As filed with the Securities and Exchange Commission on September 23, 1998
File No. 000-24083
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AMERICAN QUANTUM CYCLES, INC.
(Exact name of issuer as specified in its charter)
Florida 59-2651232
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
731 Washburn Road
Melbourne, Florida 32934
(Address of principal executive offices) (Zip Code)
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AMERICAN QUANTUM CYCLES, INC. AMENDED 1997 STOCK OPTION PLAN
(Full title of the plan)
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Richard Hagen, President
731 Washburn Road
Melbourne, Florida 32934
(407) 752-0008
(Name and address of agent for service)
Copy to:
James Schneider, Esq.
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
(954) 763-1200
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<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==================================================================================================================================
Proposed Proposed
Maximum Maximum
Offering Aggregate Amount of
Title of Securities Amount to be Price per Offering Registration
to be Registered Registered(1) Share(1) Price(1) Fee (1)
==================================================================================================================================
<S> <C> <C> <C> <C>
Common Stock
($.001 par value) 3,000,000 shares $3.125 $9,375,000 $2,765
==================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee in accordance with Rule 457(c) under the Securities
Act based upon the average of the bid and ask price ($3.125) for the
Common Stock, $.001 per share (the "Common Stock") as reported by NASD
Over the Counter Bulletin Board on September 17, 1998.
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AMERICAN QUANTUM CYCLES, INC.
CROSS REFERENCE SHEET REQUIRED BY ITEM 501(b) OF REGULATION S-K
<TABLE>
<CAPTION>
Form S-8 Item Number
and Caption Caption in Prospectus
-------------------- ---------------------
<S> <C>
1. Forepart of Registration State- Facing Page of Registration
ment and Outside Front Cover Statement and Cover Page of
Page of Prospectus Prospectus
2. Inside Front and Outside Back Inside Cover Page of Pros pectus
Cover Pages of Prospectus and Outside Cover Page of
Prospectus
3. Summary Information, Risk Fac- Not Applicable
tors and Ratio of Earnings to
Fixed Charges
4. Use of Proceeds Not Applicable
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Cover Page of Prospectus and Sales by
Selling Security Holders
9. Description of Securities to be Description of Securities;
Registered American Quantum Cycles, Inc. Amended 1997
Stock Option Plan
10. Interests of Named Experts and Legal Matters
Counsel
11. Material Changes Not Applicable
12. Incorporation of Certain Infor- Incorporation of Certain
mation by Reference Documents by Reference
13. Disclosure of Commission Posi- Indemnification
tion on Indemnification for
Securities Act Liabilities
</TABLE>
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PROSPECTUS
AMERICAN QUANTUM CYCLES, INC.
3,000,000 Shares of Common Stock
($.001 par value)
Issued Pursuant to the
American Quantum Cycles, Inc. Amended 1997 Stock Option Plan
This Prospectus is part of a Registration Statement which registers an
aggregate of 3,000,000 shares of Common Stock, $.001 par value (such shares
being collectively referred to as the "Shares") of American Quantum Cycles, Inc.
(the "Company") which may be issued, as set forth herein, to officers,
directors, key employees and consultants of the Company pursuant to the exercise
of non-qualified or incentive stock options to purchase up to 3,000,000 shares
of Common Stock under and in accordance with the American Quantum Cycles, Inc.
Amended 1997 Stock Option Plan (the "Plan") (the Plan covers the issuance of up
to 3,000,000 shares of Common Stock), and separate stock option agreements with
employees, officers, directors and consultants (the "Option Agreements") (such
options being collectively referred to as "Options"). All of the Options or
Shares have been or will be granted or issued to such officers, directors, key
employees and consultants pursuant to individual written option agreements. Such
selling stockholders may sometimes hereafter be collectively referred to as the
"Selling Security Holders." The Selling Security Holders may sell all or a
portion of the Shares from time to time in the over-the-counter market, in
negotiated transactions, directly or through brokers or otherwise, and that such
shares will be sold at market prices prevailing at the time of such sales or at
negotiated prices, and the Company will not receive any proceeds from such sales
except upon exercise of the Options.
No person has been authorized by the Company to give any information or
to make any representation other than as contained in this Prospectus, and if
given or made, such information or representation must not be relied upon as
having been authorized by the Company. Neither the delivery of this Prospectus
nor any distribution of the Shares issuable upon exercise of the Options or
under the terms of the Agreements shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company since
the date hereof.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------
This Prospectus does not constitute an offer to sell securities in any
state to any person to whom it is unlawful to make such offer in such state.
The date of this Prospectus is September 23, 1998.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed with the Commission can be inspected and
copied at the public reference facilities of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of this material can also be obtained at
prescribed rates from the Public Reference Section of the Commission at its
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission also maintains a website on the internet that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission at http://www.sec.gov. The Company's Common
Stock is traded on the NASD Over the Counter Bulletin Board (OTCBB:AMQC) under
the symbol "AMQC."
