ITEM 1 - BUSINESS.
GENERAL
J-Bird Music Group LTD ("the Company") was incorporated in the State of
Pennsylvania on June 7, 1991. J-Bird is authorized by its articles of
incorporation to issue 25,000,000 shares of $.001 par value of common stock,
of which approximately 10,780,475 shares were outstanding as of August 18, 1998.
J-Bird Music Group LTD was formerly known as Caltron, Inc. The name was
changed on October 8, 1997 upon acquiring J-Bird Records, Inc., the first
World Wide Web Recording Label TM. Prior to acquiring J-Bird Records, Inc.,
the Company was in the business of developing and producing electron beam
sterilization and ozone production equipment. Upon management's decision to
realign its business by acquiring J-Bird Records, it sold its interests in
these businesses, with the exception of a five percent (5%)equity interest in
Feild Technologies,LLC("FTL").
BACKGROUND
From June 7, 1991 until November 15, 1995, the Company had no operations,
owned no properties and was inactive.
On November 15, 1995, the Company entered into an agreement with a company
called Laminar Fluid Controls ("Laminar") under which the Company purchased
seven patents relating to fluid control technologies and equipment. Laminar
assigned all of its rights, title and interest in said patents to the
Company and in return received 100,000 shares of the Company's common stock.
Laminar's valves solve many problems such as eliminating pressure spikes in
hydraulic lines, regulating precise pressures and flows, and providing long
lasting operation in many applications which currently wear out valves in days
or weeks.
On April 22, 1997, the Company entered into an Option Agreement with Feild
Technologies,LLC("FTL"),a company based in Bangor, Maine. Under this agreement,
the Company merged all seven domestic and foreign valve patents, previously
acquired from Laminar, into FTL for a five percent(5%)equity position in FTL.In
the event the Company does not receive distributions of at least $100,000 on or
before December 31, 2000, it shall be entitled to increase its interest in FTL
from 5% to 10%, and the other members' interests in FTL shall be reduced on a
basis proportionate to their relative interests. FTL is an operating company
run by the original inventor of the patented valve technology. FTL owns a
number of fluid control ideas and is in the process of obtaining additional
patents.
On May 3, 1996, the Company entered into an agreement with Rhode Island Renal
Institute ("RIRI") and Brooks Porter ("Porter"). RIRI and Porter entered into a
Development and Investment Agreement ("D&I Agreement") and pursuant to the D&I
Agreement, RIRI agreed to provide financial support, clinical testing
facilities and supplies to Porter to assist his development of the Renal Ozone
Sterilization System ("ROSS"). Under the agreement with the Company, RIRI and
Porter assigned to the Company the right to manufacture and distribute ROSS,
and any other interests or rights created by the D & I Agreement between or
among Porter and RIRI. In accordance with the agreement between the Company and
RIRI, RIRI received One Hundred Twenty-five Thousand (125,000) shares of
restricted common stock of the Company.
ROSS is a dialyzer sterilization technology currently in development stage. The
technology involves the generation of ozonated water and the use of this water
as the dialyzer sterilant. The device is used to generate the ozonated water
and use the ozonated water to sterilize filters in kidney dialysis machines.
The use of this ozonated water to sterilize said filters is the subject of a
patent application which has been filed by RIRI and Porter.
On July 28, 1997, the Company signed a letter of intent with a private investor
group to sell its interest in the ROSS technology to said investor group. This
agreement called for the Company to assign all of its rights, title and
interest in the patent pending and the ROSS project to a newly formed company
called the ROSS Corporation in exchange for the return of 1,375,000 shares of
the Company's common stock. The ROSS Corporation, using the letter of intent,
offered to exchange one share of ROSS Corporation stock for one share of stock
of the Company. This exchange offer was open to all shareholders of the Company
on a first come, first served basis. The exchange offer was for the period
between July 28, 1997 and December 15, 1997. The ROSS Corporation was not able
to get commitments for the required 1,375,000 shares of the Company's common
stock and the offer was revoked on December 15, 1997. The letter of intent
thereafter expired and became null and void.
In December, 1997, the ROSS Corporation signed an agreement with the Company
where the ROSS Corporation is going to buy the Company's interest in the ROSS
project for $500,000 and have executed said Agreement and promissory note for
that amount. In connection with this transaction the Company recognized a loss
of $1,810,000.
On June 14, 1996, the Company entered into an agreement with a company called
Applied Advanced Technologies, Inc. ("AAT") and an individual named Tovi Avnery
("Avnery") to acquire an interest in AAT and for AAT to acquire an equity
interest in the Company. Under the terms of this Agreement, the Company
received an interest in the rights, title and interest in and to an electron
beam technology. Under this agreement, the Company was to advance a total of
Three Hundred Thousand ($300,000) dollars to AAT in three installments of One
Hundred Thousand ($100,000) dollars, AAT received a total of $350,000. In
return, the Company received One Hundred Fourteen Thousand Five Hundred
Forty-six (114,546) shares of common stock of AAT, representing forty-five
(45%) percent ownership in the company. Avnery also received One Hundred Thirty
Thousand (130,000) shares of restricted common stock of the Company.
The electron beam technology developed by AAT can apply to the fields of
sterilization, ozone generation, fuel atomization, curing inks and coatings,
treatment of various surfaces, and hazardous waste cleanup. The electron beam
technology is a method of generating electrons in a vacuum, accelerating them
into a beam, and then projecting the beam into air through a thin membrane or
"window". The proprietary feature of the technology is a newly developed window
technology and the unique simplified and compact design of the system.
On April 18, 1997, the Company and AAT entered into an agreement whereby AAT
was to buy back the Company's equity position in AAT, conditional upon approval
of financing. If the transaction was completed, the Company would have received
$4,000,000 for its equity position in AAT. On May 21, 1997, the Company was
advised by AAT that it had been unable to secure the potential financing under
the April 18, 1997 Agreement to buy back the Company's equity position in AAT.
A dispute arose over certain monthly payments and the Company and AAT agreed to
go to arbitration, pursuant to their Letter Agreement dated June 14, 1996, to
clarify the terms of the Letter Agreement and to determine whether the Company
was obligated to continue funding AAT's research and development operations.
Through mediation, the Company decided to conclude its relationship with AAT.
On July 15, 1997, the Company and AAT entered into a Memorandum of
Understanding. In accordance with this Memorandum of Understanding, AAT will
pay to the Company $350,000 plus interest, not to exceed $500,000, by July 31,
1999. In September, 1997, the Company executed a Release and Assignment of
Interest in AAT, to be held in escrow until said monies owed to the Company
have been paid in full. The Company and AAT entered into a Pledge Agreement in
favor of the Company, wherein AAT permitted the pledge of all issued and
outstanding shares of capital stock of AAT, as well as its patent/patent
pending in a certain Electron Beam Accelerator, to secure AAT's obligation to
make certain deferred payments to the Company under a certain Promissory Note
of even date. AAT also executed a Release and Assignment of Interest in the
Company. All shares of common stock of the Company owned by AAT or Avnery are
to be returned to the Company.
On July 28, 1997, the Company entered into a Letter of Intent with J-Bird
Records, Inc., a Connecticut corporation. On October 7, 1997, the Company
entered into a Stock Purchase Agreement with the shareholders of J-Bird
Records, Inc. to exchange their shares of J-Bird Records for the equivalent
number of shares of the Company. The total number of shares exchanged in this
transaction was 4,358,000. Upon entering into these agreements, the Company
acquired J-Bird Records, Inc. On October 8, 1997, the Company changed its name
to J-Bird Music Group LTD. J-Bird Records, Inc., is a wholly owned subsidiary
of J-Bird Music Group LTD.
J-Bird Records, Inc.("J-Bird") is the first World Wide Web Recording Label TM.
