXCHANGE.
A-5
COMMON STOCK COMMON STOCK
PAR VALUE $.01 PAR VALUE $.01
NUMBER SHARES
C
[LOGO]
INCORPORATED UNDER THE LAWS SEE REVERSE FOR CERTAIN DEFINITIONS
OF THE STATE OF DELAWARE CUSIP 738909 10 0
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK OF
POWERTRADER, INC.
transferable on the books of the Corporation by the holder hereof in person or
by attorney upon surrender of this Certificate properly endorsed. This
Certificate and the shares represented hereby are issued and shall be held
subject to all the provisions of the Certificate of Incorporation of the
Corporation, as amended from time to time, to all of which each holder of this
Certificate, by acceptance hereof, assents.
This Certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar. WITNESS the facsimile seal of the
Corporation and the facsimile signatures of its duly authorized
officers.
/s/ Michael C. Withrow COUNTERSIGNED AND REGISTERED:
PRESIDENT AND CHAIRMAN AMERICAN STOCK TRANSFER AND
OF THE BOARD TRUST COMPANY
[seal] TRANSFER AGENT AND REGISTRAR
/s/ David C. Furlonger
SECRETARY BY
AUTHORIZED SIGNATURE
<PAGE>
The following abbreviations, when used in the inscription on the fact
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as
tenants in common
UNIF GIFT MIN ACT - _____________ Custodian __________________
(Cust.) (Minor)
under Uniform Gifts to Minors Act __________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received, ___________________________ hereby sell, assign and
transfer unto __________________________________________________________________
Please insert Social Security or Other
Identifying Number of Assignee
- --------------------------------------------------------------------------------
(Please print or typewrite name and address, including zip code, of Assignee)
- --------------------------------------------------------------------------------
___________________________________________________________ Shares of the Common
Stock evidenced by this Certificate, and do hereby irrevocably constitute and
appoint
______________________________________________________ Attorney to transfer said
shares on the books of the within names Corporation with full power of
substitution in the premises.
Dated___________________________
X__________________________________
X__________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By______________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
EXHIBIT A
No. W VOID AFTER ____________, 2002
WARRANTS
COMMON STOCK PURCHASE WARRANT CERTIFICATE TO
PURCHASE ONE SHARE OF COMMON STOCK
THIS WARRANT IS TRANSFERRABLE IN NEW YORK, NEW YORK
POWERTRADER, INC.
CUSIP 738909 11 8
THIS CERTIFIES THAT, FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number of
Common Stock Purchase Warrants (the "Warrants") specified above. Each Warrant
initially entitles the Registered Holder to purchase, subject to the terms and
conditions set forth in this Certificate and the Warrant Agreement (as
hereinafter defined), one fully paid and nonassessable share of Common Stock,
$0.01 par value, of PowerTrader, Inc., a Delaware corporation (the "Company"),
at any time after the effective date of the Registration Statement on Form SB-2
(File no. 333-20121) or such earlier date as the Company may determine (the
"Initial Warrant Exercise Date"), and prior to the Expiration Date (as
hereinafter defined) upon the presentation and surrender of this Warrant
Certificate with the Subscription Form on the reverse hereof duly completed and
executed, at the corporate office of American Stock Transfer and Trust Company,
40 Wall Street, 46th Floor, New York, New York 10005, as Warrant Agent, or its
successor (the "Warrant Agent"), accompanied by payment of $3.50, subject to
adjustment (the "Purchase Price"), in lawful money of the United States of
America in cash or by check made payable to the Warrant Agent for the account of
the Company.
This Warrant Certificate and each Warrant represented hereby
are issued pursuant to and are subject in all respects to the terms and
conditions set forth in the Warrant Agreement, dated _____________, 1997, by and
between the Company and the Warrant Agent (the "Warrant Agreement"). In the
event of a conflict between the terms and conditions hereof and the terms and
conditions of the Warrant Agreement, the terms and conditions of the Warrant
Agreement will control. Copies of the Warrant Agreement are on file at the
corporate office of the Warrant Agent and are obtainable without charge from the
Warrant Agent.
In the event of certain contingencies provided for in the
Warrant Agreement, the Purchase Price and the number of shares of Common Stock
subject to purchase upon the exercise of each Warrant represented hereby are
subject to modification or adjustment.
Each Warrant represented hereby is exercisable at the option
<PAGE>
of the Registered Holder, but no fractional interests will be issued. In the
case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
The term "Expiration Date" shall mean 5:00 p.m. (New York City
time) on the earlier of: (i) the Business Day (as defined in the Warrant
Agreement) immediately preceding the Redemption Date (as defined in the Warrant
Agreement), or (ii) March _____, 2002, the date which is 60 months after the
Initial Warrant Exercise Date. If each such date shall in the State of New York
be a holiday or a day on which the banks are authorized to close, then the
Expiration Date shall mean 5:00 p.m. (New York City time) the next following day
which in the State of New York is not a holiday or a day on which banks are
authorized to close.