The Company has filed with the Commission a Registration Statement on
Form S-8 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Act"), with respect to an aggregate of 3,000,000 shares of the
Company's Common Stock, issued or to be issued to officers, directors, key
employees or consultants to the Company under the Plan, the Option Agreements or
the Agreements, as the case may be. This Prospectus, which is Part I of the
Registration Statement, omits certain information contained in the Registration
Statement. For further information with respect to the Company and the shares of
the Common Stock offered by this Prospectus, reference is made to the
Registration Statement, including the exhibits thereto. Statements in this
Prospectus as to any document are not necessarily complete, and where any such
document is an exhibit to the Registration Statement or is incorporated by
reference herein, each such statement is qualified in all respects by the
provisions of such exhibit or other document, to which reference is hereby made,
for a full statement of the provisions thereof. A copy of the Registration
Statement, with exhibits, may be obtained from the Commission's office in
Washington, D.C. (at the above address) upon payment of the fees prescribed by
the rules and regulations of the Commission, or examined there without charge.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission are incorporated herein by reference and made a part hereof:
(a) The Registrant's Registration Statement filed on Form
10-SB, dated April 24, 1998, File No. 000-24083 April 24, 1998, effective June
23, 1998 and as may be amended from time to time.
(b) The Company's Quarterly Report on Form 10-QSB for the
quarter ended July 30, 1998 filed September 23, 1998.
(c) The Company's Annual Report on Form 10-KSB for the
year ended April 30, 1998 filed September 23, 1998.
(d) The Description of the Common Stock of the Company which
is contained in a Registration Statement filed under the Exchange Act, including
any amendment or report filed for the purpose of updating such description.
All reports and documents filed by the Company pursuant to Section 13,
14 or 15(d) of the Exchange Act, prior to the filing of a post-effective
amendment which indicates that all securities offered
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hereby have been sold or which deregisters all securities then remaining unsold,
shall be deemed to be incorporated by reference herein and to be a part hereof
from the respective date of filing of such documents. Any statement incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document, which also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any statement modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of the Prospectus has been
delivered, on the written request of any such person, a copy of any or all of
the documents referred to above which have been or may be incorporated by
reference in this Prospectus, other than exhibits to such documents. Written
requests for such copies should be directed to Corporate Secretary, American
Quantum Cycles, Inc., 731 Washburn Road, Melbourne, Florida 32934, Telephone
(407) 752-0008.
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THE COMPANY
HISTORY AND OVERVIEW
American Quantum Cycles, Inc. (the "Company"), a development stage
company, designs, manufactures, promotes, markets, distributes and sells
American-made, high performance V-twin engine cruiser and touring style
motorcycles. These motorcycle products include stock models, and motorcycles
built to customer specified configurations. Utilizing its "just in time"
approach (i.e. ordering parts on an as-needed basis to minimize inventory and
work-in-progress costs, as well as the "build to order" production process) to
manufacturing, the Company believes that it can manufacture a high quality
product utilizing mass production. The Company believes that this approach is
also advantageous for configure-to-order products, which in turn, will likely
yield greater customer satisfaction and reduce the need for added cash flow. The
Company also expects that its motorcycles will be lower in price compared to the
other major source of high performance, customer specified motorcycles, which is
small customization shops.
The Company was originally incorporated as a Florida corporation on
March 20, 1986 as "Norbern, Inc." and on May 8, 1997, the Company changed its
name to "American Quantum Cycles, Inc." The Company had no operations prior to
May 9, 1997, when it issued 2,414,285 shares of its common stock in exchange
shares for management, equipment and other assets to enable the Company to
manufacture, promote, distribute and sell American-made motorcycles, motorcycle
parts and related products. The Company's fiscal year end is April 30. The
Company's executive offices are located at 731 Washburn Road, Melbourne, Florida
32934 (Telephone No. (407) 752-0008; Facsimile No. (407) 752-0550).
MANUFACTURING
The Company has manufactured 32 motorcycles since October 1997, 24 of
which are sold, 6 are used for marketing purposes, and two are for engineering
and regulatory testing. During the remainder of the calendar year 1998, the
Company anticipates producing 300 additional motorcycles. This projection is
based on a plan to ramp production through refinement of the assembly process
and investing in jigs, fixtures and material handling equipment. The total
monthly production is projected to increase from 30 motorcycles to 120
motorcycles in November. Production is projected to be increased to 188.
DISTRIBUTION AND SALES
The Company's distribution channels will typically consist of
independently-owned full-service dealerships to whom the Company will sell
directly. The Company will also sell directly to consumers through various media
including the Internet, but only in those geographic regions in which there are
no authorized the Company dealerships. The Company anticipates that
approximately 15% of its dealerships will sell the Company motorcycles
exclusively. Additionally, all the Company dealers will carry the Company
replacement parts and aftermarket accessories and perform servicing of the
Company motorcycle products.
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INTELLECTUAL PROPERTY RIGHTS
The Company believes that it has the exclusive right to use the
trademarks AMERICAN QUANTUM CYCLES, Q, Q2, and QX, along with certain related
word and design trademarks in the United States and in certain foreign countries
in connection with the manufacture and sale of motorcycles and related
structural parts. In addition, the Company believes that it has the right to use
certain of these marks on ancillary merchandise and apparel. The Company also
believes that it has obtained common law rights through the use of these marks
on its prototype motorcycles and ancillary merchandise and apparel that are
independent of the United States Patent and Trademark Office ("PTO")
registration process. In addition, the Company has filed for trademark
protection for the marks "American Quantum Cycles(TM)", the "Q(TM)", "Q2(TM)"
and "QX(TM)". In some instances, these rights may be dependent upon pending
applications to register the marks in a foreign country. A failure to obtain
such registrations could impair the Company's rights to use a mark in a
particular country.