The Company was officially launched on November 1, 1996 to market, distribute
and sell music via a new medium - the Internet. At its Website, located at
http://www.j-birdrecords.com, the Company attracts and signs recording artists
through its on-line office and promotes, markets and sells their recordings
through its on-line record store.
The Company's Website provides a comprehensive entertainment and information
resource enabling users to search and sample music and artist information
interactively through sound and graphics, including on-line "sound stations"
for each artist and the J-Bird on-line "radio station". When an artist signs a
recording contract with the Company, such artist's music is posted on the
Company's Website in digital form for downloading using either Real Audio TM or
Shockwave TM "plug-ins". The Website contains a webpage for each of the
Company's artists. Users who are interested in the music they sample may
purchase it immediately on-line. Users can also obtain information on specific
artists and related concert tours, music events and other promotions and read
recent articles on the favorite J-Bird artists. J-Bird designs, produces and
distributes CD's on-line and in the traditional retail chains around the
country. Artists, either new or established, who want more control over the
production and distribution of their music, select and contract with J-Bird.
J-Bird and the artists then share in the proceeds of the CD sales. By giving
tens of millions of Internet users worldwide access to the music of these
artists, J-Bird fills a niche not addressed by radio, music videos, and
traditional music retailers.
Each new artist that signs with J-Bird is required to submit a master
recording, sample art work and pay a nominal fee of currently $1,250 for which
the artist automatically receives 125 CDs to sell for $10 each in order to
recoup their investment. The artist can also elect to purchase 1,000 CDs upon
signing at $2.25 each and the set up fee of $1,250 is waved. The artist
executes a Recording Contract with J-Bird which requires the artist to produce
one compilation of music for J-Bird during the three year term of their
contract. Pursuant to the Recording Contract, J-Bird has the exclusive rights,
in perpetuity, to manufacture, advertise, sell and distribute such compilation.
In return, the artist receives a 12% royalty on the sales of all CDs produced.
If the artist enters into a recording contract with another record label during
the three-year term, J-Bird will receive a royalty of 2% of all sales for the
first album produced by such artist with such new record label. J-Bird
currently has 260 artists in the J-Bird catalogue.
J-Bird has chosen the Internet as its primary marketing vehicle because the
Internet provides a low-cost method of providing, displaying and selling
different styles and genres of music to a worldwide audience. The Internet also
allows J-Bird to target sales to the largest music-buying population, the 15 to
24 age group, which also represents the highest concentration of Internet
users. J-Bird's Website offers content-rich music genre sites for rock, pop,
alternative, country, urban, rap, jazz, gospel, classical and world music,
through the combination of audio, graphics, and text. J-Bird's genre and artist
web pages allow users to target music and information based on personal
interests. J-Bird believes that this approach provides a stimulating and
entertaining on-line environment which establishes a community atmosphere
and promotes consumer-driven product sales. J-Bird believes that the Company's
business will greatly benefit from the growth of the Internet.
The Company believes that on-line sales of recorded music will compliment the
traditional retail channel and will expand overall music sales because of the
on-line medium's ability to capitalize on the ongoing shift in demographics of
music buyers; to reach a growing international consumer market and to offer the
consumer easier access to a broad range of titles. J-Bird also believes that
the ability to gather and process data resulting from customer purchases and
usage will facilitate targeted promotional efforts in the highly segmented
recorded music market. The Internet also provides access to international
markets for recorded music which are growing faster than the U.S. market.
In addition, the Company gathers important information about demographics and
consumer preferences from users of its Website. This information permits the
Company to target subsequent promotions to a particular customer group or
geographic area. The Company believes that this practice will enable the
Company to market its artists in an efficient, cost-effective manner by
targeting the most likely buyers for such artists music. In the future, the
Company expects to promote its artists through the use of its radio
station and on-line "chat-rooms" intended to spark interest in a particular
music genre or artist. The Company believes that its strategy of interactive
sales on the Internet combined with targeted promotions will enable it to build
a loyal customer base.
Traditional record companies typically incur high promotional and other costs
in the distribution of their music, providing a strong disincentive to sign
unproven bands. J-Bird's low-cost approach of relying upon listeners'
interests, which has already attracted over 250 new artists to the J-Bird
label, will continue to do so, and will allow the Company to compete on a
cost-effective basis with other record companies. The Company feels that the
use of it's interactive Website, it's on-line radio station, and it's targeted
advertising, promotion and distribution, creates a new medium for the music
industry that permits it to reach music buyers throughout the world and that
has the potential to shift the way music is marketed to consumers.
In November, 1997, J-Bird announced that three of it's recording artists were
featured on the Pepsiworld.com Website for the months of November and December.
Pepsi's new generation of web clients are able to view videos, listen to sound
samples, get biographical information and link directly to the J-Bird Records
web site to purchase CDs.
Also in November, 1997, J-Bird announced that AudioNet added twenty five (25)
J-Bird recording artists to their on-line CD Jukebox. AudioNet is a pioneer in
the music industry in helping artists promote and sell their music through
broadcasting on the Web.
J-Bird also competes in the distribution and sale of recorded music directly
with established record label companies and with other music producers and
distributors, including Polygram, Time Warner, EMI, Columbia and Phillips. In
November, J-Bird was approached by Navarre Corporation ("Navarre"). J-Bird
entered into a three-year exclusive retail distribution Agreement with Navarre.
Navarre, one of the leading independent distributors of music and interactive
software, distributes to retail accounts throughout the nation, including,
Tower Records, The Musicland Group (which includes Media Play, Sam Goody,
Musicland and On-Cue), Blockbuster, Best Buy, Wherehouse, Camelot, HMV, Borders
and Circuit City as well as all the leading One Stops. Under the Agreement,
Navarre will distribute J-Bird products nationally through its retail
distribution relationships.
The Company has 6 employees.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
J-Bird derives its revenues from four principle sources: (i) sales of compact
disks ("CDs") directly to the artists for resale to consumers, (ii) fees paid
by artists to sign recording contracts, (iii) CD sales on the J-Bird Website;
and (iv) retail CD sales.
J-Bird's strategy to develop products and services for the music entertainment
business was primarily responsible for its net loss for the years ended
December 31, 1996 and 1997. The Company has only a limited operating history in
its operations upon which an evaluation of J-Bird and its prospects can be
based. Accordingly, J-Bird believes that the results of its operations for the
past two years, during which time the Company had minimal revenues, are not
meaningful indications of future performance. J-Bird incurred losses from
continuing operations of $232,000 for the year ended December 31, 1996 and
$537,000 for the year ended December 31, 1997.
The Company currently intends to increase substantially its operating expenses
as a result of the Company's strategic alliances, to fund increased sales and
marketing, to enhance its existing website and to complete strategic
relationships important to the success of the Company. To the extent that such
expenses precede or are not subsequently followed by increased revenues, the
Company's business, results of operations and financial condition will be
materially adversely affected. There can be no assurance that the Company will
be able to generate sufficient revenues from the sale of music recordings,
related merchandise, advertising and sponsorship programs to achieve or
maintain profitability on a quarterly or annual basis in the future. The
Company expects negative cash flow from operations to continue for the
foreseeable future as it continues to develop and market its business.
<TABLE>
SELECTED FINANCIAL DATA
The selected consolidated financial data set forth below for the years ended
December 31,1997, 1996 and 1995 were derived from the audited consolidated
financial statements of the Company. The data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Consolidated Financial Statements and related Notes
appearing elsewhere in the registration statement. The data includes the
results of operations of J-Bird Records, Inc. since the date of acquisition,
October 7, 1997.
