U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Inter-Con/PC, Inc.
(Name of Small Business Issuer in its charter)
Minnesota 41-1853972
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7667 Equitable Drive
Eden Prairie, Minnesota 55344
(Address of principal executive office) (Zip Code)
Issuer's telephone number (612) 975-0001
Securities to be registered under Section 12(g) of the Act:
Common Shares
Charles Clayton
527 Marquette
Minneapolis, Minnesota 55402
(612) 338-3738
(Agent for Service)
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Item 1. Description of Business
GENERAL
The Company was formed as a Minnesota corporation in June 1996 for the
purpose of developing and marketing certain computer products for the consumer
electronics and telecommunications industries. In particular, the Company
proposes currently to market and sell the TOTEBOOK (the "Set Top Box"). The
Company also anticipates developing, marketing and selling complementary and
peripheral products in conjunction with the Set Top Box. The Company has
contracted for the development of the Set Top Box and has received the first two
versions of the Set Top Box, one with a hard drive and a DVD drive, and one with
no drives. The Company's present emphasis is on the development, manufacturing,
marketing, and sale of the Set Top Box.
STRATEGY
The Company's objective is to market certain niche computer products such
as those described above for the consumer electronics and telecommunications
industries and to contract for the research, development and manufacturing of
its products. At the present time, the Company does not intend to hire personnel
to develop or manufacture its own products. (See "Technical Support and
Development Agreement-Research and Development").
PRODUCTS
Set Top Box. The Set Top Box is a small, relatively inexpensive
alternative to a traditional desktop personal computer ("PC"). It combines the
interactivity of the Internet, the convenience of an ordinary television set,
and the functionality of a personal computer, to provide "PC performance with TV
convenience." The Set Top Box is a small box (approximately 8" x 10" x 3") about
the size of a VCR, which can be placed on top of a television set, allowing the
television set to function as the monitor, or the Set Top Box can be connected
to a monitor. With simple connections to a telephone line for communications and
a television for display, the Set Top Box provides low-cost home computing by
performing basic PC functions, including word processing, spreadsheet, data base
functions and games, as well as Internet access. The Set Top Box supports
industry-standard PC peripherals such as printers, monitors, hard disk drives
and CD-Rom drives. The Company has developed the first two versions of the Set
Top Box, one with a hard drive and a DVD , and one with no drives.
Unlike traditional desktop personal computers, the Set Top Box uses a
wireless infra-red keyboard to communicate with the Set Top Box, in addition to
the ability to use a hard-wire connection typical of a PC connection. The
wireless keyboard communicates with the Set Top Box from the comfort of an easy
chair without the inconvenience of wires. The Set Top Box provides users with
easy access to the
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Internet and intranet applications. Depending on the limitations of the Internet
access provider, users are able to utilize E-mail, perform search and file
transfer functions, execute financial transactions, participate in open forums
and interactive advertising, play interactive games and perform a wide variety
of data retrieval and transmission.
Unlike most of its current competitors, the Set Top Box will be designed
to be capable of performing traditional computer functions, such as document
creation using word processing software or spreadsheet software. Furthermore,
the Company is designing the Set Top Box to be capable of running 31 different
operating systems, such as DOS, Unix, Linux or Windows98(TM), which is needed to
run the DVD on our products. However, the Company does not intend to equip each
Set Top Box with a specific set of software or a specific operating system.
Instead, the Company will allow the distributors to decide which package of
software to include or embed in the Set Top Box. Depending on the package
selected, the memory configuration of the Set Top Box will be determined. At a
minimum, however, the Company intends to recommend a basic package that will
include DOS or MicroSoft 98 operating system, a basic word processing program
and a basic spreadsheet function. The Company anticipates that this basic
package will cost an additional $10 to $25. The Company will also need to obtain
licenses from the various software companies, such as MicroSoft, in order to
sell the Set Top Box with the software already a part of the package. At this
point, the Company has not entered into any such licensing agreements.
The Company anticipates that the retail price for the Set Top Box will
range from $400.00 to $1,100.00 per unit. The Company believes that its Set Top
Box offers more functionality for the consumer, at the anticipated retail
selling price, than is offered by existing and comparably priced competing
products which also employ a television set for Internet access, but which lack
most of the PC-type functions of the Company's Set Top Box. The Company believes
its target market for the Set Top Box initially will include consumers seeking
some of the functions of a PC and low cost and easy access to the Internet
without being required to use any specific Internet access provider. For
example, currently the WEB TV set top box only allows Internet access through
WEB TV's Internet Access Provider, the WebTVNetwork. The Company's Set Top Box,
however, is designed to be used with any Internet Access Provider such as
America-On-Line ("AOL") or others. The Company believes, but can offer no
assurances, that in the future the Set Top Box may also be utilized for distance
learning and a variety of other applications.
The Company believes that the following features will make the Set Top
Box attractive to customers: (a) value/price; (b) use with an ordinary
television set; (c) compatibility with off-the-shelf PC software (subject to
memory and storage requirements; (d) ease of access to the Internet; and (e)
attractive unit size and case.
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FURTHER DEVELOPMENT OF THE SET TOP BOX
The Set Top Box is currently ready for manufacturing and sale. The Set
Top Box may require further testing and refinement in order to meet regulatory,
non-regulatory, and certain export approval. The Company is selecting the
software that could be used in the Set Top Box. The Company is further
conducting certain field tests with demonstration units and experimenting with
various hardware software combinations. The Company believes, but it can offer
no assurances, that the Set Top Box will be able to meet regulatory,
non-regulatory, and export standards. The Company further believes that it can
eliminate possible electromagnetic radiation problems and will be able to create
a bill of materials and additional supporting documentation which will enable
the selected manufacturer to manufacture the Set Top Box.
MARKETING AND DISTRIBUTION
The Company has identified several potential markets for its products.
Specifically, the Company believes there are five distinct markets for its Set
Top Box: (1) the consumer electronics industry, targeting individual consumers
for home use of the Set Top Box; (2) Original Equipment Manufacturers; (3) Value
Added Resellers; and (4) System Integrators and niche markets such as hotel,
motel, education and casino. The Company's initial marketing efforts will be
directed toward penetrating these markets through networking, referrals, and
general business contacts, with a heavy emphasis on trade shows where, to date,
the Set Top Box has been received favorably. Specifically, however, the Company
will pursue these various markets by selling the Set Top Box to, or distributing
the Set Top Box through (i) retail electronic stores engaged in mass
merchandising, e.g. Best Buy, Circuit City, etc., (ii) Internet access providers
and cable TV companies that have been appointed as a distributor, dealer, or
sales representative by the Company. The Company plans to sell in these outlets
using distributors and independent sales representatives, and personal contacts
obtained at trade shows and other industry connections.
To date, the Company has 10 distribution or marketing agreements in
place. In addition, the Company may enter into OEM Agreements with certain
entities for private labeling. Furthermore, the Company plans to investigate the
possibility of selling the Set Top Box to direct marketing organizations as well
as international or domestic licensing agreements.
The Company has not yet developed a complete marketing plan or determined
which of the foregoing markets or marketing methods hold the best potential for
successful commercial exploitation of the Set Top Box and the Company's future
products. The Company will market its products initially through independent
distributors, dealers or sales representative firms, rather than spend its
capital on its own full-time sales force. The Company plans to assess during the
early months of
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its marketing efforts which channels of distribution show the best potential for
the best market penetration of the Set Top Box and other products, and will
concentrate its sales and marketing efforts accordingly.
COLLABORATIVE RELATIONS
The Company anticipates that it will enter into agreements with certain
software distributors and Internet service providers to sell the Company's Set
Top Box. The Company also plans to enter into licensing agreements with various
software developers and distributors allowing the Company to use such software
in the Set Top Box. The Company is currently negotiating such agreement with a
software developer that will allow such version of the Set Top Box to browse the
Internet, use e-mail and perform other bulletin board functions.
MANUFACTURING
To date, the Company has several working versions of its Set Top Box,
which need further testing and certain features need to be refined.
The Company intends to engage in sales and marketing activities, rather
than manufacturing functions. Accordingly, the Company must locate and hire
suitable manufacturers for its Set Top Box and its other products. At this time,
the Company has not selected a manufacturer, but has provided a number of
manufacturers with bid specifications for the manufacture of its Set Top Box. To
date, the Company does not know with any certainty the actual manufacturing
costs associated with its Set Top Box. Accordingly, until such manufacturing
costs are established, the Company will be unable to price its products. The
Company's sale price of $400.00 to $1,100.00 is only an estimate.
SUPPLIERS
The Company will rely on vendors to supply all of the components used in
manufacturing the products, including certain components with long lead times of
up to eight (8) weeks or more. There are a number of significant risks involved
in relying on outside vendors to supply the components for the Company's
products. Such risks include, but are not limited to, the unavailability or
interruption in the delivery of the components, manufacturing delays resulting
from unavailability of components, and uncertainty relating to the quality and
price of the components. Any interruption in the supply or increase in the costs
of such components by outside suppliers and vendors could materially and
adversely affect the Company's ability to have its products manufactured and its
ability to compete effectively. In addition, certain components for the
Company's products may, in the future, be available only from single suppliers.
If such components from these suppliers become unavailable, the Company's
business could be adversely affected until alternative sources, if any, for such
components could be developed. Furthermore, it is also possible that certain
components currently being used in the Company's
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products may not be available in the future from the same, or any, suppliers,
thus forcing the Company to obtain new replacement components, and possibly
redesigning its products in order to use such components.
RELIABILITY AND PRODUCT WARRANTY
To date, the Company has developed two versions of the Set Top Box, one
with two versions, internet only box in developemnt and one with a hard drive
and a DVD. Both versions, however, need further field-testing and refinement
Data on long term maintenance requirements and performance of the Company's
products is limited. Furthermore, because the components used in the Company's
products are being supplied by outside vendors, the Company has little, if any,
data regarding the maintenance and reliability of such components. If future
maintenance requirements are significantly greater than what the Company
expects, the Company's finances could be adversely affected and customers may be
reluctant to place future orders.
To be competitive, the Company anticipates that it will provide a limited
manufacturer's warranty for its products. Although the Company has not yet
determined the specific provisions and requirements of such a limited warranty,
the Company expects that it will be required to perform additional maintenance
and repairs or replacements on products covered by the limited warranty. If such
maintenance, repairs or replacements are greater than anticipated, the Company's
finances and reputation could be adversely affected. The Company anticipates
that any warranty work will be handled by the manufacturer that the Company has
contracted for the manufacturing of the product.
INDUSTRY AND COMPETITION
In 1990, less than 1 million people used the Internet. Today industry
sources estimate that over 40 million users are currently linked to the Internet
in the United States alone. While there can be no assurance that such growth
will continue in the future, most reports indicate that traffic on the Internet
will continue to increase significantly.
This rapid growth of the Internet has brought intense competition. There
are numerous companies involved in the development, manufacture, service, and
marketing of computer software and Internet access services. In the
Minneapolis/St. Paul area alone, there are more than forty (40) companies
currently providing Internet access. The Company is aware of numerous companies
positioning themselves to sell, or are already selling, a product similar to the
Set Top Box.
While many of the Company's competitors have substantially greater
resources and experience than the Company, the Company believes, but can offer
no assurance, that its Set Top Box will be able to effectively compete as a
turn-key
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package for Internet access and personal computer functionality at a competitive
price. However, many of these competitors may now, or in the future, market and
sell products and/or services that are comparable to, superior to, and/or
competitive with, the Company's Set Top Box. Although the Company believes that
certain features of its Set Top Box may make its Set Top Box more attractive and
valuable to the end user, there can be no assurance that the Company's products
can compete successfully with products already on the market or that may enter
the market in the future.