The Company owns copyrights for its designs used as trademarks on
documents generated in the course of its operations. The Company intends to
register its copyrights, designs and promotional materials and other works with
the U.S. Copyright Office as appropriate.
The Company owns no patents directly, nor has it filed or been assigned
any patent applications. The Company believes, however, that a number of
elements of the Q-series of motorcycle design have the potential to receive
patents. In the foreseeable future, the Company intends to file patent
applications for certain of the patentable elements. The Company will also
actively seek to license and/or purchase additional intellectual property rights
to enhance the market competitiveness of its product line.
COMPETITION
As of December 31, 1996, Harley-Davidson, Honda, Suzuki, Kawasaki, and
Yamaha had the largest market share of the U.S. heavy motorcycle market. The
Company's primary competitor in the U.S. heavyweight market is expected to be
Harley-Davidson (which, in 1996, had a market share of 48% of new U.S. and 7% of
the European heavyweight motorcycle registrations). The U.S. and worldwide
motorcycle markets are highly competitive and all of the Company's existing
major competitors have resources that are substantially greater than those of
the Company, as well as larger overall sales volumes and are more diversified
than the Company.
GOVERNMENT REGULATIONS
Commercial sales of the Company's motorcycles depend upon compliance
with certain government regulations and the Company is designing its motorcycles
to comply with all such regulations. Both federal and state authorities have
various environmental control requirements relating to air, water and noise
pollution which affect the business and operations of the Company. In
particular, the Company's motorcycles will be subject to the emissions and noise
standards of the U.S. Environmental Protection Agency and the more stringent
emissions standards of the State of California Air Resources Board ("CARB"). The
Company has initiated the testing of its motorcycles in January, 1998 to meet
the emission standards designated by the CARB. Preliminary results indicate that
the Q2 and its associated 4-VALVE(R) engine will pass all CARB requirements. The
Company's motorcycles also will be subject to the National Traffic and Motor
Vehicle Safety Act and the rules promulgated thereunder by the National Highway
Traffic Safety Administration. The Company has carried out an audit of the Q2
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prototype design and has found that only a few minor changes are required for
full compliance. These modifications are being incorporated into the engineering
change releases which will be reflected in units produced in June 1998.
AMERICAN QUANTUM CYCLES, INC. AMENDED 1997 STOCK OPTION PLAN
Introduction
The following descriptions summarize certain provisions of the Plan and
the form of agreements to be entered into by recipients of options thereunder.
Such summaries do not purport to be complete and are qualified by reference to
the full text of the Plan and form of agreement. A copy of the Plan is on file
as an exhibit to the Registration Statement of which this Prospectus is a part.
Each person receiving an option under the Plan should read the Plan and related
option agreement in its entirety.
The Company's 1997 Stock Option Plan was adopted by the Board of
Directors and a majority of the shareholders of the outstanding common stock of
the Company on June 15, 1997, effective as of that date. Under the Plan, the
Company had reserved an aggregate of 500,000 shares of Common Stock for issuance
pursuant to options granted under the Plan ("Plan Options"). On February 21 1998
the Board of Directors and a majority of the shareholders of the outstanding
common stock of the Company approved an Amendment to the Plan to increase the
number of shares of Common Stock reserved under the Plan to 3,000,000 shares of
Common Stock for issuance pursuant to Plan Options.
The purpose of the Plan is to encourage stock ownership by officers,
directors, key employees and consultants of the Company, and to give such
persons a greater personal interest in the success of the Company's business and
an added incentive to continue to advance and contribute to the Company. The
Board of Directors of the Company, or a committee designated thereunder, which
currently oversees compensation matters, will administer the Plan including,
without limitation, the selection of the persons who will be granted Plan
Options under the Plan, the type of Plan Options to be granted, the number of
shares subject to each Plan Option and the Plan Option price.
Plan Options granted under the Plan may either be options qualifying as
incentive stock options ("Incentive Options") under Section 422 of the Internal
Revenue Code of 1986, as amended, or options that do not so qualify
("Non-Qualified Options"). In addition, the Plan also allows for the inclusion
of a reload option provision ("Reload Option"), which permits an eligible person
to pay the exercise price of the Plan Option with shares of Common Stock owned
by the eligible person and receive a new Plan Option to purchase shares of
Common Stock equal in number to the tendered shares. As discussed hereafter, any
Incentive Option granted under the Plan must provide for an exercise price of
not less than 100% of the fair market value of the underlying shares on the date
of such grant, but the exercise price of any Incentive Option granted to an
eligible employee owning more than 10% of the outstanding Common Stock of the
Company must not be less than 110% of such fair market value as determined on
the date of the grant. The term of each Plan Option and the manner in which it
may be exercised is determined by the Board of Directors or the Committee,
provided that no Plan Option may be exercisable more than ten (10) years after
the date of its grant and, in the case of an Incentive Option granted to an
eligible employee owning more than 10% of the Common Stock, no more than five
(5) years after the date of the grant.
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Eligibility
Officers, directors, key employees and consultants of the Company and
its subsidiaries are eligible to receive Non-Qualified Options under the Plan.