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Net sales $13,226 $-0- $-0-
Gross profit $5,910 $-0- $-0-
Loss from disposition
of assets $(2,610,250) -0- -0-
Net loss $(3,147,701) $(473,310) $(38,110)
Net loss per share $(.62) $(.17) $(.02)
Working capital $151,710 $1,458 $86
Total Assets $3,327,924 $3,228,146 $86
Long term liabilities $10,880 $8,000 $10,949
Shareholders Equity
(Deficit) $2,828,228 $3,145,147 $(10,865)
</TABLE>
The registrant did not have operations prior to 1995.
RESULTS OF OPERATIONS
Fiscal Year Ended 1997 Compared to 1996
1997 operations include the operations of J-Bird Records, Inc., since October
7, 1997 the date of acquisition.
Advertising and promotion increased by approximately $54,000 due to the
acquisition of J-Bird Records, Inc.
Professional fees increased by approximately $154,000 due to the acquisition of
J-Bird Records, the disposition of the investments in AAT and the ROSS project
and the settlement agreement with David Rager described in Item 8 Legal
proceedings.
Amortization and depreciation decreased by approximately $123,000 due to the
disposition of the ROSS project and the write-off of the patents acquired from
Laminar Fluid Controls.
Travel and entertainment increased by approximately $36,000 due to the
acquisition of J-Bird Records, Inc.
Administrative expenses decreased by approximately $62,000 primarily to due to
the decrease in bad debt expense of $45,000.
The loss from disposition of assets in 1997 is from the disposition of the
investments in AAT, the ROSS project and the write-off of the patents acquired
from Laminar Fluid Controls.
The bad debt recovery for $40,000 relates to the $45,000 bad debt expense in
1996.
Sales in 1997 relate to the sales by J-Bird Records, Inc., since October 7,
1997 the date of acquisition.
FISCAL YEAR ENDED 1996 COMPARED TO 1995
Amortization and depreciation increased by approximately $228,000 due to the
investments in the ROSS project, AAT and the patents acquired from Laminar
Fluid Controls.
Consulting fees increased by $109,000 due to the increase in operating and
investment activity by the Registrant.
Administrative expenses increased by approximately $100,000 due to the increase
in operating and investment activity by the Registrant and bad debt expense of
$45,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations and capital expenditures primarily from
equity financings and loans from shareholders. At December 31, 1997, the
Company had a cash balance of $0.00. The Company expects negative cash flow
from operations to continue for the foreseeable future, as it continues to
develop and market its operations. Inflation has not had any material impact on
the Company's operations.
While the Company has positive working capital at December 31, 1997 the
$500,000 note receivable responsible for the positive working capital is due on
December 31, 1998. Until that payment is received the Company must obtain
external financing to meet its current obligations.
The Registrant is pursuing long term financing for its operating activities. No
source of financing has occurred to date and there can be no assurance that
financing will be available, or if available, that it will be on acceptable
terms. The ability to finance existing and future operations will be dependent
upon external sources.
J-Bird Records, Inc. purchased $30,000 worth of computer and office equipment
in 1996. In 1997, J-Bird created a website on the Internet for $136,000.
The Company does not have any material commitments for capital expenditures in
1998.
In 1996, the Company sold 1,030,000 shares of stock pursuant to subscription
agreements for $643,000.
In 1997, the Company sold 1,355,666 shares of stock pursuant to subscription
agreements for $613,000.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No.130, "Reporting Comprehensive
Income" and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information." SFAS No.130 establishes standards for reporting and
display of comprehensive income and its components (revenues, expenses, gains
and losses) in a full set of general-purpose financial statements and requires
that all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements. SFAS
No.130 is required to be adopted for the Company's fiscal year ending December
31, 1998. The adoption of this pronouncement is expected to have no impact on
the Company's financial position or results of operations. SFAS No.131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to stockholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. SFAS No.131 is required to be adopted
for the Company's 1998 year-end financial statements. The Company is evaluating
the impact, if any, of the adoption of this pronouncement on the Company's
existing disclosures.
RISKS ASSOCIATED WITH THE YEAR 2000
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. In other words,
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failures or miscalculations
causing disruptions of operations, including, among others, a temporary
inability to process transactions, send invoices or engage in similar normal
business activities.
The Company intends to conduct an analysis in 1998 to determine the extent to
which its major suppliers' systems (insofar as they relate to the Company's
business) are subject to the Year 2000 issue. The Company is currently unable
to predict the extent to which the Year 2000 issue will affect the Company and
its suppliers, or the extent to which it would be vulnerable to its suppliers'
failure to remediate any Year 2000 issues on a timely basis.
The failure of a major supplier subject to the Year 2000 issue to convert its
systems on a timely basis or a conversion that is incompatible with the
Company's systems could have a material adverse effect on the Company. In
addition, most of the purchases from the Company's website are made with credit
cards, and the Company's operations may be materially adversely affected to the
extent its customers are unable to use their credit cards due to Year 2000
issues that are not rectified by their credit card providers.
ITEM 3 - PROPERTIES
The Company's principal place of business is an office located at 396 Danbury
Road, Wilton, Connecticut 06897. The office facility consists of approximately
1800 square feet and is being leased pursuant to a thirty-six month lease
expiring in July, 2000 for a monthly lease payment of $2638.00. This does not
include overhead charges or salaries.
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table sets forth information, to the best knowledge of the
Company, as of December 31, 1997, with respect to the beneficial ownership of
the Company's common stock by (i) each person known by the Company to be the
beneficial owner of more than 5% of the Company's outstanding stock, (ii) each
director of the Company, (iii) the Chief Executive Officer of the Company, and
(iv) all current directors and executive officers as a group.
<CAPTION>
Beneficial owner Amount beneficially owned Percentage of shares owned
<S> <C> <C>
John J. Barbieri 2,960,000 32.2%
IMM International,
Inc. 2,270,000 <F2> 24.7
Douglas G. McCaskey 450,000 4.8
Hope D. Trowbridge 250,000 2.7
Asa L. Fish 135,000 1.5
All Officers and
Directors as a group
(4 persons) 6,065,000 65.9
Securities listed as "beneficially owned" by a person who directly or
indirectly holds or shares power to vote or dispose of the securities, whether
or not the person has an economic interest in the securities. In addition, a
person is deemed a beneficial owner if he has the right to acquire beneficial
ownership within 60 days, whether upon the exercise of a stock option or
otherwise.
<FN>
<F1>
Unless otherwise indicated, the individuals or entities identified herein each
own their respective shares and sole investment powers regarding their
disposition. The percentages are based upon 9,206,235 shares of J-Bird common
stock outstanding as of December 31, 1997 and are computed in accordance with
Rule 13d-3 of the Securities Exchange Act of 1934, as amended.
<F2>
Hope D. Trowbridge is the sole shareholder of IMM International, Inc.
</FN>
</TABLE>
The Company intends to issue, pursuant to two Option Agreements dated October
29, 1997, a total of 60,000 shares of J-Bird. The Option Agreements are for
$1.00 per share and expire on October 29, 2000.
ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS, PARTNERS AND CONTROL PERSONS
All directors of the Company serve a term of one (1) year until the next Annual
Shareholders Meeting or until their death, resignation, retirement, removal,
disqualification, or until their successors have been elected and qualified.
Vacancies in the existing board are to be filled by a majority vote of the
remaining directors. Officers of the Company serve at the will of the Board of
Directors.
<TABLE>
The directors and executive officers of J-Bird Music Group LTD as of December
31, 1997 are as follows:
<CAPTION>
Director Age Present Position Served as Director
Since
<S> <C> <C> <C>
John J. Barbieri 33 CEO,President and October 7, 1997
Di
rector
Douglas G. McCaskey 42 Chairman and Director April 28,1997
Hope D. Trowbridge 37 Secretary, Treasurer June 7,1991
and Director
Asa L. Fish 31 Director April 28, 1997
</TABLE>
The following is a brief account of the business experience, during the past
five years, of each Director. Each of the Directors is a citizen of the United
States who has a business address at the Company.