For instance, Web TV, which makes a set box similar to that of the
Company's but with less capability and functionality (for a retail price of
approximately $99.00-199.00 including the keyboard), was acquired by MicroSoft.
Although the Company is unaware of any existing product containing the same
exact features and capabilities, (such as download, perform word and spread
sheet functions and off-the-shelf games, of the Company's Set Top Box, which is
comparable in cost and performance, there is no guarantee that competitive
products will not be developed. If comparable products are available from other
companies, the Company might find it difficult to compete. In addition, many of
the Company's competitors and potential competitors include large, well-financed
and established companies with far greater marketing and financial resources
than the Company.
RESEARCH AND DEVELOPMENT
The goal of the Company is to contract for research and development of
the Set Top Box and other products The research and development expenditures
will not only be used for current products but for upgrades and newer models of
its existing products. The Company may have to engage others to perform
additional design and engineering.
COMPANY'S TWELVE MONTH PLAN OF OPERATION REQUIRES ADDITIONAL FINANCING
The Company believes that the Set Top Box market is extremely dynamic and
may experience rapid growth. The market will become ever more competitive and,
therefore, the Company's objective in the next twelve months is to manufacture
the Set Top Box and develop its marketing and sales organizations. The Company
anticipates hiring additional employees and entering into various agreements for
marketing and selling its Set Top Box. The Company's overall strategy dictates
that, in the short term, current profitability is not as important as revenue
and market share. Should such revenue not occur as forecasted, the Company will
find it necessary to seek additional financing.
INTELLECTUAL PROPERTY RIGHTS
The success of the Company will be determined in large part by the
success of the Company's technology. Currently none of the Company's proposed
products are
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patented. Although the Company is pursuing U.S. patents, and has applied for
certain foreign patents and may apply for additional foreign patents for certain
features of its Set Top Box, no assurances can be given that any patent will
ever issue or that, if issued, the Company will have the resources to protect
any patent. Regardless of the Company's ability to obtain patent protection for
its Set Top Box, such protection may not afford complete protection, and there
is no assurance that others will not develop similar know-how, concepts, and
ideas in competition with the Company. The Company further believes that such
patent protection, if any, may be limited because of the scope of the prior uses
and publications by others of the components used in the Set Top Box. The
Company may also apply for patent protection on its products other than the Set
Top Box, but there can be no assurances that any patent will ever issue with
respect to such products or that, if issued, the Company will have the resources
to protect any patent.
The Company believes that its Set Top Box does not infringe upon patents
held by others, but the Company cannot offer any assurances that such
infringement does not or will not exist. Moreover, if the Company's products
infringe patents or proprietary rights of others, the Company could, under
certain circumstances, be liable for damages that could materially and adversely
affect the Company.
The Company has filed an application for U.S. trademark registration of
the trade name "Inter-Con/PC(TM)".
GOVERNMENT REGULATION AND UL LISTING
The Company must comply with certain requirements and specifications set
forth in rules adopted by the FCC, including Part 15, regulating electromagnetic
radiation. The Company intends to submit its product to an independent
laboratory for testing and to receive FCC certification upon filing such test
results with the FCC. Although the Company believes that FCC standard will be
met and certified, such approval cannot be assured. Part 15 regulations require
that certain products that are marketed for commercial use, such as the
Company's Set Top Box (Class A Devices) be in compliance with such regulation as
a prerequisite to commercial sales. The FCC regulation also governs sales of the
Company's Set Top Box that are marketed for residential use (Class B Devices)
and require that such products be certified. In addition, the Company may be
required to comply with requirements of various foreign government agencies to
effect its foreign sales. The Company expects to seek electrical approval for
its products from certain European countries if it intends to market its
products in such countries. If foreign distributors are involved in the sale of
the Company's products in foreign countries, the Company plans to require such
foreign distributors to be responsible for insuring compliance with and
obtaining any necessary permits from such foreign government agencies under the
terms of any distribution agreement with the Company.
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The Company has received a UL rating but believes that if it does not
obtain listing or certain regulatory or non-regulatory approvals for its
products, it will be difficult, if not impossible, to sell its products in the
consumer market.
EMPLOYEES
The Company has 8 full-time employees and 4 part-time employees. The
Company is not subject to any collective bargaining agreement.
FACILITIES
The Company's offices are located in Eden Prairie, Minnesota in a leased
facility consisting of approximately 5,194 square feet. The lease expires on
August 31, 2001. Commencing on August 31, 1999, the base rent the Company will
pay is $5,919 per month through August 31, 2001. In addition to base rent, the
Company is required to pay as additional rent its pro rata share of operating
expenses and real estate taxes for the building in which its facilities are
located.
The leased facility contains office space as well as a laboratory for
testing the Set Top Box.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1998
The Company had no revenues in either year from sales. There have been
small revenues from interest, $20,475 in 1997 and $22,235 in 1998.
Payroll and related expenses increased in 1998 to $512,500 from $346,912
in 1997. General and administrative expenses increased in 1998 to $757,358 from
$640,946 in 1997. Product development expenses increased in 1998 to $731,362
from $540,900 in 1997.
As a result there was a net loss in 1998 of $2,015,675, compared to a net
loss in 1997 of $1,583,775. The net loss per share in 1998 was $.11, and $.11 in
1997.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998
The Company had no revenues in either nine month period from sales. There
have been small revenues from interest, $4,632 in 1999 and $18,634 in 1998.
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Payroll and related expenses decreased in 1999 to $350,909 from $386,727
in 1998. General and administrative expenses increased in 1999 to $662,952 from
$570,130 in 1998. Product development expenses decreased in 1999 to $105,091
from $657,293 in 1998.
The result was a net loss in 1999 of $1,206,800 compared to a net loss of
$1,593,263 in the same nine months in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically had more expenses than income in each year
of its operations. The accumulated deficit from inception to September 30, 1999
was $5,023,086. It has been able to maintain a positive cash position solely
through financing activities. As a result of this, and the fact that the
Company's current liabilities exceed its current assets, the independent auditor
has issued a going concern opinion.
There are no known trends, events or uncertainties that are likely to
have a material impact on the short or long term liquidity. The primary source
of liquidity in the future will be increased sales. There are no material
commitments for capital expenditures. There are no known trends, events or
uncertainties reasonably expected to have a material impact on the net sales or
revenues or income from continuing operations. There are no significant elements
of income or loss that do not arise from continuing operations. There are no
seasonal aspects to the business of the Company.
YEAR 2000 COMPLIANCE
The computers used by the Company are year 2000 compliant. The software
used by the Company is year 2000 compliant. Based on the assessments to this
date management believes that future costs relating to the year 2000 issue will
not have a material effect on its financial position, results of operations or
cash flows.
ITEM 3. DESCRIPTION OF PROPERTY
The Company leases office, warehouse and production space in suburban
Minneapolis for a monthly rental of $5,919.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There are presently 27,718,407 shares of the Company's common shares
outstanding. The following table sets forth the information as to the ownership
of each person who, as of November 30, 1999, owns of record, or is known by the
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Company to own beneficially, more than five per cent of the Company's common
stock, and the officers and directors of the Company.
Shares of Percent of
Name Common Stock Ownership
- --------------------------------------------------------------------------------
Michael Ferderer (1) 6,275,005 23%
7667 Equitable Drive
Eden Prairie, MN
Thomas Schrade 6,250,000 23%
23 Cascade Creek Lane
Las Vegas, NV
Michael Pint 3,157,142 11%
1235 Yale Place
Minneapolis, MN
Joseph Novogratz 1,693,335 6%
7667 Equitable Drive
Eden Prairie, Mn
Directors and Officers 6,275,005 23%
as a group
(1) Mr. Ferderer holds 6,000,005 shares in his name, the total includes 250,000
shares held by MPF, Inc., a corporation controlled by Mr. Ferderer, and 25,000
shares held by Pamela Holl, Mr. Ferderer's wife. Does not include 125,000
options held by Mr. Ferderer, 250,000 options held by MPF, Inc. and 197,850
options held by Ms Holl.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The executive officers and directors of the company, with a brief
description are as follows:
Name Age Position
- ---- --- --------
Michael Ferderer 52 Chairman, Chief Executive Officer, Secretary
Michael Ferderer, Mr. Ferderer is the Chairman, Chief Executive Officer,
Secretary and a Director of the Company. Mr. Ferderer was an account executive
of U.S. West Communications from 1970 to 1994. From 1994 to August, 1996 he was
President of MPF, Inc. a telecommunications related consulting firm. He has been
the Chief Executive Officer of the Company since its inception in June of 1996.
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ITEM 6. EXECUTIVE COMPENSATION
Mr. Ferderer is paid $100,000 per year. In the past John Walker was paid
$80,888.88, Ron Porter was paid $80,888.88, Steve Sowata was paid $80,888.88 and
Fran McGovern was paid $80,888.88.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has an agreement with MPF, Inc., a corporation wholly owned
by Michael P. Ferderer. MPF, Inc. subleases office space from the Company, and
the Company uses equipment owned by or leased by MPF, Inc. MPF, Inc. pays the
Company $531 per month as rent. The Company acquired certain assets of MPF, Inc.
in June of 1999 in exchange for 250,000 shares of common stock.
ITEM 8. LEGAL PROCEEDINGS
The Company is the plaintiff in a case filed in 1999 in, Colorado against
Flagstick Enterprises, Inc. The case concerns a note made by Flagstick
Enterprises, payable to the Company, in the amount of $100,000. Flagstick
Enterprises is in default of the note.
S & W Plastics, Inc. is the plaintiff in a case filed in Hennepin County,
Minnesota. The Company entered into an agreement with S & W to make a plastic
box for the product of the Company. S & W contends that the Company issued a
purchase order for a number of the plastic boxes in May, 1998 and that there is
now due $108,800 after the Company paid $140,000 for plastic boxes made for the
Company. The Company has filed a counterclaim in the case contending that the
plastic boxes manufactured by S & W did not meet the specifications of the
Company, and that it has lost potential profits as a result.
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's common stock has been traded since June, 1998 on the OTC
Bulletin Board with the symbol IPCN, before that time there was no activity.
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The following table sets forth for the periods indicated the range of
high and low closing bid quotations per share as reported by the
over-the-counter market. These quotations represent inter-dealer prices, without
retail markups, markdowns or commissions and may not necessarily represent
actual transactions.