Only officers and employees of the Company who are employed by the Company or by
any subsidiary thereof are eligible to receive Incentive Options.
Administration
The Plan will be administered by the Company's Board of Directors or an
underlying committee (the "Committee"). The Board of Directors or the Committee
determines from time to time those officers, directors, key employees and
consultants of the Company or any of its subsidiaries to whom Plan Options are
to be granted, the terms and provisions of the respective option agreements, the
time or times at which such Plan Options shall be granted, the type of Plan
Options to be granted, the dates such Plan Options become exercisable, the
number of shares subject to each Plan Option, the purchase price of such shares
and the form of payment of such purchase price. All other questions relating to
the administration of the Plan, and the interpretation of the provisions thereof
and of the related option agreements, are resolved by the Committee.
Shares Subject to Awards
The Company has reserved 3,000,000 of its authorized but unissued
shares of Common Stock or shares maintained in the treasury of the Company for
issuance under the Plan, and a maximum of 3,000,000 shares may be issued
thereunder unless the Plan is subsequently amended. In connection with the
adoption and approval of the Plan, the Company's Board of Directors resolved
that the aggregate number of total shares of the Company's Common Stock issuable
under the Plan may not exceed 3,000,000 shares (subject to adjustment in the
event of certain changes in the Company's capitalization) without further action
by the Company's Board of Directors and shareholders, as required. Except for
such limitation on the aggregate number of shares issuable under the Plan, there
is no maximum or minimum number of shares of Common Stock as to which a Plan
Option may be granted to any person. Shares used for Plan Options may be
authorized and unissued shares or shares reacquired by the Company, including
shares purchased in the open market. Shares covered by Plan Options which
terminate unexercised will again become available for additional Plan Options,
without decreasing the maximum number of shares issuable under the Plan,
although such shares may also be used by the Company for other purposes.
The Plan provides that, if the Company's outstanding shares are
increased, decreased, exchanged or otherwise adjusted due to a share dividend,
forward or reverse share split, recapitalization, reorganization, merger,
consolidation, combination or exchange of shares, an appropriate and
proportionate adjustment shall be made in the number or kind of shares subject
to the Plan or subject to unexercised Plan Options and in the purchase price per
share under such Plan Options. Any adjustment, however, does not change the
total purchase price payable for the shares subject to outstanding Plan Options.
In the event of the proposed dissolution or liquidation of the Company, a
proposed sale of all or substantially all of the assets of the Company, a merger
or tender offer for the Company's shares of Common Stock, the Board of Directors
may declare that each Option granted under this Plan shall terminate as of a
date to be fixed by the Board of Directors; provided that not less than thirty
(30) days written notice of the date so fixed shall be given to each Eligible
Person holding an Option, and each such Eligible Person shall have the right,
during the period of thirty (30) days proceeding such termination,
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to exercise his Option as to all or any part of the Shares, including shares of
stock as to which such Option would not otherwise be exercisable.
Terms of Exercise
The Plan provides that the Plan Options granted thereunder shall be
exercisable from time to time in whole or in part, unless otherwise specified in
the agreement representing the Plan Options or by the Committee or by the Board
of Directors. Each Plan Option may be exercised in whole or in part at any time
during the period from the date of the grant until the end of the period covered
by the Plan Option period.
The Plan provides that, with respect to Incentive Stock Options, the
aggregate fair market value (determined as of the time the option is granted) of
the shares of Common Stock, with respect to which Incentive Stock Options are
first exercisable by any option holder during any calendar year (including all
incentive stock option plans of the Company, any parent or any subsidiaries
which are qualified under Section 422 of the Internal Revenue Code of 1986)
shall not exceed $100,000.
Exercise Price
The purchase price for shares subject to Incentive Stock Options must
be at least 100% of the fair market value of the Company's Common Stock on the
date the option is granted, except that the purchase price must be at least 110%
of the fair market value in the case of an Incentive Stock Option granted to a
person who is a "10% stockholder." A "10% stockholder" is a person who owns
(within the meaning of Section 422(b)(6) of the Internal Revenue Code of 1986)
at the time the Incentive Stock Option is granted, shares possessing more than
10% of the total combined voting power of all classes of the outstanding shares
of the Company, any parent or any subsidiaries. The Plan provides that fair
market value shall be determined by the Board or the Committee in accordance
with procedures which it may from time to time establish. If the purchase price
is paid with consideration other than cash, the Board or the Committee shall
determine the fair value of such consideration to the Company in monetary terms.
The exercise price of Non-Qualified Options shall be determined by the
Board of Directors or the Committee but not less than 55% of the fair market
value (but in no event less than the par value) of one share of the Company's
Common Stock on the date the Option is granted.
The per share purchase price of shares subject to Plan Options granted
under the Plan may be adjusted in the event of certain changes in the Company's
capitalization, but any such adjustment shall not change the total purchase
price payable upon the exercise in full of Plan Options granted under the Plan.
Manner of Exercise
Plan Options are exercisable under the Plan by delivery of written
notice to the Company stating the number of shares with respect to which the
Plan Option is being exercised, together with full payment of the purchase price
therefor. Payment shall be in cash, checks, certified or bank cashier's checks,
promissory notes secured by the Shares issued through exercise of the related
Options, shares of Common Stock or in such other form or combination of forms
which shall be acceptable to the Board of Directors or the Committee, provided
that any loan or guarantee by the Company of the purchase price may only
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be made upon resolution of the Board or Committee that such loan or guarantee is
reasonably expected to benefit the Company.