JOHN J. BARBIERI, CEO, President and Director of the Company, earned a B.F.A.
Degree from Paier College of Art in 1986. After graduating, Mr. Barbieri
joined Polygram Records as a Senior Graphics Manager responsible for the print
production and graphic production budgets as well as implementing domestic
production on product. In 1993, Mr. Barbieri joined Angel Records, a division
of EMI Records Group as Vice President of Creative and Production Services. He
was responsible for creative services production, operations and new
technologies departments. Involved in creative direction, marketing and label
management. Mr. Barbieri has help pioneer the new multi-media technology for CD
PLUS and Enhanced CDs. He founded J-Bird Records, Inc. on November 1, 1996 and
serves as its CEO, President and Director as well as serving the same positions
for J-Bird Music Group LTD as of October 7, 1997.
DOUGLAS G. McCASKEY, Chairman and Director of the Company. Mr. McCaskey is a
graduate and MBA candidate of Babson College, where he earned a B.S.B.A. degree
in Accounting/Finance in 1975. He was a member of the class of 1976. In
November, 1975 he joined Readers Digest Association as a Field Manager. In
January, 1982 he joined Shearson American Express as a Vice President of
Investments. He went on to work as Vice President of Investments for
Oppenheimer & Company and Drexel Burnham Lambert. Mr. McCaskey has over fifteen
years of experience in the field of investments, as a retail and institutional
broker as well as a Registered Investment Advisor. He held several licenses,
but has been inactive in the field of securities since November, 1992. Since
leaving the securities industry he has been Managing Partner for several real
estate partnerships and consulted for several companies.
HOPE D. TROWBRIDGE: Secretary, Treasurer and Director of J-Bird Music Group LTD
since June 7, 1991. Earned a B.S. Degree in Business, concentration marketing,
from Skidmore College in 1983. Over fifteen years of experience in the field of
securities. Account Executive from March, 1986 to November, 1992 at Drexel
Burnham Lambert, Access Securities, Minotaur Securities and Harbor Financial,
Inc. Registered Agent (Series 7 and 63) August, 1983. Currently inactive in the
field of securities as a Registered Representative or in any other capacity
since November, 1992. From December 15, 1992 to present is the Corporate
Secretary and Director of Marcorp, Inc. Served as President of J-Bird Music
Group from December 1996 to April, 1997. Currently the Secretary, Treasurer and
Director of J-Bird Records, Inc. Responsible for all administrative aspects of
the Company as well as maintaining all compliance filings and requirements of
the Securities and Exchange Commission and the National Association of
Securities Dealers.
ASA L. FISH, Director of J-Bird Music Group since April 28, 1997. Served as the
Corporate Secretary from April 28, 1997 until October 7, 1997. Vice President
and head of Investor Relations, he has been with the Company since April, 1996.
Prior to his joining the Company he was a Nutrition Expert and Fitness
Consultant for Golds Gym.
During the past five years, none of the officers and/or directors of the
Company, nor any of the affiliates or promoters of the Company filed any
bankruptcy petition, have been convicted in or been the subject of any pending
criminal proceedings, or the subject of any order, judgment or decree involving
the violation of any state or federal securities laws.
All directors serve a term of one (1) year until the next Annual Shareholders
Meeting or until their death, resignation, retirement, removal,
disqualification, or until their successors have been elected and qualified.
Vacancies in the existing board are to be filled by a majority vote of the
remaining directors. Officers of the Company serve at the will of the Board of
Directors.
ITEM 6 - EXECUTIVE COMPENSATION
In the year ended December 31,1997 the chief executive officer, John J.
Barbieri received a salary of $31,250.00 prior to the date of acquisition,
October 7,1997. Subsequent to October 7, 1997 he did not receive a salary. In
1996 the Company did not pay a salary to its chief executive officer.
There were no stock options granted or exercised to the executive officers in
1996 or 1997.
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain shareholders perform legal and accounting services for the Company. The
Company issued 55,000 shares of stock valued at $55,000 for services performed
for J-Bird Records Inc. as of the date of acquisition.
ITEM 8 - LEGAL PROCEEDINGS
There are no legal proceedings pending to which J-Bird is a party.
In December, 1997, J-Bird entered into a Settlement Agreement with David Rager,
a former employee of J-Bird Records, Inc. Mr. Rager initiated a lawsuit
pending in the Superior Court for the Judicial District of Fairfield at
Bridgeport entitled Rager V. J-Bird Records, Inc., et al., whereby Rager did
not want to enter into the Stock Exchange Agreement with J-Bird Music Group due
to differences between Rager and J-Bird Records. Under the Agreement, Rager
agreed to exchange his shares in J-Bird Records for shares in J-Bird Music
Group. Rager is to receive a total of $48,000, of which $8000 was paid, and
50,000 additional shares of J-Bird Music Group LTD.
ITEM 9 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
The principal market on which the Company's common shares have traded is the
NASDAQ - Over the Counter Bulletin Board under the symbol of "JBRD".
The Company is presently authorized to issue 25,000,000 shares of common stock,
par value $.001 per share, of which, as of December 31, 1997, there were
9,206,235 issued and outstanding. All shares of the common stock are of one
class with equal rights and privileges with respect to voting, liquidation and
dividend rights.
There are approximately 500 shareholders of record, which figures do not take
into consideration those shareholders whose certificates are held in the name
of broker-dealers.
As of the date hereof, the Company has not paid or declared any cash dividends.
The Company can give no assurance that it will generate future earnings from
which cash dividends can be paid. Future payment of dividends by the Company,
if any, is at the discretion of the Board of Directors and will depend, among
other criteria, upon the Company's earnings, capital requirements, and its
financial condition as well as other relative factors. Management has followed
the policy of retaining any and all earnings to finance the development of the
business. Such a policy is likely to be maintained as long as necessary to
provide working capital for the Company's operations.
<TABLE>
The following table represents the average range of high and low bid quotations
for the calendar quarters during the past two years.
<CAPTION>
Calendar Quarters High Bid Low Bid
Fiscal Year Ended December 31, 1996
<S> <C> <C>
1st Quarter............ 7.50 1.50
2nd Quarter........... 13.50 6.00
3rd Quarter........... 14.50 8.25
4th Quarter........... 15.25 1.25
<CAPTION>
Fiscal Year Ended December 31, 1997
<S> <C> <C>
1st Quarter........... 7.75 1.25
2nd Quarter............ 3.25 .5313
3rd Quarter............ 2.00 .5313
4th Quarter............ 1.875 .4063
</TABLE>
The foregoing quotations were obtained from broker-dealers and market makers
who provide daily reports of the NASD Electronic Bulletin Board. The above
quotes reflect inter-dealer prices without retail mark-up, mark-down, or
commissions and may not necessarily represent actual transactions.
ITEM 10 - RECENT SALES OF UNREGISTERED SECURITIES
Described below is information regarding all securities issued by the Company
during the past three years which are unregistered and restricted shares. All
transactions described below were private transactions not involving a public
offering and were exempt from the registration requirements of the Securities
Act pursuant to Section (4)2 thereof. No underwriter was engaged in connection
with the foregoing sales of securities. All shares sold were common stock.
On April 10, 1996, the Company, pursuant to the Agreement with Laminar Fluid
Control, acquired all of Laminar Fluid Control's rights, title and interests in
seven (7) US and Foreign Valve Patents in exchange for 100,000 shares of stock.
On April 11, 1996, Cooke Family Trust accepted 10,000 shares of common stock as
full payment of the Company's indebtedness of $10,000 for consulting services.
