SEC 2336 POTENTIAL PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM (5-99) ARE NOT REQUIRED TO RESPOND UNLESS THIS FORM
DISPLAYS A CURRENTLY VALID OMB CONTROL NUMBER.
- --------------------------------------------------------------------------------
UNITED STATES OMB APPROVAL
SECURITIES AND EXCHANGE COMMISSION OMB Number: 3235-419
WASHINGTON, D.C. 20549 Expires: March 31, 2000
Estimated average burden
FORM 10-SB hours per response: 23
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
EMC GROUP, INC.
----------------------------------------------
(Name of Small Business Issuer in its charter)
FLORIDA 059-9346551
------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
346 TANAGER COURT, LAKELAND, FL 33803-4843
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (941)-619-6353
Securities to be registered pursuant to Section 12(b) of the Act.
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
Not applicable.
Not applicable.
Securities to be registered pursuant to Section 12(g) of the Act.
COMMON STOCK PAR VALUE $.0001 OTC BULLETIN BOARD
- ----------------------------- ------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
INFORMATION REQUIRED IN REGISTRATION STATEMENT
CAPTION PAGE NO.
------- --------
PART I
<S> <C> <C>
ITEM 1. DESCRIPTION OF BUSINESS 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS 10
ITEM 3. DESCRIPTION OF PROPERTY 15
ITEM 4. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 15
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 17
ITEM 6. EXECUTIVE COMPENSATION 19
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. 20
ITEM 8. DESCRIPTION OF SECURITIES 20
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY 23
AND RELATED STOCKHOLDER MATTERS
ITEM 2. LEGAL PROCEEDINGS 24
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 25
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES 25
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS 27
PART F/S
ITEM 1. FINANCIAL STATEMENTS 28
PART III
ITEM 1. INDEX TO EXHIBITS 49
ITEM 2. DESCRIPTION OF EXHIBITS. 49
SIGNATURES 51
</TABLE>
<PAGE>
PART I
ITEM 1 - DESCRIPTION OF BUSINESS ITEM 101 OF REGULATION SB
REG. 228.101 (ITEM 101)
I-1(a) Business Development
(1) FORM AND YEAR OF ORGANIZATION EMC Group, Inc. (a Florida
Corporation, the "Company") was formed March 3, 1997.
(2) ANY BANKRUPTCY, RECEIVERSHIP OR SIMILAR PROCEEDINGS
There are no bankruptcy and/or receivership proceedings against
EMC Group, Inc.
(3) ANY MATERIAL RECLASSIFICATION, MERGER, CONSOLIDATION, OR PURCHASE
OR SALE OF A SIGNIFICANT AMOUNT OF ASSETS NOT IN THE ORDINARY
COURSE OF BUSINESS.
On December 1, 1997, the Company entered into an exclusive license
agreement with Treats Canada Corporation to develop Treats stores
in the United States and the Caribbean, and holds the right of
first refusal for the U.K. The agreement is for a term of 20
years. In exchange for the U.S. marketing rights, 2,700,000 shares
of Class "A" preferred shares were issued to Treats Canada
Corporation. The shares are convertible to common stock, subject
to approval by the Board of Directors of EMC Group, Inc.
On February 3, 1998, the Company acquired assets for a Treats
store in Detroit, Michigan. The Company acquired the assets at a
cost of $100,000 from Treats Canada Corporation. In exchange for
the assets, 100,000 shares of Class "A" preferred shares were
issued. The shares are convertible to common stock, subject to the
approval of the Board of Directors of EMC Group, Inc. the assets
are owned by EMC Group, Inc., but the store is operated by an
independent party under the terms and conditions of a management
agreement with the Company. EMC Group, Inc. collects management
fees from the party which operates the store.(1)
(1)When converted to the Company's common stock, the total number
of Class "A" Preferred Shares of 2,800,000 issued to Treats Canada
Corporation, may not exceed 10% of the then outstanding number of
common shares of the Company.
On March 26, 1999, the Company's Board of Directors authorized a
25:1 reverse split of its common stock by way of a Board of
Directors Resolution. On April 2, 1999, the Company advised the
OTC Bulletin Board Coordinator, NASDAQ Market Operations
accordingly by way of FAX transmission. On April 2, 1999 the OTC
Bulletin Board Coordinator, NASDAQ Market Operations advised the
Company's Stock Transfer Agent, Atlas Stock Transfer Corporation,
of the issuance of a new CUSP # reflecting the reverse split. As a
result of the reverse split, the original 9,505,000 shares of the
Company's common stock issued October 6, 1997 were reduced to
380,200 shares.
Page 3 of 79 of Form 10-SB
<PAGE>
On April 6, 1999 the Company issued 2,400,000 shares of its common
stock to various parties pursuant to Rule 504 OF Regulation D
promulgated under the Securities Act of 1933 by the Securities and
Exchange Commission. Of these, 2,195,000 shares remain
outstanding.
As at July, 1999, the lease for the premises for the Treats store
in Washington, D.C. was assigned to the then store
operators/franchisees with the consent of the landlord and the
parties, the franchise agreement between the parties was
terminated for a one time payment of $25,000. Additionally, the
franchisees were in default of the franchise agreement for
non-reporting of sales
For the Treats stores located in Orlando, Florida and Detroit,
Michigan the leases for the store premises were assigned by Treats
to the Company with the consent of the respective landlords.
I-1(b) BUSINESS OF ISSUER. BRIEFLY DESCRIBE THE BUSINESS AND INCLUDE, TO THE
EXTENT MATERIAL TO AN UNDERSTANDING OF THE ISSUER:
I-1(b)(1) PRINCIPAL PRODUCTS OR SERVICES AND THEIR MARKETS:
(i) Franchise Related Information.
EMC Group, Inc. (the "Company") is the National Licensee of the
Treats Franchise System in the United States of America. The
Treats System entails the preparation and sales of muffins,
cookies, cinnamon rolls, gourmet coffees, and related food and
beverage products in retail stores, using a system and methodology
of marketing developed and designed by Treats Canada Corporation
and identified by the trademark "TREATS".
Currently, there are two (2) TREATS stores operating in the United
States. One of these units is owned and operated by the Company.
The other unit is owned by the Company but the store is operated
by an independent third party under the terms and conditions of a
management agreement with the Company.
While there are approximately 140 Treats stores in Canada licensed
by Treats Canada Corporation, they are not part of EMC Group, Inc.
and EMC Group, Inc. does not realize any financial contribution
from the Canadian Treats stores and/or Treats Canada Corporation.
The Company grants single unit franchises and area development
franchises throughout the United States. With the exception of the
states of California, Hawaii, Illinois, Indiana, Maryland,
Minnesota, New York, North Dakota, Rhode Island, South Dakota,
Virginia, Washington and Wisconsin (the "Registration States"),
the Company is currently able to sell franchises in most of the
United States. It is the
Page 4 of 79 of Form 10-SB
<PAGE>
intent to file the Company's Uniform Franchise Offering Circular
("UFOC") with the Registration States when warranted.
(ii) TREATS Bakery, TREATS Cafe, TREATS Emporium.
The Company markets three versions of the Treats concept. These
are the Treats Bakery, normally 250 - 500 square feet in size with
no seating area of its own, the Treats Bakery Cafe, commonly 500 -
2,000 square feet in size with its own seating arrangement, and
the Treats International Coffee Emporium, which varies generally
between 500 - 2,000 square feet with its own seating arrangements.
(iii) Locations and Leases.
Treats franchise stores are found in a variety of locations
including office complexes, shopping centers, mixed use properties
(commercial location with shopping area), street front locations,
transportation terminals and any other location where high
visibility and relatively high pedestrian traffic prevails.
For single store franchises it is the Company's intention to enter
into a lease (the "head lease") for the location with the relevant
landlord and to sub-lease it to the franchise owner on the same
terms and conditions. The head lease is the agreement between
landlord and the entity which signs it (the "tenant"). The tenant
is bound by the terms and conditions thereof. That gives the
Company extra control over the single store operation, but also
subjects it to extra risk of liabilities which the franchisee
might create.
For stores governed by an area development agreement, the area
development franchisee will enter into the head lease directly and
the head lease will be collaterally assigned to the Company. The
collateral assignment means that the Company does not have the
rights and obligations associated with the head lease, but it does
give the right to the Company to assume those rights and
obligations if the area franchisee defaults under the area
development agreement with the Company.
(iv) Daily Baking Using Proprietary Mixes.
Treats franchisees prepare their baked goods on site daily in
order to ensure wholesomeness and to attract customers with
provocative fresh baked smells. The Company's principal products
are prepared according to proprietary recipes, in many cases using
dry mixes which have been manufactured by the Quaker Oats Company
of Canada to the specifications of Treats Canada Corporation.
(v) http://www.treatscoffee.com
The Company has launched a dedicated web-site (stated above) to
ensure it reaches its objective of offering Treats private gourmet
coffees through "E-commerce".
Page 5 of 79 of Form 10-SB
<PAGE>
I-1(b)(2) DISTRIBUTION METHODS OF PRODUCTS OR SERVICES.
The Company advertises its franchise opportunities in major
regional newspapers on a periodic basis. In order to assist and
facilitate the sale of franchises, the Company created a web-site
(http://www.treatsusa.com) Additionally, the Company created a
second web-site (http://www.treatscoffee.com ) to market Treats
private label gourmet coffees, primarily packaged in a gift box
format.
Customers may place their orders directly on the web-site and make
payments via major credit cards on a secured site and receive
their orders through UPS Ground Transport. Customers will not be
charged until gift boxes have been shipped. The Company offers 100
% guaranteed satisfaction with a full refund without re-stocking
charge on return of product.
I-1(b)(3) STATUS OF ANY PUBLICLY ANNOUNCED NEW PRODUCT OR SERVICE:
The Company avails itself of Investor Public Relations Firms under
contract to announce any acquisitions of subsidiaries or of
licenses for or development of new product(s) or services, or
other developments of a material nature publicly on the Internet
and through News Agencies. Currently there are no proposed
acquisitions, or any new products or services in development,
other than as described in this document.
I-1(b)(4) COMPETITIVE BUSINESS CONDITIONS AND THE SMALL BUSINESS
ISSUER'S COMPETITIVE POSITION IN THE INDUSTRY AND METHODS OF
COMPETITION:
The restaurant industry, and particularly the quick service
segment, is highly competitive with respect to price, service,
food quality (including taste, freshness, healthfulness, and
nutritional value), and location. There are numerous well
established competitors, including national and regional fast food
chains. The Company faces competition from a broad range of other
restaurants and food service establishments. Many of the
competitors have established significant national, regional and
local brand name and product recognition and engage in extensive
promotional programs, both generally and in response to efforts by
additional competitors to enter new markets or introduce new
products. In addition, the quick service food industry is
characterized by the frequent introduction of new products,
accompanied by substantial promotional campaigns. In recent years,
numerous companies in the fast food industry have introduced new
products positioned to capitalize on growing consumer preferences
for food products that are perceived as healthful, nutritious, low
in calories and low in fat content. It can be expected that the
Company will be subject to increasing competition from companies
whose products or marketing strategies address these consumer
preferences. There can be no assurance that consumer will continue
to regard the Company's products as sufficiently distinguishable
from competitive products, so that substantially equivalent
products will not be introduced
Page 6 of 79 of Form 10-SB
<PAGE>
by the Company's other competitors or that the Company will be
able to compete successfully in the industry.
I-1(b)(5) SOURCES AND AVAILABILITY OF RAW MATERIALS AND THE NAMES OF
PRINCIPAL SUPPLIERS:
The raw materials required with respect to producing fresh baked
products daily at store level, will be provided by designated
distributors such as Sysco Foodservice. Most of the dry mixes, raw
materials and private label packaging materials needed to produce
fresh baked goods and fresh brewed coffee are produced by the
Quaker Oats Company of Canada, the Nestle Company of Canada and
Fort Howard Paper Co. respectively under license from Treats
Canada Corporation. All materials needed are readily available
from multiple sources. Numerous options exist to distribute
products. The Company enjoys good relationships with its
suppliers.
I-1(b)(6) DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS:
All Treats franchise stores rely solely on walk-in or walk-by
traffic. Dependence on one or a few major customers does not
exist.
I-1(b)(7) PATENTS, TRADEMARKS, LICENSES, FRANCHISES, CONCESSIONS,
ROYALTY AGREEMENTS OR LABOR CONTRACTS, INCLUDING DURATION:
The following Marks are owned by Treats Canada corporation and
registered on the following Registers of the United States Patent
and Trademark Office (the "USPTO"):
<TABLE>
<CAPTION>
TRADEMARK REGISTER REGISTRATION NO. REGISTRATION DATE
------------------ ------------ ---------------- -----------------
<S> <C> <C> <C>
"Treats & Design" Supplemental 1,302,288 October 23, 1984*
"Treats" Supplemental 2,076,543 July 1, 1997
"Nobody Treats You
Better" Principal 1,913,927 August 22, 1995
</TABLE>
*The Registration of this Mark has lapsed. The Company is
diligently pursuing re-registration of this Mark.
The Company does not own any patents nor are there any pending
applications.
The Company obtained the right to use the Marks from a National
Marketing Agreement with Treats Canada Corporation dated December
1, 1997. Under this Agreement, Treats Canada Corporation has
granted the Company exclusive right to own and franchise Treats
stores and to use and license the use of the Marks and the Treats
System in the United States. Provided the Company remains in
compliance with its terms, this Agreement has a term of 20 years
and is renewable for an additional 10
Page 7 of 79 of Form 10-SB
<PAGE>
years. The Agreement provides for the following payments to be
made to Treats Canada Corporation:
A store development fee in an amount equal to 10% of the franchise
development fee charged to an area developer or a single store
franchisee by the Company. In the event the Company opens a
Corporately owned and managed location the Company must submit to
Treats Canada Corporation an amount equal to 10% of the highest
store franchise fee charged in the previous calendar year.
On an ongoing basis an amount equal to 1% of the store sales.
Not withstanding the above, there is a Memorandum of Understanding
between the Company and Treats Canada Corporation which (among
other things) provides for a period of 30 months during which
there are no fees due to Treats Canada Corporation by the Company,
until May 30, 2000.
The agreement requires the Company to meet certain development
criteria, as to which the Company is not in compliance (not having
sold any franchises yet in 1999). However, the default provisions
of the agreement has been waived until December 1, 2001.
Single store Franchise Agreements provide for an 8% Royalty
payable by franchisee to the Company on weekly gross sales. Area
Development Agreements provide for an 8% Royalty payable by each
franchisee within the defined area on weekly gross sales, payable
to the Company, of which 50% is paid by the Company to Area
Developer as compensation.
There are currently no Franchise or Area Development Agreements in
effect. Consequently, the Company does not collect any Royalties
at this time.
There are no labor contracts in effect.
I-1(b)(8) NEED FOR ANY GOVERNMENT APPROVAL OF PRINCIPAL PRODUCTS OR
SERVICES. IF GOVERNMENT APPROVAL IS NECESSARY AND THE SMALL BUSINESS
ISSUER HAS NOT YET RECEIVED THAT APPROVAL, DISCUSS THE STATUS OF THE
APPROVAL PROCESS;
The Company grants single unit franchises and area development
franchises throughout the United States. With the exception of the
Registration States, the Company is currently able to sell
franchises in most of the United States. It is the Company's
intent to file the Company's Uniform Franchise Offering Circular
(the "UFOC") with the Registration States when warranted.
There are no other government approvals required, except customary
food preparation permits and health inspection criteria to be met.
Page 8 of 79 of Form 10-SB
<PAGE>
I-1(b)(9) EFFECT OF EXISTING OR PROBABLE GOVERNMENTAL REGULATIONS ON
THE BUSINESS;
The Company as a franchisor, is required to file a UFOC with any
of the Registration States (California, Hawaii, Illinois, Indiana,
Maryland, Minnesota, New York, North
Dakota, Rhode Island, South Dakota, Virginia, Washington and
Wisconsin). Approval by each state is required prior to offering
for sale Treats franchises in any of these Registration States.
Each of the Registration States have their own requirements and
approval criteria, and therefore approval is not guaranteed. The
Company believes, however, that it will meet all requirements of
any of the Registration States when filing the Company's UFOC.
I-1(b)(10) ESTIMATE THE AMOUNT SPENT DURING EACH OF THE LAST TWO FISCAL
YEARS ON RESEARCH AND DEVELOPMENT ACTIVITIES, AND IF APPLICABLE THE
EXTENT TO WHICH THE COST OF SUCH ACTIVITIES ARE BORNE DIRECTLY BY
CUSTOMERS;
All research and development of new products and services are
conducted by Treats Canada Corporation. Therefore, there are no
cost to the Company or its customers.
I-1(b)(11) COSTS AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS
(FEDERAL, STATE AND LOCAL);
The Treats stores are subject to inspection by local health
department agencies in order to ensure compliance with all health
standards. There are no costs involved other than the cost of
necessary food preparation equipment (bakery oven, etc.) and
licenses to open and operate a Treats store.
I-1(b)(12) NUMBER OF TOTAL EMPLOYEES AND NUMBER OF FULL TIME EMPLOYEES.
The Company employs a total of four persons, of which two are
employed on a full time basis.
I-1(c) REPORTS TO SECURITY HOLDERS. DISCLOSE THE FOLLOWING IN ANY
REGISTRATION STATEMENT YOU FILE UNDER THE SECURITIES ACT OF 1933:
I-1(c)(1) IF YOU ARE NOT REQUIRED TO DELIVER AN ANNUAL REPORT TO
SECURITY HOLDERS, WHETHER YOU WILL VOLUNTARILY SEND AN ANNUAL REPORT
AND WHETHER THE REPORT WILL INCLUDE AUDITED FINANCIAL STATEMENTS;
Not applicable because the Company's Form 10-SB is filed under the
Securities Exchange Act of 1934. However, the Company will send to
the Company's security holders annual reports which will include
annual audited financial statements. Since the inception of EMC
Group, Inc., all annual financial statements have been audited.
Page 9 of 79 of Form 10-SB
<PAGE>
I-1(c)(2) WHETHER YOU FILE REPORTS WITH SECURITIES AND EXCHANGE
COMMISSION. IF YOU ARE A REPORTING COMPANY, IDENTIFY THE REPORTS AND
OTHER INFORMATION YOU FILE WITH THE SEC;
Not applicable because the Company's Form 10-SB is filed under the
Securities Exchange Act of 1934. However, as soon as the Company
becomes a reporting company, it will file all required
documentation, including but not limited to Form 10-Q-SB and Form
10-K-SB.