Option Period
All Incentive Stock Options shall expire on or before the tenth (10th)
anniversary of the date the option is granted except as limited above.
Non-Qualified Options shall expire ten (10) years and one (1) day from the date
of grant unless otherwise provided under the terms of the option grant.**
Termination
All Plan Options are nonassignable and nontransferable, except by will
or by the laws of descent and distribution, and during the lifetime of the
optionee, may be exercised only by such optionee. If an optionee shall die (i)
while an employee of the Corporation or a Subsidiary or (ii) within three months
after termination of his employment with the Corporation or a Subsidiary because
of his disability, or retirement or otherwise, his or her Options may be
exercised, to the extent that the optionee shall have been entitled to do so on
the date of his death or such termination of employment, by the person or
persons to whom the optionee's right under the Option pass by will or applicable
law, or if no such person has such right, by his executors or administrators, at
any time, or from time to time.
In the event of termination of employment because of his death while an
employee or because of disability, his Options may be exercised not later than
the expiration date specified in the Plan or one year after the optionee's
death, whichever date is earlier, or in the event of termination of employment
because of retirement or otherwise, not later than the expiration date specified
in the Plan or one year after the optionee's death, whichever date is earlier.
If an optionee's employment by the Corporation or a Subsidiary shall
terminate because of his disability and such optionee has not died within the
following three months, he may exercise his Options, to the extent that he shall
have been entitled to do so at the date of the termination of his employment, at
any time, or from time to time, but not later than the expiration date specified
in Paragraph 5 hereof or one year after termination of employment, whichever
date is earlier.
If an optionee's employment shall terminate by reason of his retirement
in accordance with the terms of the Corporation's tax-qualified retirement plans
if any, or with the consent of the Board or the Stock Option Committee or
involuntarily other than by termination for cause, and such optionee has not
died within the following three months, he may exercise his Option to the extent
he shall have been entitled to do so at the date of the termination of his
employment, at any time and from to time, but not later than the expiration date
specified in the Plan or thirty (30) days after termination of employment,
whichever date is earlier. Termination for cause is defined by the Plan to mean;
(i) termination of employment for cause as defined in the optionee's Employment
Agreement or (ii) in the absence of an Employment Agreement for the optionee,
termination of employment by reason of the optionee's commission of a felony,
fraud or willful misconduct which has resulted, or is likely to result, in
substantial and material damage to the Corporation or a Subsidiary, all as the
Board of Directors or the Committee in its sole discretion may determine.
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If an optionee's employment shall terminate for any reason other than
death, disability, retirement or otherwise, all right to exercise his Option
shall terminate at the date of such termination of employment absent specific
provisions in the optionee's Option Agreement.
Modification and Termination of Plans
The Board of Directors or Committee may amend, suspend or terminate the
Plan at any time. However, no such action may prejudice the rights of any
optionee who has prior thereto been granted options under this Plan. Further, no
amendment to this Plan which has the effect of (a) increasing the aggregate
number of Shares subject to this Plan (except for adjustments due to changes in
the Company's capitalization), or (b) changing the definition of "Eligible
Person" under this Plan, may be effective unless and until approved by the
Shareholders of the Company in the same manner as approval of this Plan is
required. Any such termination of the Plan shall not affect the validity of any
Plan Options previously granted thereunder. Unless the Plan shall theretofore
have been suspended or terminated by the Board of Directors, the Plan shall
terminate on June 15, 2007.
Federal Income Tax Effects
The following discussion applies to the Plan and is based on federal
income tax laws and regulations in effect on December 31, 1997. It does not
purport to be a complete description of the federal income tax consequences of
the Plan, nor does it describe the consequences of state, local or foreign tax
laws which may be applicable. Accordingly, any person receiving a grant under
the Plan should consult with his own tax adviser.
The Plan is not subject to the provisions of the Employee Retirement
Income Security Act of 1974 and is not qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
An employee granted an Incentive Stock Option does not recognize
taxable income either at the date of grant or at the date of its timely
exercise. However, the excess of the fair market value of Common Stock received
upon exercise of the Incentive Stock Option over the Option exercise price is an
item of tax preference under Section 57(a)(3) of the Code and may be subject to
the alternative minimum tax imposed by Section 55 of the Code. Upon disposition
of stock acquired on exercise of an Incentive Stock Option, long-term capital
gain or loss is recognized in an amount equal to the difference between the
sales price and the Incentive Stock Option exercise price, provided that the
option holder has not disposed of the stock within two years from the date of
grant and within one year from the date of exercise. If the Incentive Stock
Option holder disposes of the acquired stock (including the transfer of acquired
stock in payment of the exercise price of an Incentive Stock Option) without
complying with both of these holding period requirements ("Disqualifying
Disposition"), the option holder will recognize ordinary income at the time of
such Disqualifying Disposition to the extent of the difference between the
exercise price and the lesser of the fair market value of the stock on the date
the Incentive Stock Option is exercised (the value six months after the date of
exercise may govern in the case of an employee whose sale of stock at a profit
could subject him to suit under Section 16(b) of the Securities Exchange Act of
1934) or the amount realized on such Disqualifying Disposition. Any remaining
gain or loss is treated as a short-term or long-term capital gain or loss,
depending on how long the shares are held. In the event of a Disqualifying
Disposition, the Incentive Stock Option tax preference described above may not
apply (although, where the Disqualifying Disposition occurs subsequent to the
year the Incentive Stock Option
13
<PAGE>
is exercised, it may be necessary for the employee to amend his return to
eliminate the tax preference item previously reported). The Company and its
subsidiaries are not entitled to a tax deduction upon either exercise of an
Incentive Stock Option or disposition of stock acquired pursuant to such an
exercise, except to the extent that the Option holder recognized ordinary income
in a Disqualifying Disposition.