On May 5, 1996, the Company, pursuant to its Agreement with Rhode Island Renal
Institute and Brooks Porter, acquired all of their rights, title and interest
in a certain Renal Ozone Sterilization equipment in exchange, Rhode Island
Renal received 125,000 shares of stock and Porter received 75,000 shares of
stock.
On June 14, 1996, the Company, pursuant to its Agreement with Applied Advanced
Technologies and Tovi Avnery, acquired an equity interest in AAT. Under the
Agreement, the Company invested $350,000 for a 45% ownership in AAT. Tovi
Avnery was issued 130,000 shares of stock pursuant to this Agreement. Pursuant
to a Memorandum of Understanding signed in July, 1997, these shares are to be
returned to the Company and put into treasury and are not included in the
issued and outstanding figure throughout this document.
All shares issued pursuant to a subscription agreement with the Company were
done so with the subscriber's knowledge and representations that the purchase
of said shares was speculative and involved a high degree of risk in that (i)
they may not be able to liquidate their investment in the event of an
emergency, (ii ) transferability is extremely limited; and (iii) in the event
of disposition, they could sustain a loss. Each subscriber acknowledged and
represented that they must be able to bear the economic risk of their
investment.
On April 23, 1996, the Company sold 250,000 shares of stock to Cooke Family
Trust pursuant to a Subscription Agreement. The Company received $0.40 a share
for a total of $100,000.
On April 25, 1996, the Company sold 150,000 shares of stock to Nostradamus, a
partnership, pursuant to a Subscription Agreement. The Company received $0.735
a share for a total of $110,000.
On May 1, 1996, the Company sold 20,000 shares of stock to Lawrence D. Moses
pursuant to his Subscription Agreement. The Company received $2.00 a share for
a total of $40,000.
On May 15, 1996, the Company sold 10,000 shares of stock to the Bailey Realty
Trust pursuant to a Subscription Agreement. The Company received $5.00 a share
for a total of $50,000.
On July 26, 1996, the Company issued McCaskey Group 250,000 shares pursuant to
a Subscription Agreement. The Company received $1.00 a share for a total of
$250,000.
On August 6, 1996, the Company issued Sandra K. Fitzpatrick 35,000 shares of
stock pursuant to her Agreement with the Company as serving as a Director.
On August 8, 1996, the Company issued Donald K. Whitcher 12,000 shares of stock
as full payment for his outstanding invoice of $10,000 for consulting and
investor relations.
On August 14, 1996, the Company issued Cooke Capital Management 300,000 shares
pursuant to the terms of his Consulting Agreement with the Company.
On December 15, 1996, the Company issued McCaskey Group 75,000 shares pursuant
to a Subscription Agreement. The Company received $1.00 a share for a total of
$75,000.
On December 19, 1996, the Company issued Roseann E. Miller 16,500 shares
pursuant to a Subscription Agreement. The Company received $1.00 a share for a
total of $16,500.
On December 19, 1996, the Company issued Judith Stevenson as custodian 500
shares pursuant to a Subscription Agreement. The Company received $1.00 a
share for a total of $500.
On December 19, 1996, the Company issued Judith Stevenson 1,000 shares pursuant
to a Subscription Agreement. The Company received $1.00 a share for a total of
$1,000.
On January 9, 1997, the Company issued Jerold Ehrlich 7,000 shares pursuant to
a Subscription Agreement. The Company received $1.00 a share for a total of
$7,000.
On January 13, 1997, the Company issued Michael and Cheryl Donahue 1,000 shares
pursuant to a Subscription Agreement. The Company received $1.00 a share for a
total of $1,000.
On January 14, 1997, the Company issued Jerry and Joanee Cohen 5,000 shares
pursuant to a Subscription Agreement. The Company received $1.00 a share for a
total of $5,000.
On January 17, 1997, the Company issued to James England 2,000 shares pursuant
to a Subscription Agreement. The Company received $1.00 a share for a total of
$2,000.
On January 22, 1997, the Company issued Arnold and Marian Bowles 20,000 shares
pursuant to a Subscription Agreement. The Company received $1.00 a share for a
total of $20,000.
On January 25, 1997, the Company issued Cooke Family Trust 40,000 shares
pursuant to a Subscription Agreement. The Company received $1.00 a share for a
total of $40,000.
On January 28, 1997, the Company issued Tamara and Daniel Miller 1,000 shares
pursuant to a Subscription Agreement. The Company received $1.00 a share for a
total of $1,000.
On February 8, 1997, the Company issued to Cooke Family Trust 50,000 shares
pursuant to a Subscription Agreement. The Company received $1.00 a share for a
total of $50,000.
On February 15, 1997, the Company issued to Robert Fisk 5,000 shares pursuant
to a Subscription Agreement. The Company received $1.00 a share for a total of
$5,000.
On February 25, 1997, the Company issued Chennekatu and Anney Peter 2,000
shares pursuant to a Subscription Agreement. The Company received $1.00 a
share for a total of $2,000.
On February 25, 1997, the Company issued William T. Rogers 2,000 shares
pursuant to a Subscription Agreement. The Company received $1.00 a share for a
total of $2,000.
On March 18, 1997, the Company issued McCaskey Group 400,000 shares pursuant to
a Subscription Agreement. The Company received $0.50 a share for a total of
$200,000.
On April 9, 1997, the Company issued Bailey Realty Trust 15,000 shares pursuant
to a Subscription Agreement. The Company received $1.00 a share for a total of
$15,000.
On April 9, 1997, the Company issued Cooke Capital Management 60,000 shares
pursuant to the terms of his Consulting Agreement with the Company.
On April 14, 1997, the Company issued Shiela R. Miller IRA 1,333 shares
pursuant to a Subscription Agreement. The Company received $1.50 a share for a
total of $2,000.
On April 14, 1997, the Company issued The Volunteer Realty Trust 13,333 shares
pursuant to a Subscription Agreement. The Company received $1.50 a share for a
total of $20,000.
On April 28, 1997, the Company issued Asa L. Fish 35,000 shares pursuant to an
Agreement with the Company. The Company received $0.10 a share for a total of
$3,500.
On July 28, 1997, the Company issued Asa L. Fish 100,000 shares pursuant to an
Agreement with the Company. The Company received $0.10 a share for a total of
$10,000.
On July 28, 1997, the Company issued IMM International, Inc. 250,000 shares
pursuant to an Agreement with the Company. The Company received $0.10 a share
for a total of $25,000.
Between October 7, 1997 and December 10, 1997, the Company issued 4,475,000
shares to J-Bird Records, Inc. shareholders pursuant to their Agreement with
J-Bird Music Group. Pursuant to this Agreement J-Bird Records shareholders
exchange their shares one for one with J-Bird Music Group.
<TABLE>
These shares were issued to the following people:
<CAPTION>
Name Number of Shares
<S> <C>
John J. Barbieri 2,960,000
Joseph Kriz 200,000
Maurizio Lancia 200,000
Walter Ancker 90,000
IMM International Inc. 270,000
Justin Cuccia 210,000
David Minus 70,000
James Burns 80,000
Hope Trowbridge 5,000
Samuel Anderson 5,000
Mary McCaskey 10,000
Robert Morrison 25,000
Richard Wingate 10,000
John C. Buchanan 500
Donald Morrison 1,000
Anna Bailey 1,000
Bill Kousmanidis 5,000
Joel Dunkel 500
Mario Clericuzio 2,000
David B. McCaskey 5,000
Morrison Family Trust 1,000
Donna Lancia 7,500
Eric Friedberg 2,500
Eric Sands 4,000
Noteworthy Management Group 1,000
John Sullivan 80,000
Nancy Piccirillo 2,500
Thomas Payne 2,000
Paul Sitar 500
Michael DeZaio 5,000
Dana Barron 5,000
Paul Freundlich 5,000
Stephen Habetz 2,000
Michael Russo 2,000
Fredericka Sands 5,000
David Rager 200,000
</TABLE>
On October 24, 1997, the Company issued Adam Frick 10,000 shares as full
payment for an invoice for $10,000.