The Warrants may be redeemed at the election of the Company
upon 30 days' written notice to the holders, at a Redemption Price (as defined
in the Warrant Agreement) equal to $.01 per Warrant, if the Market Price (as
defined in the Warrant Agreement) of the Common Stock is at least $4.50 per
share for at least 20 Business Days out of any period of 30 consecutive Business
Days ending on the fifth Business Day prior to the date of notice of redemption.
The Company shall not be obligated to deliver any securities
pursuant to the exercise of this Warrant unless a registration statement under
the Securities Act of 1933, as amended (the "Act"), with respect to such
securities is effective or an exemption thereunder is available. The Company has
covenanted and agreed that it will file a registration statement under the
Federal securities laws, use its best efforts to cause the same to become
effective, to keep such registration statement current, if required under the
Act, while any of the Warrants are outstanding, and deliver a prospectus which
complies with Section 10(a)(3) of the Act to the Registered Holder exercising
this Warrant. This Warrant shall not be exercisable by a Registered Holder in
any state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender
hereof by the Registered Holder at the corporate office of the Warrant Agent,
for a new Warrant Certificate or Warrant Certificates of like tenor representing
an equal aggregate number of Warrants, each of such new Warrant Certificates to
represent such number of Warrants as shall be designated by such Registered
Holder at the time of such surrender. Upon due presentment and payment of any
tax or other charge imposed in connection therewith or incident thereto, for
registration of transfer of this Warrant Certificate at such office, a new
Warrant Certificate of Warrant Certificates representing an equal aggregate
number of Warrants will be issued to the transferee in exchange therefor,
subject to the limitations provided in the Warrant Agreement.
<PAGE>
Prior to the exercise of any Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
Prior to due presentment for registration of transfer hereof,
the Company and the Warrant Agent may deem and treat the Registered Holder as
the absolute owner hereof and of each Warrant represented hereby
(notwithstanding any notations of ownership or writing hereon made by anyone
other than a duly authorized officer of the Company or the Warrant Agent) for
all purposes and shall not be affected by any notice to the contrary, except as
provided in the Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to
conflicts of laws.
This Warrant Certificate is not valid unless countersigned by
the Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed, manually or in facsimile by two of its officers
thereunto duly authorized and a facsimile of its corporate seal to be imprinted
hereon.
POWERTRADER, INC. Dated: ______________, 1997
By: /s/ Michael C. Withrow COUNTERSIGNED:
President AMERICAN STOCK TRANSFER AND
TRUST COMPANY
[SEAL] as Warrant Agent
By: /s/ David C. Furlonger By:
Secretary Authorized Officer
<PAGE>
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned hereby irrevocably elects to exercise
________________ of the Warrants represented by this Warrant Certificate and to
purchase the shares of Common Stock issuable upon the exercise of such Warrants,
and requests that certificates for such shares be issued and delivered as
follows:
issue to:_______________________________________________________________________
(NAME)
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
________________________________________________________________________________
(SOCIAL SECURITY OR OTHER TAX IDENTIFYING NUMBER)
delivered to:___________________________________________________________________
(NAME)
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
If such number of Warrants shall not be all the Warrants
evidenced by this Warrant Certificate, the undersigned requests that a new
Warrant Certificate representing the number of full Warrants not exercised be
issued in the name of, and delivered to the Registered Holder at the address
stated below.
In full payment of the purchase price with respect to the
Warrants exercised and transfer taxes, if any, the undersigned hereby tenders
payment of $________ by certified check or money order payable in United States
currency to the order of the Company.
Dated: ____________________ X____________________________________
_____________________________________
Address
_____________________________________
Social Security or Taxpayer
Identification Number
_____________________________________
Signature Guaranteed
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto the Assignee named below all of the rights of the undersigned
represented by the within Warrant Certificate, with respect to the number of
Warrants set forth below:
Name of Assignee Address No. of Warrants
and does hereby irrevocably constitute and appoint
________________________________________________________ Attorney
to make such transfer of the books of Powertrader, Inc. maintained
for that purpose, with full power of substitution in the premises.
Dated:______________ X___________________________
Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER AND MUST BE
GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE,
MIDWEST STOCK EXCHANGE OR BOSTON STOCK EXCHANGE.
GALLOP, JOHNSON & NEUMAN, L.C.
Interco Corporate Tower
101 S. Hanley
St. Louis, MO 63105
March 14, 1997
PowerTrader, Inc.
Suite 591
885 Dunsmuir Street
Vancouver, British Columbia
Canada V6C 1N5
Re: Registration Statement on Form SB-2 (File No. 333-20121)
Ladies and Gentlemen:
We have acted as counsel for PowerTrader, Inc., a Delaware corporation
(the "Company"), in connection with the various legal matters relating to the
filing of a Registration Statement on Form SB-2, File No. 333-20121 (the
"Registration Statement") under the Securities Act of 1933, as amended, relating
to up to 1,700,000 Units to be sold by the Company, each consisting of one share
of common stock of the Company, $0.01 par value per share (the "Common Stock")
and a warrant to purchase one additional share of Common Stock (the "Warrant")
and up to 595,000 shares of Common Stock to be sold by certain of the
stockholders of the Company (the "Selling Stockholders").