If the holder of an Incentive Stock Option pays the exercise price, in
full or in part, with shares of previously acquired Common Stock, the exchange
should not affect the Incentive Stock Option tax treatment of the exercise. No
gain or loss should be recognized on the exchange, and the shares received by
the employee, equal in number to the previously acquired shares exchanged
therefor, will have the same basis and holding period for long-term capital gain
purposes as the previously acquired shares. The employee will not, however, be
able to utilize the old holding period for the purpose of satisfying the
Incentive Stock Option statutory holding period requirements. Shares received in
excess of the number of previously acquired shares will have a basis of zero and
a holding period which commences as of the date the Common Stock is issued to
the employee upon exercise of the Incentive Stock Option. If an exercise is
effected using shares previously acquired through the exercise of an Incentive
Stock Option, the exchange of the previously acquired shares will be considered
a disposition of such shares for the purpose of determining whether a
Disqualifying Disposition has occurred.
In respect to the holder of Non-Qualified Options, the option holder
does not recognize taxable income on the date of the grant of the Non-Qualified
Option, but recognizes ordinary income generally at the date of exercise in the
amount of the difference between the option exercise price and the fair market
value of the Common Stock on the date of exercise. However, if the holder of
Non-Qualified Options is subject to the restrictions on resale of Common Stock
under Section 16 of the Securities Exchange Act of 1944, such person generally
recognizes ordinary income at the end of the six-month period following the date
of exercise in the amount of the difference between the option exercise price
and the fair market value of the Common Stock at the end of the six-month
period. Nevertheless, such holder may elect within 30 days after the date of
exercise to recognize ordinary income as of the date of exercise. The amount of
ordinary income recognized by the option holder is deductible by the Company in
the year that income is recognized.
Restrictions Under Securities Laws
The sale of the Shares must be made in compliance with federal and
state securities laws. Officers, directors and 10% or greater shareholders of
the Company, as well as certain other persons or parties who may be deemed to be
"affiliates" of the Company under the Federal Securities Laws, should be aware
that resales by affiliates can only be made pursuant to an effective
Registration Statement, Rule 144 or any other applicable exemption. Officers,
directors and 10% and greater stockholders may also be subject to the "short
swing" profit rule of Section 16(b) of the Securities Exchange Act of 1934.
14
<PAGE>
DESCRIPTION OF SECURITIES
The Company is authorized to issue 50,000,000 shares of Common Stock,
par value $.001 per Share, and 2,500,000 shares of Preferred Stock, $.001 per
Share. As of the date hereof, there were 2,827,545 shares of Common Stock issued
and outstanding and no shares of Preferred Stock outstanding.
Common Stock
- ------------
The Company is authorized to issue up to 50,000,000 shares ("Shares")
of Common Stock, $.001 par value, per share, of which 3,789,285 Shares are
issued and outstanding as of the date hereof. The holders of shares of Common
Stock are entitled to share, on a ratable basis, such dividends as may be
declared by the Board of Directors out of funds legally available therefor. Upon
liquidation, dissolution or winding up of the Company, after payment to
creditors and holders of any outstanding shares of Preferred Stock, the assets
of the Company will be divided pro rata on a per Share basis among the holders
of the Common Stock.
Each share of Common Stock entitles the holders thereof, to one vote.
Holders of Common Stock do not have cumulative voting rights which means that
the holders of more than 50% of shares voting for the election of Directors can
elect all of the Directors if they choose to do so, and in such event, the
holders of the remaining shares will not be able to elect any Directors. The
ByLaws of the Company require that only a majority of the issued and outstanding
shares of Common Stock of the Company need be represented to constitute a quorum
and to transact business at a shareholders' meeting. The Common Stock has no
preemptive, subscription or conversion rights and is not redeemable by the
Company.
Preferred Stock
- ---------------
The Company is authorized to issue 2,500,000 shares of Preferred Stock,
par value $.001 per share none of which are issued or outstanding. The Preferred
Stock may be issued by resolutions of the Company's Board of Directors from time
to time without any action of the stockholders. Such resolutions may authorize
issuances of such Preferred Stock in one or more series and may fix and
determine dividend and liquidation preferences, voting rights, conversion
privileges, redemption terms and other privileges and rights of the shares of
each authorized series. While the Company includes such Preferred Stock in its
capitalization in order to enhance its financial flexibility, such Preferred
Stock could possibly be used by the Company as a means to preserve control by
present management in the event of a potential hostile takeover of the Company.
In addition, the issuance of large blocks of Preferred Stock could possibly have
a dilutive effect with respect to the existing holders of Common Stock of the
Company.