I-1(c)(3) THAT THE PUBLIC MAY READ AND COPY ANY MATERIALS YOU FILE WITH
THE SEC AT THE SEC'S PUBLIC REFERENCE ROOM AT 450 FIFTH STREET, N.W.,
WASHINGTON, D.C 20549. STATE THE PUBLIC MAY OBTAIN INFORMATION ON THE
OPERATION OF THE PUBLIC REFERENCE ROOM BY CALLING THE SEC AT
1-800-SEC-0330. IF YOU ARE AN ELECTRONIC FILER, STATE THAT THE SEC
MAINTAINS AN INTERNET SITE THAT CONTAINS REPORTS, PROXY AND INFORMATION
STATEMENTS, AND OTHER INFORMATION REGARDING ISSUERS THAT FILE
ELECTRONICALLY WITH THE SEC AND STATE THE ADDRESS OF THAT SITE
(HTTP://WWW.SEC.GOV). YOU ARE ENCOURAGED TO GIVE YOUR INTERNET ADDRESS,
IF AVAILABLE:
The public may read and copy this Form 10-SB and any other
materials filed with the SEC at the SEC's Public Reference Room at
450 Fifth Street, N.W. Washington, D.C. 20549. The public may
obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The SEC maintains an
Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file
electronically with the SEC, at http://www.sec.gov. The Company
has two web-sites available to the public. Each of these web-sites
gives the public an opportunity to contact the Company through
E-mail. Those web-sites are: http://www.treatsusa.com and
http://www.treatscoffee.com. Additionally, the president of the
Company may be contacted currently directly via E-mail at:
[email protected].
ITEM 2 - MANAGEMENT'S DISCUSSION ITEM 303 OF REGULATION SB
AND ANALYSIS OR PLAN OF REG. 228.303
OPERATION (ITEM 303)
I-2(A) PLAN OF OPERATION.
The Company has sufficient cash flow from its operations to meet
its day to day financial obligations. As the Company succeeds in
attracting new equity capital, that capital will be used to expand
the Treats concept throughout the United States.
At that time the Company will derive its revenue from one time
franchise fees as a result of the sale of single store franchises
and area development rights, and from
Page 10 of 79 of Form 10-SB
<PAGE>
ongoing royalties, the profit on the sale of corporately owned
stores, operating profit from corporately managed locations,
leasehold and other related fees when and if applicable, and
commissions and fees on the resale of existing franchises.
The Company intends, in due course, to make a strategic
acquisition of small to medium sized, well managed, food service
chain, with a strong emphasis on coffee and a significant
geographic presence in a target market.
Human resources will be adjusted to accommodate business levels.
I-2(b) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
FROM OPERATIONS.
I-2(b)(1) FULL FISCAL YEARS. DISCUSS THE SMALL BUSINESS ISSUER'S
FINANCIAL CONDITION, CHANGES IN FINANCIAL CONDITION AND RESULTS FROM
OPERATIONS FOR EACH OF THE PAST TWO FISCAL YEARS. THIS DISCUSSION
SHOULD ALSO ADDRESS THE PAST AND FUTURE FINANCIAL CONDITION AND RESULTS
FROM OPERATIONS OF THE SMALL BUSINESS ISSUER, WITH PARTICULAR EMPHASIS
ON THE PROSPECTS FOR THE FUTURE. THE DISCUSSION SHOULD ALSO ADDRESS
THOSE KEY VARIABLES AND OTHER QUALITATIVE AND QUANTITATIVE FACTORS
WHICH ARE NECESSARY TO AN UNDERSTANDING AND EVALUATION OF THE SMALL
BUSINESS ISSUER. IF MATERIAL, THE SMALL BUSINESS ISSUER SHOULD DISCLOSE
THE FOLLOWING:
I-2(b)(1)(i) ANY KNOWN TRENDS, EVENTS OR UNCERTAINTIES THAT
HAVE OR ARE REASONABLY LIKELY TO HAVE A MATERIAL IMPACT ON THE
SMALL ISSUER'S SHORT-TERM OR LONG-TERM LIQUIDITY;
I-2(b)(1)(ii) INTERNAL AND EXTERNAL SOURCES OF LIQUIDITY;
I-2(b)(1)(iii) ANY MATERIAL COMMITMENTS FOR CAPITAL
EXPENDITURES AND THE EXPECTED SOURCES OF FUNDS FOR SUCH
EXPENDITURES.;
I-2(b)(1)(iv) ANY KNOWN TRENDS, EVENTS OR UNCERTAINTIES THAT
HAVE HAD OR THAT ARE REASONABLY EXPECTED TO HAVE A MATERIAL
IMPACT ON THE NET SALES OR REVENUES OR INCOME FROM OPERATIONS;
I-2(b)(1)(v) ANY SIGNIFICANT ELEMENTS OF INCOME OR LOSS THAT
DO NOT ARISE FROM THE SMALL BUSINESS ISSUER'S CONTINUING
OPERATIONS;
I-2(b)(1)(vi) THE CAUSES FOR ANY MATERIAL CHANGES FROM PERIOD
TO PERIOD IN ONE OR MORE LINE ITEMS OF THE SMALL BUSINESS
ISSUER'S FINANCIAL STATEMENTS;
I-2(b)(1)(vii) ANY SEASONAL ASPECTS THAT HAD A MATERIAL EFFECT
ON THE FINANCIAL CONDITION OR RESULTS OF OPERATION.
Page 11 of 79 of Form 10-SB
<PAGE>
I-2(b)(2) INTERIM PERIODS. IF THE SMALL BUSINESS ISSUER MUST INCLUDE
INTERIM FINANCIAL STATEMENTS IN THE REGISTRATION STATEMENT OR REPORT,
PROVIDE A COMPARABLE DISCUSSION THAT WILL ENABLE THE READER TO ASSESS
MATERIAL CHANGES IN FINANCIAL CONDITION AND RESULTS OF OPERATIONS SINCE
THE END OF THE LAST FISCAL YEAR AND FOR THE COMPARABLE INTERIM PERIOD
IN THE PRECEDING YEAR.
INSTRUCTIONS TO ITEM 303
1. THE DISCUSSION AND ANALYSIS SHALL FOCUS SPECIFICALLY ON MATERIAL
EVENTS AND UNCERTAINTIES KNOWN TO MANAGEMENT THAT WOULD CAUSE
REPORTED FINANCIAL INFORMATION NOT TO BE NECESSARILY INDICATIVE
OF FUTURE OPERATING RESULTS OR OF FUTURE FINANCIAL CONDITION.
2. SMALL BUSINESS ISSUERS ARE ENCOURAGED, BUT NOT REQUIRED, TO
SUPPLY FORWARD LOOKING INFORMATION. THIS IS DISTINGUISHED FROM
PRESENTLY KNOWN DATA WHICH WILL IMPACT UPON FUTURE OPERATING
RESULTS, SUCH AS KNOWN FUTURE INCREASES IN COSTS OF LABOR AND
MATERIALS. THIS LATTER DATA MAY BE REQUIRED TO BE DISCLOSED.
GENERAL
THE YEAR ENDED FEBRUARY 28, 1999 COMPARED TO THE YEAR ENDED FEBRUARY
28, 1998.
The Company, in its second year of operation recorded system wide
sales of $728,250 (1) compared to $468,250 (1) for the previous
year of operation. The sales increase of $260,000 is due to the
following:
The corporately owned and operated Treats store in Orlando,
Florida was acquired December 1, 1997 and therefore sales for
this store are only for a three (3) month period for the fiscal
year ended February 28, 1998.
The corporately owned store located in Detroit was acquired by
the Company on February 3, 1998 and therefore only a 25 day
period in sales are reported for this store for the fiscal year
ended February 28, 1998. This store is operated by an independent
operator.
FOOTNOTE TO TEXT:
(1)Sales include estimated sales of $350,000 for each fiscal year
for the Treats store located in Washington, D.C. The estimate is
based on previous years history. Additionally, the store was not
reporting sales and the lease was assigned in July 1999 to
Franchisees with the consent of landlord and the parties for a
settlement fee of $25,000 paid subsequently by the Franchisees to
the Company. As a result of the foregoing, the number of Treats
stores in operation in the United States has decreased from 3 to
2 stores.
RESULTS OF OPERATIONS
Page 12 of 79 of Form 10-SB
<PAGE>
Total revenue for the most recent fiscal year was $242,900
compared to $48,500, an increase of 400%. This was the result of
the previous year of operation being the Company's year of
inception. The increase in revenue by category was: Sales of the
corporately managed store increased by 260% from $45,900 to
$165,000 in the most recent fiscal year, ended February 28, 1999.
Management fees in the last fiscal year were $49,500 compared to
$2,500 in the fiscal year immediately preceding, an increase of
$47,000.
Store rent collected for the fiscal year ended February 28, 1999
was $28,300 compared to no revenue for the previous fiscal year.
Expenses for the year ended February 28, 1999 increased $311,600
or 265% to $428,700 from $117,100 for the same period in the
previous fiscal year. The increase in expenses, in general, was a
direct result of the previous year being the Company's year of
inception. Specifically, the increase can be attributed as
follows:
Cost of Sales increased from $19,100 (41.5%) to $83,500 (50.6%)
in the last fiscal year ended February 28, 1999. This increase
can be directly attributed to:
Cost of Sales for the fiscal year ended February 28, 1998 covers
only a 3 month period, since the Treats store, located in Orlando
was acquired by the Company December 1, 1997. Cost of Sales for
the fiscal year ended February 28, 1999 is for a full 12 months
period. The increase of Cost of Sales for the fiscal year ended
February 28, 1999 is largely due to internal promotions of
additional food and beverage items to the store's customers.
Depreciation and Amortization increased from $49,900 in the year
of inception to $149,400 in the fiscal year ended February 28,
1999.
General, Operating and Retail Store expenses increased from
$48,100 to $195,800 an increase of $147,700; however, this
constitutes a decrease, if expressed as a percentage of revenue,
from 99% to 80.6%.
CAPITAL RESOURCES
The Company's projected capital asset requirements for the
current fiscal year are not very demanding and will not impact
the fiscal health of the Company in any manner.
On April 6, 1999, the company raised additional capital of
$419,500 in cash and cash equivalents through the sale of
2,195,000 of the Company's common stock to various parties
pursuant to Rule 504 of Regulation d promulgated under the
Securities Act of 1933 by the Securities and Exchange
Commission. The Company has collected $128,500 in cash in the
balance of $291,000 are due February 28, 2000 pursuant to
Promissory Notes with subscribers.
LIQUIDITY AND CASH FLOW
The working capital deficit of $9,000 at the end of the fiscal
year was as a result of an increase in current liabilities, in
particular an increase in accounts payable and
Page 13 of 79 of Form 10-SB
<PAGE>
unsecured short term advances from the President of the Company.
The advances have subsequently been repaid in full.
The Company did operate under a negative cash flow for the fiscal
year ended February 28, 1999. Management believes, however, that
the current year is showing a significant improvement in cash
flow.
DEBT TO EQUITY RATIO
The debt to equity ratio is insignificant at .02 to 1. The ratio
was .002 to 1 in the Company's year of inception.
IN THE CURRENT YEAR:
This year the Company focused on establishing short and long term
objectives and the development of a business plan to implement
those objectives.
The Company determined that it was important to use the Internet
for communication and dissemination of information. As a result
the Company entered into a contract with Visibility Consulting
Inc. of Orlando, Florida to develop a web site ( ) in order to
promote the Treats Franchise System in the United States and to
provide other relevant information to a prospective client.
In addition to its web site, Company management felt strongly that
an opportunity existed to market some of the Treats Coffees
through the Internet. To that extent a web site was developed. The
site is still under construction but management believes that it
will be ready to take its first orders at the end of January 2000.
The Treats private label coffees are offered on the Internet site
in a gift box format. The management of the Company further
believes, that the Treats gourmet coffees offer significant price
advantages due to the fact that the coffees are produced under
private label by the Nestle Company of Canada, and as a direct
result the savings of conversion of Canadian to US Dollars are
passed on to the Company's E-commerce customers.
The Company will adopt the new design criteria and appearance of
Treats stores, developed by Treats Canada Corporation, which have
been well received by its customers, landlords and franchise
owners. The updated interior and exterior decor provides for a
more comfortable and relaxing atmosphere.
The Company has reviewed its Year 2000 readiness and does not
believe that there will be any material impact on its operation
either directly or indirectly.
IN THIS AND FUTURE YEARS:
Page 14 of 79 of Form 10-SB
<PAGE>
Significant numbers of inquiries have been received from
potentially qualified single, multiple and area development
franchisees. The Company is cautiously optimistic that it will
sell at least one area development franchise in the current fiscal
year.
Additionally, the Company is cautiously optimistic that it will
sell at least 10 single franchise stores in the current fiscal
year.
The Company further believes that it will derive significant
revenues from the sale of its Treats private label gourmet coffees
on its E-commerce web-site (http://www.treatscoffee.com ). The
site is in its final development stage and is expected to be fully
operational on or about November 20, 1999.
ITEM 3 - DESCRIPTION OF PROPERTY ITEM 102 OF REGULATION SB
REG. 228.102
(ITEM 102)
I-3(a) GIVE THE LOCATION OF THE PRINCIPAL PLANTS AND OTHER PROPERTY OF THE SMALL
BUSINESS ISSUER ETC.
The Company at present owns no real properties. Its leased premises for
the Company owned and operated business is 255 So. Orange Avenue,
Orlando, FL 32801. Its other leased location for a business owned by
the Company and operated by an independent operator, is at 3031 West
Grand Boulevard, #201, Detroit, MI 48202.
ITEM 4 - SECURITY OWNERSHIP ITEM 403 OF REGULATION SB
OF CERTAIN BENEFICIAL REG. 228.403
OWNERS AND MANAGEMENT (ITEM 403)
I-4(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS. COMPLETE THE TABLE BELOW
FOR ANY PERSON (INCLUDING ANY "GROUP") WHO IS KNOWN TO THE SMALL BUSINESS ISSUER
TO BE THE OWNER OF MORE THAN 5% OF ANY CLASS OF THE SMALL BUSINESS ISSUER'S
VOTING SECURITIES.
<TABLE>
<CAPTION>
NAME AND AMOUNT AND PERCENT
TITLE OF CLASS ADDRESS OF BENEFICIAL OWNER NATURE OF BENEFICIAL OWNER OF CLASS
- -------------- --------------------------- -------------------------- --------
<S> <C> <C>
Class "A" Pref. Treats Canada Corporation (1) 2,800,000 shares - International
418 Preston Street Franchisor of the Treats
Ottawa, Ontario K1S 4N2 System 100%
Canada
Common Stock 134330 Ontario, Inc. 300,000 shares - A Canadian 12%
38 Stinson Ave. Company
Nepean, Ontario K2H 6N3
Canada
</TABLE>
Page 15 of 79 of Form 10-SB
<PAGE>
<TABLE>
<CAPTION>
NAME AND AMOUNT AND PERCENT
TITLE OF CLASS ADDRESS OF BENEFICIAL OWNER NATURE OF BENEFICIAL OWNER OF CLASS
- -------------- --------------------------- -------------------------- --------
<S> <C> <C> <C>
Common Stock Hector Campagna (3) 575,000 shares - A Canadian 23%
2132 Johnston Road Investor
Ottawa, Ontario K1G 5J7
Canada
Common Stock 882793 Ontario Ltd. (4) 475,000 shares - A Canadian 19%
632 Princess Louise Drive Company
Orleans, Ontario K4A 2B7
Common Stock George Gibson (2) 204,000 shares - Private 8.16%
632 Princess Louise Drive Investor
Orleans, Ontario K4A 2B7
Canada
</TABLE>
(1) The Class "A" Preference Shares issued to Treats Canada Corporation carry
the legend "Convertible to Common Stock subject to the approval by the
Board of Directors of EMC Group, Inc., Inc.". When converted, the total
shares of such issuable common stock may not exceed 10% of the then
outstanding number of shares of the Company.
(2) The Common Stock owned by George Gibson are subject to Rule 144. George
Gibson is a brother of the President and CEO of Treats Canada Corporation.
(3) Hector Campagna is a private investor and the brother of Sandro Campagna, a
Director of the Company.
(4) The President of 882793 Ontario Ltd. is George Gibson, the over 5%common
shareholder of the Company, who is a brother of the President & CEO of
Treats Canada Corporation.
No warrants, options, rights, conversion privileges or any other obligations
exercisable within 60 days have been authorized by the Company.
I-4(b) SECURITY OWNERSHIP OF MANAGEMENT
<TABLE>
<CAPTION>
NAME AND AMOUNT AND PERCENT
TITLE OF CLASS ADDRESS OF BENEFICIAL OWNER NATURE OF BENEFICIAL OWNER OF CLASS
- -------------- --------------------------- -------------------------- --------
<S> <C> <C> <C>
Common Stock Erhard Sommer 40,000 shares- President 1.44%
346 Tanager Court CEO and Director of EMC
Lakeland, FL 33803 Group, Inc.
Common Stock Peter- Mark Bennett 14,000 shares- Secretary 0.50%
71 Bernard Court, N.W. and Treasurer and Director
Calgary, Alberta T3K 2B3 of EMC Group, Inc.
Canada
Common Stock Sandro Campagna 14,000 shares - Director 0.50%
1316 Squire Drive of EMC Group, Inc.
Manotick, Ontario K4M 1B8
Canada
</TABLE>
Page 16 of 79 of Form 10-SB
<PAGE>
OFFICERS AND DIRECTORS AS A GROUP 68,000 SHARES 2.45%
- --------------------------------- ------------- -----
The above noted Common Shares are Restricted Stock subject to Rule 144.
There are no options or warrants granted to present officer(s), directors or
other entities.
I-4(c) CHANGES IN CONTROL. DESCRIBE ANY ARRANGEMENTS WHICH MAY RESULT IN A
CHANGE IN CONTROL OF THE SMALL BUSINESS ISSUER.
No arrangements exist which may result in a change of control of the
Company.
ITEM 5 - DIRECTORS AND EXECUTIVE ITEM 401 OF REGULATION SB
OFFICERS, PROMOTERS AND REG. 228.401
CONTROL PERSONS (ITEM 401)
I-5(a) IDENTIFY DIRECTORS AND EXECUTIVE OFFICERS
I-5(a)(1) LIST THE NAMES AND AGES OF ALL DIRECTORS AND EXECUTIVES AND
ALL PERSONS NOMINATED OR CHOSEN TO BECOME SUCH;
NAME AGE POSITION
----------------- --- ------------------------------
Erhard Sommer 61 President & CEO, Director
since March 3, 1997
Peter-Mark Bennet 42 Secretary, Treasurer, Director
since March 3, 1997
Sandro Campagna 42 Director since March 3, 1997
ERHARD SOMMER
Mr. Erhard Sommer is President, CEO and Chairman of the Board of the
Company. Mr. Sommer has served in this capacity since the March 3, 1997
formation of EMC Group, Inc. Prior to March 3, 1997, Mr. Sommer served
as V.P. Operations of Treats International Enterprises Inc. for 6 1/2
years.