We have examined such corporate records of the Company, such laws and
such other information as we have deemed relevant, including the Company's
Restated Certificate of Incorporation, Bylaws, resolutions adopted by the Board
of Directors and stockholders of the Company relating to such offering and
certificates received from state officials and from officers of the Company. In
delivering this opinion, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
the originals of all documents submitted to us as certified, photostatic or
conformed copies, and the correctness of all statements submitted to us by
officers of the Company.
Based solely on the foregoing, the undersigned is of the opinion that:
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware.
<PAGE>
PowerTrader, Inc.
March 14, 1997
Page 2
2. The Units, and the Common Stock and Warrants comprising the
Units, being offered by the Company, if sold and issued in the
manner described in the Registration Statement, will be
validly issued and outstanding and will be fully paid and
non-assessable.
3. The Common Stock issuable upon exercise of the Warrants, if
issued in accordance with the Warrant Agreement attached as an
exhibit to the Registration, will be validly issued and
outstanding and will be fully paid and non-assessable.
4. The Common Stock being offered by each of the Selling
Stockholders will be validly issued and outstanding and will
be fully paid and non-assessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Registration Statement.
We also consent to your filing copies of this opinion as an exhibit to the
Registration Statement with agencies of such states as you deem necessary in the
course of complying with the laws of such states regarding the issuance of the
securities sold.
Very truly yours,
/s/ GALLOP, JOHNSON & NEUMAN, L.C.
HBDT SOFTWARE LICENCE AGREEMENT
THIS AGREEMENT ("Agreement'), made and entered into this 17th day of
January, 1997,
Between:
POWERTRADER SOFTWARE INC.
a company incorporated pursuant to the laws of British Columbia, incorporation
number 357165, with a head office at Suite 591, 885 Dunsmuir Street, Vancouver,
B.C. V6C 1N5.
(Hereinafter referred to as PSI)
(Of the First Part)
And:
Hongkong Bank Discount Trading, Inc.,
a corporation incorporated pursuant to the laws of Canada, incorporation number
303312-1 with a head office at 70 York Street, Toronto, Ontario and a registered
office at 5th Floor, 885 W. Georgia Street, Vancouver, British Columbia, V6C
3G9.
(Hereinafter referred to as HBDT)
(Of the Second Part) .
WHEREAS:
R.1 HBDT carries on the business of providing Discount Brokerage Services and,
R.2 HBDT operates an Internet Site and,
R.3 PSI owns the software programs called PowerTrader CyberCharts. When compiled
this source produces executables for products: (hereinafter collectively
referred to as " PowerTrader CyberCharts") that makes possible the processing
and display of information relating to stock and commodity prices with personal
computers; all of which is more particularly described in the features.* file
contained in PowerTrader CyberCharts. and
R.4 HBDT desires that PSI provide it with an exact current copy of PowerTrader
CyberCharts which it will provide to its own Customers under the product name
"PowerCharts" and
R.5 PSI is in possession of the technical expertise to develop and provide to
HBDT, software program(s) required to allow PowerTrader CyberCharts and
PowerCharts to receive, process and display information provided by PSI and
NOW THEREFORE WITNESSETH THAT in consideration of the payments specified in this
Agreement, and other good and valuable consideration and the mutual promises and
covenants herein made the parties hereto hereby agree as follows:
<PAGE>
Article I DEFINITIONS
1. As used in this Agreement, the following terms shall have the following
meanings:
1.1 "Agreement" means this Agreement.
1.2 "Customers" means subscribers in the Licensed Territory to the service
provided by HBDT and a "Customer" means one subscriber:
1.3 Dollars shall refer to currency of the Dominion of Canada for
installations in Canada and for installations in countries other than
Canada dollars shall refer to currency of the United States of America.
1.4 "Enhancement(s)" means all changes to the Release from any given Release
to the most recent Release.
1.5 The words "Licensed Territory" shall mean all countries and territories
throughout the world.
1.6 "Operating Systems" means personal computer programs provided by other
companies that determine how personal computers operate, such as
Microsoft Corporation's Windows 3.1, Windows 3.11, Windows 95 and Windows
NT and International Business Machines' O/S2.
1.7 "Parties" means the signatories to this Agreement and a "Party" means one
of the signatories.
1.8 "Private Label" means the name designated by HBDT in place of PowerTrader
CyberCharts which, unless HBDT notifies PSI otherwise, is "PowerCharts".
1.9 "Release" means a version of PowerTrader CyberCharts that has been
distributed by PSI to HBDT for distribution to Customers
1.10 "Source Code" means all uncompiled PowerTrader CyberCharts programs
developed by PSI including all uncompiled programs developed for HBDT by
PSI.