NASD OTC Bulletin Board
The Company's Common Stock is traded on the NASD Over the Counter
Bulletin Board under the symbol "AMQC." As such, the Company's Common Stock is
covered by a Securities and Exchange Commission rule that imposes additional
sales practice requirements on broker-dealers who sell such securities to
persons other than established customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals with net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse). For transactions covered by the rule, the
15
<PAGE>
broker-dealer must make a special suitability determination for the purchaser
and receive the purchaser's written agreement to the transaction prior to the
sale. Consequently,the rule may affect the ability of broker-dealers to sell the
Company's securities and also may affect the ability of purchasers in this
offering to sell their shares in the secondary market.
Transfer Agent
The Transfer Agent for the shares of Common Stock is Florida Atlantic
Stock Transfer 7130 Nob Hill Road, Tamarac, Florida 33321.
LEGAL MATTERS
Certain legal matters in connection with the securities being offered
hereby will be passed upon for the Company by Atlas, Pearlman, Trop & Borkson,
P.A., 200 East Las Olas Boulevard, Suite 1900, Fort Lauderdale, Florida 33301.
Members of the firm own an aggregate of 10,000 Shares of Common Stock of the
Company.
EXPERTS
The consolidated financial statements of the Company appearing in the
Company's Form 10-SB Registration Statement, filed on April 24, 1998, have been
audited by Pricher and Company, Independent Certified Public Accountants, as set
forth in their report thereon included therein and incorporated herein by
reference. Such financial statements are, and audited financial statements to be
included in subsequently filed documents will be, incorporated herein in
reliance upon the reports of Pricher and Company pertaining to such financial
statements (to the extent covered by consents filed with the Securities and
Exchange Commission) given upon the authority of such firm as experts in
accounting and auditing.
INDEMNIFICATION
The Florida Business Corporation Act (the "Corporation Act") permits
the indemnification of directors, employees, officers and agents of Florida
corporations. The Company's Articles of Incorporation (the "Articles") and
Bylaws provide that the Company shall indemnify its directors and officers to
the fullest extent permitted by the Corporation Act. Insofar as indemnification
for liabilities arising under the Act may be permitted to directors, officers or
persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that, in the opinion of the Commission, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed that
in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as express in the act and is therefore unenforceable.
The Articles of Incorporation and Bylaws of the Company require the
Company to indemnify its Directors and officers to the fullest extent permitted
by the Business Corporation Act of the State of Florida.
16
<PAGE>
The above indemnification provisions notwithstanding, the Company is
aware that insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as express in the act and is
therefore unenforceable.
17
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
- ------ ---------------------------------------
The documents listed in (a) through (c) below are incorporated by
reference in the Registration Statement. All documents subsequently filed by the
Registrant pursuant to Section 13(a), 13(c), 14 and 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), prior to the filing of a
post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference in the Registration Statement and to be part
thereof from the date of filing of such documents.
(a) The Registrant's Registration Statement filed on Form
10-SB, dated April 24, 1998, File No. 000-24083, April 24, 1998, effective June
23, 1998 and as amended from time to time.
(b) The Company's Quarterly Report on Form 10-QSB for the
quarter ended July 30, 1998 filed September 23, 1998.
(c) The Company's Annual Report on Form 10-KSB for the
year ended April 30, 1998 filed September 23, 1998.
(d) The Description of the Common Stock of the Company which
is contained in a Registration Statement filed under the Exchange Act, including
any amendment or report filed for the purpose of updating such description.
ITEM 4. DESCRIPTION OF SECURITIES
- ------ -------------------------
The class of securities to be offered hereby is registered under
Section 12 of the Securities Exchange Act of 1934, as amended. A description of
the Registrant's securities is set forth in the Prospectus incorporated as a
part of this Registration Statement.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
- ------ --------------------------------------
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
- ------ -----------------------------------------
The Florida Business Corporation Act (the "Corporation Act") permits
the indemnification of directors, employees, officers and agents of Florida
corporations. The Company's Articles of Incorporation (the "Articles") and
Bylaws provide that the Company shall indemnify its directors and officers to
the fullest extent permitted by the Corporation Act. Insofar as indemnification
for liabilities arising under the Act may be permitted to directors, officers or
persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that, in the opinion of the Commission, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed that
in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as express in the act and is therefore unenforceable.
II-1
<PAGE>
The Articles of Incorporation and Bylaws of the Company require the
Company to indemnify its Directors and officers to the fullest extent permitted
by the Business Corporation Act of the State of Florida.
The above indemnification provisions notwithstanding, the Company is
aware that insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as express in the act and is
therefore unenforceable.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
- ------ -----------------------------------
Inasmuch as the employees, executives, directors and consultants who
received the Shares of the Company will be either knowledgeable, sophisticated
or have access to comprehensive information relevant to the Company, such
transaction was undertaken in reliance on the exemption from registration
provided by Section 4(2) of the Act. Alternatively, the Company will rely upon
the exemptions afforded by Regulation D under the Act. As a condition precedent
to such grant, such security holders were required to express an investment
intent and consent to the imprinting of a restrictive legend on each stock
certificate to be received from the Registrant.