Price per Share
---------------
High Low
----------------
Fiscal year 1999
Third Quarter (July 1, 1999 $2.065 $0.56
through September 30, 1999)
Fourth Quarter (October 1, 1999 $0.875 $.25
through December 31, 1999)
There are 76 holders of the common stock of the Company. There have never
been any dividends, cash or otherwise, paid on the common shares of the Company.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
Name Date Shares Cost
721 Hennepin Corp 7/97 25,000 $11,250
Darrel. Kluge 7/97 12,000 $5,400
Robert Bach 7/97 50,000 $22,500
Charles Barry 7/97 100,000 $45,000
June Beeler 5/98 10,715 $7,500
Wayne Beisle 7/97 50,000 $50,000
John Benedict 7/97 166,665 $50,000
Raymond Benson 7/97 50,000 $10,000
Ted Bestgen 7/97 25,000 $25,000
James Butler 7/97 25,000 $25,000
Robin Carlin 7/97 50,000 $50,000
Steven Carpenter 7/97 50,000 $50,000
Glen Chamberline 5/98 25,000 $17,500
Ken Denhardt 7/97 25,000 $25,000
Dan Dietrich 7/97 50,000 $50,000
Dorglass, Inc. 7/97 25,000 $25,000
James Drummond 7/97 45,000 $45,000
Jay Duda 7/97 50,000 $22,500
Gary Erickson 7/97 25,000 $11,250
Richard Erickson 7/97 100,000 $45,000
Russell Erkkila 7/97 25,000 $11,250
Eileen Ferderer 7/97 116,210 $52,294
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James Bublitz 7/97 50,000 $22,500
Frederich Gowan 7/97 50,000 $22,500
Jerry Groom 7/97 25,000 $11,250
David Larson 7/97 100,000 $45,000
Steve Polski 7/97 50,000 $22,500
Fred Traffas 7/97 50,000 $22,500
Gary Flam 7/97 25,000 $11,250
Frank Frattalone 7/97 50,000 $22,500
Martin Fudenberg 7/97 50,000 $22,500
David Garceau 7/97 166,665 $50,000
Irving Geislinger 7/97 25,000 $11,250
Rick Geislinger 7/97 25,000 $11,250
Sandi Goetz 7/97 166,665 $50,000
Jeffrey Goetz 7/97 50,000 $22,500
Roger Goetz 5/98 25,000 $17,500
Duane Graff 7/97 25,000 $11,250
Kim Gruetzmacher 7/97 50,000 $22,500
Gordon Halloran 7/97 25,000 $11,250
William Hanneman 5/98 50,000 $17,500
Eugene Hennen 7/97 50,000 $17,500
Joe Hennen 7/97 25,000 $11,250
Larry and Darlene Holberg 7/97 50,000 $22,500
Justin Holl 7/97 33,330 $10,000
David Hutchinson 7/97 50,000 $22,500
James Johnson 7/97 133,330 $40,000
Lloyd and Marie Johnson 7/97 25,000 $11,250
Robert Johnson 7/97 50,000 $22,500
Celine Kammerer 7/97 25,000 $11,250
Lewis Kaufman 7/97 25,000 $11,250
Thomas Keller 7/97 25,000 $11,250
Eileen Kern 5/98 25,000 $17,500
Steven King 7/97 116,665 $3,500
Sandra and Robert Klien 5/98 25,000 $17,500
Thomas and June Kozita 7/97 50,000 $22,500
Ronald Lehrke 7/97 166,665 $50,000
Jeffrey Lessard 5/98 25,000 $17,500
Mary Loberg 7/97 25,000 $11,250
Walton and Joan Madlund 7/97 50,000 $22,500
Jerry Mathwig 5/98 25,000 $17,500
MacDonald Distributing Co 7/97 100,000 $45,000
Marilyne Mitchell 7/97 50,000 $22,500
David Nelson 7/97 50,000 $22,500
Richard Nestlund 7/97 250,000 $112,500
James Olchepski 7/97 25,000 $11,250
Keith Olson 7/97 25,000 $11,250
Eric Overig 7/97 26,785 $12,033
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Barbara Patchen 7/97 500,000 $130,000
Mark Pazlar 7/97 50,000 $22,500
Dean and Jeanne Peterson 5/98 25,000 $17,500
Marlys and Jerome Peterson 7/97 50,000 $22,500
Kimberly and David Rakos 7/97 25,000 $11,250
Phillip Reim 7/97 50,000 $22,500
Adele Roehl 7/97 50,000 $22,500
George Rosenquist 7/97 50,000 $22,500
Daniel Ross 7/97 25,000 $11,250
Robert Ruddy 7/97 50,000 $22,500
Jake Sadlak 5/98 25,000 $17,500
William and Connie Sandison 7/97 50,000 $22,500
Esther Schrade 7/97 100,000 $45,000
Thomas Schrade 7/97 250,000 $112,500
Robert Shively 7/97 50,000 $22,500
Jerry Snyder 7/97 50,000 $11,250
Srmi, Inc. 7/97 50,000 $22,500
Craig Stelton 5/98 25,000 $17,500
Sterling Farms, Inc. 7/97 71,425 $25,000
Larry Swanson 7/97 50,000 $22,500
John Tancheff 5/98 50,000 $35,000
Gale Torstenson 5/98 12,500 $8,750
Leo and Sharon Tutenwohl 7/97 25,000 $11,500
Robert Van Vorst 7/97 100,000 $45,000
Kenneth Vohs 5/98 25,000 $17,500
Marvin Weiss 7/97 50,000 $22,500
Douglas Wenum 7/97 50,000 $22,500
Duane Whitney 5/98 25,000 $17,500
Norman White 5/98 100,000 $70,000
Scott Winter 7/97 125,000 $56,250
Scott Zbikowski 7/97 100,000 $45,000
Deanne Zogg 7/97 166,665 $50,000
Jerry Braeglmann 10/99 500,000 $100,000
Joe Novogratz 3/99 100,000 $100,000
Joe Novogratz 10/99 560,000 $56,000
Eileen Ferderer 12/99 100,000 $10,000
Michael Pint 6/99 718,830 $600,000
Kobi Angress 1/00 150,000 $30,000
Dan Lindberg 1/00 230,000 $23,000
Dan Lindberg 1/00 10,000 $1,000
Jeremiah Lindberg 1/00 10,000 $1,000
Shirley Lindberg 1/00 50,000 $5,000
Timothy Lindberg 1/00 100,000 $10,000
Coleen Scheibe 1/00 100,000 $10,000
Vicky Tollefson 1/00 80,000 $8,000
Mark Bowers 1/00 250,000 $25,000
15
<PAGE>
Ward Savage Trust 1/00 1,000,000 $200,000
Bob Ginges 1/00 250,000 $50,000
Gary Roth 1/00 44,444 $20,000
Ron Saatzer 1/00 100,000 $20,000
Charlie Davis 1/00 200,000 $20,000
The registrant believes that all transactions were transactions not
involving any public offering within the meaning of Section 4(2) of the
Securities Act of 1933, since (a) each of the transactions involved the offering
of such securities to a substantially limited number of persons; (b) each person
took the securities as an investment for his own account and not with a view to
distribution; (c) each person had access to information equivalent to that which
would be included in a registration statement on the applicable form under the
Act; (d) each person had knowledge and experience in business and financial
matters to understand the merits and risk of the investment; therefore no
registration statement need be in effect prior to such issuances.
ITEM 11. DESCRIPTION OF SECURITIES
The Company has authorized 50,000,000 shares of common stock, no par
value. Each holder of common stock has one vote per share on all matters voted
upon by the shareholders. Such voting rights are noncumulative so that
shareholders holding more than 50% of the outstanding shares of common stock are
able to elect all members of the Board of Directors. There are no preemptive
rights or other rights of subscription.
Each share of common stock is entitled to participate equally in
dividends as and when declared by the Board of Directors of the Company out of
funds legally available, and is entitled to participate equally in the
distribution of assets in the event of liquidation. All shares, when issued and
fully paid, are nonassessable and are not subject to redemption or conversion
and have no conversion rights.
Risk Factor - Penny Stock Regulation. Broker-dealer practices in
connection with transactions in "penny stocks" are regulated by certain penny
stock rules adopted by the Securities and Exchange Commission. Penny stock
generally are equity securities with a price of less than $5.00 (other than
securities registered on certain national securities exchanges or quoted on the
Nasdaq system, provided that current price and volume information with respect
to transactions in such securities is provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks and the risks
in the penny stock market. The broker-dealer must also provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in
16
<PAGE>
the customer's account. In addition, the penny stock rules generally require
that prior to a transaction in a penny stock the broker-dealer make a special
written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules. If the Company's securities become subject to the penny stock
rules, investors in this offering may find it more difficult to sell their
securities.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Minnesota Statutes contain an extensive indemnification provision
which requires mandatory indemnification by a corporation of any officer,
director and affiliated person who was or is a party, or who is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a member, director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a member,
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys' fees,
and against judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted, or failed to act, in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. In some instances a court must approve such
indemnification.
As to indemnification for liabilities arising under the Securities Act of
1933 for directors, officers or persons controlling the company, the company has
been informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy and unenforceable.
ITEM 13. FINANCIAL STATEMENTS
FINANCIAL STATEMENTS FOR:
INTER-CON/PC, INC.
(A Development Stage Company)
Years ended
December 31, 1998 and 1997
and period June 17, 1996
(inception) to September 30, 1999
17
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Inter-Con/PC, Inc.
Eden Prairie, Minnesota
We have audited the accompanying balance sheets of Inter-Con/PC, Inc. (a
development stage company) as of December 31, 1998 and 1997, and the related
statements of operations, stockholders' equity (deficit) and cash flows for the
years then ended and for the period June 17, 1996 (inception) to December 31,
1998. 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. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Inter-Con/PC, Inc. as of
December 31, 1998 and 1997, and the results of its operations for the years then
ended and the period June 17, 1996 (inception) to December 31, 1998, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. However, as discussed in Note 2 to the
financial statements, the Company is in the development stage, has not generated
any revenues since inception, and has a deficit accumulated during the
development stage, all of which raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also discussed in Note 2. These financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
The accompanying financial statements include a note receivable of $87,645 which
is currently in default and an investment of $50,000 in an unrelated development
stage company. Collectibility of the note and the return of the investment in
the development stage company are both uncertain. These financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/s/ Schechter, Dokken, Kanter, Andrews & Selcer Ltd.
July 30, 1999
Minneapolis, Minnesota
18
<PAGE>
INTER-CON/PC, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
----------------------------- September 30,
1997 1998 1999
------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 754,090 $ 2,758 $ 7,410
Note receivable 87,645 90,969
Prepaid expenses 104,899 52,667 542
Deferred financing costs, net 57,446
------------ ------------ ------------
Total current assets 858,989 200,516 98,921
------------ ------------ ------------
Property and equipment:
Equipment 56,383 67,743 81,755
Leasehold improvements 86,887
Less accumulated depreciation (7,866) (18,944) (40,040)
------------ ------------ ------------
48,517 48,799 128,602
------------ ------------ ------------
Other assets:
Miscellaneous 37,883 976
Investment 50,000 50,000
------------ ------------ ------------
37,883 50,976 50,000
------------ ------------ ------------
Total assets $ 945,389 $ 300,291 $ 277,523
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
Current liabilities:
Accounts payable:
Trade $ 147,774 $ 465,723 $ 415,283
Related parties 60,144 256,515 259,347
Accrued expenses 31,238 134,244 253,974
Notes payable, current portion 695,532 340,044
------------ ------------ ------------
Total current liabilities 239,156 1,552,014 1,268,648
------------ ------------ ------------
Note payable, long-term 1,773
------------
Stockholders' equity (deficit):
Common stock, no par, authorized
50,000,000 shares, shares outstanding;
18,814,250, December 31, 1997; 18,889,250,
December 31, 1998; 25,655,698, September
30, 1999 2,506,844 2,562,790 4,031,961
Deficit accumulated during the development
stage (1,800,611) (3,816,286) (5,023,086)
------------ ------------ ------------
706,233 (1,253,496) (991,125)
------------ ------------ ------------
Total liabilities and stockholders' equity $ 945,389 $ 300,291 $ 277,523
============ ============ ============
</TABLE>
See notes to financial statements.