1.11 "Standalone Installations" means a single installation of PowerCharts
software at HBDT 's customer location.
1.12 "Ticker Feed" means all information consolidated into HBDT 's broadcast
transmission.
Article II LICENSE GRANT TO HBDT
2.1 In consideration of the initial payment of $5,000.00 specified in
section 6.1 herein, PSI hereby grants, a license to HBDT, to distribute to its
Customers in the Licensed Territory free of charge copies of, the current and
all future Releases of PowerTrader CyberCharts under the name PowerCharts. The
grant of this license does not preclude PSI from entering into exclusive or
non-exclusive license agreements, during or after the term of this Agreement,
with any other parties to market PowerTrader CyberCharts under any name other
than PowerCharts.
<PAGE>
Article III SOFTWARE SUPPORT
3.1 PSI will provide to Customers of HBDT, in an electronic format through
HBDT's "netTRADER" internet site, PSI's Getting Started Guide and Manuals (the
"Documentation). The Documentation will be in Adobe Page Maker format, and PSI
expects to provide the Documentation on HBDT's "netTRADER internet site in HTML
format in the future. PSI will adapt the Documentation to reflect the Private
Label.
3.2 PSI will provide cursory initial instructions on the installation of
PowerCharts, and downloading of market price data from the HBDT "netTRADER"
internet site to paying HBDT Customers via a toll free telephone number supplied
by HBDT. HBDT may only advertise this service to Customers.
3.3 PSI will provide to the Customers optional detailed telephone support
covering the operation of PowerCharts, (the "Detailed Support") for an annual,
non-refundable fee of $360.00 per year, per Customer paid to PSI in advance by
HBDT. HBDT shall maintain a database of Customers who have paid for the Detailed
Service, which HBDT will provide to PSI, and PSI will only provide Detailed
Service to Customers whose names appear in that database.
Article IV SOFTWARE ENHANCEMENT
4.1 PSI shall provide to HBDT a Released version (with Enhancements) at no
additional cost, other than those specified in Article VI within 30 days of
signing this Agreement.
4.2 Enhancement of PowerTrader PowerCharts may be done from time to time at
the sole discretion of PSI, provided that PSI provides 30 days notice to HBDT of
such Enhancement.
4.3 Enhancements and new features and upgrades requested by HBDT shall be
paid for by HBDT. The costing of the said requests shall be determined by PSI
using the then industry standard rates and using personnel approved by PSI. The
timetable for the said requests shall be determined according to the scheduling
capacity of PSI.
Article V OWNERSHIP
5.1 Notwithstanding anything in this Agreement to the contrary, PSI shall
retain ownership and control of all software, trademarks, copyrights and
confidential information provided to HBDT or its Customers pursuant to this
Agreement, including all software, trademarks, copyrights and confidential
information that may be embodied or contained in the software other than that
related to the Private Label. PSI shall be the sole provider to the Customers of
financial market price data for use with PowerCharts, HBDT shall not provide the
Customers with financial market price data which can be used in conjunction with
PowerCharts. For further clarity, PSI shall disclose development credits in (2)
two places in PowerTrader CyberCharts stating the following:
(a) PowerCharts Developed for Hongkong Bank Discount Trading
Inc. by PowerTrader Software Inc. of Vancouver British Columbia, the makers of
PowerTrader CyberCharts, and that
(b) PowerCharts is not for use except in conjunction with
financial market price data supplied by PowerTrader Software Inc.
5.2 Notwithstanding anything in this Agreement to the contrary, HBDT shall
retain ownership and control of all software, trademarks, copyright and
confidential information provided to PSI pursuant to this
<PAGE>
Agreement, including all software, trademarks, copyrights and confidential
information that may be embodied or contained in the software. HBDT shall retain
ownership and control of any Enhancements, new features and upgrades requested
by HBDT.
5.3 PSI shall place in escrow a complete copy of all Source Code to the
Private Label version of PowerTrader CyberCharts, including all software
developed specifically for HBDT. PSI will further maintain a complete, current
copy of all Source Code with revisions and updates that may be made periodically
time to time. The escrow holder shall be a third party agreed to by both parties
and the escrow holder's fees shall be paid by HBDT.
5.4 The escrow agreement shall provide, inter alia that the escrow Source
Code together with all related documentation for each Release sufficient to
allow an experienced programmer to understand, modify and maintain the
PowerCharts software and all Releases shall only be Released to HBDT in the
event of:
a) PSI has been adjudged a bankrupt or insolvent;
b) PSI has filed a petition for bankruptcy, or a petition in bankruptcy
has been filed against it and is not being disputed by PSI;
c) PSI has made a general assignment for the benefit of its creditors;
d) PSI has had a receiver, receiver-manager or manager appointed by a
court with respect to all or substantially all of its assets generally;
e) PSI has made a valid determination to wind-up or dissolve;
f) PSI has been dissolved or wound-up by operation of law or order of a
component court;
g) PSI has ceased to carry on business;
ARTICLE VI DEVELOPMENT COSTS AND LICENSE FEES
Reimbursement of Costs
6.1 HBDT shall pay $5,000.00 to PSI upon execution of this agreement to
partially reimburse cost of manual customization and production, and other hard
costs for building a Private Label version of PowerTrader CyberCharts for
redistribution by HBDT to its clients.