Page 17 of 79 of Form 10-SB
<PAGE>
PETER-MARK BENNETT
Mr. Bennett is Secretary, Treasurer and Director of the Company since
its inception on March 3, 1997. Mr. Bennett is the Product Manager for
Telus Advance Communications in Calgary, Alberta. From July 1997 to
February 1998, Mr. Bennett served as Director of Design Group Ltd.,
Ottawa, Canada. From July 1994 to July 1997, Mr. Bennett was Director
of Operations for Network Excellence Ltd., Ottawa. He was appointed
Director of Treats International Enterprises, Inc. on December 16, 1994
and still serves in this capacity.
SANDRO CAMPAGNA
Mr. Campagna is a Director of the Company. He is President and a
Director of Arban Construction Ltd., in Gloucester, Ontario, Canada
from June 1993 to present. Prior to June 1994, Mr. Campagna was the
President of Campagna Enterprises, which owned several Treats
franchises in Canada.
I-5(b) IDENTIFY SIGNIFICANT EMPLOYEES. GIVE THE INFORMATION SPECIFIED IN
PARAGRAPH (A) OF THIS ITEM FOR EACH PERSON WHO IS NOT AN EXECUTIVE OFFICER BUT
WHO IS EXPECTED BY THE SMALL BUSINESS ISSUER TO MAKE SIGNIFICANT CONTRIBUTION TO
THE BUSINESS;
Does not apply.
I-5(c) FAMILY RELATIONSHIPS. DESCRIBE ANY FAMILY RELATIONSHIP AMONG DIRECTORS,
EXECUTIVE OFFICERS, OR PERSONS NOMINATED OR CHOSEN BY THE SMALL BUSINESS ISSUER
TO BECOME DIRECTORS OR EXECUTIVE OFFICERS.
Hector Campagna (an over 5% common shareholder of the Company) is the brother of
Sandro Campagna, a Director of the Company.
I-5(d) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS. DESCRIBE THE FOLLOWING EVENTS
ETC. ETC.
I-5(d)(1) BANKRUPTCY
None of the officer(s) and Directors has been involved in bankruptcy
proceedings and no bankruptcy petitions were filed by or against any
executive officer or Director while holding office in any capacity in
any business.
I-5(d)(2) ANY CRIMINAL CONVICTIONS
There are no criminal proceedings or pending criminal proceedings
against any of the Officer(s) and Directors of the COMPANY.
I-5(d)(3) BEING SUBJECT TO ANY ORDER, JUDGMENT OR DECREE ETC.
There are no judgments, decrees of any competent jurisdiction against
any of the Company's Officer(s) and Directors which would bar, suspend
or otherwise limit their involvement in any type of business.
Page 18 of 79 of Form 10-SB
<PAGE>
ITEM 6 - EXECUTIVE COMPENSATION ITEM 402 OF REGULATION SB
REG. 228.402
(ITEM 402)
I-6(a) GENERAL.
I-6(a)(1) ALL COMPENSATION COVERED.
All forms of compensation are considered in making the required
disclosures.
I-6(a)(2) PERSONS COVERED.
Disclosure shall be provided pursuant to this item for each of the
following (the "named executive officers"):
ERHARD SOMMER, PRESIDENT & CEO, DIRECTOR AND CHAIRMAN OF THE BOARD
During the last fiscal year ended February 28, 1999, Mr. Sommer
received total gross wages of $12,000, plus Health Insurance Coverage
at a cost of approximately $3,700. There are no compensation or benefit
plans nor any non-plan compensation awards of any kind to Mr. Erhard
Sommer
PETER-MARK BENNETT, SECRETARY & TREASURER, DIRECTOR
Mr. Bennet has not received any compensation of any kind during the
past fiscal year ended February 28, 1999. There are no plans
compensation or benefit nor any non-plan compensation awards of any
kind to Mr. Peter-Mark Bennett.
SANDRO CAMPAGNA, DIRECTOR
Mr. Campagna has not received any compensation of any kind during the
past fiscal year ended February 28, 1999. There are no plans
compensation or benefit nor any non-plan compensation awards of any
kind to Mr. Sandro Campagna.
There are no other executive officers in the Company.
The Company does not own any subsidiaries.
The Company has no overseas operations.
No compensation was paid to any Third Party during the fiscal year
ended February 28, 1999.
I-6(b) SUMMARY COMPENSATION TABLE.
I-6(b)(1) GENERAL.
Page 19 of 79 of Form 10-SB
<PAGE>
The information specified in paragraph (b)(2) of this item, concerning
the compensation of the named executive officers for each registrant's
last three completed fiscal years, shall be provided in a Summary
Table, in the tabular format specified below.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION AWARDS LONG TERM COMPENSATION PAYOUTS
----------------------------------------- ------------------------------- -----------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- --------------------------------------------------------------------------------------------------------------------------
NAME AND
PRINCIPAL SECURITIES LTIP ALL OTHER
COMPENSATION TOTAL SALARY BONUS OTHER ANNUAL RESTRICTED STOCK UNDERLYING PAYOUTS
POSITION YEAR ($) ($) COMPENSATION AWARD(S)($) OPTIONS ($) ($)
- --------------------------------------------------------------------------------------------------------------------------
CEO
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Erhard
Sommer 98 14,400 14,400 None None None None None
Erhard
Sommer 99 12,000 12,000 None None None None None
</TABLE>
ITEM 7 - CERTAIN RELATIONSHIPS ITEM 404 OF REGULATION SB
AND RELATED TRANSACTIONS REG. 228.404
(ITEM 404)
I-7(a) DESCRIBE ANY TRANSACTION DURING THE LAST TWO YEARS, OR PROPOSED
TRANSACTIONS, TO WHICH THE SMALL BUSINESS ISSUER WAS OR IS TO BE A PARTY, IN
WHICH ANY OF THE FOLLOWING PERSONS HAD OR IS TO HAVE A DIRECT OR INDIRECT
MATERIAL INTEREST. GIVE THE NAME OF THE PERSON, THE RELATIONSHIP TO THE ISSUER,
NATURE OF THE PERSON'S INTEREST IN THE TRANSACTION AND, THE AMOUNT OF SUCH
INTEREST.
Not applicable.
ITEM 8 - DESCRIPTION OF ITEM 202 OF REGULATION SB
SECURITIES REG. 228.202
(ITEM 202)
I-8(a) COMMON OR PREFERRED STOCK.
I-8(a)(1) IF THE SMALL BUSINESS ISSUER IS OFFERING COMMON EQUITIES,
DESCRIBE ANY DIVIDEND, VOTING AND PREEMPTION RIGHTS.
Page 20 of 79 of Form 10-SB
<PAGE>
The Company's authorized stock is 50,000,000 Common shares and
50,000,000 Preferred shares. The total number of outstanding shares of
the Company's common stock to date are 2,575,200.
DIVIDENDS
The Company has not paid any dividends and does not anticipate paying
any dividends in the foreseeable future.
VOTING OF SHARES (pursuant to the Florida Statues, the Company's
Articles of Incorporation, and Section 9 of the Company's By-laws):
Each outstanding share regardless of class, shall be entitled to one
(1) vote on each matter submitted at a meeting of shareholders.
Treasury shares, shares of stock of this corporation owned by a
subsidiary corporation, of which the majority of the voting stock is
owned by this corporation, and shares of stock of this corporation held
by this corporation in fiduciary capacity shall not be voted, directly
or indirectly, at any meeting and shall not be counted in determining
the total number of outstanding shares at any given time.
A shareholder may vote either in person or by proxy executed in writing
by the shareholder or his or her duly and expressly authorized
attorney-in-fact. If a proxy expressly provides, any proxy holder may
appoint a substitute to act in his or her behalf.
There is cumulative voting for directors. This means that at each
election for directors, every shareholder entitled to vote at such
election shall have the right to vote, in person or by proxy, the
number of votes attributable to the shares owned by the shareholder for
as many persons as there are directors to be elected at that time and
for whose election the shareholder has a right to vote.
Shares standing in the name of a corporation, domestic or foreign, may
be voted as specified by governing law or else by the officer, agent or
proxy designated by the bylaws of the corporate shareholder; or, in the
absence of any applicable law or bylaw, by such person as the Board of
Directors of the corporate shareholder may designate. Proof of such
designation may be made by presentation of a certified copy of the
bylaws or other instrument of the corporate shareholder. In the absence
of any such designation, or in case of conflicting designations by the
corporate shareholder, the chairman of the board, president, any vice
president, secretary and treasurer of the corporate shareholder shall
be presumed to possess , in that order, authority to vote such shares.
I-8(a)(2) If the small business is offering preferred stock, describe
the dividend, voting, conversion and liquidation rights as well as
redemption or sinking fund provisions.
Page 21 of 79 of Form 10-SB
<PAGE>
On December 1, 1997, the Company entered into an exclusive license
agreement with Treats Canada Corporation to develop Treats stores in
the United States and the Caribbean and the Company holds the right of
first refusal for stores in the U.K. The agreement is for a term of 20
years. In exchange for the U.S. marketing rights, 2,700,000 shares of
Class "A" preferred shares were issued to Treats Canada Corporation.
There are outstanding 2,800,000 Class "A" preferred shares. Each share
votes equally with common shares, one vote per share. The shares are
convertible to common stock, subject to approval by the Board of
Directors of EMC Group, Inc. and upon conversion may not exceed 10% of
the outstanding common stock of the Company. There are no redemption
rights or sinking fund provisions and no dividends are payable. No
additional Class "A" preferred shares are presently being offered or
are presently planned to be issued.
On February 3, 1998, the Company acquired assets for a Treats store in
Detroit, Michigan. The Company acquired the assets at a cost of
$100,000 from Treats Canada Corporation. In exchange for the assets,
100,000 shares of Class "A" preferred shares were issued. The shares
are convertible to common stock subject to the approval of the Board of
Directors of EMC Group, Inc. The assets are owned by EMC Group, Inc.,
but the store is operated by an independent party. EMC Group, Inc.
collects management fees from the party which operates the store.
I-8(a)(3) DESCRIBE ANY OTHER MATERIAL RIGHTS OF COMMON OR PREFERRED
SHAREHOLDERS.
The total of 2,800,000 Class "A" Preferred Shares issued to Treats
Canada Corporation, when converted to common stock upon approval by the
Board of Directors of the Company, may not exceed 10% of the Company's
outstanding common shares.
I-8(a)(4) DESCRIBE ANY PROVISION IN THE CHARTER OR BY-LAWS THAT WOULD
DELAY, DETER OR PREVENT A CHANGE IN CONTROL OF THE SMALL BUSINESS
ISSUER.
There are no provisions contained in the Company's charter or by-laws
that would prevent, delay or deter a change in control of the Company.
I-8(b) DEBT SECURITIES
Not applicable.
I-8(c) OTHER SECURITIES TO BE REGISTERED
Not applicable
Page 22 of 79 of Form 10-SB
<PAGE>
PART II
ITEM 1 - MARKET PRICE OF AND ITEM 201 OF REGULATION SB
DIVIDENDS ON THE REG. 228.201
REGISTRANT'S COMMON (ITEM 201)
EQUITY AND RELATED
SHAREHOLDER MATTERS
II-1(a) MARKET INFORMATION
II-1(a)(1) IDENTIFY THE PRINCIPAL MARKETS WHERE THE SMALL BUSINESS
ISSUER'S COMMON STOCK IS TRADED. IF THERE IS NO PUBLIC MARKET, SO
STATE.
The Company's common stock is traded over the counter on the NASDAQ
bulletin board, trading symbol EMCB.
II-1(a)(1)(i) If the principal market for the small business
issuer's common equity is an exchange, give the high and low
sales prices for each quarter within the last two fiscal years
and any subsequent interim period for which financial
Statements are required by Item 310(b) in the over-the-counter
market.
THE COMPANY'S STOCK IS NOT TRADED PRINCIPALLY ON A STOCK EXCHANGE. THE FOLLOWING
TABLE SETS FORTH THE HIGH AND LOW PRICES FOR THE COMPANY'S STOCK. PRICES
REPRESENT QUOTATIONS BETWEEN DEALERS WITHOUT ADJUSTMENT FOR RETAIL MARK-UPS,
MARK-DOWNS OR COMMISSIONS, AND MAY NOT REPRESENT ACTUAL TRANSACTIONS.
QUARTER ENDED LOW PRICE HIGH PRICE
- --------------------------------------------------------------------------------
February 28, 1998(1) $ 12.50 $ 12.50
May 31, 1998(1) $ 8.575 $ 10.15
August 28, 1998(1) $ 7.80 $ 10.15
November 30, 1998(1) $ 3.50 $ 3.50
February 28, 1999(1) $ 1.25 $ 1.25
May 31, 1999 $ 0.50 $ 0.50
August 31, 1999 $ 0.375 $ 0.375
(1)Stock prices have been adjusted to reflect the reverse split of the Company's
common stock for each quarter reported.
II-1(b) IF THE INFORMATION CALLED FOR BY PARAGRAPH (A) OF THIS ITEM IS BEING
PRESENTED IN A REGISTRATION STATEMENT RELATING TO A CLASS OF COMMON EQUITY FOR
WHICH AT THE TIME OF FILING THERE IS NO ESTABLISHED PUBLIC TRADING MARKET,
INDICATE THE AMOUNT(S) OF COMMON EQUITY:
II-1(b)(i) THAT IS SUBJECT TO OUTSTANDING WARRANTS TO PURCHASE, OR
SECURITIES CONVERTIBLE INTO, COMMON EQUITY OF THE REGISTRANT;
Believed to be not applicable because there is a trading market.
However, see Part I, Item 8, "Description of Securities" in the
Company's Form 10-SB.
Page 23 of 79 of Form 10-SB
<PAGE>
II-1(b)(ii) THAT COULD BE SOLD PURSUANT TO RULE 144 UNDER THE
SECURITIES ACT OR THAT THE REGISTRANT HAS AGREED TO REGISTER UNDER THE
SECURITIES ACT FOR SALE BY THE SECURITY HOLDERS; OR
Believed to be not applicable because there is a trading market.
However, all or substantially all of the outstanding common equity
could be sold pursuant to Rule 144, but shares held by affiliates of
the Company (its parent(s), officers, directors and 10% or more common
equity holders) are subject to the sales volume, method of sale, and
reporting restrictions of Rule 144 (and the trading and reporting
restrictions of Section 16 of the Securities Exchange Act of 1934).
II-1(b)(iii) THAT IS BEING OR HAS BEEN PROPOSED TO BE, PUBLICLY OFFERED
BY THE REGISTRANT UNLESS SUCH COMMON EQUITY IS BEING OFFERED PURSUANT
TO AN EMPLOYEE BENEFIT PLAN OR DIVIDEND REINVESTMENT PLAN, THE OFFERING
OF WHICH COULD HAVE A MATERIAL EFFECT ON THE MARKET PRICE OF THE
REGISTRANTS COMMON EQUITY.
Believed to be not applicable because there is a trading market and
because no common equity is being or has been proposed to be publicly
offered by the Company (other than pursuant to a benefit or
reinvestment plan) so as to have a material market price effect.
II-1(b) HOLDERS. GIVE THE APPROXIMATE NUMBER OF HOLDERS OF RECORD OF EACH CLASS
OF COMMON EQUITY.
Preferred Class "A" stock: One (1) holder
Common stock: Three Hundred Sixty-Six (366) holders
II-1(c) DIVIDENDS
No cash dividends have been declared in the past two years and the
Company does not anticipate that it will declare dividends in the
foreseeable future. However, there are no restrictions limiting the
ability of the Company to declare and/or pay dividends.
ITEM 2 - LEGAL PROCEEDINGS ITEM 103 OF REGULATION SB
REG. 228.103
(ITEM 103)
II-2(a) IF A SMALL BUSINESS ISSUER IS A PARTY TO ANY PENDING LEGAL PROCEEDING
(OR ITS PROPERTY IS SUBJECT OF A PENDING LEGAL PROCEEDING), GIVE THE FOLLOWING
INFORMATION (NO INFORMATION IS NECESSARY AS TO ROUTINE LITIGATION THAT IS
INCIDENTAL TO THE BUSINESS):
There no legal proceedings of any kind against the Company or as to its
property.
Page 24 of 79 of Form 10-SB
<PAGE>
ITEM 3 - CHANGES IN AND ITEM 304 OF REGULATION SB
DISAGREEMENTS REG. 228.304
WITH ACCOUNTANTS (ITEM 304)
II-3(a) There are no changes in or disagreements with the accountants.
ITEM 4 - RECENT SALES OF ITEM 701 OF REGULATION SB
UNREGISTERED REG. 228.701
SECURITIES (ITEM 701)
II-4 GIVE THE FOLLOWING INFORMATION FOR ALL SECURITIES THAT THE SMALL BUSINESS
ISSUER SOLD WITHIN THE PAST THREE YEARS WITHOUT REGISTERING THE SECURITIES WITH
THE SECURITIES ACT.
THE DATE, TITLE AND AMOUNT OF SECURITIES SOLD.
The Company issued the following securities to Treats Canada
Corporation.
On December 1, 1997, the Company entered into an exclusive license
agreement with Treats Canada Corporation to develop Treats stores in
the United States and the Caribbean and the Company holds the right of
first refusal for stores in the U.K. The agreement is for a term of 20
years. In exchange for the U.S. marketing rights, 2,700,000 shares of
Class "A" preferred shares were issued to Treats Canada Corporation.
There are outstanding 2,800,000 Class "A" preferred shares. Each share
votes equally with common shares, one vote per share. The shares are
convertible to common stock, subject to approval by the Board of
Directors of EMC Group, Inc. and upon conversion may not exceed 10% of
the outstanding common stock of the Company. There are no redemption
rights or sinking fund provisions and no dividends are payable. No
additional Class "A" preferred shares are presently being offered or
are presently planned to be issued.
The Company issued on the following dates the following amounts of
common shares to the following persons:
On April 6, 1999 the Company issued 2,400,000 shares of its common
stock to various parties pursuant to Rule 504 OF Regulation D
promulgated under the Securities Act of 1933 by the Securities and
Exchange Commission. Of these, 2,195,000 shares remain outstanding.
100,000 shares of the Company's free trading shares were issued at no
cost to Power Media Group, Inc. in payment for Public/Investor
Relations to be undertaken by this firm on behalf of the Company.