19
<PAGE>
INTER-CON/PC, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine months ended June 17, 1996
Years ended December 31 September 30 (inception) to
----------------------------- ----------------------------- September 30,
1997 1998 1998 1999 1999
------------ ------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Operating expenses:
Payroll, contract labor,
and related costs $ 346,912 $ 512,500 $ 386,727 $ 350,909 $ 1,287,224
Product development 540,900 731,362 657,293 105,091 1,430,324
General and
administrative 640,946 757,358 570,130 662,952 2,142,976
------------ ------------ ------------ ------------ ------------
Operating loss 1,528,758 2,001,220 1,614,150 1,118,952 4,860,524
------------ ------------ ------------ ------------ ------------
Other income (expense):
Interest income 20,475 22,235 18,634 4,632 47,342
Interest expense (79,665) (47,117) (8,794) (94,053) (227,117)
Miscellaneous income 4,173 10,427 11,047 1,573 17,213
------------ ------------ ------------ ------------ ------------
(55,017) (14,455) 20,887 (87,848) (162,562)
------------ ------------ ------------ ------------ ------------
Net loss $ (1,583,775) $ (2,015,675) $ (1,593,263) $ (1,206,800) $ (5,023,086)
============ ============ ============ ============ ============
Basic and diluted loss
per share $ (0.11) $ (0.11) $ (0.08) $ (0.06) $ (0.32)
Weighted average number of
shares outstanding, basic
and diluted 14,190,179 18,867,880 18,861,404 21,376,629 15,577,470
</TABLE>
See notes to financial statements.
20
<PAGE>
INTER-CON/PC, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common stock Deficit
no par, authorized accumulated
50,000,000 shares during the
-------------------------- development
Shares Amount stage Total
--------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Initial sale of common
stock at $0.007 per share 300,000 $ 2,000 $ 2,000
Common stock issued
October 31, 1996 at $0.00
per share in exchange for
contribution of technology:
I-Pad(TM) 5,700,000 0 0
Set Top Box 6,000,000 0 0
Common stock issued in
exchange for rent
November 5, 1996 at
$0.30 per share 333,335 100,000 100,000
Fair value of warrants
issued November 29, 1996,
to debt holders and place-
ment agent 50,763 50,763
Net loss $ (216,836) (216,836)
--------- ---------- ------------ -----------
Balance, December 31,
1996 12,333,335 152,763 (216,836) (64,073)
Common stock issued
July 22, 1997 for services
at $0.35 per share 25,000 8,750 8,750
Fair value of warrants
issued to debt holders,
June and July 1997 7,323 7,323
Common stock issued
August and September,
1997 at $0.38 per share 4,375,000 1,650,387 1,650,387
</TABLE>
See notes to financial statements.
21
<PAGE>
INTER-CON/PC, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
<TABLE>
<CAPTION>
Common stock Deficit
no par, authorized accumulated
50,000,000 shares during the
--------------------------- development
Shares Amount stage Total
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Common stock issued for debt
conversions:
September 29, 1997 at $0.35
per share 414,265 $ 145,000 $ 145,000
October 27, 1997 at $0.30 per
share 1,666,650 500,000 500,000
Contribution by SAC Technologies,
Inc. 42,621 42,621
Net loss $ (1,583,775) (1,583,775)
---------- ---------- ------------ -----------
Balance, December 31, 1997 18,814,250 2,506,844 (1,800,611) 706,233
Common stock issued April 15, 1998
for services $0.35 per share 75,000 26,250 26,250
Fair value of warrants issued to debt
holders June, July and September
1998 29,696 29,696
Net loss (2,015,675) (2,015,675)
---------- ---------- ------------ -----------
Balance, December 31, 1998 18,889,250 2,562,790 (3,816,286) (1,253,496)
Common stock issued January 1,
1999, at $0.35 per share 25,000 17,500 17,500
Fair value of stock options issued
to advisory board 80,069 80,069
Common stock issued for product
development costs, June 1, 1999,
at $0.70 per share 53,515 37,460 37,460
Common stock issued to acquire
equipment from related party, June
7, 1999, at $0.026 per share 250,000 12,892 12,892
</TABLE>
See notes to financial statements.
22
<PAGE>
INTER-CON/PC, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
<TABLE>
<CAPTION>
Common stock Deficit
no par, authorized accumulated
50,000,000 shares during the
---------------------------- development
Shares Amount stage Total
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Common stock issued for leasehold
improvements, June 7, 1999 at
$0.20 per share 500,000 $ 100,000 $ 100,000
Common stock outstanding of Infopac
Systems, Inc. recorded in connection
with merger June 8, 1999 4,331,600 0 0
Common stock issued for debt
conversion, June 25, 1999 at
$0.835 per share 718,830 600,000 600,000
Common stock issued for debt
conversion, September 12, 1999,
at $0.70 per share 887,500 621,250 621,250
Net loss (unaudited) $ (1,206,800) (1,206,800)
---------- ----------- ------------ -----------
Balance, September 30, 1999
(unaudited) 25,655,695 $ 4,031,961 $ (5,023,086) $ (991,125)
========== =========== ============ ===========
</TABLE>
See notes to financial statements.
23
<PAGE>
INTER-CON/PC, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended June 17, 1996
Years ended December 31 September 30 (inception) to
----------------------------- ----------------------------- September 30,
1997 1998 1998 1999 1999
------------ ------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss $ (1,583,775) $ (2,015,675) $ (1,593,264) $ (1,206,800) $ (5,023,086)
Adjustment to reconcile
net loss to net cash
flows from operating
activities:
Depreciation 7,706 11,078 8,310 21,096 40,040
Amortization 169,785 128,830 76,411 90,961 408,381
Common stock issued
for services 8,750 26,250 26,250 52,460 87,460
Fair value of options issued
to non employees 80,069 80,069
Additional paid-in
capital contributed
for services 42,621 42,621
Interest income added
to note principal (9,130) (3,324) (3,324)
Change in assets and
liabilities:
Prepaid expenses (48,735) 31,018 (12,412) 36,975 (542)
Other assets (18,222) (23,316)
Accounts payable:
Trade 140,225 317,949 233,456 (50,440) 415,283
Related parties 28,895 93,730 25,994 2,832 156,706
Accrued expenses 11,609 103,006 5,356 119,730 253,974
------------ ------------ ------------ ------------ ------------
Net cash used in
operating activities (1,241,141) (1,303,814) (1,239,029) (856,441) (3,565,734)
------------ ------------ ------------ ------------ ------------
Cash flows from investing activities:
Expenditures for:
Property and
equipment (40,110) (11,360) (12,358) (3,007) (70,750)
Note receivable (100,000) (100,000) (100,000)
Investment (50,000) (50,000) (50,000)
Repayment received on
note receivable 12,355 12,355
------------ ------------ ------------ ------------ ------------
Net cash used in
investing activities (40,110) (149,005) (162,358) (3,007) (208,395)
------------ ------------ ------------ ------------ ------------
</TABLE>
See notes to financial statements.
24
<PAGE>
INTER-CON/PC, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended June 17, 1996
Years ended December 31 September 30 (inception) to
----------------------------- ----------------------------- September 30,
1997 1998 1998 1999 1999
------------ ------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from financing
activities:
Proceeds from:
Notes payable $ 197,500 $ 716,249 $ 706,649 $ 895,709 $ 2,309,458
Related parties 102,641 97,641 102,641
Issuance of common
stock 1,650,387 17,500 1,669,887
Repayment on notes
payable (52,500) (1,555) (1,075) (49,109) (103,164)
Deferred financing costs (115,848) (115,848) (197,283)
------------ ------------ ------------ ------------ ------------
Net cash provided by
financing activities 1,795,387 701,487 687,367 864,100 3,781,539
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
cash and cash equivalents 514,136 (751,332) (714,020) 4,652 7,410
Cash and cash equivalents:
Beginning 239,954 754,090 754,090 2,758
------------ ------------ ------------ ------------ ------------
Ending $ 754,090 $ 2,758 $ 40,070 $ 7,410 $ 7,410
============ ============ ============ ============ ============
Cash paid for interest $ 52,001 $ 14,231 $ 7,611 $ 54,755 $ 66,232
============ ============ ============ ============ ============
Supplemental disclosure
of noncash investing
activities:
Fair value of warrants
and options issued $ 7,323 $ 29,696 $ 29,696 $ 80,069 $ 167,851
============ ============ ============ ============ ============
Common stock issued:
For services $ 8,750 $ 26,250 $ 26,250 $ 52,460 $ 87,460
============ ============ ============ ============ ============
For rent $ 100,000
============
For debt conversion $ 645,000 $ 1,221,250 $ 1,866,250
============ ============ ============
For fixed assets $ 97,892 $ 97,892
============ ============
Contribution by SAC
Technologies, Inc. $ 42,621 $ 42,621
============ ============
</TABLE>
See notes to financial statements.
25
<PAGE>
INTER-CON/PC, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1998
(Including Data Applicable to Unaudited Periods)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of business and basis of presentation:
Inter-Con/PC, Inc. (the "Company"), was incorporated in Minnesota in 1996 and
has been a development stage company since inception. On June 8, 1999,
Infopac Systems, Inc. acquired all outstanding common stock of Inter-Con/PC,
Inc. For accounting purposes, the acquisition has been treated as an
acquisition by Inter-Con/PC, Inc. of Infopac Systems, Inc. and as a
recapitalization of Inter-Con/PC, Inc. The historical financial statements
prior to June 8, 1999, are those of Inter-Con/PC, Inc. All share and per
share information has been restated for this transaction.
Inter-Con/PC, Inc. was formed to develop and market a set-top-box that would
facilitate the convergence of voice, data and other technologies and bring
them to the TV screen. These boxes will be primarily sold in the consumer
electronics and telecommunications industries. The Company has completed
development of its set-top-box and has manufactured a small number of
prototype units and is prepared to enter high volume manufacturing. It is
actively marketing the TOTEBOOK(TM) 6000, which features a high-speed
processor, hard drive and DVD drive that functions as an interactive
multi-media home center. The Company may also sell the product under the
names "CYBER SPIDER(TM)," "INTER-CON/PC(TM)" and "P.I.N.TV(TM)." The Company
has several patents pending and copyrights on its board design and other
intellectual properties.
Interim financial statements:
The balance sheet as of September 30, 1999, and the related statements of
operations, shareholders' equity and cash flows for the nine month periods
ended September 30, 1998 and 1999 are unaudited. However, in the opinion of
management these interim financial statements include all adjustments
(consisting only of normal recurring adjustments) which are necessary for the
fair presentation of the results for the interim periods presented. The
results of operations for the unaudited nine month period ended September 30,
1999, are not necessarily indicative of the results which may be expected for
the entire 1999 fiscal year.
Use of estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Actual results could
differ from those estimates.
Cash equivalents:
Cash equivalents consist of highly liquid, interest bearing investments that
have original maturities of three months or less.
Concentration of credit risk:
The Company maintains its cash at two financial institutions in the
Minneapolis/St. Paul area of Minnesota. At times, balances may exceed
federally insured limits.
26
<PAGE>
INTER-CON/PC, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1998
(Including Data Applicable to Unaudited Periods)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
Property, equipment, leasehold improvements and depreciation:
Property, equipment and leasehold improvements are carried at cost.
Depreciation is computed using the straight-line method over estimated lives
of 3-7 years.
Investment:
The investment consists of a minority interest in common stock of a
development stage company and is recorded at cost.