License Fees.
6.2 PSI will allow the customer to download current financial market price
data through HBDT's "netTRADER" internet site. HBDT shall pay to PSI a monthly
fee of $14.95 plus applicable taxes, per customer per month. This fee is subject
to change without notice to HBDT. In addition to current financial market price
data, PSI shall provide to the Customers, at no additional charge, historical
financial market price data on the trading symbols listed in the attached
Schedule "A" to this Agreement.
6.3 PSI will provide to each of HBDT's Customers on request, a database of
historical financial market quotations in CD-ROM format, together with a manual,
for a charge to HBDT of $139.95 plus applicable taxes, plus shipping and
handling. This charge is subject to change without notice to HBDT.
<PAGE>
6.4 On the last day of each month, PSI shall provide HBDT with a listing of
the ID numbers of Customers who downloaded the current financial market price
data from PSI through HBDT's "netTRADER" internet site during that month, with a
total, and a listing of the ID numbers of Customers who ordered the database of
historical financial market quotations on CD-ROM during that month, with a
total.
Customer Status.
6.5 HBDT shall pay to PSI on the first day of each calendar month, all
amounts due and owing to PSI for the previous month's downloaded current
financial market price data, and historical financial market quotation CD-ROM's,
provided that if the first day does not fall on a business day the payment shall
be received by the next business day immediately following.
Article VII SERVICE TERM
7.1 This Agreement shall take effect on December 12, 1996 and shall as
hereinafter provided continue in force for a term of three (3) years from that
date. Subsequent terms may be mutually agreed upon by PSI and HBDT.
Article VIII TERMINATION
8.1 If either party, commits a major or material breach of any of its
obligations hereunder the aggrieved party may serve notice in writing upon the
party in breach requiring the said party to remedy the breach within 30 days of
the date of the notice, failing which the aggrieved party may forthwith
terminate this Agreement by giving notice of termination in writing to the party
in breach. For further clarity and without limiting the generality of the
foregoing a failure by HBDT to make any of the payments specified herein within
the required times shall constitute a major or material breach. PSI may at its
option refuse to provide validation for new Customers until said outstanding
fees are paid in full in addition to any other remedies at law that are
available to PSI.
8.2 If either party ceases doing business as a going concern, is insolvent,
makes an assignment for the benefit of creditors, admits in writing its
inability to pay its debts as they become due, files a voluntary petition in
bankruptcy, is adjudicated bankrupt or insolvent, files or has filed against it
a petition seeking any reorganization arrangement or composition under any
present or future bankruptcy statute, law or regulation, or if the beneficial
ownership of either party changes, then in any such event the other party may by
notice in writing terminate this Agreement forthwith or from such date as its
shall designate.
Article IX ADDITIONAL RIGHTS AND OBLIGATIONS ON TERMINATION
In the event of termination of this Agreement howsoever occasioned:
9.1 Each party shall return promptly to the other all copies of any
material relating to the supply by such other of data hereunder which are in its
possession or under its control, except as set forth below. The provisions of
article of 13 or 14 of this Agreement shall continue in full force after
termination of this Agreement.
9.2 Neither party shall be relieved or discharged from any obligations
which accrued prior to such termination, and termination hereof shall neither
destroy nor diminish the binding force and effect of any of the provisions of
this Agreement that expressly or by implication come into or continue in effect
on or following termination hereof.
<PAGE>
9.3 If this Agreement terminates upon expiration of a three year term, PSI
shall not, nor shall it cause any related or associated corporation of PSI, nor
any person who has an interest in any of the aforesaid corporations to use in
any way the information provided by HBDT to PSI under the agreement.
9.4 If this Agreement terminates upon expiration of a three year term, HBDT
shall not, nor shall it cause any related or associated corporation of HBDT, nor
any person who has an interest in any of the aforesaid corporations to use in
any way the information provided by PSI to HBDT under the agreement.
9.5 If the parties agree to extend this contract at the end of the term,
but are unable to agree on terms, the contract shall be in force for an
additional 6 months at the same terms and conditions.
Article X FORCE MAJEURE
10.1 If the performance by either party of its material obligations is
delayed or becomes impossible or impractical because of any equipment failure,
transmission difficulty, failure of the Exchanges to generate or transmit data,
act or failure to act by a common carrier, Act of God, fire, tempest, earthquake
or other event, strike, civil commotion, acts of government, war, civil unrest,
or any other order, regulation, ruling, decision, or action of any labor union
or association affecting the business with which this Agreement is concerned or
any matter beyond the control or a party then such party shall not be liable to
the other for any breach of its obligations hereunder by virtue of any such
event and such party may upon notice to the other party suspend the performance
of its obligation for the duration of any such delay, impossibility or
impracticality.