On April 6, 1999, the Company entered into a Marketing Agreement with
Visibility Consulting, Inc., a Florida corporation, with their
principal office located at 425
Page 25 of 79 of Form 10-SB
<PAGE>
Chickasaw Trail, Suite 166, Orlando, Florida 32825, Phone 407-658-7760.
The agreement provides for services to be rendered by Visibility
Consulting, Inc. including general consulting and project management in
the areas of Investor Relations, Public Relations, Marketing, Internet
Development (www.treatsusa.com) and www.treatscoffee.com), and
Financial Communications. In payment for these services to be
performed, the Company issued a total of 100,000 free trading shares of
the Company's common stock at $0.005 per share in three draws: (1)
50,000 shares of the Company's common stock immediately upon execution
of the agreement; (2) 25,000 shares of the Company's common stock 90
days after execution of the agreement and; (3) 25,000 shares of the
Company's common stock 180 days after execution of the agreement.
On July 23, 1999 the Company entered into a Public/Investor Relations
Agreement with Talk Stock With Me, Inc.. In return for services to be
rendered, the Company issued 100,000 free trading shares of its common
stock to Talk Stock With Me, Inc. at no cost to Talk Stock With Me,
Inc. The agreement calls for a three (3) month term, with renewal
options by either party. The original agreement has been extended by an
additional one (1) month by way of a verbal commitment from Talk Stock
With Me, Inc., at no further cost to the Company.
On October 8, 1999, the Company returned 205,000 shares of its
outstanding common stock to treasury by way of cancellation advice to
the Company's transfer Agent, Atlas Stock Transfer Corporation. 200,000
shares were part of a 300,000 share certificate originally issued to
Power Media Group, Inc., on April 6, 1999 with an option to purchase
the common stock as a block for $100,000 cash. However, Power Media,
Inc. did not exercise their option. The remaining 100,000 shares were
issued to Talk Stock With Me, Inc. on July 23, 1999 for services to be
rendered as referenced in the previous paragraph. A 5,000 share
certificate was canceled as a result of a private investor not wishing
to pursue the purchase of this stock certificate.
The remaining 2,195,000 shares of the 2,400,000 issued on April 6, 1999
pursuant to Rule 504 of Regulation D promulgated under the Securities
Act of 1933 by the Securities and Exchange Commission, were subscribed
to at an average price per share of $0.1911 or a total of $419,500, of
which the Company has received $128,500 from these subscriptions to
date. Payments are due February 28, 2000 pursuant to Promissory Notes
with subscribers.
GIVE THE NAMES OF THE PRINCIPAL; UNDERWRITERS, IF ANY. IF THE SMALL
BUSINESS ISSUER DID NOT PUBLICLY OFFER ANY SECURITIES, IDENTIFY THE
PERSON OR CLASS OF PERSONS TO WHOM THE SMALL BUSINESS ISSUER SOLD THE
SECURITIES.
The Class "A" preferred shares were not publicly offered. They were
sold to Treats Canada Corporation, 418 Preston Street, Ottawa, Ontario,
Canada.
Page 26 of 79 of Form 10-SB
<PAGE>
The common shares were not publicly offered. They were sold to the
persons named above for services and the balance were subscribed for by
cash investors who had no other significant relationships with the
Company.
None of the securities sold within the past three years have been
registered by the Company with the SEC.
ITEM 5 - INDEMNIFICATION OF ITEM 702 OF REGULATION SB
DIRECTORS AND OFFICERS REG. 228.702
(ITEM 702)
II-5 STATE WHETHER ANY STATUTE, CHARTER PROVISIONS, BY-LAWS CONTRACT OR OTHER
ARRANGEMENTS INSURES OR INDEMNIFIES A CONTROLLING PERSON, DIRECTOR OR OFFICER OF
THE SMALL BUSINESS ISSUER OR AFFECTS HIS OR HER LIABILITY IN THAT CAPACITY.
Article IX of the Company's by-laws states that the Company, in its discretion,
shall indemnify any person who was or is a party in a threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than a action by, or in the right of, the corporation) by
reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against liabilities, expenses
(including attorney's fees at all trial and appellate levels), judgments, fines,
penalties and amounts paid in settlement, actually and reasonably incurred by
him or her in connection with such action, suit or proceeding, including any
appeal thereof, if he or she acted in good faith and in a manner he or she
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 or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment order, settlement or conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
or she reasonably believed to be in, or not opposed to, the best interests of
the corporation or, with respect to any criminal action or proceeding, had
reasonable cause to be believe that his or her conduct was unlawful.
Page 27 of 79 of Form 10-SB
<PAGE>
PART F/S
ITEM 310 FINANCIAL STATEMENTS ITEM 310 OF REGULATION SB
REG. 228.310
(ITEM 310)
F/S-1. Furnish the information required by Item 301 of Regulation SB.
EMC GROUP, INC.
FINANCIAL STATEMENTS
YEAR ENDED FEBRUARY 28, 1999 AND
INITIAL PERIOD ENDED FEBRUARY 28, 1998
EMC GROUP, INC.
YEAR ENDED FEBRUARY 28, 1999
AND INITIAL PERIOD ENDED FEBRUARY 28, 1998
TABLE OF CONTENTS
PAGE
NUMBER
------
Financial Statements:
Independent Auditor's Report 29
Balance Sheets 30
Statements Of Operations 31
Statement Of Changes In Stockholders' Equity 32
Statements Of Cash Flows 33
Notes To Financial Statements 34-36
Accompanying Information 36
Page 28 of 79 of Form 10-SB
<PAGE>
DAVID R. RAMOS
CERTIFIED PUBLIC ACCOUNTANT
1543 LAKELAND HILLS BOULEVARD
LAKELAND, FLORIDA
TELEPHONE (941) 683-4388
FAX (941) 686-8620
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders
EMC Group, Inc.
I have audited the accompanying balance sheets of EMC Group, Inc., as
of February 28, 1999 and 1998, and the related statements of operations, changes
in stockholders' equity, and cash flows for the year and initial period then
ended. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audits.
I conducted my audits in accordance with generally accepted auditing
standards. Those standards require that I 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.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, financial statements referred to above present fairly,
in all material respects, the financial position of EMC Group, Inc. as of
February 28, 1999 and 1998, and the results of its operations and its cash flows
for the year and initial period then ended in conformity with generally accepted
accounting principles.
/s/ DAVID R. RAMOS, CPA
- -----------------------
David R. Ramos, CPA
July 13, 1999
Page 29 of 79 of Form 10-SB
<PAGE>
EMC GROUP, INC.
BALANCE SHEETS
FEBRUARY 28,
ASSETS 1999 1998
----------- -----------
CURRENT:
Cash $ 4,590 $ 15,847
Accounts receivable 25,835 774
Note receivable 0 8,713
Inventory 3,478 2,994
Prepaid expenses 972 834
----------- -----------
TOTAL CURRENT ASSETS 34,875 29,162
PROPERTY AND EQUIPMENT, at cost:
Leasehold improvements 68,099 68,099
Equipment 37,485 36,219
----------- -----------
105,584 104,318
Less accumulated depreciation 26,580 14,748
----------- -----------
NET PROPERTY AND EQUIPMENT 79,004 89,570
OTHER ASSETS:
Organization costs 3,102 4,136
Marketing rights 2,559,375 2,695,875
Deposits 1,199 1,199
----------- -----------
$ 2,677,555 $ 2,819,942
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQITY
CURRENT LIABILITIES:
Accounts payable $ 21,677 $ 652
Advances from officer 22,254 0
----------- -----------
TOTAL CURRENT LIABILITIES 43,931 652
LONG-TERM LIABILITIES:
Deposits 4,400 4,400
----------- -----------
TOTAL LIABILITIES 48,331 5,052
STOCKHOLDERS' EQUITY:
Preferred stock ($.0001 par value; 50 million
shares authorized; 2.8 million issued) 280 280
Common stock ($.0001 par value; 50 million
shares authorized; 9.505 million issued) 951 951
Additional paid-in capital 2,882,116 2,882,116
Deficit (254,123) (68,457)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 2,629,224 2,814,890
----------- -----------
$ 2,677,555 $ 2,819,942
=========== ===========
Page 30 of 79 of Form 10-SB
<PAGE>
EMC GROUP, INC.
STATEMENTS OF OPERATIONS
FROM
MARCH 3, 1997
YEAR ENDED (INCEPTION)
FEBRUARY 28, FEBRUARY 28,
1999 1998
----------- -----------
SALES:
Food and beverage $ 165,049 $ 45,927
Management fees 49,506 2,545
Store rent 28,357 0
----------- -----------
TOTAL SALES 242,912 48,472
EXPENSES:
Food and beverage 83,535 22,013
Retail store operating 91,637 19,099
General and administrative 104,167 26,066
Depreciation and amortization 149,366 49,907
----------- -----------
TOTAL EXPENSES 428,705 117,085
----------- -----------
LOSS BEFORE INTEREST INCOME (185,793) (68,613)
INTEREST INCOME 127 156
----------- -----------
NET LOSS $ (185,666) $ (68,457)
=========== ===========
EARNINGS PER COMMON SHARE $ .00 $ .00
=========== ===========
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 9,505,000 9,095,468
=========== ===========
Page 31 of 79 of Form 10-SB
<PAGE>
EMC GROUP, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FROM MARCH 3, 1997 (INCEPTION)
TO FEBRUARY 28, 1999
<TABLE>
<CAPTION>
PAR VALUE ADDITIONAL
---------------------------- PAID-IN INCOME
COMMON PREFERRED CAPITAL (LOSS) TOTAL
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Common stock issued
7,500,000 shares
March 3, 1997 $ 750 $ 0 $ 0 $ 0 $ 750
Common stock issued
1,005,000 shares
April 30, 1997 101 0 4,924 0 5,025
Common stock issued
1,000,000 shares
May 31, 1997 100 0 77,472 0 77,572
Preferred stock issued
2,800,000 shares
February 28, 1998 0 280 2,799,720 0 2,800,000
Net loss 0 0 0 (68,457) (68,457)
----------- ----------- ----------- ----------- -----------
BALANCE, February 28, 1998 951 280 2,882,116 (68,457) 2,814,890
Net loss 0 0 0 (185,666) (185,666)
----------- ----------- ----------- ----------- -----------
BALANCE, February 28, 1999 $ 951 $ 280 $ 2,882,116 $ (254,123) $ 2,629,224
=========== =========== =========== =========== ===========
</TABLE>
Page 32 of 79 of Form 10-SB
<PAGE>
EMC GROUP, INC.
STATEMENTS OF CASH FLOWS
FROM
MARCH 3,1997
YEAR ENDED (INCEPTION)
FEBRUARY 28, FEBRUARY 28,
1999 1998
--------- ---------
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net loss $(185,666) $ (68,457)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 149,366 49,907
(Increase) in accounts receivable (25,061) (774)
(Increase) in inventory (484) (2,994)
(Increase) in prepaid expenses (138) (834)
Increase in accounts payable 21,025 652
--------- ---------
Net cash used in
operating activities (40,958) (22,500)
CASH FLOWS FROM INVESTING ACTIVITIES:
Collection of principal on note receivable 8,713 3,287
Purchase of equipment (1,266) (518)
--------- ---------
Net cash provided by
investing activities 7,447 2,769
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 0 82,181
Stock issuance costs 0 (16,603)
Principal repaid on debt obligations 0 (30,000)
Advances from officer 22,254 0
--------- ---------
Net cash provided by
financing activities 22,254 35,578
--------- ---------
NET INCREASE (DECREASE) IN CASH (11,257) 15,847
CASH, beginning of period 15,847 0
--------- ---------
CASH, end of period 4,590 $ 15,847
========= =========
Page 33 of 79 of Form 10-SB
<PAGE>
EMC GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
COMPANY ACTIVITIES - The Company (a Florida corporation) was
formed March 3, 1997, to develop Treats restaurants in the United States. An
agreement between the Company and Treats Canada Corporation provides for a 20
year territory exclusivity arrangement for the United States of America to
develop Treats Bakeries, Treats Bakery Cafes, Treats International Coffee
Emporiums and Treats Carts. The various concepts will be marketed collectively
under the protected trade name "Treats".
METHOD OF ACCOUNTING - The accompanying financial statements
are maintained on the accrual basis of accounting.
ACCOUNTS RECEIVABLE - Accounts receivable consist primarily of
franchise fees due to the Company. At February 28, 1999 and 1998, the
receivables are considered fully collectible.
INVENTORY - Inventory consists of food and beverage products,
which are valued at the lower of cost or market on a first-in, first-out basis.
ORGANIZATION COSTS - Organization costs are amortized over
five years using the straight-line basis. Amortization expense relating to
organization costs is $1,034 for each of the periods ended February 28, 1999 and
1998.
PROPERTY AND EQUIPMENT - Property and equipment are stated at
cost. Depreciation is computed over the estimated useful lives of the assets
using accelerated methods.
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. Accordingly, actual results could differ from those estimates.
RECLASSIFICATIONS - Certain prior year amounts have been
reclassified to conform with the current year presentation.
NOTE 2 - U.S. MARKETING RIGHTS
On April 8, 1997, the Company entered into an exclusive
licensing agreement with Treats Canada Corporation to develop Treats stores in
Florida and Georgia. As consideration for this agreement, the Company agreed to
pay Treats Canada Corporation $300,000. Of that balance, $30,000 was paid by the
Company. That agreement and the remaining unpaid debt of $270,000 was replaced
by an agreement dated December 1, 1997, as described below.
On December 1, 1997, the Company entered into an exclusive
licensing agreement with Treats Canada Corporation to develop Treats stores in
the United States. The agreement is for a term of 20 years. The agreement is
being amortized using the straight-line method over its 20 year life. In
connection with that agreement, $136,500 has been amortized and reflected as
expense for the year ended February 28, 1999. For the initial period ended
February 28, 1998, $34,125 was amortized and reflected as expense. In exchange
for U.S. marketing rights, 2,700,000 shares of Class "A" preferred shares were
issued to Treats Canada Corporation. The shares are convertible to common stock
subject to approval by EMC Group, Inc.'s board of directors.
Page 34 of 79 of Form 10-SB
<PAGE>
NOTE 3 - STORE LOCATIONS
On December 1, 1997, the Company acquired assets to operate a
Treats store in Orlando, Florida. The Company acquired the assets at a cost of
$5,000. A cash payment of $600 was made and the Company assumed an obligation to
pay $4,400 in various deposits.
On February 3, 1998, the Company acquired assets for a Treats
store in Detroit, Michigan. The Company acquired the assets at a cost of
$100,000 from Treats Canada Corporation. In exchange for the assets, 100,000
shares of Class "A" preferred shares were issued. The shares are convertible to
common stock subject to approval by EMC Group, Inc.'s board of directors. The
assets are owned by EMC Group, Inc., but the Treats store is operated by an
independent party. EMC Group, Inc. collects management fees from the party which
operates the Treats store.
NOTE 4 - COMMON STOCK OFFERINGS
On April 30 and May 31, 1997, the Company concluded two
offerings of its common stock to the public at $.005 and $.10 per share,
respectively. The combined offerings raised $70,597 after reflecting payment of
offering costs such as legal, accounting, filing fees and registration fees. The
Company issued one million eight hundred eighty five thousand shares (1,885,000)
of its $.0001 par value common stock as a result of the offerings. The offerings
were made in reliance of S.E.C. Regulation D Rule 504 and were, accordingly,
exempt from registration.
NOTE 5 - STOCK OPTIONS AND STOCK AWARDS
On August 1, 1997, the Company adopted a compensatory common
stock "Equity Incentive Plan". The plan is to provide directors, officers and
certain key employees with additional incentives by increasing their ownership
interest in the Company. Four million shares (4,000,000) of common stock have
been reserved for issuance under the plan as either stock options or stock
awards. Options granted under the plan may be either qualified or non-qualified
as determined by the U.S. Internal Revenue Code. As of February 28, 1999, no
options, whether qualified or non-qualified, have been granted nor have any
shares been awarded as incentive compensation.
NOTE 6 - ADVANCES FROM OFFICER
During the fiscal year ended February 28, 1999, the Company's
president provided various operating noninterest-bearing cash advances to the
Company. These advances were made under an informal, unsecured agreement. The
Company repaid the advances in full in April 1999.
NOTE 7 - LEASE COMMITMENTS
The Company rents its Orlando facility. The operating lease
expires in October 2002. For the periods ended February 28, 1999 and 1998, the
base rent expense was $18,671 and $4,770, respectively. The Company also leases
space for the Detroit facility. The base rent expense for that facility for the
year ended February 28, 1999 and 1998, was $23,676 and $21,719, respectively.
Future minimum lease payments under the noncancellable leases for years ending
February 28 are as follows:
2000 $ 43,734
2001 43,734
2002 45,708
2003 27,589
2004 27,589
2005 27,589
2006 13,995
---------
$ 229,938
=========
Page 35 of 79 of Form 10-SB
<PAGE>
At the Detroit facility, the Company incurred $12,000 in equipment rental
expense under an operating lease during the year ended February 28, 1999.
NOTE 8 - INCOME TAXES
At February 28, 1999, the Company had a net operating loss
carryforward for income tax purposes of $446,809, which is available to offset
future taxable income. The loss carryforward expires in the year 2014, unless it
is utilized sooner. There are temporary differences in the recognition of
expense of the marketing rights for tax purposes and financial statement
purposes.
No income taxes have been paid by the Company since inception.
NOTE 9 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's financial instruments
approximate fair value due to the short-term nature of such assets. Deposits
payable are not current, however. In the case of deposits, no defined maturity
exists. As such, the carrying value and the fair value are assumed to be equal.
NOTE 10 - YEAR 2000 MATTERS
The Company has completed or is in the process of testing new
or revised computer systems and interfaces and generally expects that its
various systems, as well as those of its key external service providers, will be
ready to handle year 2000 without significant problems. While the year 2000
problem is unprecedented and the Company cannot eliminate altogether the
possibility that the Company could be affected in some way, it is confident that
all parties are taking appropriate steps to resolve the year 2000 concerns.
NOTE 11 - SUBSEQUENT EVENT
On April 6, 1999, the Company sold 2,400,000 shares to various
parties pursuant to Rule 504 Regulation D of the Securities Exchange Commission
and by NASD. The total subscription price was $488,999. At June 13, 1999, the
Company had received $122,500 from these sales.
ACCOMPANYING INFORMATION
FEBRUARY 28, 1999
The Company's attorneys of record are as follows:
SECURITIES ATTORNEY
Mr. James R. Leone, Attorney at Law
1275 Lake Heathrow Lane, Suite 115
Heathrow, FL 32746
FRANCHISE ATTORNEY
Mr. John D. Dougherty, Jr.