On October 24, 1997, the Company issued Mark Galbraith 10,000 shares as full
payment for an invoice for $10,000.
On October 24, 1997, the Company issued Todd Connelly 18,000 shares pursuant to
his Agreement with J-Bird Records. These shares are currently held in escrow.
On October 30, 1997, the Company issued Maurizio Lancia 11,000 shares as full
payment for an invoice for $11,000 for legal work done for the company.
On October 30, 1997, the Company issued Joseph A. Kriz 24,000 shares as full
payment for an invoice for $24,000 for legal and accounting work done for the
company.
On December 8, 1997, the Company issued IMM International Inc. 500,000 shares
pursuant to a Subscription Agreement. The Company received $0.25 a share for a
total of $125,000.
On December 8, 1997, the Company issued IMM International, Inc. 500,000 shares
pursuant to a Subscription Agreement. The Company received $0.25 a share for a
total of $125,000.
ITEM 11 - DESCRIPTION OF SECURITIES
COMMON STOCK - The Company is presently authorized to issue 25,000,000 shares
of common stock, par value $.001 per share, of which, as of December 31, 1997,
there were 9,206,235 issued and outstanding. All of the shares of the common
stock are of one class with equal rights and privileges with respect to voting,
liquidation and dividend rights.
ITEM 12 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
The By-laws of the Company provide that a director of officer of the Company
will not be personally liable to the Company or its shareholders for monetary
damages for acts or conduct of said officer or director performed for or on
behalf of the Company, except for liability arising out of his own negligence
or willful misconduct.
The Company is entitled under its By-laws to purchase and maintain insurance on
behalf of any director or officer against any liability asserted against him
and incurred by him in any capacity.
ITEM 13 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted as a separate section of this report
commencing on Page F-1.
ITEM 14 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
ITEM 15 - EXHIBITS, FINANCIAL STATEMENTS AND REPORTS
The responses to these portions are submitted as separate documents of this
report commencing after the signature page.
Exhibits:
(a) (3) and (c) Exhibit (numbered in accordance with Item 601 of Regulation S-K)
Exhibit No. Description
(3i) Articles of Incorporation
(3ii) By-laws
(4) NA
(9) NA
(10) NA
(11) NA
(12) NA
(13) NA
(16) NA
(18) NA
(19) NA
(21) Subsidiaries (J-Bird Records, Inc)
(22) NA
(23) NA
(24) NA
(25) NA
(28) NA
(29) NA
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
J-BIRD MUSIC GROUP LTD
Date: March 31, 1998
By: John J. Barbieri
(Signature)
President and CEO,
Director
Pursuant to the requirement of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Date: March 31, 1998
Douglas G. Mc Caskey
(Signature)
Chairman, Director
Date: March 31, 1998
Hope D. Trowbridge
(Signature)
Corporate Secretary,
Director
Date: March 31, 1998
Asa L. Fish
(Signature)
Director
Schnitzer & Kondub P.C.
Certified Public Accountants
550 Mamaroneck Avenue
Harrison, New York 10528
Board of Directors
J-Bird Music Group LTD.
We have audited the accompanying balance sheets of J-Bird Music Group LTD. as
of December 31, 1997 and the related statements of operations and retained
earnings, changes in stockholders' equity and cash flows for each of the years
in the two year period ended December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by the Company's management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of J-Bird Music Group LTD. as of
December 31, 1997 and the results of its operations and cash flows for each of
the years in the two year period ended December 31, 1997 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements the Company is in the process of raising capital to fund its
operations. Although management believes that the financing will occur and it
will become profitable, no assurance can be given that the financing will occur
and the Company will become profitable. The financial statements do not
include any adjustments that might result form the outcome of this uncertainty.
Schnitzer & Kondub P.C.
Harrison, New York
February 18, 1998
<TABLE>
J-BIRD MUSIC GROUP LTD
BALANCE SHEET
DECEMBER 31, 1997
<CAPTION>
ASSETS
<S> <C>
Inventory 53,766
Accounts receivable 10,095
Loans receivable, shareholder 35,000
Recording advances 21,665
Note receivable 500,000
----------
Total Current assets 620,526
Fixed assets, net 153,475
Cost in excess of net assets acquired 2,206,308
Accumulated amortization (32,664)
----------
2,173,644
Note receivable 350,000
Other assets 30,279
----------
Total assets 3,327,924
___________
LIABILITIES AND STOCKHOLDERS' EQUITY
Account payable and accrued expenses 378,816
Notes payable 90,000
-----------
Total current liabilities 468,816
Due to shareholders and officers 30,880
-----------
Total Liabilities 499,696
Stockholders' Equity
Common stock $.001 par value
25,000,000 shares authorized, 9,206,235 issued
and outstanding 9,206
Paid in capital 6,478,143
Deficit (3,659,121)
-----------
2,828,228
Total Liabilities and Equity $ 3,327,924
___________
</TABLE>
<TABLE>
J-BIRD MUSIC GROUP LTD.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<CAPTION>
1997 1996
<S> <C> <C>
Net sales $ 13,226 $ -
Cost of sales 7,316 -
5,910 -
Operating expenses:
Advertising and promotion 54,147 -
Professional fees1 53,689 -
Amortization and depreciation 104,890 228,215
Salaries 9,715 -
Consulting fees 134,062 109,256
Rent 8,158 -
Travel and entertainment 36,262 -
Selling expenses 8,571 -
Administrative expenses 73,867 135,839
--------- ---------
583,361 473,310
Net (loss) before other income (expense) (577,451) (473,310)
Other income (expense):
Loss from disposition of assets (2,610,250) -
Bad debt recovery 40,000 -
---------- ---------
(2,570,250) -
Net loss (3,147,701) (473,310)
___________ __________
Net loss per common share $ (0.62) $(0.17)
___________ __________
Weighted average common shares outstanding 5,116,298 2,705,886
</TABLE>
<TABLE>
J-BIRD MUSIC GROUP LTD.
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<CAPTION>
(Amounts in dollars, except shares)
Retained
Common Stock Paid-in Earnings
Shares Amount Capital (Deficit) Total
_____________________________________________________
<S> <C> <C> <C> <C> <C>
BALANCE AT
JANUARY 1, 1996 2,002,469 2,002 25,245 (38,110) (10,863)
Net Loss - - - (473,310) (473,310)
Stock issued for
Investments 400,000 400 3,299,600 - 3,300,000
Stock issued for cash 1,030,000 1,030 641,970 - 643,000
Stock issued for
services - - - - -
_______________________________________________________
<S> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1996 3,432,469 3,432 3,966,815(511,420) 3,458,827
Net loss - - - (3,147,701)(3,147,701)
Stock issued for J-Bird
Records, Inc. 4,358,100 4,358 1,839,750 - 1,844,108
Stock issued for cash 1,355,666 1,356 611,638 - 612,994
Stock issued for
services 60,000 60 59,940 - 60,000
______________________________________________________
BALANCE AT
DECEMBER 31,1997 9,206,235 9,206 6,478,143(3,659,121) 2,828,228
</TABLE>
<TABLE>
J-BIRD MUSIC GROUP LTD
STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<CAPTION>
(All amounts in dollars)
<S> <C> <C>
Cash flows from (used in) operating activities 1997 1996
Net (loss) (3,147,701) (473,310)
Adjustments to reconcile net (loss) to net cash
from (used in) operating activities:
Amortization and depreciation 104,890 228,215
Stock issued for services 60,000 -
Loss on sale of assets (non cash) 2,511,250 -
Decrease in accounts receivable 37,115 -
Increase in inventory (9,116) -
Increase in recording advances (4,560) -
Other assets (1,300) -
Decrease in accounts payable (69,004) -
__________ __________
Net cash (used in) operating activities (518,426) (245,095)
Cash flows from (used in) investing activities
Increase in note receivable (110,000) (70,000)
Decrease in note receivable 70,000 -
Fixed assets acquired (10,250) (13,403)
Loan receivable 8,718 -
Cash paid for investments (53,000) (311,500)
___________ ___________
Net cash (used in) investing activities (94,532) (394,903)
Cash flows from (used in) financing activities
Stock issued for cash 612,250 644,319
Due to shareholder (5,750) (2,949)
Notes payable 40,000 -
Officer loan (35,000) -
___________ ___________
Net cash from (used in) financing activities 611,500 641,370
Net increase in cash (1,458) 1,372
Cash, beginning of year 1,458 86
Cash, end of year - 1,458
___________ ___________
___________ ___________
Supplemental cash flow information:
Stock issued for investments:
Rhode Island Renal Institute 2,475,000
Laminar Fluid Controls- patent 825,000
</TABLE>
J- Bird Music Group LTD.