Article XI MUTUAL RELEASES
11.1 Neither party shall be liable to the other or to any person or
organization claiming by or through the other for any errors, omissions, or
delays relating to the sequence, accuracy, or completeness in the information
carried, furnished, or displayed by or through HBDT 's equipment or for any
damages arising therefrom or occasioned thereby nor shall either party have any
liability or obligation for the accuracy or display of its stored computer data
or for any damages arising therefrom or occasioned thereby, except those caused
by the gross negligence or willful misconduct of the relevant party, its
employees, or agents. Furthermore, neither party shall be liable for any
damages, either directly or indirectly attributable to either party, any other
software, Communications Cards, Disks or any Information provided under the
Agreement except those caused by the gross negligence or willful misconduct of
the relevant party. This includes loss of business, anticipatory profits and
consequential damages of either party and their Customers.
Article XII RESTRICTIONS ON DISSEMINATION AND USE
12.1 HBDT Acknowledges, and Agrees to Maintain Confidentiality. - HBDT
acknowledges that the PSI Confidential Information includes the property and
trade secrets of PSI and that any publication or disclosure to third parties of
the PSI Confidential Information may cause immediate and irreparable harm to
PSI. HBDT will take all reasonable steps to maintain the confidentiality of the
PSI Confidential Information. Confidential Information is any development
techniques which make up the PowerCharts product and access of data for use with
PowerCharts. PSI acknowledges and agrees that the distribution of the
PowerCharts software by HBDT in accordance with the license granted in this
Agreement shall be deemed not to be a breach of any covenant of HBDT under this
Agreement or an infringement or interference with any proprietary right of PSI.
12.2 Prohibition on Making PSI Confidential Information Available to
Others. - HBDT shall not, without PSI's prior written consent or as expressly
provided in this Agreement, disclose, provide, or make available any of the PSI
Confidential Information in any form to any person, except to employees or
consultants of HBDT whose access is necessary to enable HBDT to exercise its
rights under this Agreement.
<PAGE>
12.3 Restriction on HBDT Employees and Customers - HBDT shall require any
employee or Customer having access to the PSI confidential information to agree,
in writing to maintain the confidentiality of the PSI Confidential Information.
12.4 Restrictions on Use - HBDT shall not use any of the PSI Confidential
Information for any purpose other than the proper purposes of this Agreement.
Article XIII COPYRIGHT, COPYING AND TRADEMARKS
13.1 Prohibition on Copying Printed Material - Each party shall not copy or
cause to be copied all or any part of the other Party's Confidential Information
which is human-readable form, except if authorized in advance by the other Party
or expressly provided in this agreement.
13.2 Disclosure of Machine-Readable Material - Each party shall not copy or
cause to be copied all or any part of the other Party's Confidential Information
which is in machine-readable form, except if authorized in advance by the other
party or expressly provided in this agreement.
13.3 Legend Required on Copies - On all authorized copies made by each
party, each party shall include proprietary, copyright, trademark and trade
secret legends, in the same form and location as any legend appearing on the
original from which the copies are made, or in any other form and location
specified by the other party from time-to-time in writing.
13.4 Prohibition on Removal of Legend - Each party shall not remove any
proprietary, copyright, or trade secret legend from any of the other Party's
Confidential Information.
13.5 Reference to Copyright - The inclusion of copyright notice on any of
the other party's Confidential Information shall not cause, or be construed to
cause, it to be a published work.
13.6 Reference to Copyright and Trademark - Each party shall identify and
refer to the various copyright and trademarks of the party or its related or
associated companies as such whenever used, such as, but not limited to,
marketing, advertising and providing services to Customers. Each party shall not
use or take any action inconsistent with the other party's or its related or
associated companies' copyright and trademarks.
Article XIV MISCELLANEOUS
14.1 Entire Agreement--This Agreement sets forth the entire agreement
between the parties with respect to the subject matter hereof and no
modification, amendment, waiver, termination or discharge of this Agreement or
of any provisions hereof shall be binding upon either party hereto unless
confirmed by a written instrument signed by the duly authorized representative
of that party.
14.2 Notices--All Notices from either party to the other may be delivered
personally or sent by registered or certified mail or by fax followed by a
confirmation letter to the addresses indicated herein or an those addresses may
be changed from time to time by notice.
PowerTrader Software Inc.
# 591 - 885 Dunsmuir Street
Vancouver British Columbia
V6C 1N5
Attention: David Furlonger
Fax: 604-685-1513
<PAGE>
Hongkong Bank Discount Trading, Inc.