Dougherty & Associates
Attorneys & Consultants
60 Howe Road
Cohasset, Massachusetts 02025
GENERAL COUNSEL
Mr. Vincent J. Profaci, PA
Attorney at Law
1964 Howell Branch Road, Suite 206
Winter Park, FL 32792
Page 36 of 79 of Form 10-SB
<PAGE>
PART F/S
ITEM 310(b) AND (g) ITEM 310 OF REGULATION SB
INTERIM FINANCIAL STATEMENT REG. 228.310
(ITEM 310)
F/S. Furnish the information required by Item 310(b) and (g)
EMC GROUP, INC.
INTERIM FINANCIAL STATEMENTS
UNAUDITED
FOR THE FIRST NINE (9) FISCAL MONTHS ENDED NOVEMBER 30, 1999
AND THE FIRST NINE (9) FISCAL MONTHS ENDED NOVEMBER 30, 1998
TABLE OF CONTENTS
PAGE
NUMBER
------
INDEX 37
BALANCE SHEET 38
STATEMENT OF OPERATIONS 40
STATEMENT OF CASH FLOWS 41
STATEMENT OF STOCKHOLDERS' EQUITY 42-43
NOTES TO FINANCIAL STATEMENTS 44-45
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 46-49
Page 37 of 79 of Form 10-SB
<PAGE>
EMC Group, Inc.
Balance Sheets
Previous Year Comparison
For the First Three Quarters ended November 30, 1999
<TABLE>
<CAPTION>
UNAUDITED
FOOT NOVEMBER 30
NOTE 1999 1998
---- ---------- ----------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash (1) $ 45,994 4,922
Cash Register Float 200 200
Accounts Receivable (2) 1,891 1,446
Other Current Assets
Notes Receivable (3) 295,764 0
Inventory (4) 3,798 6,023
Prepaid Expenses (5) 0 519
---------- ----------
TOTAL CURRENT ASSETS 347,648 13,111
---------- ----------
PROPERTY AND EQUIPMENT, at cost:
Leasehold Improvements 68,099 68,099
Equipment 40,485 36,790
---------- ----------
Total Property & Equipment 108,584 104,889
Less accumulated depreciation 35,454 23,622
---------- ----------
NET PROPERTY AND EQUIPMENT 73,130 81,267
Other Assets
Accum. Amortization-Marketing License -273,000 -136,500
Accum. Amortization-Organization Cost -2,843 -1,808
Administration 518 518
National Marketing License 2,730,000 2,730,000
Issue & Organization Cost 5,170 5,170
Rent Security Deposit 1,195 1,195
Total Other Assets 2,461,039 2,598,579
---------- ----------
TOTAL ASSETS 2,881,817 2,692,958
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THE INTERIM FINANCIAL STATEMENTS
Page 38 of 79 of Form 10-SB
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNAUDITED
FOOT NOVEMBER 30
NOTE 1999 1998
---- ---------- ----------
<S> <C> <C> <C>
CURRENT LIABILITIES
Accounts Payable (6) $ 2,539 12,131
Advances from Officer (7) 0 17,500
TOTAL CURRENT LIABILITIES 2,589 29,631
---------- ----------
LONG TERM LIABILITIES
Rent Security Deposit 4,400 4,400
---------- ----------
TOTAL LIABILITIES 6,938 34,031
EQUITY
Capital Stock 537 1,230
Opening Balance Equity 0 .20
Paid in Capital 3,302,309 2,882,117
Retained Earnings -254,123 -68,458
Net Income -173,844 -155,961
---------- ----------
TOTAL EQUITY 2,874,879 2,658,927
---------- ----------
TOTAL LIABILITIES & EQUITY 2,881,817 2,692,958
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THE INTERIM FINANCIAL STATEMENTS
Page 39 of 79 of Form 10-SB
<PAGE>
EMC Group, Inc.
Statements of Operations
Previous Year Comparison
For the First Nine Months Ended November 30, 1999
<TABLE>
<CAPTION>
UNAUDITED
FOOT NINE MONTHS ENDED
NOTE NOVEMBER 1999 NOVEMBER 1998
---- ------------- -------------
<S> <C> <C> <C>
Ordinary Income/Expense
Income
Food & Beverage Sales (8) $ 119,379 126,804
Store Rent (9) 22,001 21,023
Management Fees (10) 18,904 18,468
---------- ----------
Total Income 160,284 166,295
---------- ----------
Expenses
Retail Store - Orlando, FL (11)
Cost of Goods sold 53,811 62,245
Store Labor Cost 32,222 42,296
Store Rent 18,978 18,548
Liability Insurance 1,949 1,694
Other Operating Expenses 7,653 7,677
General & Administrative (12)
Labor Cost 34,534 13,032
Automobile Expenses 6,723 2,556
Advertising 6,882 166
Equipment Lease Detroit Store 9,000 9,000
Health Insurance 2,822 2,561
Postage & Delivery 1,095 1,191
Professional Fees (Legal & Accounting) 15,338 14,737
Telephone 1,142 1,288
Rent Detroit Store 23,905 27,683
Operating Expenses - Other 6,418 3,359
Depreciation & Amortization 112,029 114,351
---------- ----------
TOTAL EXPENSES 334,501 322,384
---------- ----------
LOSS BEFORE INTEREST INCOME -174,217 -156,088
Interest Income 373 127
---------- ----------
NET LOSS $ -173,884 -155,961
---------- ----------
EARNINGS PER COMMON SHARE $ 0.00 0.00
---------- ----------
AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING (A) 2,575,200 9,505,000
---------- ----------
</TABLE>
(A) The number of outstanding shares as of November 30, 1999 have been adjusted
to reflect the 25:1 reverse split of the Company's Common Stock in April 1999,
and the issuance of 2,400,000 additional shares of the Company's Common Stock on
April 6, 1999 to various parties pursuant to Rule 504 of Regulation D
promulgated under the Securities Act of 1933 by the Securities and Exchange
Commission. Of these, 2,195,000 shares remain outstanding.
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THE INTERIM FINANCIAL STATEMENTS
Page 40 of 79 of Form 10-SB
<PAGE>
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
UNAUDITED
FIRST NINE MONTHS ENDED
NOVEMBER 30
1999 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ -173,844 -155,961
Adjustments to reconcile Net Income
to net cash used in operating activities
Accounts Receivable 23,943 673
Inventory Asset -320 -3,029
Notes Receivable -295,764 8,712
Pre-Paid Expenses 972 314
Accounts Payable -19,145 11,478
Loan Payable -22,254 17,500
---------- ----------
Net cash used in operating activities -486,412 21,659
---------- ----------
INVESTING ACTIVITIES
Equipment Purchase -3,694 -1,089
Accumulated Amortization - Marketing License -34,125 34,125
Accumulated Amortization - Organization Cost -1,028 1,808
Issue & Organization Cost 1,034 -1,034
National Marketing License 34,125 -34,125
---------- ----------
Net cash provided by Investing Activities -3,688 37,341
---------- ----------
FINANCING ACTIVITIES
Capital Stock -2,713 0
Capital Stock: Preferred Stock 280 0
Opening Balance Equity 2,803,232 -2,803,232
Paid in Capital 421,932 0
Retained Earnings -2,691,026 2,803,232
---------- ----------
Net cash provided by Financing Activities 531,705 0.20
---------- ----------
Net cash increase for period 41,603 -10,724
Cash at beginning of period 4,390 15,647
---------- ----------
Cash at end of period 45,994 4,922
---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THE INTERIM FINANCIAL STATEMENTS
Page 41 of 79 of Form 10-SB
<PAGE>
STATEMENT OF STOCKHOLDER'S EQUITY
FISCAL YEARS ENDED FEBRUARY 1998 (YEAR OF INCEPTION)
AND FEBRUARY 1999 AND THE FIRST 3 QUARTERS ENDED
NOVEMBER 30, 1999
<TABLE>
<CAPTION>
COMMON PREFERRED PAR CAPITAL ADDITIONAL INCOME
STOCK STOCK VALUE STOCK PAID IN CAPITAL OR (LOSS) TOTAL
--------- ---------- --------- --------- --------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL NUMBER
OF SHARES
AUTHORIZED 50,000,000 50,000,000
--------- --------- --------- --------- ---------
$ $ $ $
MARCH 3, 1997
Shares issued 7,500,000 .0001 750 750
APRIL 30, 1997
Shares issued 1,005,000 .0001 100 4,924 5,024
MAY 31, 1997
Shares issued 1,000,000 .0001 100 77,472 77,572
FEB. 28, 1998
Shares issued 2,800,000 .0001 280 2,799,720 2,800,000
NET LOSS
FOR THE YEAR (68,457) (68,457)
FEBR. 28, '98
BALANCES 9,505,000 2,800,000 .0001 1,230 2,882,116 (68,457) 2,814,889
--------- --------- --------- --------- --------- --------- ---------
LOSS FOR
Quarter ended
May 31, 1998 (59,079) (59,079)
MAY 31, 1998
BALANCES 9,505,000 2,800,000 .0001 1,230 2,882,116 (127,536) 2,755,809
--------- --------- --------- --------- --------- --------- ---------
LOSS FOR
Quarter ended
Aug. 31, 1998 (55,217) (55,217)
AUG. 31, 1998
BALANCES 9,505,000 2,800,000 .0001 1,230 2,882,116 (182,754) 2,700,592
--------- --------- --------- --------- --------- --------- ---------
LOSS FOR
Quarter ended
Nov. 30, 1998 (38,161) (38,161)
NOV. 30, 1998
BALANCES 9,505,000 2,800,000 .0001 1,230 2,882,116 (220,915) 2,662,430
--------- --------- --------- --------- --------- --------- ---------
LOSS FOR
Quarter ended
Febr. 28, 1999 (33,207) (33,207)
FEBR. 28, 1999
BALANCES 9,505,000 2,800,000 .0001 1,230 2,882,116 (254,123) 2,629,223
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
Page 42 of 79 of Form 10-SB
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
APRIL 2, 199
Reverse Split
25:1 BALANCES 380,200 2,800,000 .0001 318 2,883,028 (254,123) 2,629,223
--------- --------- --------- --------- --------- --------- ---------
APRIL 6, 1999
Shares issued 2,195,000 .0001 219 419,280 419,500
LOSS FOR
Quarter ended
May 31, 1999 (54,692) (54,692)
MAY 31, 1999
BALANCES 2,575,000 2,800,000 .0001 537 3,302,308 (308,815) 2,994,031
--------- --------- --------- --------- --------- --------- ---------
LOSS FOR
Quarter ended
Aug. 31, 1999 (69,845) (69,845)
AUG. 31, 1999
BALANCES 2,575,000 2,800,000 .0001 537 3,302,308 (378,660) 2,924,186
--------- --------- --------- --------- --------- --------- ---------
LOSS FOR
Quarter ended
Nov. 30, 1999 (49,307) (49,307)
NOV. 30, 1999
BALANCES 2,575,000 2,800,000 .0001 537 3,303,308 (436,936) 2,874,878
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THE INTERIM FINANCIAL STATEMENTS
Page 43 of 79 of Form 10-SB
<PAGE>
EMC GROUP, INC.
FOOT NOTES TO INTERIM FINANCIAL STATEMENTS
FOR THE FIRST NINE MONTHS ENDED NOVEMBER 30, 1999
AND THE FIRST NINE MONTHS ENDED NOVEMBER 30, 1998
UNAUDITED
FOOT NOTE (1) CASH
Cash for the nine months ended November 30, 1999 increased over the comparative
period of the previous year due to the following:
Collection of a payment from the franchisees/operators of the Treats located in
Washington, D.C. The lease was assigned to the then franchisees/operators with
the consent of the landlord and the parties, the franchise agreement between the
parties terminated for a one time payment of $25,000 received by the Company in
July 1999. Additionally, the franchisees were in default of the franchise
agreement for non-reporting sales. Due to the foregoing, no sales have been
recorded or estimated by the Company since March 1, 1999 for this store.
On April 6, 1999 the Company issued 2,400,00 shares of its common stock to
various parties pursuant to Rule 504 of Regulation D promulgated under the
Securities Act of 1933 by the Securities and Exchange Commission. Of these,
2,195,000 shares remain outstanding. These 2,195,000 shares were sold for a
total of $419,5000 in cash and cash equivalents. The Company has collected
$128,500 in cash and the balance of $291,000 are due February 28, 2000 pursuant
to Promissory Notes with subscribers.
FOOT NOTE (2) ACCOUNTS RECEIVABLE
ccounts receivable have increased over the same period of the previous year due
to increased management fees from the Treats store in Detroit, Michigan as of
September 1, 1999. The store is owned by the Company but the store is operated
by an independent party under the terms and conditions of a management agreement
with the Company.
FOOT NOTE (3) NOTES RECEIVABLE
The Promissory Notes of $295,764 represent the difference of cash received by
the Company of $128,500 and the total subscription price of $419,500 with
respect to the sale of the Company's common stock on April 6, 1999 and a short
term unsecured advance to the President of the Company, of which $3,000 has been
repaid by the President of the Company as of December 14, 1999.
The reader is advised to also see NOTE (A) For additional details.
FOOT NOTE (4)
Inventory asset decreased by $2,225 or 37% over the previous year due to
conversion of raw inventory to salable retail food and beverage products.
FOOT NOTE (5) PREPAID EXPENSES
The Company no longer carries provisions for prepaid expenses. Licenses,
insurance premiums are expensed on the date of such invoices.
FOOT NOTE (6) ACCOUNTS PAYABLE
The decrease in accounts payable of $9,592 over the same period of the previous
year is due to the availability of sufficient cash during current reported
period.
FOOT NOTE (7) ADVANCES FROM OFFICER
The unsecured short term advances of $17,500 from the President of the Company
have been fully repaid.
Page 44 of 79 of Form 10-SB
<PAGE>
FOOT NOTE (8) FOOD & BEVERAGE SALES
Food & beverage sales decreased by $7,425 or 5.90% during the current nine
months period compared to the same period of the previous year. The decrease
occurred primarily during the months of June, July, August and September 1999
due to certain tenants of the office building in which the store is located,
relocating to other facilities. Most of the vacated offices have been re-rented
and sales are increasing again to previous year's level. The Company is making
every effort to increase sales further through vigorous promotional campaigns
such as coupons targeted for early breakfast, lunch and after 2 pm sales.
FOOT NOTE (9) STORE RENTS
The company collects monthly rents for the Treats store located in Detroit,
Michigan, which is operated by an independent party pursuant to the terms and
conditions of a management agreement with the Company. The increase in store
rent income is offset by the increase in store rent the Company pays landlord.
FOOT NOTE (10) MANAGEMENT FEES
Management fees are collected from the independent operator of the Treats store
located in Detroit, Michigan. The percentage increase in certain management fees
became effective September 1, 1999. The store is owned by the Company.
FOOT NOTE (11) RETAIL STORE OPERATIONS
The decrease of cost of goods sold of $8,434 or 13.6% over the same nine months
period of the previous year is due to a combination of reduced sales as well as
a percentage reduction of COGS for the current nine months. The percentage
decrease of COGS of 10% for the current nine months over the same period of last
year when compared to retail sales is primarily due to introduction over time of
more cost effective food and beverage products on a per item basis as well as
combinations of various food and beverage products. As a result of the
foregoing, the Treats store in Orlando realized a net income of $4,775 during
the first nine fiscal months of this year when compared to a net loss of $7,809
for the same period of the previous year.
Management of the Treats store located in Orlando initiated a dedicated web-site
www.treatscafe.com in order to promote and provide daily updated special menu
offerings, coupons and promotions on the Internet to the store's present
customers and office personnel in the immediate neighborhood with the intent to
attract new customers. The web-site is updated every day by 11 a.m.
Labor cost decreased by $10,074 or 23.80% over the same nine months period of
the previous year. The decrease is primarily due to a change in staff,
especially with respect to a hands-on store manager.
FOOT NOTE (12) GENERAL AND ADMINSTRATIVE
Salary paid the President of the Company during the current nine months period
reported was $32,000 compared to $12,000 for the same period for the previous
year. Total salary for the President of the Company will be $38,000 during the
Company's current fiscal year ending February 28, 2000.
Automobile expenses have increased $4,167 or 163% for the first nine months of
the current reported period over the same period of the previous year. The
increase is due to the associated cost of substantially increased long distance
driving requirements by the Company's President over the same period of the
previous year.
Other operating expenses have increased by $6,617 or 11% for the current nine
months period when compared to the same period last year. The increase is
primarily due to the cost of $4,800 for classified Treats Franchise ads in the
business opportunity section of a newspaper. The balance of the increase is due
to the cost of creating web-sites for www.treatsusa.com and www.treatscoffee.com
on the Internet. The purpose of the web-sites is to promote the Treats Franchise
System and offer for sale Treats private label coffees in gift box format on
E-commerce respectively. The web-site www.treatscoffee.com is expected to be
operational during the month of January 2000.
Page 45 of 79 of Form 10-SB
<PAGE>
EMC GROUP, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
(SOME PORTIONS PREPARED BY THE COMPANY'S MANAGEMENT)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
COMPANY ACTIVITIES - The Company (a Florida corporation) was
formed March 3, 1997, to develop Treats restaurants in the United States. An
agreement between the Company and Treats Canada Corporation provides for a 20
year territory exclusivity arrangement for the United States of America to
develop Treats Bakeries, Treats Bakery Cafes, Treats International Coffee
Emporiums and Treats Carts. The various concepts will be marketed collectively
under the protected trade name "Treats".
METHOD OF ACCOUNTING - The accompanying interim financial
statements are maintained on the accrual basis of accounting.
ACCOUNTS RECEIVABLE - Accounts receivable consist primarily of
management fees due to the Company. At November 30, 1999 the receivables are
considered fully collectible.
INVENTORY - Inventory consists of food and beverage products,
which are valued at the lower of cost or market on a first-in, first-out basis.
ORGANIZATION COSTS - Organization costs are amortized over
five years using the straight-line basis. Amortization expense relating to
organization costs is $1,034 for each of the periods ended February 28, 1999 and
1998.
PROPERTY AND EQUIPMENT - Property and equipment are stated at
cost. Depreciation is computed over the estimated useful lives of the assets
using accelerated methods.
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. Accordingly, actual results could differ from those estimates.
RECLASSIFICATIONS - Certain prior year amounts have been
reclassified to conform with the interim nine months period presentation.