Organization costs:
Organization costs were being amortized using the straight-line method over a
60 month period through December 31, 1998. On January 1, 1999, unamortized
organization costs were expensed.
Debt placement costs:
Debt placement costs in connection with bridge financing are being amortized
over the term of the notes using the straight-line method.
Earnings per share:
Basic earnings per share is computed using the weighted average number of
common shares outstanding. Diluted earnings per share is computed using the
combination of dilative common share equivalents and the weighted average
number of common shares outstanding. Diluted earnings per share is not
presented as the effect of outstanding warrants and options is antidilutive.
Stock-based compensation:
The Company has adopted the disclosure provisions of Statement of Financial
Accounting Standards No. 123, "ACCOUNTING FOR STOCK-BASED COMPENSATION"
("SFAS No. 123"), and elected to continue the accounting set forth in
Accounting Principles Board No. 25, "ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES" ("APB No. 25"). The Company has provided the necessary pro forma
disclosures as if the fair value method had been applied.
Disclosures of fair value of financial statements:
The carrying amounts reported in the balance sheet for cash approximate fair
value due to the short maturity of such instrument. The fair value of the
Company's investment in notes receivable and equity investment in a privately
held company have no quoted market prices and accordingly, a reasonable
estimate of fair market value could not be made without incurring excessive
costs.
The fair value of the Company's notes payable is not practical to estimate
due to conversion features and warrants offered with the debt, whose market
value is not determinable.
27
<PAGE>
INTER-CON/PC, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1998
(Including Data Applicable to Unaudited Periods)
2. DEVELOPMENT STAGE ENTERPRISE AND GOING CONCERN:
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. However, the Company is in the development stage
with no sales of its products and its products are subject to rapid changes in
technology. There is no assurance that the Company will be able to generate
significant sales of its products. Additionally, the Company has a deficit
accumulated during the development stage of $3,816,286 as of December 31, 1998
and $5,023,086 (unaudited) as of September 30, 1999. Management anticipates net
losses will continue for the foreseeable future. Additional financing, beyond
the financing obtained through July 1, 1999, (see Note 9), will be required to
complete development and enhancement of the Company's products and bring them to
market.
The matters described in the preceding paragraph raise substantial doubt about
the Company's ability to continue as a going concern. Recoverability of a major
portion of the recorded asset amounts shown in the accompanying balance sheet is
dependent upon the Company advancing beyond the development stage and developing
sustained operations. The accompanying financial statements do not include any
adjustments that might be necessary should the Company be unable to continue in
existence.
3. NOTE RECEIVABLE:
The Company has invested in a note receivable from Flagstick Guarantee, Inc. The
note was in default in April 1998. In October 1998, the Company received
interest to the date of the receipt plus $12,855 of principal but has not
collected anything more since then. The Company is pursuing collection of the
outstanding balance. The amount that the Company may recover is presently not
determinable.
4. INVESTMENT:
The Company has invested $50,000 for 76,923 shares of common stock in Cyrus
Intersoft, Inc., (Cyrus) a software company that is in the development stage.
The stock split three for one resulting in the Company holding 230,769 shares.
The Company plans to use Cyrus Intersoft Software as an application overlay with
a LINUX operating system. This provides the TOTEBOOK(TM) user with a multiple of
applications and eliminates the need for a hard drive within the TOTEBOOK(TM).
Management believes the value of the investment is not less than cost, but the
stock is not currently traded.
28
<PAGE>
INTER-CON/PC, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1998
(Including Data Applicable to Unaudited Periods)
5. NOTES PAYABLE:
Notes payable consist of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Note payable, payable quarterly with $16,000 installments
plus interest at 12%, due April 2000 $ 152,952
Note payable, due on demand with no interest $ 9,600
Note payable, bank, due in monthly installments of $303
through June 2000 with interest at 8.75%, secured by vehicle 5,094 2,628
Convertible debentures, due on demand, 2% above the prime
rate, convertible into 1,300,000 shares of common stock 131,964
Convertible notes payable, $700,000, at 8% interest, imputed
interest at 12%, unsecured due June, 1999(A) 682,611 52,500
------------ ------------
697,305 340,044
Less current portion 695,532 340,044
------------ ------------
$ 1,773 $ 0
============ ============
</TABLE>
(A) The notes can be converted into 1,000,000 shares of common stock and were
sold with 350,000 detachable warrants to purchase common stock at $0.70 per
share. The notes and warrants were recorded using a 12% interest rate to
recognize the value of the warrants and conversion feature. Additional warrants
were issued to the selling agent to purchase 100,000 shares of stock at $0.84
per share. No amounts were ascribed to these warrants. The Company has requested
note holders to exercise their conversion rights in 1999 on the date of maturity
and $621,250 of the notes were converted in September 1999.
In 1997, the Company issued convertible notes payable of $197,500 with interest
at 8% and detachable warrants to purchase 98,750 shares of common stock. The
notes and warrants were recorded using a 12% interest rate to recognize the
value of the warrants and conversion feature. In 1997, $145,000 of these notes
were converted to common stock with the remainder being redeemed.
29
<PAGE>
INTER-CON/PC, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1998
(Including Data Applicable to Unaudited Periods)
6. PROVISION FOR INCOME TAXES:
The Company has approximately $1,800,000, $3,800,000 and $4,800,000 (unaudited)
of net operating loss carryforwards for tax purposes at December 31, 1997, 1998
and September 30, 1999, respectively. Net operating loss carryforwards may be
subject to limitations under Section 382 of the Internal Revenue Code should the
ownership of the Company change substantially and expire in years 2011-2014.
Gross deferred tax assets of approximately $720,000, $1,520,000 and $1,920,000
(unaudited) result from the net operating loss carryforwards as of 1997, 1998
and September 30, 1999, respectively. However, due to the uncertainty
surrounding realization of deferred tax assets, a valuation allowance has been
recorded and, accordingly, no benefit was included in these financial
statements.
7. RELATED PARTY TRANSACTIONS AND COMMITMENTS:
Technical support and cooperative development agreement:
The Company entered into a technical support and cooperative development
agreement effective November 1, 1996 with SAC Technologies, Inc. (SAC), a
principal stockholder of the Company.
The agreement required SAC to provide technical support regarding the
set-top-box, and design, develop, and deliver the Mux Panel and Data-Cop
products in accordance with detailed specifications for which the Company
agreed to pay SAC $15,566 per month for the first six months of ongoing
technical support. Thereafter, 30 monthly payments of $11,667 were required.
Expense related to this agreement for the year ended December 31, 1997 was
$156,000.
The agreement originally was set to expire October 31, 1999, but was
terminated by the parties as of December 31, 1997. The Company owed SAC
$42,621 at the termination date and this amount was contributed to the
Company and recorded as common stock.
Support, sublease, and sharing agreements:
The Company has a support services agreement with MPF, Inc., a company wholly
owned by a principal stockholder of the Company. The three year agreement is
dated September 1, 1996, and is subject to any termination or renewal as
provided in the employment agreement of the principal stockholder of the
Company. MPF, Inc. is required to make available to the Company local and
long distance carrier services which will be paid for based on actual usage
on a monthly basis. In addition, MPF, Inc. agrees not to market internet
access switches or services directly in competition with the Company except
in the Minneapolis/St. Paul area of Minnesota.
30
<PAGE>
INTER-CON/PC, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1998
(Including Data Applicable to Unaudited Periods)
7. RELATED PARTY TRANSACTIONS AND COMMITMENTS (CONTINUED):
The Company also has a sublease and sharing agreement with MPF, Inc. dated
September 1, 1996 and continuing on a monthly basis thereafter. The Company
subleases office space to MPF, Inc. for $624 per month. Effective March 1,
1997, the amount was reduced to $531 per month as MPF, Inc. moved to smaller
office space than initially agreed upon. MPF, Inc. permits the Company to use
certain equipment owned or leased by MPF, Inc. for a monthly fee of $500.
The amount of annual sublease income received was $6,558 and $6,372 for 1997
and 1998, respectively. Total annual equipment rent expense was $6,000 for
the years ended December 31, 1997 and 1998. Amounts of transactions were
immaterial in 1999.
Employment agreements:
The Company has entered into an employment agreement with a principal
stockholder effective September 1, 1996 that obligates the Company to employ
him as chief executive officer for three years at a base salary of $100,000
per year, along with certain benefits and discretionary bonuses.
In the event the Company terminates his employment prior to August 31, 1999
without cause, the employee will be entitled to receive the remaining amount
of base salary due under this agreement or at his option, a lump sum payment
of the present value of the remaining salary using a discount rate of 12%.
The agreement restricts the employee's post-employment activities for a
period of 18 months following his termination of employment.
The Company also has an employment agreement with a vice-president effective
August 1, 1998, for a three year period for $81,000 per year with benefits
and discretionary bonus. The agreement includes a two year non-compete clause
along with a requirement to pay a six month severance for termination without
cause. Subsequent to December 31, the vice-president resigned.
Office lease:
The Company leases office space from Equitable Holdings, Inc., a minority
stockholder, expiring September 30, 2002. The Company pays a monthly base
rent and additional amounts equal to its share of real estate taxes and
building operating expenses.
In an amendment to the lease dated November 5, 1996, the lessor agreed to
accept 333,335 shares of the Company's common stock and a warrant to purchase
125,000 shares of common stock at $0.35 per share exercisable from March 1,
1998 through December 31, 1999 as prepayment of all base rent and additional
rent for the period September 1, 1996 through May 31, 1999. Such rent has
been valued at $100,000 and has been capitalized as prepaid rent amortizable
over 33 months using the straight-line method. For the year and period ended
December 31, 1998 and 1997, amortization of prepaid rent was $36,360, and was
$15,150 (unaudited) for the nine months ended September 30, 1999.
31
<PAGE>
INTER-CON/PC, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1998
(Including Data Applicable to Unaudited Periods)
7. RELATED PARTY TRANSACTIONS AND COMMITMENTS (CONTINUED):
Future minimum annual base rents payable on the lease as of September 30,
1999 are as follows:
1999 $ 17,333
2000 69,324
2001 69,324
2002 51,993
Accounts payable related parties:
Accounts payable to related parties includes amounts due to officers,
shareholders and family members of principal shareholders which were the
result of services performed, payments made on behalf of the Company, or cash
advances to the Company. The amount due at December 31, 1998 includes $44,000
of notes payable to an officer's spouse, with interest at 12%. Interest
expense for related parties was $2,440 in 1998 and $2,832 (unaudited) for
nine months ended September 30, 1999.
The Company also entered into consulting agreements with an officer's spouse
and a shareholder of the Company in which the Company has agreed to pay for
services rendered by issuing common stock. As of December 31, 1998, no common
stock has been issued to these parties for services. Expenses of $60,144 and
$140,484 have been recorded in the financial statements for the years ending
December 31, 1997 and 1998, respectively.
Product Development Agreement:
Effective July 1, 1997, the Company entered into an agreement for the
development of the appropriate plastic cases for the Company's set-top-box as
well as other future products. The agreement states that the Company will pay
$53,000 for the delivery of the plastic box, of which $18,000 will be paid in
monthly installments of $500. The remaining balance will be paid with 100,000
shares of stock at $0.35 per share. Twenty-five thousand shares of common
stock were issued upon execution of the agreement and the remaining 75,000
shares were issued on April 15, 1998.