#1680 - 70 York Street
Toronto,
Ontario
M5J 1S9
Attention Peter Hickman
Fax: 416-868-6249
Any such notice shall be deemed to have been received:
A) In the case of a letter, on the day on which the letter is actually
received or five (5) business days after posting by air mail, whichever is the
earlier: or
B) In the case of a fax, at the time and on the day that the whole of the
said notice or communication has been transmitted from the sending Fax machine,
with transmission verified as complete.
14.3 Illegal Transactions -- Both parties agree that they will not engage
in and acknowledge that they are not presently engaged in the operation of any
illegal transactions or business and will not use or permit anyone to use
information received from one another for any illegal purpose.
14.4 Heading - The headings appearing at the beginning of several articles
contained herein have been inserted for identification and reference purposes
and shall not themselves determine the construction or interpretation of this
Agreement.
14.5 Assignment - Neither party to this Agreement shall assign or purport
to assign any of its rights and responsibilities under this Agreement without
the prior consent in writing of the other party except that an assignment may be
made to a corporation that is beneficially owned by the same persons who
beneficially own the party at the time this agreement was executed.
14.6 Inurement--Subject to the provisions hereof, this Agreement shall be
binding upon the inure to the benefit of the parties and their respective
successors and assigns. In the event of a merger or consolidation involving
either party, this Agreement shall be binding on the surviving entity to such
merger or consolidation.
14.7 Further Assurance--The parties shall execute and deliver all such
documents and take all such action and do all such things as shall be necessary
for the complete performance of their respective obligations under this
Agreement.
14.8 Counterparts--This Agreement may be executed in any number of
counterparts and by the parties hereto on separate counterparts, each of which
when executed and delivered shall constitute an original, but all the
counterparts shall together constitute one and the same agreement.
14.9 Severance--If any term or provision of this Agreement shall be
determined or found to be invalid or unenforceable by any court of competent
jurisdiction, then such term or provision shall be deemed severed from the
balance of this Agreement which shall continue in full force and effect as if
any such term or provision had not been contained herein.
ARTICLE XV GOVERNING LAW
15.0 This agreement is governed by the laws of the Province of British
Columbia and the parties hereto shall attorn to the courts of British Columbia.
<PAGE>
IN WITNESS WHERE OF THE PARTIES HAVE HERETO AFFIXED THEIR SIGNATURES BY
THEIR AUTHORIZED SIGNATORIES
PowerTrader Software Inc. Hongkong Bank Discount Trading, Inc.
By: /s/ David Furlonger By: /s/ Peter Hickman
Name: David Furlonger Name: Peter Hickman
Title: President Title: President and CEO
Dated: January 22, 1997 Dated: January 30, 1997
Witness: /s/ Michael C. Withrow Witness: /s/
<PAGE>
SCHEDULE A
COMPANY DATA FROM EXCHANGE
ALUMINIUM CO. OF AMERICA MAY 83 NYSE
APPLE COMPUTER INC DEC 94 NASD
ADAM RES & ENERGY AUG 93 AMEX
ABER J AUG 89 TSE
ABX MAY 93 ME
ALFIN INC AUG 93 AMEX
ALBERTA OIL FEB 91 ASE
BOEING MAY 83 NYSE
BRITISH AIRWAYS AUG 87 NYSE
BLACKROCK BROAD INVT AUG 93 AMEX
BENSON PET DEC 91 TSE
BGM AUG 89 VSE
BOOKER SEP 89 VSE
BANK OF MONTREAL AUG 89 TSE
BORLAND INTL INC DEC 89 NASD
BIG ROCK BREW APR 93 ASE
COMPUTER ASSC INTL MAY 83 NYSE
CAE AUG 89 TSE
CATALYST VE APR 96 VSE
COBRA PACI MAR 96 VSE
COCOA FUTURES OCT 95 CEC
CENTRAL SECURITIES CO AUG 93 AMEX
CYBERCASH INC FEB 96 NASD
DATA BROADCASTING CO JUN 92 NASD
DEJOUR MIN J AUG 89 TSE
DISNEY CO MAY 83 NYSE
DATA TRANSM NETWORK FEB 87 NASD
ENGELHARD CORP MAY 83 NYSE
ELECTRONIC CL OCT 89 NASD