NOTE 2 - U.S. MARKETING RIGHTS
On April 8, 1997, the Company entered into an exclusive
licensing agreement with Treats Canada Corporation to develop Treats stores in
Florida and Georgia. As consideration for this agreement, the Company agreed to
pay Treats Canada Corporation $300,000. Of that balance, $30,000 was paid by the
Company. That agreement and the remaining unpaid debt of $270,000 was replaced
by an agreement dated December 1, 1997, as described below.
On December 1, 1997, the Company entered into an exclusive
licensing agreement with Treats Canada Corporation to develop Treats stores in
the United States. The agreement is for a term of 20 years. The agreement is
being amortized using the straight-line method over its 20 year life. In
connection with that agreement, $136,500 has been amortized and reflected as
expense for the year ended February 28, 1999. For the initial period ended
February 28, 1998, $34,125 was amortized and reflected as expense. In exchange
for U.S. marketing rights, 2,700,000 shares of Class "A" preferred shares were
issued to Treats Canada Corporation. The shares are convertible to common stock
subject to approval by EMC Group, Inc.'s Board of Directors.
Page 46 of 79 of Form 10-SB
<PAGE>
NOTE 3 - STORE LOCATIONS
On December 1, 1997, the Company acquired assets to operate a
Treats store in Orlando, Florida. The Company acquired the assets at a cost of
$5,000. A cash payment of $600 was made and the Company assumed an obligation to
pay $4,400 in various deposits.
On February 3, 1998, the Company acquired assets for a Treats
store in Detroit, Michigan. The Company acquired the assets at a cost of
$100,000 from Treats Canada Corporation. In exchange for the assets, 100,000
shares of Class "A" preferred shares were issued. The shares are convertible to
common stock subject to approval by EMC Group, Inc.'s Board of Directors. The
assets are owned by EMC Group, Inc., but the Treats store is operated by an
independent party pursuant to a management agreement with the Company . EMC
Group, Inc. collects management fees from the party which operates the Treats
store.
NOTE 4 - COMMON STOCK OFFERINGS
On April 30 and May 31, 1997, the Company concluded two
offerings of its common stock to the public at $.005 and $.10 per share,
respectively. The combined offerings raised $70,597 after reflecting payment of
offering costs such as legal, accounting, filing fees and registration fees. The
Company issued one million eight hundred eighty five thousand shares (1,885,000)
of its $.0001 par value common stock as a result of the offerings. The offerings
were made in reliance of S.E.C. Regulation D Rule 504 and were, accordingly,
exempt from registration.
On March 26, 1999 , the Company's Board of Directors authorized a 25:1 reverse
slit of its common stock by way of a Board of Directors Resolution. On April 2,
1999, the Company advised the OTC Bulletin Board Coordinator, NASDAQ Market
Operations accordingly via FAX transmission. On April 2, 1999 the OTC Bulletin
Board Coordinator, NASDAQ Market Operations advised the Company's Stock Transfer
Agent, Atlas Stock Transfer Corporation, of a new CUSP # reflecting the reverse
split. As a result of the reverse split , the original 9,505,000 shares of the
Company's common stock issued October 6, 1997, were reduced to 380,200 shares
On April 6, 1999, the Company concluded an offering of 2,400,000 shares of its
common stock to various parties pursuant to Rule 504 of Regulation D promulgated
under the Securities Act of 1933 by the Securities and Exchange Commission . Of
these 2,195,000 remain outstanding. The offering raised a total of $419,500 of
which $128,500 have been received by the Company. The remaining $291,000 are
carried as Promissory Notes with subscribers. The Promissory Notes are payable
by February 28, 2000.
NOTE 5 - STOCK OPTIONS AND STOCK AWARDS
On August 1, 1997, the Company adopted a compensatory common
stock "Equity Incentive Plan". The plan is to provide directors, officers and
certain key employees with additional incentives by increasing their ownership
interest in the Company. Four million shares (4,000,000) of common stock have
been reserved for issuance under the plan as either stock options or stock
awards. Options granted under the plan may be either qualified or non-qualified
as determined by the U.S. Internal Revenue Code. As of November 30, 1999, no
options, whether qualified or non-qualified, have been granted nor have any
shares been awarded as incentive compensation.
NOTE 6 - ADVANCES FROM OFFICER
During the fiscal year ended February 28, 1999, the Company's
president provided various operating noninterest-bearing cash advances to the
Company. These advances were made under an informal, unsecured agreement. The
Company repaid the advances in full in April 1999.
Page 47 of 79 of Form 10-SB
<PAGE>
NOTE 7 - LEASE COMMITMENTS
The Company rents its Orlando facility. The operating lease
expires in October 2002. For the periods ended February 28, 1999 and 1998, the
base rent expense was $18,671 and $4,770, respectively. The Company also leases
space for the Detroit facility. The base rent expense for that facility for the
year ended February 28, 1999 and 1998, was $23,676 and $21,719, respectively.
Future minimum lease payments under the noncancellable leases for years ending
February 28 are as follows:
2000 $ 43,734
2001 43,734
2002 45,708
2003 27,589
2004 27,589
2005 27,589
2006 13,995
---------
$ 229,938
=========
At the Detroit facility, the Company incurred $9,000 in equipment rental expense
under an operating lease during the nine months ended November 30, 1999. The
same amount of $9,000 was paid during the same nine months period of the
previous year.
NOTE 8 - INCOME TAXES
At November 30, 1999, the Company had a net operating loss
carryforward for income tax purposes of $619,836 which is available to offset
future taxable income. The loss carryforward expires in the year 2015, unless it
is utilized sooner. There are temporary differences in the recognition of
expense of the marketing rights for tax purposes and financial statement
purposes. No income taxes have been paid by the Company since inception.
NOTE 9 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's financial instruments
approximate fair value due to the short-term nature of such assets. Deposits
payable are not current, however. In the case of deposits, no defined maturity
exists. As such, the carrying value and the fair value are assumed to be equal.
NOTE 10 - YEAR 2000 MATTERS
The Company has completed or is in the process of testing new
or revised computer systems and interfaces and generally expects that its
various systems, as well as those of its key external service providers, will be
ready to handle year 2000 without significant problems. While the year 2000
problem is unprecedented and the Company cannot eliminate altogether the
possibility that the Company could be affected in some way, it is confident that
all parties are taking appropriate steps to resolve the year 2000 concerns.
NOTE 11- ADJUSTMENTS TO INTERIM FINANCIAL STATEMENTS
The Company affirms that all material adjustments for the
first nine fiscal months ended November 30, 1999 and November 30, 1998
respectively have been entered into the Interim Financial Statements in order to
provide a fair presentation. All adjustments of material nature were provided to
the management of the Company by the Company's independent Certified Public
Accountant, Mr. David R. Ramos. Accordingly, as advised by Mr. Ramos, all
material adjustments were entered into the Company's books and are reflected in
the Interim Financial Statements.
NOTE 12 - SUBSEQUENT EVENTS
There no subsequent events other than those reported in the
Interim Financial Statements.
Page 48 of 79 of Form 10-SB
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS.
III-1(a) AN INDEX TO THE EXHIBITS SHOULD BE PRESENTED.
See Part III Item 2, "Description of Exhibits" in the Company's Form
10-SB.
III-1(b) EACH EXHIBIT SHOULD BE LISTED IN THE EXHIBIT INDEX ACCORDING
TO THE NUMBER ASSIGNED TO IT IN PART III OF FORM 1-A OR ITEM 2 BELOW.
III-1(c) THE INDEX TO THE EXHIBITS SHOULD IDENTIFY THE LOCATION OF THE
EXHIBIT UNDER THE SEQUENTIAL PAGE NUMBERING SYSTEM FOR THIS FORM 10-SB.
III-1(d) WHERE EXHIBITS ARE INCORPORATED BY REFERENCE, THE REFERENCE
SHALL BE MADE IN THE INDEX OF THE EXHIBITS.
INSTRUCTIONS:
1. ANY DOCUMENT OR PART THEREOF FILED WITH THE COMMISSION PURSUANT TO ANY ACT
ADMINISTERED BY THE COMMISSION MAY, SUBJECT TO THE LIMITATION OF RULE 24 OF THE
COMMISSION'S RULES OF PRACTICE, BE INCORPORATED BY REFERENCE AS AN EXHIBIT TO
ANY REGISTRATION STATEMENT.
2. IF ANY MODIFICATION HAS OCCURRED IN THE TEXT INCORPORATED BY REFERENCE SINCE
THE FILING THEREOF, THE ISSUER SHALL FILE WITH THE REFERENCE A STATEMENT
CONTAINING THE TEXT OF SUCH MODIFICATION AND THE DATE THEREOF.
3. PROCEDURALLY, THE TECHNIQUES SPECIFIED IN RULE 12B-23 SHALL BE FOLLOWED.
ITEM 2. DESCRIPTION OF EXHIBITS
III-2. As appropriate, the issuer should file those documents required to be
filed as Exhibit Number 2, 3, 5, 6 and 7 in Part III of Form 1-A. The registrant
also shall file:
(12.) ADDITIONAL EXHIBITS. - Any additional exhibits which the issuer may
wish to file, which shall be so marked as to indicate clearly the subject
matters to which they refer.
Not applicable.
(13) Form -F-X pertains to Canadian issuers.
Not applicable.
Page 49 of 79 of Form 10-SB
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT TITLE PAGE NOS.
- ------- ----- ---------
<S> <C> <C>
(2) Charter and by-laws
THE CHARTER AND BY-LAWS OF THE ISSUER OR INSTRUMENTS
CORRESPONDING THERETO AS PRESENTLY IN EFFECT AND ANY
AMENDMENTS THERETO.
(2)(A)(1) Articles of Incorporation 52
(2)(A)(2) Amendments to Articles (none)
(2)(B)(1) Bylaws 61
(2)(B)(1) Amendments to Bylaws (none)
(3) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS -
3(a) ALL INSTRUMENTS DEFINING THE RIGHTS OF ANY HOLDER OF THE ISSUER'S
SECURITIES, INCLUDING BUT NOT LIMITED TO (I) HOLDERS OF EQUITY OR DEBT
SECURITIES BEING ISSUED; (II) HOLDERS OF LONG TERM DEBT OR ISSUER, AND
OF ALL SUBSIDIARIES FOR WHICH CONSOLIDATED OR UNCONSOLIDATED STATEMENTS
REQUIRED TO BE FILED.
(3)(a) Documents (if any)
stating Class "A" preferred shares
terms not stated in the Articles or
bylaws or amendments.
3(b) Not applicable.
(5) VOTING TRUST AGREEMENTS - ANY VOTING TRUST AGREEMENTS AND AMENDMENTS THERETO.
The Company is not aware of any existing voting trust agreements.
(6) MATERIAL CONTRACTS
None
(7) MATERIAL FOREIGN PATENTS
The Company does not own any foreign patents.
</TABLE>
Page 50 of 79 of Form 10-SB
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
EMC GROUP, INC.
________________________________
(Registrant)
Date: November 11, 1999 /s/ ERHARD SOMMER
-----------------
(Signature)*
Erhard Sommer, President & CEO
*Print name and title of signing officer under his signature.
EXHIBITS BEGIN ON NEXT PAGE
Page 51 of 79 of Form 10-SB
<PAGE>
FLORDIA DEPARTMENT OF STATE
Sandra B. Mortham
Secretary of State
March 7, 1997
J.A. JURGENS P.A.
1964 HOWELL BRANCH ROAD
SUITE 206
WINTER PARK, FL 32792
The Articles of Incorporation for EMC GROUP, INC. were filed on March 3, 1997
and assigned document number P97000021055. Please refer to this number whenever
corresponding with this office regarding the above corporation. The
certification you requested is enclosed.
PLEASE NOTE: COMPLIANCE WITH THE FOLLOWING PROCEDURES IS ESSENTIAL TO
MAINTAINING YOUR CORPORATE STATUS. FAILURE TO DO SO MAY RESULT IN DISSOLUTION OF
YOUR CORPORATION.
A CORPORATION ANNUAL REPORT MUST BE FILED WITH THIS OFFICE BETWEEN JANUARY 1 AND
MAY 1 OF EACH YEAR BEGINNING WITH THE CALENDAR YEAR FOLLOWING THE YEAR OF THE
FILING DATE NOTED ABOVE AND EACH YEAR THEREAFTER. FAILURE TO FILE THE ANNUAL
REPORT ON TIME MAY RESULT IN ADMINISTRATIVE DISSOLUTION OF YOUR CORPORATION.
A FEDERAL EMPLOYER IDENTIFICATION (FEI) NUMBER MUST BE SHOWN ON THE ANNUAL
REPORT FORM PRIOR TO ITS FILING WITH THIS OFFICE. CONTACT THE INTERNAL REVENUE
SERVICE TO RECEIVE THE FEI NUMBER IN TIME TO FILE THE ANNUAL REPORT AT
1-800-829-3676 AND REQUEST FORM SS-4.
SHOULD YOUR CORPORATE MAILING ADDRESS CHANGE, YOU MUST NOTIFY THIS OFFICE IN
WRITING, TO INSURE IMPORTANT MAILINGS SUCH AS THE ANNUAL REPORT NOTICES REACH
YOUR.
Should you have any questions regarding corporations, please contact this office
at the address given below.
Loria Poole, Corporate Specialist
New Filings Section Letter Number: 597A00011797
Division of Corporations - P.O. Box 6327 - Tallahassee, Florida 32314
Page 52 of 79 of Form 10-SB
<PAGE>
State of Florida
Department of State
I certify the attached is a true and correct copy of the Articles of
Incorporation of EMC GROUP, INC., a Florida corporation, filed on March 3, 1997,
as shown by the records of this office.
The document number of this corporation is P97000021055.
Given umber my hand and the
Great Seal of the State of
Florida at Tallahassee, The
Capitol, this the Seventh
day of March, 1997
/s/ SANDRA B. MORTHAM
----------------------
Sandra B. Mortham
Secretary of State
Page 53 of 79 of Form 10-SB
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
(2)(A)(1) Articles of Incorporation
(2)(B)(1) Bylaws
Page 54 of 79 of Form 10-SB
ARTICLES OF INCORPORATION
OF
EMC GROUP, INC.
The undersigned, acting as Incorporator, desiring to form a corporation for
profit pursuant to the Florida Business Corporation Act, adopts the following
Articles of Incorporation for such corporation:
ARTICLE I
NAME
----
The name of this corporation is EMC GROUP, INC.
ARTICLE II
ADDRESS OF PRINCIPAL OFFICE
---------------------------
The principal office and street address of this corporation is 346 Tanager
Court, Lakeland, Florida 33803-4843.
ARTICLE III
CAPITAL STOCK
-------------
The total number of authorized shares of the capital stock of this
corporation is one hundred million (100,000,000) shares, divided into two
classes, Common stock and Preferred stock. The total number of shares of Common
stock authorized is fifty million (50,000,000) shares. The total number of
shares of Preferred stock authorized is fifty million (50,000,000) shares.
The Common stock shall be of a single class. No preferences,
qualifications, limitations, restrictions, or special rights, other than those
provided by law, shall exist with respect to any of the Common shares of the
corporation or any of the holders of such shares.
The board of directors is authorized to fix or alter the designations,
preferences, and relative, participating, optional, or other special rights, and
qualifications, limitations, or restrictions of the Preferred shares, including
without limitation of the generality of the above, dividend rights, dividend
rates, conversion rights, voting rights, rights and terms of redemption
(including sinking fund provisions), the redemption price or prices and
liquidation preferences of any wholly unissued series of preferred shares, and
the designation and number of shares constituting any such series, or any of
them; and to increase or decrease the number of shares of that series, but not
below the number of shares of such series then outstanding. In case the number
of shares of any series shall be so decreased, the shares constituting such
decrease shall
Page 55 of 79 of Form 10-SB
<PAGE>
resume the status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
ARTICLE IV
INITIAL REGISTERED OFFICE AND AGENT
-----------------------------------
The street address of the initial registered office of this corporation is
346 Tanager Court, Lakeland, Florida 33803-4843 and the name of the initial
registered agent of this corporation at that address is Erhard Sommer.
ARTICLE V
INITIAL BOARD OF DIRECTORS
--------------------------
A. This corporation shall have three (3) directors initially.
B. The names and addresses of the initial member of the Board of
Directors who shall hold office until their successors are
duly elected and have qualified are:
Mr. Erhard Sommer 346 Tanager Court
Lakeland, Florida 33803-4843
Mr. Peter-Mark Bennett 38 Stinson Avenue
Nepean, Ontario
K2H 6N3
Mr. Sandro Campagna 316 Squire Drive
Manotik, Ontario
K4M 1B8
ARTICLE VI
INCORPORATORS
-------------
The name and address of each Incorporator of this corporation is:
Mr. Erhard Sommer 346 Tanager Court
Lakeland, Florida 33803-4843
Page 56 of 79 of Form 10-SB
<PAGE>
ARTICLE VII
INDEMNIFICATION
---------------
This corporation shall indemnify any officer or director, or any former
officer or director, to the full extent permitted by the Florida Business
Corporation Act.
IN WITNESS WHEREOF, the undersigned has executed these Articles on this
25th day of February, 1997.
/s/ ERHARD SOMMER
_________________________________
ERHARD SOMMER
Incorporator
Page 57 of 79 of Form 10-SB
<PAGE>
CERTIFICATE OF DESIGNATION OF
REGISTERED AGENT/REGISTERED OFFICE
PURSUANT TO THE PROVISIONS OF SECTION 607.0501 OR 617.0501, FLORIDA STATUTES,
THE UNDERSIGNED CORPORATION, ORGANIZED UNDER THE LAWS OF THE STATE OF FLORIDA,
SUBMITS THE FOLLOWING STATEMENT IN DESIGNATING THE REGISTERED OFFICE/REGISTERED
AGENT, IN THE STATE OF FLORIDA.
1. The name of the corporation is: EMC GROUP, INC.
----------------------------------
----------------------------------
2. The name and address of the registered agent and office is:
ERHARD SOMMER
------------------------------------------------
(Name)
346 TANAGER COURT
------------------------------------------------
(P.O. Box NOT acceptable)
LAKELAND, FLORIDA 33803-4843
------------------------------------------------
(City/State/Zip)
HAVING BEEN NAMED AS REGISTERED AGENT AND TO ACCEPT SERVICE OF PROCESS FOR THE
ABOVE STATED CORPORATION AT THE PLACE DESIGNATED IN THIS CERTIFICATE, I HEREBY
ACCEPT THE APPOINTMENT AS REGISTERED AGENT AND AGREE TO ACT IN THIS CAPACITY. I
FURTHER AGREE TO COMPLY WITH THE PROVISIONS OF ALL STATUTES RELATING TO THE
PROPER AND COMPLETE PERFORMANCE OF MY DUTIES, AND I AM FAMILIAR WITH AND ACCEPT
THE OBLIGATIONS OF MY POSITION AS REGISTERED AGENT.