32
<PAGE>
INTER-CON/PC, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1998
(Including Data Applicable to Unaudited Periods)
7. RELATED PARTY TRANSACTIONS AND COMMITMENTS (CONTINUED):
Additional common stock:
The Company has agreed to issue 762,070 shares of common stock as of
September 30, 1999 for accrued rent and services.
8. STOCK OPTIONS AND WARRANTS:
1997 Stock Option Plan:
On March 6, 1997, the Company adopted the 1997 Stock Option Plan intended to
provide two types of options:
- Qualified incentive stock options for the benefit of the Company's
officers and employees.
- Nonqualified options for the benefit of the Company's directors, officers,
employees, and consultants.
Aggregate shares issued under this plan shall not exceed 200,000 shares,
adjusted for stock splits, dividends, or combinations that may occur. The
Board of Directors has sole discretion in determining which eligible
individuals will be granted options, what type, the option price, the number
of shares subject to each option, and whether other terms will apply. The
plan expires March 5, 2007.
1997 Directors Stock Option Plan:
The Company has a 1997 Directors Stock Option Plan intended to attract
individuals for service as outside directors. None of these options are
incentive stock options. Aggregate shares issued under this plan shall not
exceed 750,000 shares, adjusted for stock splits, dividends, or combinations
that may occur.
Each outside director shall be granted an option to purchase 120,000 shares
of the Company's common stock on the date such person first becomes a
director.
On the date of each annual meeting, each director will automatically receive
an option to purchase 30,000 shares of the Company's common stock to become
exercisable six months after the date granted.
33
<PAGE>
INTER-CON/PC, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1998
(Including Data Applicable to Unaudited Periods)
8. STOCK OPTIONS AND WARRANTS (CONTINUED):
1997 Directors Stock Option Plan (continued):
These options will expire ten years from the date the option is granted.
Vesting occurs only while a director remains a director, but vested options
shall be exercisable for up to five years after the date a director ceases to
be a director. The option price per share will be 100% of the fair market
value on the date the option was granted.
Information relating to all stock options is as follows:
<TABLE>
<CAPTION>
December 31
--------------------------------------------------------------- September 30
1997 1998 1999 (Unaudited)
-------------------------- ----------------------------- ---------------------------
Weighted Weighted Weighted
Number average Number average Number average
of exercise of exercise of exercise
shares price shares price shares price
---------- --------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Beginning 0 360,000 $ 0.35 795,500 $ 0.55
Granted 360,000 $ 0.35 587,500 0.71 1,375,506 0.72
Exercised 0 0
Forfeited 0 (152,000) 0.70 (383,000) 0.55
Expired 0 0 0
---------- ------------ ------------
Ending 360,000 $ 0.35 795,500 $ 0.55 1,788,006 $ 0.68
========== ========= ============ ========= ============ =========
Exercise price range $0.35 $0.35 to $0.84 $0.35 to $0.84
===== ============== ==============
Exercisable shares 80,000 $ 0.35 275,500 $ 0.45 1,748,006 $ 0.68
========== ========= ============ ========= ============ =========
Weighted average
remaining life 7.7 years 6.4 years 5.7 years
</TABLE>
34
<PAGE>
INTER-CON/PC, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1998
(Including Data Applicable to Unaudited Periods)
8. STOCK OPTIONS AND WARRANTS (CONTINUED):
Pro forma information regarding net loss is required by Statement of Financial
Accounting Standards No. 123, "ACCOUNTING FOR STOCK BASED COMPENSATION", and has
been determined as if the Company had accounted for the stock options under the
fair value method in that Statement. The fair value for these options was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted average assumptions:
Years ended Nine months ended
December 31 September 30
------------------------ ------------------------
1997 1998 1998 1999
---------- ---------- ---------- ----------
Risk-free interest rate 6% 6% 6% 6%
Dividend yield 0% 0% 0% 0%
Volatility factor 0% 0% 0% 0%
Weighted average
expected life 3 years 3 years 3 years 3 years
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's stock options have characteristics significantly different from
those of traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the fair
value of its stock options.
The Company's proforma net loss is as follows:
Years ended Nine months ended
December 31 September 30
------------------------- -------------------------
1997 1998 1998 1999
----------- ----------- ----------- -----------
As reported:
Net loss $(1,583,775) $(2,015,675) $(1,593,263) $(1,206,800)
Loss per share $ (0.11) $ (0.11) $ (0.08) $ (0.06)
Proforma:
Net loss $(1,603,775) $(2,075,476) $(1,653,064) $(1,255,800)
Loss per share $ (0.11) $ (0.11) $ (0.09) $ (0.06)
35
<PAGE>
INTER-CON/PC, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1998
(Including Data Applicable to Unaudited Periods)
8. STOCK OPTIONS AND WARRANTS (CONTINUED):
Stock warrants:
The Company has issued stock warrants to its landlord, placement agent, and
the note holders.
<TABLE>
<CAPTION>
December 31
------------------------------------------------- September 30
1997 1998 1999 (Unaudited)
--------------------- ---------------------- -----------------------
Weighted Weighted Weighted
Number average Number average Number average
of exercise of exercise of exercise
shares price shares price shares price
-------- --------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 541,665 $ 0.37 1,077,915 $ 0.45 1,527,915 $ 0.53
Granted 536,250 0.52 450,000 0.73 775,000 0.70
Exercised 0 0 0
Expired 0 0 0
--------- --------- ---------
Outstanding at end
of year 1,077,915 $ 0.45 1,527,915 $ 0.53 2,302,915 $ 0.59
========= ====== ========= ====== ========= ======
Range of exercise prices at
end of year $0.35 - $0.54 $0.35 - $0.84 $0.35 - $0.84
Warrants exercisable at
year end 166,665 $ 0.35 1,527,915 $ 0.53 2,302,915 $ 0.59
========= ====== ========= ====== ========= ======
Weighted average
remaining life 3.1 years 3.0 years 3.2 years
</TABLE>
36
<PAGE>
INTER-CON/PC, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1998
(Including Data Applicable to Unaudited Periods)
9. SUBSEQUENT EVENTS:
Acquisitions and merger:
In June 1999, the Company agreed to acquire certain assets of FutureComm,
Inc., and MPF, Inc., in exchange for 750,000 shares of common stock of the
Company. Assets acquired relate to the internet services and telephone
licenses of these companies. Both of these companies were controlled by
officers of the Company. The Company has not closed on the Future Comm, Inc.
transaction as of September 30, 1999 but has committed to issuing 500,000
shares of common stock for certain assets. The assets acquired from MPF, Inc.
were recorded at the seller's historical net book value rather than fair
value since they were purchased from an entity controlled by an officer of
the Company. Immediately subsequent to the acquisition, the Company was
merged into a public non-reporting shell company, retaining the name
InterCon/PC, Inc. by exchanging 3,785,253 shares of Company common stock and
options outstanding for 18,926,265 shares of the public shell's common stock.
After the transaction, the stockholders of the Company owned 18,926,265
shares of 23,257,865 shares of outstanding common stock. The public shell
company had no assets and no liabilities.
Additional financing:
In 1999, the Company obtained additional debt of $750,000 from individual
investors. The notes are structured as follows:
Note payable, 12% interest, due in quarterly installments of
$16,000 in April, July and October 1999, with a final
installment of $105,000 due in January 2000. $ 150,000
Convertible debentures, 2% above the prime rate, interest only
payable annually, principal due May 2004. Notes are convertible
at a rate of $0.84 per share. 600,000
----------
$ 750,000
==========
10. CONTINGENCIES:
The Company is involved in two disputes with vendors that could result in
additional liability to the Company as follows:
The first dispute involves a vendor regarding an order of component parts
which the Company canceled. The amount claimed to be owed by the Company to
the vendor is in excess of $100,000. Management believes it has no further
obligation to the vendor and accordingly, has not recorded any liability
associated with this dispute.
The other dispute involves failure for payment for services rendered. The
vendor alleges the Company has been billed for work completed for over
$250,000. The Company has paid approximately $140,000 and has recorded
approximately $108,000 in accounts payable in addition to amounts paid. The
Company has countered with a claim for breach of contract, fraud and
negligence. Management expects that this dispute will be settled favorably
and has not recorded any additional liability in the financial statements for
this contingency.
37
<PAGE>
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Please see the attached Financial Statements
(b) Exhibits:
3. Articles of Incorporation and bylaws
38
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: 2/08/00 Inter-Con/PC, Inc.
/s/
-----------------------------------------
Michael Ferderer, President, Director
39
EXHIBIT 3
ARTICLES OF INCORPORATION
OF
INFOPAC SYSTEMS, INC.
The undersigned, for the purpose of forming a corporation under and
pursuant to the provisions of Chapter 302A of the Minnesota Statutes, does
hereby adopt the following Articles of Incorporation:
ARTICLE I
The name of this corporation shall be Infopac Systems, Inc.
ARTICLE II
The address of the registered office of the corporation is 19131
Industrial Blvd., Elk River, Minnesota 55330.
ARTICLE III
The corporation shall be authorized to issue Ten Million (10,000,000)
shares of common stock with no par value. No shareholder of the corporation
shall have any preemptive right to subscribe to or purchase any new or
additional shares of any class of stock of this corporation. Each shareholder
shall be entitled to one vote per share and there shall be no cumulative voting
rights.
ARTICLE IV
The name and address of the incorporator of the corporation is
Milo F. Hennemann
251 Elk Hills Drive
Elk River, Minnesota 55330
ARTICLE V
The name and address of the first directors of the corporation are
Milo F. Hennemann
251 Elk Hills Drive
Elk River, Minnesota 55330
<PAGE>
Douglas Dupuis
P.O. Box 337
Bismark, North Dakota 58502
IN WITNESS WHEREOF, I have hereunto set my hand this 30th day of
December, 1983.
-----------------------------------------
Milo F. Hennemann
STATE OF MINNESOTA)
COUNTY OF SHERBURNE)
On this 30th day of December, 1983, before me, a Notary Public,
personally appeared Milo F. Hennemann, to me known to be the person named in and
who executed the foregoing instrument and who acknowledged to me that he
executed the foregoing, and he acknowledged to me that he executed the same as
his free act and deed and for the uses and purposes therein expressed.
-----------------------------------------
Notary Public
<PAGE>
ARTICLES OF AMENDMENT
OF ARTICLES OF INCORPORATION
OF
INFOPAC SYSTEMS, INC.
I, Milo F. Hennemann, President of Infopac Systems, Inc., a Minnesota
corporation, do hereby certify that the following resolutions pertaining to the
adoption of Article VI of the corporation's Articles of Incorporation were
approved by the affirmative vote of a majority of the shares of common stock
represented at a meeting of the shareholders of this corporation held on
Wednesday, November 30, 1988.
RESOLVED:
There shall be added to the Articles of Incorporation of this
corporation a new article to be designated as Article VI, said new
Article VI to read as follows:
ARTICLE VI
LIMITATION OF DIRECTOR LIABILITY
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) based on a breach of the duty of
loyalty to the corporation or its shareholders; (ii) for acts or omissions not
in good faith or that involve intentional misconduct or a knowing violation of
law; (iii) under Section 302A.559 or 80A.23 of the Minnesota Statutes; (iv) for
any transaction from which the director derived an improper personal benefit; or
(v) for any act or omission occurring prior to the date this Article VI becomes
effective. If, after the adoption of this Article VI, the Minnesota Business
Corporation Act is amended to authorize the further elimination of or limitation
on the liability of directors, then, in addition to the limitation of personal
liability provided herein, the liability of a director of the corporation shall
be limited to the fullest extent permitted by such amended Act. If, after the
adoption of this Article VI, this Article VI or the Minnesota Business
Corporation Act is amended to adversely affect any elimination of or limitation
on the personal liability of a director of the corporation, any such amendment
shall be prospective only and shall not adversely affect any elimination of or
limitation on the personal liability of a director of the corporation existing
at the time of such amendment.