Notes to Consolidated Financial Statements
Years Ended December 31, 1997 and 1996
Note 1. Organization and Significant Accounting Policies
On October 7, 1997, Caltron, Inc. entered into a stock purchase agreement with
the shareholders of J-Bird Records, Inc. to purchase their shares of J-Bird
Records Inc. for the equivalent number of shares of Caltron Inc. The total
number of shares exchanged in this transaction was 4,358,000. Upon entering
into these agreements, Caltron, Inc. acquired J-Bird Records, Inc. On October 8
1997, Caltron, Inc. changed its name to J-Bird Music Group LTD. J-Bird
Records, Inc., is a wholly owned subsidiary of J-Bird Music Group LTD.
As a result of this transaction, the former shareholders of Caltron, Inc. will
be the controlling shareholders of the Company. This transaction has been
accounted for as purchase of J-Bird Records, Inc. by Caltron, Inc.
J-Bird Records, Inc. is the first World Wide Web Recording Label (TM). The
Company was officially launched on November 1, 1996 to market, distribute and
sell music via a new medium - the Internet. At its Website, located at
http://www.j-birdrecords.com, the Company attracts and signs recording artists
through its on-line office and promotes, markets and sells their recordings
through its on-line record store.
The Company has experienced operating losses since its inception and has
experienced significant cash flow problems. The Company is in the processing
of raising capital through various services to fund its operations and has
implemented certain operating strategies to obtain profitably.
Investments in Affiliates
The Company accounts for its investments in affiliates by using the equity
method of accounting, under which the Company's share of earnings of these
affiliates is reflected in the statement of operations. Investments acquired
through the issuance of the Company's stock are recorded at an average of the
most recent sales price of the stock at the date of acquisition.
Fixed Assets
Fixed assets are recorded at cost and are being depreciated over their
estimated useful lives (5 to 15 years).
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, J-Bird Records Inc. Material intercompany
balances and transactions have been eliminated in consolidation.
Cash
For purposes of the statement of cash flows, the Company considers cash as cash
held in operating accounts and all highly liquid investments with a maturity of
three months or less to be cash equivalents.
Inventory
Inventory of $ 53,766, stated at the lower of cost or market (first in, first
out), consists of musical CDs.
Revenue Recognition
Revenue is recorded when CDs are shipped from its fulfillment center. The
Company maintains its inventory at a fulfillment center, which provides the
shipping to customers.
Accounts receivable are presented net of $-0- doubtful accounts.
Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired (Goodwill) of $2,206,308 represents the
consideration paid in excess of net assets acquired in the J-Bird Records Inc.
acquisition. Accumulated amortization at December 31, 1997 was $32,664.
Goodwill is being amortized over 15 years.
Recording Advances
Recording advances represent advances against future royalties of certain
recording artists. Royalties are accrued at 12% of an artist's sales.
Income Taxes
The Company accounts for income taxes under Statement of Financial Accounting
Standard No. 109, "Accounting for Income Taxes."
Basic Earnings Per Share
In 1997 the Company adopted Statement of Financial Accounting Standards No.
128, "Earnings per Share". Earnings per share are based on the weighted average
number of shares outstanding. Common stock equivalents have not been considered
as their effect would be anti-dilutive.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications and Restatements
Certain reclassifications and restatements have been made to prior years
financial statements to conform with the current years presentation
Note 2. J-Bird Records Inc.
On October 7, 1997, Caltron, Inc. entered into a stock purchase agreement with
the shareholders of J-Bird Records, Inc. to purchase their shares of J-Bird
Records, Inc. for the equivalent number of shares of the Company. The total
number of common shares exchanged in this transaction was 4,358,000 and was
valued at $1,840,000 Certain cash payments made and expenses incurred of
$366,000 increased the purchase price to 2,206,000. This transaction has been
accounted for as a purchase. Cost in excess of net assets acquired will be
amortized over 15 years using the straight line method. The financial
statements include the operations of J-Bird Records, Inc. since October 7,
1997, date of acquisition.
<TABLE>
The following table summarizes the unaudited pro forma results of operations of
the Company for the years ended December 31, 1997 and 1996, assuming the
acquisition of J-Bird Records Inc. had occurred on January 1, 1996. The
unaudited pro forma financial information presented is not necessarily
indicative of the results of operations that would have occurred had the
acquisitions taken place on January 1, 1996 or of future results of operations.
<CAPTION>
1997 1996
<S> <C> <C>
Net Sales $ 145,248 $ 6,375
Net (Loss) ($3,581,095) ($ 852,374)
Net (Loss) per share ($.43) ($.12)
</TABLE>
Note 3.-Disposition of Long Term Assets and Investments
Laminar Fluid Controls
On November 15, 1995, the Company entered into an agreement with Laminar Fluid
Controls to purchase seven patents relating to fluid control technologies and
equipment. Laminar Fluid Controls assigned all of its rights, title and
interest in said patents to the Company and in return received 100,000 shares
of the Company's common stock. On April 22, 1997, the Company entered into an
option agreement with Field Technologies, LLC ("FTL"), a company based in
Bangor, Maine. Under this Agreement, the Company merged its patents into FTL
for a five percent (5%) equity position in FTL. In the event the Company does
not receive distributions of at least $100,000 on or before December 31, 2000,
it shall be entitled to increase its interest in FTL from 5% to 10%, and the
other members' interests in FTL shall be reduced on a basis proportionate to
their relative interests. FTL is an operating company run by the original
inventor of the patented valve technology.
In 1997 the Company wrote down the value of its patents to $-0- in accordance
with Statement of Financial Accounting Standard 121 "Accounting for the
Impairment of Long Lived Assets and for Long Lived Assets to be Disposed Of"
and recognized a loss of $701,000.
Rhode Island Renal Institute
On May 3, 1996, the Company entered into an agreement with Rhode Island Renal
Institute ("RIRI") and Brooks Porter ("Porter"). RIRI and Porter entered into
a development and investment agreement and pursuant to this agreement, RIRI
agreed to provide financial support, clinical testing facilities and supplies
to Porter to assist his development of the Renal Ozone Sterilization System
("ROSS"). Under the agreement with the Company, RIRI and Porter assigned to
the Company the right to manufacture and distribute ROSS and any interests
created by the development and investment agreement among Porter and RIRI. In
accordance with the agreement, RIRI received 125,000 shares of restricted
common stock of the Company.
In December 1997, the ROSS Corporation signed an agreement with the Company
where the ROSS Corporation is going to buy the Company's interest in the Ross
Project for $500,000 and have executed an agreement and promissory note for
that amount. In connection with this transaction the Company recognized a loss
of $1,810,000.