/s/ ERHARD SOMMER FEBRUARY 25, 1997
- --------------------------------- ---------------------------------
(Signature) (Date)
Page 58 of 79 of Form 10-SB
<PAGE>
MINUTES OF FIRST JOINT MEETING OF
STOCKHOLDERS AND THE BOARD OF DIRECTORS OF
EMC GROUP, INC.
The First Joint Meeting of Stockholders and the Board of Directors of EMC GROUP,
INC. was held at 418 Preston Street, Ottawa, Ontario K1S 4N2 at 9:00 a.m., on
the 25th day of February, 1997. All present waived prior notice of the meeting.
On a call of the roll of the Stockholders and Directors, the following were
found to be present:
Erhard Sommer (Director/Shareholder)
Peter-Mark Bennett (Director/Shareholder)
Sandro Campagna (Director/Shareholder)
George Gibson (Shareholder)
Erhard Sommer was elected to serve as Chairman of the meeting, and
Peter-Mark Bennett recorded the minutes of the meeting.
On motion made, seconded and unanimously carried, the above shareholders of
the Corporation, who together hold a majority of the issued Common shares of the
Corporation, unanimously reconfirmed the following Directors:
Erhard Sommer
Peter-Mark Bennett
Sandro Campagna
A quorum of the Directors being present, on motion duly made, seconded
and unanimously carried, the Board of Directors proceeded to the election of
officers of the corporation to serve for the ensuing corporate year and until
the electing and taking of office of their successors. The following officers
were elected:
Page 59 of 79 of Form 10-SB
<PAGE>
NAME OFFICE
---- ------
Erhard Sommer President
Peter-Mark Bennett Treasurer
Peter-Mark Bennett Secretary
Paul McCullagh Director of Operations
On motion made, seconded and unanimously carried, the Board of Directors
and Shareholders ratified and approved all acts heretofore taken by said
individuals in furtherance of the Corporation's business.
The Secretary was authorized to purchase such record books of account,
stationery and office supplies as may be necessary for the proper administration
of the affairs of the corporation, and the Treasurer was directed to pay all
debts properly incurred in the organization of the corporation.
The code of By-laws were approved, as well as the corporate seal and the
lawful stock certificate.
On motion made, seconded and unanimously carried, the Directors agreed to
name Barnett Bank as depositor bank for corporate funds and as the location of
checking account for the corporation. On motion made, seconded and unanimously
carried as a bank resolution, prepared by said bank, was adopted by the
corporation. The Secretary was instructed to attach a copy of the resolution,
which shows the designated signatories, to the record of the meeting.
There being no further business to come before the First Joint Meeting of
Stockholders and the Board of Directors of EMC GROUP, INC. on motion made,
seconded and unanimously
Page 60 of 79 of Form 10-SB
<PAGE>
carried, the meeting was adjourned.
Dated this 25th day of February, 1997.
/s/ ERHARD SOMMER
-----------------
ERHARD SOMMER
/s/ PETER-MARK BENNETT
----------------------
PETER-MARK BENNETT
/s/ SANDRO CAMPAGNA
-------------------
SANDRO CAMPAGNA
/s/ GEORGE GIBSON
-----------------
GEORGE GIBSON
ATTEST:
/s/ PETER-MARK BENNETT
- ----------------------
PETER-MARK BENNETT, Secretary
Page 61 of 79 of Form 10-SB
BYLAWS
OF
EMC GROUP, INC.
Page 62 of 79 of Form 10-SB
<PAGE>
BYLAWS
OF
EMC GROUP, INC.
ARTICLE I - MEETINGS OF SHAREHOLDERS
------------------------------------
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders of this
corporation shall be held at the time and place designated by the Board of
Directors of the corporation. The annual meeting of shareholders for any year
shall be held no later than thirteen (13) months after the last preceding annual
meeting of shareholders. Business transacted at the annual meeting shall include
the election of directors of the corporation. If the day so designated falls
upon a Sunday or legal holiday, then the meeting shall be held upon the first
secular day thereafter.
SECTION 2. SPECIAL MEETING. Special meetings of the shareholders shall be
held when directed by the President or the Board of Directors, or when requested
in a writing dated and delivered to the Secretary by the holders of no less than
ten percent (10%) of all the shares entitled to vote on any issue proposed to be
considered at the special meeting; such writing shall describe the purpose or
purposes of the meeting. A meeting requested by shareholders shall be called for
a date not less than ten (10) nor more than sixty (60) days after the request is
made, unless the shareholders requesting the meeting designate a later date. The
call for the meeting shall be issued by the Secretary, unless the President,
Board of Directors or shareholders requesting the meeting shall designate
another person to do so.
SECTION 3. PLACE. Meetings of shareholders may be held within or without
the State of Florida, as directed by the Board of Directors.
SECTION 4. NOTICE. Written notice stating the place, day and hour of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than ten (10) nor more than
sixty (60) days before the meeting, either personally or by first class mail, by
or at the direction of the President, the Secretary or the shareholders calling
the meeting to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the shareholder at his or her address as it appears on
the stock transfer books of the corporation, with postage thereon prepaid.
SECTION 5. NOTICE OF ADJOURNED MEETING. When a meeting is adjourned to
another time or place it shall not be necessary to give any notice of the
adjourned meeting if the new date, time or place to which the meeting is
adjourned are announced at the meeting at which the adjournment is taken, and at
the adjourned meeting any business may be transacted that might have been
transacted on the original date of the meeting. If, however, after the
adjournment, the Board of Directors fixes a new record date for the adjourned
meeting, a notice of the adjourned meeting shall be given as provided in this
section to each shareholder of record on the new record date entitled to vote at
such meeting.
Page 63 of 79 of Form 10-SB
<PAGE>
SECTION 6. CLOSING OF TRANSFER BOOKS AND FIXING RECORD DATE. For the
purpose of determining shareholders entitled to notice of, or to vote at any
meeting of shareholders or any adjournment thereof, or entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other purpose, the Board of Directors may provide that the stock transfer
books shall be closed for a stated period but not to exceed in any case seventy
(70) days.
In lieu of closing the stock transfer books, the Board of Directors may fix
in advance a date as the record date for any determination of shareholders, such
date in any case to be not more than seventy (70) days prior to the date on
which the particular action requiring such determination of shareholders is
taken.
If the stock transfer books are not closed and no record date is fixed for
the determination of shareholders entitled to receive payment of a dividend, the
date on which the resolution of the Board of Directors declaring such dividend
is adopted shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof unless the Board of Directors fixes a new
record date for the adjourned meeting.
SECTION 7. VOTING RECORD. At least ten (10) days before each meeting of
shareholders the Secretary of the corporation shall make a complete alphabetized
list of the shareholders entitled to vote at such a meeting or any adjournment
thereof, with the address of each and the number, class and series, if any, of
shares held by each. For a period of ten (10) days prior to such meeting the
list shall be kept on file at a place identified in meeting notice, at the
principal place of business of the corporation or at the office of the transfer
agent or registrar of the corporation, and any shareholder, his or her agent or
attorney shall be entitled to inspect the list at any time during regular
business hours at the shareholder's expense. The list shall also be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any shareholder at any time during the meeting.
If the requirements of this section have not been substantially complied
with, the meeting, on demand of any shareholder in person or by proxy who failed
to get such access to the list, shall be adjourned until the requirements are
complied with. If no such demand is made, failure to comply with the
requirements of this section shall not affect the validity of any action taken
at such meeting.
SECTION 8. SHAREHOLDER QUORUM AND VOTING. A majority of the shares entitled
to vote, represented in person or by proxy, shall constitute a quorum at a
meeting of shareholders. When a specified item of business is required to be
voted on by a class of series or stock, a majority of shares of such class or
series shall constitute a quorum for the transaction of such item of business by
that class or series.
Page 64 of 79 of Form 10-SB
<PAGE>
If a quorum is present, the affirmative vote of the majority of the shares
represented at the meeting and entitled to vote on the subject matter shall be
the act of the shareholders unless otherwise provided by the law.
After a quorum has been established at a shareholders meeting, the
subsequent withdrawal of shareholders, so as to reduce the number of
shareholders entitled to vote at the meeting below the number required for a
quorum, shall not affect the validity of any action taken at the meeting or any
adjournment thereof unless a new record date is or must be set for the adjourned
meeting.
SECTION 9. VOTING OF SHARES. Each outstanding share, regardless of class,
shall be entitled to one (1) vote on each matter submitted to a vote at a
meeting of shareholders.
Treasury shares, shares of stock of this corporation owned by another
corporation, the majority of the voting stock of which is owned or controlled by
this corporation, and shares of stock of this corporation held by it in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting
and shall not be counted in determining the total number of outstanding shares
at any given time.
A shareholder may vote either in person or by proxy executed in writing by
the shareholder or his or her duly authorized attorney-in-fact.
At each election for directors, every shareholder entitled to vote at such
election shall have the right to vote, in person or by proxy, the number of
votes attributable to the shares owned by him for as many persons as there are
directors to be elected at that time and for whose election he has a right to
vote.
Shares standing in the name of another corporation, domestic or foreign,
may be voted by the officer, agent or proxy designated by the bylaws of the
corporate shareholder; or, in the absence of any applicable bylaw, by such
person as the Board of Directors of the corporate shareholder may designate.
Proof of such designation may be made by presentation of a certified copy of the
bylaws or other instrument of the corporate shareholder. In the absence of any
such designation, or in case of conflicting designation by the corporate
shareholder, the chairman of the board, president, any vice president, secretary
and treasurer of the corporate shareholder shall be presumed to possess, in that
order, authority to vote such shares.
If a proxy expressly provides, any proxy holder may appoint in writing a
substitute to act in his or her place.
SECTION 10. VOTING TRUSTEE. At any number of shareholders of this
corporation may create a voting trust for the purpose of conferring upon a
trustee or trustees the right to vote or otherwise act for them, as provided by
the law, by signing an agreement setting out the provisions of the trust and
transferring their shares to the trustee. Where the counterpart of a voting
trust agreement and the copy of the record of the holders of voting trust
certificates has been deposited with the corporation as provided by law, such
documents shall be subject to the same right of examination by a shareholder of
the corporation, in person or by agent or attorney, as are the
Page 65 of 79 of Form 10-SB
<PAGE>
books and records of the corporation, and such counterpart and such copy of such
record shall be subject to examination by any holder of record of voting trust
certificates, either in person or by agent or attorney, at any reasonable time
for any proper purpose.
SECTION 11. SHAREHOLDERS' AGREEMENTS. At any time during which the
corporation shall have one hundred (100) or fewer shareholders, two (2) or more
shareholders of this corporation may enter an agreement providing for the
exercise of voting rights in the manner provided in the agreement or relating to
any phase of the affairs of the corporation as provided by law. Such agreement,
unless otherwise provided by law, shall be set forth in the Articles of
Incorporation or these Bylaws and shall, unless otherwise provided by law, be
signed by all of the persons who are shareholders at the time the agreement is
made known to the corporation. The existence of any such agreement shall be
noted conspicuously on each certificate for outstanding shares of the
corporation. Nothing therein shall impair the right of this corporation to treat
the shareholders of record as entitled to vote their shares standing in their
names.
SECTION 12. ACTION BY SHAREHOLDERS WITHOUT A MEETING. At any action
required by law, these Bylaws or the Articles of Incorporation of this
corporation to be taken at any annual or special meeting of shareholders of the
corporation or any action which may be taken at any annual or special meeting of
such shareholders may be taken without a meeting, without prior notice and
without a vote, if a written consent setting forth the action so taken shall be
dated and signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. If any class of shares is entitled to vote thereon as a class, such
written consent shall be required of the holders of a majority of the shares of
each class of shares entitled to vote as a class thereon and of the total shares
entitled to vote thereon.
Within sixty (60) days after the date of the earliest written consent, such
written consents must be delivered to the corporation by delivery to its
principal office in this state, its principal place of business or to the
Secretary of the corporation. In addition, within ten days after obtaining such
authorization by written consent, notice shall be given to those shareholders
who have not consented in writing or who are not entitled to vote on the action.
The notice shall fairly summarize the material features of the authorized action
and, if the action be a merger, consolidation or sale or exchange of assets for
which dissenters rights are provided under law, the notice shall contain a clear
statement of the right of shareholders dissenting therefrom to be paid the fair
value of their shares upon compliance with further provisions of this act
regarding the rights of dissenting shareholders.
SECTION 13. ORDER OF BUSINESS. The order of business of all meetings of the
stockholders shall be as follows:
1. Roll Call.
2. Proof of notice of meeting or waiver of notice.
3. Reading of minutes or preceding meeting.
4. Reports of officers.
Page 66 of 79 of Form 10-SB
<PAGE>
5. Reports of committees.
6. Election of directors.
7. Unfinished business.
8. New business.
ARTICLE II - DIRECTORS
----------------------
SECTION 1. FUNCTION. All corporate powers shall be exercised by or under
the authority of, and the business and affairs of a corporation shall be managed
under the direction of, the Board of Directors.
SECTION 2. QUALIFICATION. Directors must be eighteen years old but need not
be residents of this state or shareholders of this corporation.
SECTION 3. COMPENSATION. The Board of Directors shall have authority to fix
the compensation of directors.
SECTION 4. DUTIES OF DIRECTORS. A director shall perform his duties as a
member of any committee of the board upon which he may serve, in good faith, in
a manner he reasonably believes to be in the best interests of the corporation,
and with such care as an ordinarily prudent person in a like position would use
under similar circumstances.
In performing his duties, a director shall be entitled to rely on
information, opinions, reports or statements including financial statements and
other financial date, in each case prepared or presented by:
(a) One ( l ) or more officers or employees of the corporation whom
the director reasonably believes to be reliable and competent in the matters
presented;
(b) Legal counsel, public accountants or other persons as to matters
which the director reasonably believes to be `within such person's professional
or expert competence; or
(c) A committee of the board upon which he does not serve, duly
designated in accordance with a provision of the Articles of Incorporation or
the Bylaws, as to matters within its designated authority, which committee the
director reasonably believes to merit confidence.
A director shall not be considered to be acting in good faith if he has
knowledge concerning the matter in question that would cause such reliance
described above to be unwarranted.
A person who performs his duties in compliance with this section shall have
no liability by reason of being or having been a director of the corporation.
SECTION 5. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of its Board of Directors at which action on any corporate
matter is taken shall be
Page 67 of 79 of Form 10-SB
<PAGE>
presumed to have assented to the action taken unless he or she objects at the
beginning of the meeting (or promptly upon his or her arrival ) to holding it or
transacting specified business at the meeting, or he or she votes against such
action or abstains from voting in respect thereto.
SECTION 6. NUMBER. This corporation initially shall have that number of
directors as is set forth in the Articles of Incorporation. The number of
directors may be increased or decreased from time to time by resolution of the
Board of Directors, but shall not be less than the minimum number set forth in
the Articles of Incorporation of the corporation, but no decrease shall have the
effect of shortening the terms of any incumbent director.
SECTION 7. ELECTION AND TERM. Each person named in the Articles of
Incorporation as a member of the initial Board of Directors shall hold office
until the first annual meeting of shareholders and until his or her successor
shall have been elected and qualified or until his or her earlier resignation,
removal from office or death.
At the first annual meeting of shareholders and at each annual meeting
thereafter the shareholders shall elect directors to hold office until the next
succeeding annual meeting. Each director shall hold office for the term for
which he or she is elected and until his or her successor shall have been
elected and qualified or until his or her earlier resignation, removal from
office or death.
SECTION 8. VACANCIES. At any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
directors, may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors or by the
shareholders. A director elected to fill a vacancy shall hold office only until
the next election of directors by the shareholders and until his or her or
successor is elected and qualified.
SECTION 9. REMOVAL OF DIRECTORS. At a meeting of shareholders called
expressly for that purpose, but not to exclusion of any other purpose, any
director or the entire Board of Directors may be removed, with or without cause,
by a vote of the holders of a majority of the shares then entitled to vote at an
election of directors.
SECTION 10 QUORUM AND VOTING. A majority of the number of directors fixed
by these Bylaws shall constitute a quorum for the transaction of business. The
act of the majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
SECTION 11. DIRECTOR CONFLICTS OF INTEREST. No contract or other
transaction between this corporation and one (1) or more of its directors or any
other corporation, firm, association or entity in which one ( 1) or more of the
directors are directors or officers or are financially interested, shall be
either void or voidable because of such relationship or interest or because such
director or directors are present at the meeting of the Board of Directors or a
committee thereof which authorizes, approves or ratifies such contract or
transaction or because his or her votes are counted for such purpose, if:
Page 68 of 79 of Form 10-SB
<PAGE>
(a) The fact of such relationship or interest is disclosed or
known to the Board of Directors or committee which authorizes, approves or
ratifies the contract or transaction by a vote or consent sufficient for the
purpose without counting the votes or consents of such interested directors; or
(b) The fact of such relationship or interest is disclosed or
known to the shareholders entitled to vote and they authorize, approve or ratify
such contract or transaction by vote or written consent; or
(c) The contract or transaction is fair and reasonable as to
the corporation at the time it is authorized by the board, a committee or the
shareholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction.
SECTION 12. EXECUTIVE AND OTHER COMMITTEES. The Board of Directors, by
resolution adopted by a majority of the full Board of Directors, may designate
from among its members an executive committee and one (1) or more other
committees, each of which shall have at least two members and, to the extent
provided in such resolution, shall have and may exercise all the authority of
the Board of Directors, except that no committee shall have the authority to:
(a) Approve or recommend to shareholders actions or proposals required
by law to be approved by shareholders;
(b) Designate candidates for the office of director, for purposes of
proxy solicitation or otherwise;
(c) Fill vacancies on the Board of Directors or any committee thereof;
(d) Adopt, amend or repeal the Bylaws;
(e) Authorize or approve the reacquisition of shares unless pursuant
to a general formula or method specified by the Board of Directors; or
(f) Authorize or approve the issuance or sale of, or any contract to
issue or sell, shares or determine the designation and relative rights,
preferences and limitations of a voting group, except that the Board of
Directors, having acted regarding general authorization for the issuance or sale
of shares, or any contract therefor, and, in the case of a series, the
designation thereof, may, pursuant to a general formula or method specified by
the Board of Directors, by resolution or by adoption of a stock option or other
plan, authorize a committee to fix the terms of any contract for the sale of the
shares and to fix the terms upon which shares may be issued or sold, including,
without limitation, the price, the rate or manner of payment of dividends,
provisions for redemption, sinking fund, conversion, voting or preferential
rights and provisions
Page 69 of 79 of Form 10-SB
<PAGE>
for other features of a class of shares or a series of a class of shares, with
full power in such committee to adopt any final resolution setting forth all the
terms thereof and to authorize the statement of the terms of a series for filing
with the Department of State.