RESOLVED
FURTHER:
The President of this corporation is hereby authorized and directed to
make, execute and acknowledge Articles of Amendment embracing the foregoing
resolution and to cause such Articles of Amendment to be filed for record in the
manner required by law.
<PAGE>
IN WITNESS WHEREOF, I have hereto set my hand this 30th day of
November, 1988.
-----------------------------------------
Milo F. Hennemann
President
<PAGE>
ARTICLES OF AMENDMENT
OF
INFOPAC SYSTEMS, INC.
The undersigned corporation hereby adopt the following Articles of
Amendment, which replace the following Articles:
ARTICLE I
The name of the corporation is Inter-Con/PC, Inc.
ARTICLE II
The address of the registered office of the corporation is 7667
Equitable Drive, Suite 101, Eden Prairie, MN 55344.
ARTICLE III
The corporation shall be authorized to issue 50,000,000 shares of
common stock.
IN WITNESS WHEREOF, this amendment to the Articles of Incorporation is
executed the 9th day of June, 1999.
/s/ Michael P. Ferderer
-----------------------------------------
Michael P. Ferderer
The amendment was adopted by the shareholders, on the 8th day of June,
1999.
/s/ Michael P. Ferderer
-----------------------------------------
Michael P. Ferderer
<PAGE>
BY-LAWS OF
INFOPAC SYSTEMS, INC.
ARTICLE I
Offices
Section 1. Registered Office.
The address of the registered office of the corporation is 19131 Industrial
Blvd., Elk River, Mn. 55330. The registered office need not be identical with
the principal office of the corporation and may be changed from time to time by
the Board of Directors.
Section 2. Other Offices.
The corporation may have other offices at such other places within and without
the State of Minnesota as the Board of Directors may from time to time
determine.
ARTICLE II
Meetings of Shareholders
Section 1. Place of Meeting.
All meetings of the shareholders of this corporation shall be held at its
principal office unless some other place for any such meeting within or without
the State of Minnesota be designated by the Board of Directors in the written
notice of meeting.
Section 2. Annual Meeting.
The annual meeting of the shareholders of this corporation shall be held on the
first Monday in April
<PAGE>
of each year or on such other date during the calendar year as may be designated
by the Board of Directors in the written notice of meeting which written notice
of meeting shall designate the time of meeting and the place of meeting if other
than the corporation's principal office. At the annual meeting the shareholders
shall elect a Board of Directors and transact such other business as may be
properly brought before the meeting. If an annual meeting is not held during any
calendar year, or if the directors are not elected thereat, the directors may be
elected at a special meeting of the shareholders called for that purpose which
special meeting shall be called upon the demand of any shareholder entitled to
vote, which demand for and call of said special meeting shall be in accordance
with the provisions of Section 3 of this Article relating to demands for call of
a special meeting of shareholders.
Section 3. Special meetings. Special meetings of the shareholders, for
any purpose or purposes, may be called by the President and, in his absence, by
the Vice-President, or by the Board of Directors or any two or more members
thereof, or in the manner hereinafter provided by one or more shareholders
holding not less than one-tenth of the voting power of the shareholders. Upon
request, in writing by registered mail or delivered in person to the President,
Vice President or Secretary, by any person or persons entitled to call a meeting
of shareholders, it shall be the duty of such officer forthwith to cause notice
to be given to the shareholders
-2-
<PAGE>
entitled to vote, of a meeting to be held at such time as such officer shall
fix, not less than ten (10) nor more than sixty (60) days after the receipt of
such request. The officer shall not fix a date which unduly delays the meeting
or shall have the effect of defeating the purpose of the meeting. Business
transacted at any special meeting of shareholders shall be limited to the
purpose or purposes stated in the notice of meeting.
Section 4. Notice of Meetings. Written notice of the annual meeting
stating the time and place thereof shall be given to each shareholder of record
entitled to vote at such meeting at least ten (10) days prior to the date of
such annual meeting. Written notice of all special meetings of shareholders
stating the time, place and purposes thereof shall also be given to each
shareholder of record entitled to vote at such meeting at least five (5) days
before the date fixed for such meeting. All notices of meeting shall be mailed
to each shareholder at his address as it appears on the stock transfer books of
the corporation and shall be deemed delivered when deposited in the United
States mail, thereon prepaid. Notices given by telegram shall be deemed to be
delivered when the telegram is delivered to the telegraph company properly
addressed and prepaid. Any shareholder may waive notice of any meeting.
Section 5. Record Date. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of share-
-3-
<PAGE>
holders or any adjournment thereof, or shareholders entitled to receive payment
of any dividend, or in order to make a determination of shareholders for any
other proper purpose, the Board of Directors of the corporation may, but need
not, fix a date as the record date for any such determination of shareholders,
which record date however, shall in no event be more than sixty (60) days prior
to any such intended action or meeting.
Section 6. Quorum. A majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice.
Any business may be transacted at the meeting held pursuant to the adjournment
and at which a quorum shall be present or represented, which might have been
transacted at the adjourned meeting. The shareholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
Section 7. Voting and Proxies. At each meeting of the shareholders
every shareholder shall be entitled to one vote in person or by proxy for each
share of capital stock held by such shareholder, but no proxy shall be entitled
to vote after eleven (11) months from the date of its execution, unless
otherwise provided in the
-4-
<PAGE>
proxy. Every proxy shall be in writing (which shall include telegraphing,
cabling or telephotographic transmission), and shall be filed with the Secretary
of the corporation before or at the time of the meeting. All questions regarding
the qualification of voters, the validity of proxies and the acceptance or
rejection of votes shall be decided by the presiding officer of the meeting.
When a quorum is present at any meeting, the vote of the holders of the majority
of the shares having voting power present in person or represented by proxy
shall decide any question brought before such meeting, unless the question is
one upon which by express provision of the statutes or of the Articles of
Incorporation 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 8. Informal Action by Shareholders. Any action required to be
taken at a meeting of the shareholders, or any other action which may be taken
at a meeting of the shareholders, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all of the
shareholders of record entitled to vote as of the date of such resolution.
ARTICLE III
Directors
Section 1. General Powers. The business and the property of the
corporation shall be managed and controlled by its Board of Directors. The
directors may exercise all such powers and do
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all such things as may be exercised or done by the corporation, subject to the
provisions of the Articles of Incorporation, these By-Laws and all applicable
law.
Section 2. Number, Tenure and Qualification. The number of directors
which shall constitute the whole Board of Directors shall be three or as
otherwise fixed from time to time by resolution of the shareholders subject to
increase by resolution of the Board of Directors. No decrease in the number of
directors pursuant to this section shall effect the removal of any director then
in office except upon compliance with the provisions of Section 8 of this
Article. Each director shall be elected at the annual meeting of shareholders,
except as provided in Section 7 of this Article, and shall hold office until the
next annual meeting of shareholders and thereafter until his successor is duly
elected, and qualified, unless a prior vacancy shall occur by reason of his
death, resignation or removal from office. Directors need not be shareholders.
Section 3. Regular Meetings. A regular meeting of the Board of
Directors shall be held immediately after, and at the same place as, the annual
meeting of shareholders. Other regular meetings of the Board of Directors may be
held at such time and at such place as shall from time to time be determined by
the Board of Directors.
Section 4. Special Meetings. Special meetings of the Board
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of Directors may be called by or at the request of the President, or in his
absence, by the Vice-President, or shall be called by the Secretary on the
written request of any two (2) directors. The person or persons authorized to
call special meetings may fix the time and place, either within or without the
State of Minnesota for any such special meeting.
Section 5. Notice of Meetings. Ten (10) days' written notice of the
annual meeting of directors and of all regular meetings of directors shall be
given to all directors. Such notices shall be deemed delivered when deposited in
the United States mail properly addressed, with postage thereon prepaid.
Two (2) days' written notice of all special meetings of the Board of
Directors shall be given to each director. In the event that notice is given by
mail, such notice shall be mailed at least four (4) days prior to the special
meeting and shall be deemed delivered when deposited in the United States mail
properly addressed, with postage thereon prepaid.
Notice given by telegram shall be deemed to be delivered when the
telegram is delivered to the telegraph company properly addressed and prepaid.
Any director may waive notice of any meeting. The attendance of a
director at any meeting shall constitute a waiver of notice of such meeting,
unless his attendance is for the express purpose of objecting to the transaction
of business on grounds that the
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meeting is not lawfully called or convened.
Section 6. Quorum and Voting. A majority of the directors then in
office shall constitute a quorum for the transaction of business at any regular
or special meeting of the Board of Directors. If a quorum shall not be present
at any meeting of the Board of Directors, a majority of the directors present
may adjourn the meeting from time to time without further notice. The act 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 to any question upon which
any different or greater vote is required by the Articles of Incorporation,
these By-Laws or Minnesota Statutes.
Section 7. Vacancies and Newly Created Directorships. Any vacancy
occurring in the Board of Directors may be filled by the affirmative vote of a
majority of the directors remaining in office even though said remaining
directors may be less than a quorum; any newly created directorship resulting
from an increase in the authorized number of directors by action of the Board of
Directors may be filled by a two-thirds vote of the directors serving at the
time of such increase; or said vacancy or newly created directorship may be
filled by resolution of the shareholders at any annual meeting or at any special
meeting called for that purpose. Unless a prior vacancy occurs by reason of his
death, resignation or removal from office, any director so elected shall hold
office until the next annual meeting of shareholders and until his successor is
duly
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elected and qualified.
Section 8. Removal of Directors. The entire Board of Directors or any
director or directors may be removed from office, with or without cause, at any
special meeting of the shareholders, duly called for that purpose as provided in
these By-Laws, by a vote of the shareholders holding a majority of the shares
entitled to vote at an election of directors. At such meeting a successor or
successors may be elected by the vote of the holders of the majority of the
shares having voting power present in person or represented by proxy, or if any
such vacancy is not so filled, it may be filled by the directors as provided in
Section 7 of this Article.
Section 9. Executive Committee. The Board of Directors may, by
unanimous resolution of all directors then in office, appoint an Executive
Committee of three or more directors to meet and act on behalf of the Board of
Directors between meetings of the Board. The Executive Committee shall advise
and aid the officers of the corporation in all matters concerning the management
of its business, and between meetings of directors the Executive Committee shall
possess and may exercise all the powers of the Board of Directors with reference
to the conduct of the business of the corporation, except the power to fill
vacancies in their own membership, which vacancies shall be filled by the Board
of Directors. The Executive Committee shall meet at stated times or on notice to
all members. It shall fix its own rules of procedure. A majority of the
committee
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shall constitute a quorum but the affirmative vote of a majority of the whole
committee shall be necessary on every item of business. The Executive Committee
shall keep regular minutes of its proceedings and report the same to the Board
of Directors.
Section 10. Other Committees. The Board of Directors may appoint such
other committees and delegate to such committees such powers and
responsibilities as it may from time to time deem appropriate.
Section 11. Action in Writing. Any action which might be taken at a
meeting of the Board of Directors or of a lawfully constituted executive
committee thereof may be taken without a meeting if such action is taken in
writing and signed by all of the directors then in office or by all of the
members of such committee, as the case may be.