ECHO BAY MINES LTD AUG 93 AMEX
ECHO BAY AUG 89 TSE
FORD MOTOR CO MAY 83 NYSE
FIRSTBANK OF ILLINOIS JAN 84 NASD
FRANCO-NEV AUG 89 TSE
GATEWAY 2000 INC APR 94 NASD
GOLD FUTURES SEPT 95 CEC
GREATR LEN J AUG 89 TSE
GENERAL MOTORS CORP MAY 83 NYSE
GMD RESOURCES AUG 89 VSE
HANSON PLC NOV 86 NYSE
HOME BN MAY 83 NASD
HALEY AUG 89 TSE
INTL BUSINESS MACHINES MAY 83 NYSE
VSE INDEX JUN 93
INVESTORS GROUP AUG 89 TSE
DOW INDUSTRIALS INDEX OCT 83
INTEL CORP MAY 83 NASD
HUNT JB TRANS SVCS NOV 83 NASD
JCI TECHS AUG 94 ASE
JANNOCK AUG 89 TSE
<PAGE>
MORGAN JP & CO INC MAY 83 NYSE
KLA INSTRUMENTS CORP MAY 83 NASD
COCA COLA CORP MAY 83 NYSE
LIZ CLAIBORNE INC MAY 83 NYSE
LMX RESOURCES INC AUG 89 VSE
LAM RESEARCH CORP MAY 84 NASD
MACROMEDIA INC JAN 94 NASD
MONETA POR J AUG 89 TSE
SAY YES FOODS INC FEB 96 NASD
PHILIP MORRIS CO INC MAY 83 NYSE
MOLY OCT 96 NASD
MOTOROLA INC MAY 83 NYSE
MICROSOFT CORP MAR 86 NASD
NEWMONT MINING CORP MAY 83 NYSE
NETSCAPE COMM CORP AUG 95 NASD
QUAKER OATS CORP MAY 83 NYSE
ONE FEB 96 VSE
ORACLE CORP MAR 86 NASD
PEPSICO INC MAY 83 NYSE
PC QUOTE INC AUG 93 AMEX
PEOPLESOFT INC AUG 93 NASD
QUANTUM CORP MAY 83 NASD
RAYMOR FEB 91 ASE
ROYAL DUTCH PETROLEUM MAY 83 NYSE
REUTERS HOLDINGS PLC JUN 84 NASD
SEARS ROEBUCK & CO MAY 83 NYSE
SILVER FUTURES NOV 94 CEC
S & P FUTURES INDEX AUG 93 CBOE
SYBASE INC AUG 91 NASD
AT & T CORP DEC 80 NYSE
TSE INDEX JUN 94
TCA CABLE TV INC APR 82 NASD
TD BANK AUG 89 TSE
US AIR GROUP INC DEC 80 NYSE
UAL CORP DEC 80 NYSE
US T.BOND FUTURE NOV 94 CBOT
UTAH MEDICAL PRODUCTS DEC 82 NASD
VALUE LINE INC MAY 83 NASD
VERDSTONE AUG 89 VSE
VARCO INTERNATIONAL DEC 80 NYSE
WHEAT FUTURES FEB 96 CBOT
WALL DATA INC AUG 93 NASD
WELLS FARGO & CO DEC 80 NYSE
USX-US STEEL GROUP APR 91 NYSE
EXXON CORP DEC 80 NYSE
XPLOR DEC 80 NASD
YELLOW CORP DEC 80 NASD
YPF SOCIEDAD AUG 93 NYSE
WOOLWORTH CORP HLD DEC 80 NYSE
ZYGO CORP DEC 83 NASD
ZAPPA RESOURCES JUN 90 VSE
TOTAL SYMBOLS = 99
Accountants' Consent
We consent to the use in the registration statement on Pre-Effective Amendment
No. 1 Form SB-2 of PowerTrader, Inc. of our report dated 14 March 1997 which
contains an explanatory paragraph regarding a going concern uncertainty,
relating to the balance sheet of PowerTrader, Inc. as of 31 December 1996 and
the related Statements of Loss, Cash Flow and Changes in Shareholders' Deficit
for the period from 22 August 1996 (inception) to 31 December 1996, and to the
reference to our firm under the heading "Experts" in the registration statement.
14 March 1997 CHARTERED ACCOUNTANTS
Vancouver, British Columbia (Internationally BDO Binder)
<PAGE>
Accountants' Consent
We consent to the use in the registration statement on Pre-Effective Amendment
No. 1 Form SB-2 of PowerTrader, Inc. of our report dated 14 March 1997 which
contains an explanatory paragraph regarding a going concern uncertainty,
relating to the balance sheets of PowerTrader Software, Inc. as of 30 June 1996
and 1995 and the related Statements of Loss, Cash Flow and Changes in
Shareholders' Deficit for the years then ended and the Statements of Loss, Cash
Flow and Changes in Shareholders' Deficit for the period from 29 December 1988
(inception) to 14 March 1996 (cumulative).
14 March 1997 CHARTERED ACCOUNTANTS
Vancouver, British Columbia (Internationally BDO Binder)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> AUG-22-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 2,568
<SECURITIES> 0
<RECEIVABLES> 311,900
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 314,468
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 531,618
<CURRENT-LIABILITIES> 214
<BONDS> 0
0
0
<COMMON> 92
<OTHER-SE> 531,312
<TOTAL-LIABILITY-AND-EQUITY> 531,618
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 261,032
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (261,032)
<INCOME-TAX> 0
<INCOME-CONTINUING> (261,032)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (261,032)
<EPS-PRIMARY> (0.70)
<EPS-DILUTED> (0.70)
</TABLE>