ITEM 8. EXHIBITS
- ------ --------
Exhibit Description
- ------- -----------
4(a) American Quantum Cycles, Inc. 1997 Stock Option Plan
4(b) Amendment to 1997 Stock Option Plan
(5) Opinion of Atlas, Pearlman, Trop & Borkson, P.A. relating to
the issuance of shares of Common Stock pursuant to the above
agreement
(24.1) Consent of Atlas, Pearlman, Trop & Borkson, P.A. included in
the opinion filed as exhibit (5) hereto
(24.2) Consent of independent certified public accountants
ITEM 9. UNDERTAKINGS
- ------ ------------
(1) The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offerings or sales are
being made, a post-effective amendment to this Registration Statement to include
any material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement;
(b) That, for the purposes of determining any liability under
the Act, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered
II-2
<PAGE>
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof; and
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(2) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the Act
may be permitted to Directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Director, officer of controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Melbourne and the State of Florida, on the 22nd
day of September 1998.
AMERICAN QUANTUM CYCLES, INC.
By: /s/ Richard Hagen
-----------------------------------
Richard Hagen
Chairman of the Board of Directors,
Chief Executive Officer,
Chief Financial Officer
and President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
Chairman of the
Board of Directors,
/s/ Richard Hagen Principal Executive Officer,
- ------------------------------- Principal Financial Officer September 22, 1998
Richard Hagen and President
/s/ Jim Cheal Vice President
- ------------------------------- and Director September 22, 1998
Jim Cheal
/s/ Douglas Paik Vice President
- ------------------------------- and Director September 22, 1998
Douglas Paik
/s/ Jeffrey W. Starke Vice President
- ------------------------------- and Director September 22, 1998
Jeffrey W. Starke
/s/ Denise O'Brien
- -------------------------------
Denise O'Brien Director September 22, 1998
II-4
<PAGE>
/s/ Gary Irving Acting Chief Operating Officer
- -------------------------------
Gary Irving September 22, 1998
/s/ Linda Condon Principal Accounting Officer September 22, 1998
- -------------------------------
Linda Condon
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
AMERICAN QUANTUM CYCLES, INC.
-----------------------------
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
4(a) American Quantum Cycles, Inc. 1997 Stock Option Plan
4(b) Amendment to 1997 Stock Option Plan
(5) Opinion of Atlas, Pearlman, Trop & Borkson, P.A.
relating to the issuance of shares of Common Stock
pursuant to the Amended 1997 Stock Option Plan
(24.1) Consent of Atlas, Pearlman, Trop & Borkson, P.A.
included in the opinion filed as exhibit (5) hereto
(24.2) Consent of independent certified public accountants
EXHIBIT 4(a)
American Quantum Cycles, Inc. 1997 Stock Option Plan
EXHIBIT 4(b)
Amendment to 1997 Stock Option Plan
EXHIBIT (5)
Opinion of Atlas, Pearlman, Trop & Borkson, P.A. relating
to the issuance of shares of Common Stock
pursuant to the American Quantum Cycles, Inc. Amended 1997 Stock Option Plan
September 23, 1998
American Quantum Cycles, Inc.
731 Washburn Road
Melbourne, Florida 32934
Re: Registration Statement on Form S-8; American
Quantum Cycles, Inc. (the "Company"); 3,000,000 Shares of
Common Stock
Gentlemen:
This opinion is submitted pursuant to the applicable rules of
the Securities and Exchange Commission with respect to the registration by the
Company and the resale of an aggregate of 3,000,000 shares of Common Stock, par
value $0.001 per share (the "Common Stock") to be sold pursuant to the above the
Registration Statement and the Company's Amended 1997 Stock Option Plan
("Plan"). The shares of Common Stock to be sold consist of 3,000,000 shares of
Common Stock to be issued under various Common Stock purchase options (the
"Options") pursuant to the Plan.
In our capacity as counsel to the Company, we have examined
the original, certified, conformed, photostat or other copies of the Company's
Articles of Incorporation, By-Laws, the Plan and various agreements and written
options provided to be provided to officers, directors, key employees and
consultants to the Company, corporate minutes provided to us by the Company and
such other documents and instruments as we deemed necessary. In all such
examinations, we have assumed the genuineness of all signatures on original
documents, and the conformity to originals or certified documents of all copies
submitted to us as conformed, photostat or other copies. In passing upon certain
corporate records and documents of the Company, we have necessarily assumed the
correctness and completeness of the statements made or included therein by the
Company, and we express no opinion thereon.
Based upon and in reliance of the foregoing, we are of the
opinion that the Common Stock to be issued upon exercise of the Options, when
issued in accordance with the terms thereof, will be validly issued, fully paid
and non-assessable.
We hereby consent to the use of this opinion in the
Registration Statement on Form S-8 to be filed with the Commission.
Very truly yours,
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
----------------------------------------
/s/ATLAS, PEARLMAN, TROP & BORKSON, P.A.
JMS/bb
EXHIBIT (24.1)
Consent of Atlas, Pearlman, Trop & Borkson, P.A.
included in the opinion filed as exhibit (5) hereto
EXHIBIT (24.2)
Consent of independent certified public accountants
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-8 of our
report dated October 31, 1997, relating to the financial statements of American
Quantum Cycles, Inc.
/s/Pricher and Company
Orlando, Florida
September 17, 1998