Section 12. Meeting by Means of Conference Telephone. Members of the
Board of Directors of the corporation, or any committee designated by such
Board, may participate in a meeting of such Board or 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 participation in a
meeting pursuant to this section shall constitute presence in person at such
meeting.
ARTICLE IV
Officers
Section 1. Number. The officers of the corporation shall
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be elected by the Board of Directors and shall include a President, one or more
Vice-Presidents, a Secretary and a Treasurer. The Board of Directors may also
appoint such other officers and assistant officers as it may deem necessary.
Except as provided in these By-Laws, the Board of Directors shall fix the
powers, duties and compensation of all officers. Officers may, but need not, be
directors of the corporation.
Section 2. Election and Term of Office. Officers shall be elected at
each annual meeting of the Board of Directors and shall hold office at the
pleasure of the Board. An officer shall hold office until his successor shall
have been duly elected unless prior thereto he shall have resigned or been
removed from office as hereinafter provided.
Section 3. Removal and Vacancies. Any officer or agent elected or
appointed by the Board of Directors may be removed with or without cause at any
time by the vote of a majority of the Board of Directors. Any vacancy in any
office of the corporation shall be filled by the Board of Directors.
Section 4. President. The President shall be the chief executive
officer of the corporation, shall preside at all meetings of the shareholders
and the Board of Directors, shall have general and active management of the
business of the corporation, and shall see that all orders and resolutions of
the Board of Directors are carried into effect. He shall have the general powers
and duties
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usually vested in the office of the President and shall have such other powers
and perform such other duties as the Board of Directors may from time to time
prescribe.
Section 5. Vice-Presidents. The Vice-President, or Vice-Presidents in
case there are more than one, shall have such powers and perform such duties as
the President or the Board of Directors may from time to time prescribe. In the
absence of the President or in the event of his death, inability or refusal to
act, the Vice-President or in the event there be more than one Vice-President,
the Vice-Presidents in the order designated at the time of their election, or in
the absence of any designation, then in the order of their election, shall
perform the duties of the President and when so acting, shall have all the
powers of and be subject to all of the restrictions upon the President.
Section 6. Secretary. The Secretary shall attend all meetings of the
Board of Directors and of the shareholders and record all votes and the minutes
of all proceedings of the Board of Directors and of the shareholders in a book
to be kept for that purpose. He shall keep the stock books of the corporation.
He shall give or cause to be given notice of all meetings of the shareholders
and of special meetings of the Board of Directors, and shall perform such other
duties and have such other powers as the President or the Board of Directors may
from time to time prescribe.
Section 7. Treasurer. The Treasurer shall have the care
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and custody of the corporate funds and securities of the corporation and shall
disburse the funds of the corporation as may be ordered from time to time by the
President or the Board of Directors. He shall keep full and accurate account of
a11 receipts and disbursements in books belonging to the corporation and shall
have such other powers and perform such other duties as the President or the
Board of Directors may from time to time prescribe.
Section 8. Other Officers. The Assistant Secretaries and Assistant
Treasurers in the order of their seniority, unless otherwise determined by the
Board of Directors, shall, in the absence or disability of the Secretary or
Treasurer, perform the duties and exercise the powers of the Secretary and
Treasurer respectively. Such Assistant Secretaries and Assistant Treasurers
shall have such other powers and perform such other duties as the President or
the Board of Directors may from time to time prescribe. Any other officers
appointed by the Board of Directors shall hold office for the term established
by the Board of Directors and shall have such powers, perform such duties and be
responsible to such other officer as the Board of Directors may from time to
time prescribe.
ARTICLE V
Certificates of Stock
Section 1. Certificates. Certificates representing shares of the
corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by
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the President or a Vice-President and by the Secretary or an Assistant
Secretary. If a certificate is signed (1) by a transfer agent or an assistant
transfer agent or (2) by a transfer clerk acting on behalf of the corporation
and a registrar, the signature of any such President, Vice-President, Secretary
or Assistant Secretary may be a facsimile. In case any officer or officers who
have signed, or whose facsimile signature or signatures have been used on any
such certificate or certificates, shall cease to be such officer or officers of
the corporation, whether because of death, resignation or otherwise, before such
certificate or certificates have been delivered by the corporation, such
certificate or certificates may nevertheless be adopted by the corporation and
be issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures have been
used thereon had not ceased to be such officer or officers of the corporation.
All certificates for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares represented
thereby are issued with the number of shares and date of issue shall be entered
on the stock transfer books of the corporation. All certificates surrendered to
the corporation or the transfer agent for transfer shall be cancelled and no new
certificate shall be issued until the former certificate for a like number of
shares shall have been surrendered and cancelled, except that in case of a lost,
destroyed or mutilated
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certificate, a new one may be issued therefor upon such terms and indemnity to
the corporation as the Board of Directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the holder
of record thereof or by his legal representative who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the corporation,
and on surrender of such shares to the corporation or the transfer agent of the
corporation. The person in whose name shares stand on the books of the
corporation shall be deemed by the corporation to be the owner thereof for all
purposes.
ARTICLE VI
Contracts, Loans, Checks and Deposits
Section 1. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
corporation, and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
Section 3. Checks, Drafts, etc. All checks, drafts or other
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orders for the payment of money, notes or other evidences of indebtedness
issued in the name of the corporation shall be signed by such officer or
officers, agent or agents of the corporation and in such manner as shall from
time to time be determined by resolution of the Board of Directors.
Section 4. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositaries as the Board of Directors
may select.
ARTICLE VII
Indemnification
Section 1. Indemnification. The corporation acting through its Board of
Directors, or as otherwise provided in this By-Law, shall as fully as may be
permitted from time to time by the statutes and decisional law of the State of
Minnesota or by any other applicable rules or principles of law indemnify each
officer of the corporation against the expense of any action to which he was or
is a party or is threatened to be made a party by reason of the fact that he is
or was an officer of the corporation. Any provision in these By-Laws which would
prevent the indemnification of an officer to the full extent permitted by law as
it may from time to time be expanded by statute, decision of court or otherwise,
shall be deemed amended to conform to such expanded right of indemnification
without formal action by the Board of Directors or shareholders.
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Section 2. Definitions. As used in this By-Law: (i) The term "officer"
means any person who is, was or may hereafter be a director, officer, employee
or agent of this corporation or, at the request of this corporation, of any
other corporation or of any partnership, joint venture, trust or other
enterprise and the rights of indemnification under this By-Law shall inure to
the benefit of the heirs, executors and administrators of any of such persons,
(ii) the term "action" means any threatened, pending or completed action, suit
or proceeding, wherever brought, whether civil, criminal, administrative or
investigative including those by or in the right of the corporation and whether
or not involving an act or omission of an officer in his capacity as such and
whether or not he is an officer at the time of such action, and (iii) the term
"expenses of any action" shall include attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with an action.
Section 3. Standard of Conduct. An officer shall be indemnified with
respect to any action (other than an action by or in the right of the
corporation to procure a judgment in its favor) if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and if it is a criminal action, he had no reasonable cause to
believe his conduct was unlawful. If the action be one by or in the right of the
corporation to procure a judgment in its favor, then in addition to
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the requirements of the preceding sentence, an officer shall be indemnified
only if he is not adjudged to be liable for negligence or misconduct in the
performance of his duty to the corporation or if he is adjudged to be liable for
negligence or misconduct in the performance of his duty to the corporation, then
he shall be indemnified only to the extent that the court in which such action
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 such court
shall deem proper. If he is successful on the merits or otherwise in defense of
any action, an officer shall be indemnified for expenses actually and reasonably
incurred by him in connection with such action. In all other cases (other than
an action in which the officer is successful on the merits or otherwise in
defense of such action or in an action by or in the right of the corporation to
procure a judgment in its favor where the officer has been adjudged to be liable
for negligence or misconduct in the performance of his duty to the corporation),
an officer shall be indemnified, unless ordered by a court, only as authorized
in the specific case upon a determination that indemnification of the officer is
proper in the circumstances because he has met the applicable standard of
conduct set forth above. Such determination shall be made by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, or if such a quorum
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is not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or by the
shareholders. The determination may be made that he is entitled to
indemnification as to some matters even though not so entitled as to others. The
termination of any action by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent shall not, of itself, create a
presumption that the officer did not act in a manner entitling him to
indemnification under this By-Law.
Section 4. Determination of Conduct. Except where an officer is
successful on the merits or otherwise in the defense of an action and except
where a court determination is required by law for indemnification in an action
by or in the right of the corporation, an officer shall first seek a
determination that he met the applicable standard of conduct set forth above
from the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, or 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 by the
shareholders, it being the belief of this corporation that the best judges of an
officer's conduct are those familiar with the business activities of the
corporation. In the event that it is determined that the officer partially or
completely failed to meet the applicable standard of conduct, or if no
determination is reached
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within a reasonable time, the officer may apply to the District Court of the
State of Minnesota for a determination of his right to indemnification and the
result of any prior determination of that right by disinterested directors or by
independent legal counsel or by the shareholders shall not be entered into
evidence or considered by the court in its independent determination.
Section 5. Expenses Advance. Expenses incurred in defending an action
may be paid by the corporation in advance of the final disposition of such
action as authorized by the Board of Directors in the manner provided in Section
3 of this ARTICLE VII upon receipt of an undertaking by or on behalf of such
officers to repay such amount unless it shall ultimately be determined that he
is entitled to be indemnified by the corporation as authorized by law.
Section 6. Nonexclusivity. The indemnification provided by this By-Law
shall not exclude any other right to which an officer may be entitled under any
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another while holding
such office, and shall not imply that the corporation may not provide lawful
indemnification not expressly provided for in this By-Law.
Section 7. Insurance. The corporation may purchase and maintain
insurance on behalf of any officer against any liability asserted against
him and incurred by him in any such capacity to the full extent as may from time
to time be permitted by law.
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Section 8. Notice to Shareholders. If an officer is indemnified by the
corporation other than by court order or action by the shareholders, the
corporation shall, not later than the next annual meeting of shareholders unless
such meeting is held within three months from the date of such payment, and, in
any event, within fifteen months from the date of such payment, mail to its
shareholders of record at the time entitled to vote for the election of
directors a statement specifying the officers paid, the amount paid, and the
nature and status of the litigation or threatened litigation at the time of such
payment.
ARTICLE VIII
Miscellaneous
Section 1. Dividends. The Board of Directors may from time to time
declare, and the corporation may pay, dividends on its outstanding shares in
the manner and upon the terms and conditions provided by law.
Section 2. Reserves. 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, deem proper as a reserve or reserves to
meet contingencies, or for equalizing dividends, or for repairing or maintaining
any property of the corporation, or for the purchase of additional property, or
for such other purpose as the directors shall deem to be consistent with the
interests of the corporation, and the directors may modify or
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abolish any such reserve.
Section 3. Fiscal Year. The fiscal year of the corporation shall begin
on the first day of January and end on the last day of December in each year.
Section 4. No Seal. This corporation shall have no corporate seal.
Section 5. Amendments. Except as limited by the Articles of
Incorporation of the corporation, these by-laws may be altered or amended by the
Board of Directors at any regular or special meeting of directors to the full
extent permitted by law, subject, however, to the power of the shareholders of
this corporation to alter or repeal such bylaws.
* * * * * * * * * * * * * * * * * * *
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