The Board of Directors, by resolution adopted in accordance with this
section, may designate one (1) or more directors as alternate members of any
such committee who may act in the place and stead of any absent member or
members at any meeting of such committee.
SECTION 13. PLACE OF MEETING. Regular and special meetings by the Board of
Directors may be held within or without the State of Florida.
SECTION 14. TIME. NOTICE AND CALL OF MEETINGS. Regular meeting dates of the
Board of Directors shall be designated by resolution of the Board of Directors
and shall be held without notice. Written notice of the time and place of
special meetings of the Board of Directors shall be given to each director by
either personal delivery, telegram, cablegram or telecopy or facsimile
transmission at least two (2) days before the meeting or by notice mailed to the
director at least five (5) days before the meeting.
Notice of a meeting of the Board of Directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all obligations to the place of the meeting,
the time of the meeting or the manner in which it has been called or convened,
except when a director states at the beginning of the meeting or promptly upon
arrival any objection to the transaction of business because the meeting is not
lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any regular
or special meeting of the Board of Directors need be specified in the notice or
waiver of notice of such meeting.
A majority of the directors present, whether or not a quorum exists, may
adjourn any meeting of the Board of Directors to another time and place. Notice
of any such adjourned meeting shall be given to the directors who were not
present at the time of the adjournment and, unless the time and place of the
adjourned meeting are announced at the time of the adjournment, to the other
directors.
Meetings of the Board of Directors may be called by the Chairman of the
Board, by the President of the corporation or by any two (2) directors.
Members of the Board of Directors may participate in a meeting of such
board by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation by such means shall constitute presence in person
at a meeting.
SECTION 15. ACTION WITHOUT A MEETING. Any action required or permitted to
be taken at a meeting of the directors of a corporation, or any action which may
be taken at a meeting of the directors or a committee thereof, may be taken
without a meeting if a consent in writing, setting
Page 70 of 79 of Form 10-SB
<PAGE>
forth the action so to be taken, signed by all of the directors or all the
members of the committee, as the case may be, is filed in the minutes of the
proceedings of the board of the committee. Such consent shall have the same
effect as a unanimous vote.
ARTICLE III - OFFICERS
----------------------
SECTION 1. OFFICERS. The officers of this corporation shall consist of a
president, a vice president, a secretary and a treasurer, each of whom shall be
elected by the Board of Directors. Such other officers and assistant officers
and agents as may be deemed necessary may be elected or appointed by the Board
of Directors from time to time. Any two (2) or more offices may be held by the
same person. The failure to elect a president, secretary or treasurer shall not
affect the existence of this corporation.
SECTION 2. DUTIES. The officers of this corporation shall have the
following duties:
The President shall: (1) Be the chief executive officer of the corporation;
(2) Have general and active management of the business and affairs of the
corporation subject to the directions of the Board of Directors; and (3) Preside
at all meetings of the stockholders and Board of Directors.
The Secretary shall: (1) Have and maintain custody of all of the corporate
records except the financial records; (2) Record the minutes of all meetings of
the stockholders and Board of Directors; (3) Send out all notices of meeting;
(4) Have responsibility for authenticating records of the corporation; and (5)
Perform such other duties as may be prescribed by the Board of Directors or the
President.
The Treasurer shall: (1) Have custody of all corporate funds and financial
records; (2) Keep full and accurate accounts of receipts and disbursements and
render accounts thereof at the annual meetings of stockholders and whenever else
required by the Board of Directors or the President; and (3) Perform such other
duties as any be prescribed by the Board of Directors or the President.
SECTION 3. REMOVAL OF OFFICERS. Any officer or agent elected or appointed
by the Board of Directors may be removed by the Board of Directors with or
without cause whenever, in its judgment, the best interests of the corporation
will be served thereby.
Removal of any officer shall be without prejudice to the contract rights,
if any, of the person so removed; however, election or appointment of an officer
or agent shall not itself create contract rights.
SECTION 4. SALARIES. The salaries of the officers shall be fixed from time
to time by the Board of Directors, and no officers shall be prevented from
receiving such salary by reason of the fact that he or she is also a director of
the corporation.
SECTION 5. BILLS NOTES. ETC. All bills payable, notes, checks or other
negotiable instruments of the corporation shall be made in the name of the
corporation and shall be signed by
Page 71 of 79 of Form 10-SB
<PAGE>
such officer or officers as the Board of Directors shall, from time to time,
direct. No officer or agent of the corporation, either singly or jointly with
others, shall have the power to make any bill payable, note, check, draft or
warrant or other negotiable instrument, or endorse the same in the name of the
corporation, or contract or cause to be contracted any debt or liability in the
name of or on behalf of the corporation, except as herein expressly prescribed
and provided.
ARTICLE IV - STOCK CERTIFICATES
-------------------------------
SECTION 1. ISSUANCE. Every holder of shares of this corporation shall be
entitled to have a certificate representing all shares to which he or she is
entitled. No certificate shall be issued for any share until such share is fully
paid.
SECTION 2. FORM. Certificates representing shares in this corporation shall
be signed by the President or Vice President and the Secretary or an Assistant
Secretary and may be sealed with the seal of this corporation or a facsimile
thereo(pound) The signatures of the President or Vice President and the
Secretary or Assistant Secretary may be facsimiles if the certificate is
manually signed on behalf of a transfer agent or a registrar, other than the
corporation itself or an employee of the corporation. In case any officer who
signed or whose facsimile signature has been placed upon such certificate shall
have ceased to be such officer before such certificate is issued, it may be
issued by the corporation with the same effect as if he or she were such officer
at the date of its issuance.
Every certificate representing shares which are restricted as to the sale,
disposition or other transfer of such shares shall note conspicuously on the
front or back thereof the existence of such restrictions.
Each certificate representing shares shall state upon the face thereof: (1)
The name of the corporation; (2) That the corporation is organized under the
laws of this state; (3) The name of the person or persons to whom issued; (4)
The number and class of shares and the designation of the series, if any, which
such certificate represents; and (5) If the corporation is authorized to issue
different classes of shares or different series with a class, shall state
conspicuously on its front or back that the corporation will furnish the
shareholder on request and without charge a full statement of the designations,
relative rights, preferences and limitations applicable to each class and the
variations in rights, preferences and limitations determined for each series
(and the authority of the Board of Directors to determine variations for future
series).
SECTION 3. TRANSFER OF STOCK. The corporation shall register a stock
certificate presented to it for transfer if the certificate is properly endorsed
by the holder of record or by his or her duly authorized attorney. As a
condition of such transfer the corporation may require that the signature of
such person be guaranteed by a commercial bank or trust company or by a member
of the New York or American Stock Exchange.
SECTION 4. LOST. STOLEN OR DESTROYED CERTIFICATES. The corporation shall
issue a new stock certificate in the place of any certificate previously issued
if the holder of record of the certificate:
Page 72 of 79 of Form 10-SB
<PAGE>
(a) Make proof in affidavit from that it has been lost, apparently
destroyed or wrongfully taken;
(b) Requests the issue of a new certificate before the corporation has
notice that the certificate been acquired by a purchaser for value in good faith
and without notice of any adverse claim;
(c) Gives bond in such form as the corporation, at its option, may
direct to indemnify the corporation, the transfer agent and registrar against
any claim that may be made on account of the alleged loss, destruction or theft
of a certificate; and
(d) Satisfies any other reasonable requirements imposed by the
corporation.
ARTICLE V - BOOKS. RECORDS AND FINANCIAL STATEMENTS
---------------------------------------------------
SECTION I. BOOKS AND RECORDS.
(a) The corporation shall keep as permanent records minutes of all meetings
of its shareholders and Board of Directors: (1) A record of all actions taken by
the shareholders or Board of Directors without a meeting; and (2) A record of
all actions taken by a committee of the Board of Directors in place of the Board
of Directors on behalf of the corporation.
(b) The corporation shall maintain accurate accounting records.
(c) The corporation or its agent shall maintain a record of its
shareholders in a form that permits preparation of a list of the names and
addresses of all shareholders in alphabetical order by class of shares showing
the number and series of shares held by each.
(d) The corporation shall maintain its records in written form or in
another form capable of conversion into written form within a reasonable time.
(e) The corporation shall keep a copy of the following records:
(i) Its Articles or restated Articles of Incorporation and all
amendments to them currently in effect;
(ii) Its Bylaws or restated Bylaws and all amendments to them
currently in effect;
(iii) Resolutions adopted by its Board of Directors creating one or
more classes or series of shares and fixing their relative rights, preferences
and limitations, if shares issued pursuant to those resolutions are outstanding;
(iv) The minutes of all shareholders' meetings and records of all
action taken by shareholders without a meeting for the past three years;
(v) Written communications to all shareholders generally or all
shareholders of a class or series within the past three years, including the
financial statements furnished for the past three years under Section 2 below;
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(vi) A list of the names and business street addresses of its current
directors and officers; and
(vii) Its most recent annual report delivered to the Department of
State.
SECTION 2. FINANCIAL INFORMATION. Not later than one hundred twenty (120)
days after the close of each fiscal year, this corporation shall prepare
financial statements including a balance sheet showing in reasonable detail the
financial condition of the corporation as of the close of the fiscal year and a
profit and loss statement showing the results of the operations of the
corporation during its fiscal year and a statement of cash flows for that year.
The corporation shall mail the annual financial statements to each
shareholder within one hundred twenty (120) days after the close of each fiscal
year.
ARTICLE VI - DISTRIBUTIONS
--------------------------
SECTION 1. DISTRIBUTIONS. The Board of Directors may authorize and the
corporation may make distributions to the shareholders subject to restrictions
under the laws of the State of Florida, the Articles of Incorporation and the
limitations in Section 3.
SECTION 2. RECORD DATE FOR DISTRIBUTIONS. If the Board of Directors does
not fix the record date for determining shareholders entitled to a distribution
(other than one involving a purchase, redemption or other acquisition of the
corporation's shares), the record date shall be the date the Board of Directors
authorizes the distribution.
SECTION 3. PROHIBITED DISTRIBUTIONS. No distribution may be made if, after
giving it effect:
(a) The corporation would not be able to pay its debts as they become
due in the usual course of business; or
(b)The corporation's total assets would be less than the sum of its
total liabilities plus the amount that would be needed, if the corporation were
to be dissolved at the time of the distribution, to satisfy the preferential
rights upon dissolution of shareholders whose preferential rights are superior
to those receiving the distribution.
SECTION 4. METHOD FOR DETERMINING VALIDITY OF DISTRIBUTIONS. The Board of
Directors may base a determination that a distribution is not prohibited under
Section 3 either on financial statements prepared on the basis of accounting
practices and principles that are reasonable in the circumstances or on a fair
valuation or other method that is reasonable in the circumstances. In the case
of any distribution based upon such a valuation, each such distribution shall be
identified as a distribution based upon a current valuation of assets, and the
amount per share paid on the
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basis of such valuation shall be disclosed to the shareholders concurrent with
their receipt of the distribution.
ARTICLE VII - CORPORATE SEAL
----------------------------
The Board of Directors shall provide a corporate seal for the corporation.
ARTICLE VIII - AMENDMENT
------------------------
These Bylaws may be repealed or amended and new Bylaws may be adopted by
either Board of Directors or the shareholders, but the Board of Directors may
not amend or repeal any Bylaw adopted by shareholders if the shareholders
specifically provide such Bylaw is not subject to amendment or repeal by the
directors. The Business Corporation Act reserves generally or specifically the
power to do so exclusively to the shareholders.
ARTICLE IX - INDEMNIFICATION
----------------------------
SECTION 1. PROCEDURE. This corporation may, in its discretion, indemnify
any director, officer, employee or agent in the following circumstances and in
the following manner:
(a)The corporation shall indemnify any person who was or is a party,
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by, or in the right of, the corporation) by
reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against liability, expenses (including
attorneys' fees at all trial and appellate levels), judgments, fines, penalties
and amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding, including any appeal thereof,
if he or she acted in good faith and in a manner he or she 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 or her conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation or,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his or her conduct was unlawful.
(b) The corporation shall indemnify any person who was or is a party,
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director,
officer, employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees at all trial and appellate levels),
judgments, fines and amounts paid in settlement not exceeding, in
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the judgment of the Board of Directors, the estimated expense of litigating the
proceeding to conclusion, actually and reasonably incurred by him or her in
connection with the defense or settlement of such action, suit or proceeding
including any appeal thereof, if he or she acted in good faith and in a manner
he or she reasonably believed to be in, or not opposed to, the best interests of
the corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable unless, and only to the extent that, the court in which such action, suit
or proceeding was brought, or any other court of competent jurisdiction, shall
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
(c)To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 1(a) or l(b) of this Article
IX, or in defense of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including attorneys' fees at all trial and
appellate levels) actually and reasonably incurred by him or her in connection
therewith.
(d) Any indemnification under Section l(a) or l(b) of this Article IX,
unless pursuant to a determination by a court, shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he or she has met the applicable standard of conduct set
forth in Section l (a) or l (b) of this Article IX. Such determination shall
initially be made by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding;
provided, however, that a determination made by the Board of Directors pursuant
to this Section l(d) may be appealed to the shareholders by the party seeking
indemnification or any party entitled to call a special meeting of the
shareholders pursuant to Section 2 of Article I; and, in such case, the
determination made by the majority vote of a quorum consisting of shareholders
who were not parties to such action, suit or proceeding shall prevail over a
contrary determination of the Board of Directors pursuant to this Section l(d).
If the Board of Directors shall, for any reason, decline to make such a
determination, then such determination, shall be made by the shareholdlers by a
majority vote of a quorum consisting of shareholders
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who were not parties to such action, suit or proceeding, or, if no such quorum
is obtainable, by a majority vote of shareholders who were not parties to such
action, suit or proceeding.
(e) Expenses (including attorneys' fees at all trial and appellate
levels) incurred by a director, officer, employee and agent in defending a civil
or criminal action, suit or proceeding may be paid by the corporation in advance
of the final disposition of such action, suit or proceeding upon a preliminary
determination following one of the procedures set forth in this Article IX, that
such director, officer, employee or agent met the applicable standard of conduct
set forth in Section 1 (a) or 1 (b) of this Article IX, and upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to repay
such amount, unless it shall ultimately be determined that he is entitled to be
indemnified by the corporation as authorized in this Article IX.
SECTION 2. FURTHER INDEMNIFICATION. The corporation may make any other or
further indemnification or advancement of expenses of any of its directors,
officers, employees and agents under any agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in the indemnified
party's official capacity and as to action in another capacity while holding
such office. However, indemnification or advancement of expenses shall not be
made to or on behalf of any director, officer, employee or agent if a judgment
or other final adjudication establishes that his or her actions, or omissions to
act, were material to the cause of action so adjudicated and constitute:
(a) A violation of the criminal law, unless the director, officer,
employee or agent had reasonable cause to believe his conduct was lawful or had
no reasonable cause to believe his conduct was unlawful;
(b) A transaction from which the director, officer, employee or agent
derived an improper personal benefit;
(c) In the case of a director, a circumstance under which the
liability provisions of Section 607.0834 of the Florida Business Corporation
Act, as may be amended from time to time, are applicable; or
(d) Willful misconduct or a conscious disregard for the best
interests of the corporation in a proceeding by or in the right of the
corporation to procure a judgment in its favor or in a proceeding by or in the
right of a shareholder.
SECTION 3. FORMER DIRECTORS. OFFICERS. EMPLOYEES OR AGENTS.
Indemnification, as provided in this Article IX, may continue as to a person who
has ceased to be a director, officer, employee or agent and may inure to the
benefit of the heirs, executors and administrators of such a person upon a
proper determination initially made by the Board of Directors by a majority vote
of a quorum consisting of directors who were not parties to such action, suit or
proceeding. If the Board of Directors, for any reason, shall decline to make
such a determination, then such
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determination may be made by the shareholders by a majority vote of a quorum
consisting of shareholders who were not parties to such action, suit or
proceeding or, if no such quorum is obtainable, by a majority vote of
shareholders who were not parties to such proceedings; provided, however, that a
determination made by the Board of Directors pursuant to this Section 3 may be
appealed to the shareholders by the party seeking indemnification or his or her
representative or by any party entitled to call a special meeting of the
shareholders pursuant to Section 2 of Article I; and, in such case, the
determination made by the majority vote of a quorum consisting of shareholders
who were not parties to such action, suit or proceeding or, if no such quorum is
obtainable, by a majority vote of shareholders who were not parties to such
action, suit or proceeding, shall prevail over a contrary determination of the
Board of Directors pursuant to this Section 3.
SECTION 4. INSURANCE. The corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against him
or her and incurred by him or her in any such capacity or arising out of his or
her status as such, whether or not the corporation would have the power to
indemnify him or her against such liability under the provisions of this Article
IX.
SECTION 5. NOTICE TO SHAREHOLDERS. If any expenses or other amounts are
paid by way of indemnification, other than by court order or action by the
shareholders or by an insurance carrier pursuant to insurance maintained by the
corporation, the corporation, not later than the time of delivery to
shareholders of written notice of the next annual meeting of shareholders unless
such meeting is held within three (3) months from the date of such payment, and,
in any event, within fifteen (15) months from the date of such payment, shall
deliver either personally or by mail to each shareholder of record at the time
entitled to vote for the election of directors a statement specifying the
persons paid, the amount paid and the nature and status at the time of such
payment of the litigation or threatened litigation.
SECTION 6. CONSTRUCTION OF ARTICLE IX. This Article IX shall be interpreted
to permit indemnification to the fullest extent permitted by law. If any part of
this Article shall be found to be invalid or ineffective in any action, suit or
proceeding, the validity and effect of the remaining part thereof shall not be
affected. The provisions of this Article IX shall be applicable to all actions,
claims, suits or proceedings made or commenced after the adoption hereof,
whether arising from acts or omissions to act occurring before or after its
adoption.
ARTICLE X - FISCAL YEAR
-----------------------
The fiscal year of the corporation shall be determined by the Board of
Directors.
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SECRETARY'S CERTIFICATE
-----------------------
These Bylaws were adopted by resolution of the Board of Directors at the
First Joint Meeting of Stockholders and the Board of Directors of EMC GROUP,
INC. on February 25TH, 1997.
/s/ PETER-MARK BENNETT
----------------------
PETER-MARK BENNETT, Secretary
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