Applied Advanced Technology
On June 14, 1996, the Company entered into an Agreement with Applied Advanced
Technologies, Inc. ("AAT") and Tovi Avnery ("Avnery") to acquire an interest in
AAT and for AAT to acquire an equity interest in the Company. Under the terms
of this agreement, the Company received an interest in the rights, title and
interest in and to an electron beam technology. Under this Agreement, the
Company was to advance a total of $300,000 dollars to AAT. AAT received a
total of $350,000. In return, the Company received 114,546 shares of common
stock of AAT, representing 45% ownership in the company. Avnery also received
130,000 shares of restricted common stock of the Company.
On July 15, 1997, the Company and AAT entered into a memorandum of
understanding to terminate its relationship whereby AAT will pay the Company
$350,000 plus interest, not to exceed $500,000, by July 31, 1999. In
September, 1997, the Company executed a release and assignment of interest in
AAT, to be held in escrow until said monies owed to the Company have been paid
in full. The Company and AAT entered into a pledge agreement in favor of the
Company, wherein AAT permitted the pledge of all issued and outstanding shares
of capital stock of AAT, as well as its patent/patent pending in a certain
electron beam accelerator, to secure AAT's obligation to make certain deferred
payments to the Company under the $350,000 promissory note. AAT also executed
a release and assignment of interest in the Company. All shares of common
stock of the Company owned by AAT or Avnery are to be returned to the Company
and are not included in the outstanding shares of the Company at December 31,
1997.
Note 4. Note Receivable
Notes receivable consists of:
Note from AAT bearing interest at the prime rate due
July 31,1999 AAT has pledged its outstanding stock and
patent/pending to secure this note $ 350,000
Note from Ross Corporation bearing interest at 5% due
December 10,1998. The note is collateralized by the
patent/pending associated with the ROSS project $ 500,000
Note 5. Related Party Transactions
Certain shareholders perform legal and accounting services for the Company. The
Company issued 55,000 shares of stock valued at $55,000 for services performed
for J-Bird Records Inc. as of the date of acquisition.
Note 6. Property and Equipment
Property and equipment consist of:
Computer equipment and software $ 153,829
Leasehold improvement 8,571
Furniture and fixtures 2,766
__________
165,166
Accumulated depreciation ( 11,691)
__________
$153,475
Note 7. Notes Payable
Amounts due at December 31, 1997 consist of the following:
Note payable - stockholder 40,000
In connection with a judgment of
$48,000
against the Company for past services.
The Company entered into a settlement
agreement to pay the claimant $48,000
and issue 50,000 shares of common stock.
Payments of $8,000 per month for 5 months
commence in February, 1998
Note payable - stockholder 30,000
This
represents a $30,000 note bearing interest at
the prime rate to provide the Company working capital.
Warrants to purchase 2% of the Company's stock
were issued in connection with this note.
Note payable to a former shareholder for 20,000
$20,000 bearing interest at the prime rate _________
$ 90,000
---------
Note 8. Commitments and Contingencies
(a) Leases
The Company has an operating lease agreement for an office condominium.
Aggregate annual minimum future rental payments under the lease are $31,650, in
1998: $ 31,650, in 1999: and $18,466 in 2000. The Company has an option to
purchase the office condominium for $379,800 at the end of the lease.
Fifty percent of the aggregate lease payments would be applied to the purchase
price.
(b) Operating Agreements
The Company has a one year agreement with a public relations firm that requires
monthly payments of $4,500 in 1998.
(c) Royalty Agreements
The Company typically has three year agreements with recording artists that
require royalty payments at 12% of the artists' sales.
(d) Common Stock
During the years ended December 31, 1997 and 1996, the Company issued shares of
its common stock. These shares were not registered under the Securities Act of
1933 based on the exemption from registration thereunder provided by section 4
(2), thereof for offerings not involving a public offering.
At December 31, 1997 options to purchase $60,000 shares of stock at $1 per
share were outstanding.
<TABLE>
J-BIRD MUSIC GROUP LTD.
BALANCE SHEET
MARCH 31, 1998
<CAPTION>
ASSETS
<S> <C>
Cash $ 1,919
Inventory 263,985
Accounts receivable 106,656
Loans receivable, shareholder 35,000
Recording advances 21,665
Notes receivable 705,000
------------
Total Current assets 1,134,225
Fixed assets, net 144,244
Cost in excess of net assets acquired 2,206,308
Accumulated amortization (65,331)
------------
2,140,977
Other assets 2,279
------------
Total Assets $ 3,421,725
------------
------------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
Accounts payable and accrued expenses $ 653,068
Notes payable 86,000
------------
Total current liabilities 739,068
Due to shareholders and officers 30,330
------------
Total Liabilities 769,398
Stockholders' Equity
Common stock $.001 par value
25,000,000 shares authorized, 9,678,305 issued
and outstanding 9,678
Paid in capital 6,661,135
Deficit (4,018,486)
------------
2,652,327
Total Liabilities and Equity $ 3,421,725
------------
------------
</TABLE>
<TABLE>
J-BIRD MUSIC GROUP LTD.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<CAPTION>
1998 1997
<S> <C> <C>
NET SALES $ 116,445 $ -
Cost of sales 70,055 -
------------ -------------
46,390
-
Operating expenses:
Advertising and promotion 51,164 -
Professional fees 37,066 12,626
Amortization and depreciation 41,898 -
Salaries 51,700 17,448
Rent 8,878 -
Administrative expenses 42,049 14,240
------------ -------------
232,755 44,314
NET (LOSS) BEFORE OTHER
(EXPENSE) INCOME (186,365) (44,314)
Other (expense) income:
Loss from disposition of assets (173,000) -
------------ ------------
(173,000) -
NET LOSS $ (359,365) $ (44,314)
------------ ------------
------------ ------------
Net loss per common share $ (0.04) $ (0.01)
------------ ------------
------------ ------------
Weighted average common shares
outstanding 9,539,832 3,549,802
</TABLE>
<TABLE>
J-BIRD MUSIC GROUP LTD.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998
AND 1997
<CAPTION>
1998 1997
<S> <C> <C>
Cash flows from (used in)
operating activities
Net (loss) $ (359,365) $ (44,314)
Adjustments to reconcile net (loss)
to net cash from (used in)
operating activities:
Amortization and depreciation 41,898 -
Loss on sale of assets 173,000 -
Increase in accounts receivable (96,561) -
Increase in inventory (210,219) -
Increase in accounts payable 301,206 -
------------ -------------
Net cash (used in) operating activities (150,041) (44,314)
Cash flows from (used in)
investing activities:
Cash paid for investments - (115,500)
------------ ------------
Net cash (used in) investing activities - (115,500)
Cash flows from (used in)
financing activities:
Stock issued for cash 156,510 101,000
Due to shareholder (550) 61,119
Notes payable (4,000) -
------------ -----------
Net cash from (used in) financing
activities 151,960 162,119
Net increase in cash 1,919 2,305
Cash, beginning of year - 1,458
Cash, end of year $ 1,919 $ 3,763
------------ -------------
------------ -------------
Stock issued for liabilities $27,000 -
</TABLE>
J-BIRD MUSIC GROUP LTD
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 1998
Note 1. Organization
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the provisions of Regulation SB. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Certain
reclassification and restatements of prior year numbers have been made to
conform to the current year presentations.
On October 7, 1997, Caltron, Inc. entered into a stock purchase agreement with
the shareholders of J-Bird Records, Inc. to purchase their shares of J-Bird
Records, Inc. for the equivalent number of shares of Caltron Inc. The total
number of shares exchanged in this transaction was 4,358,000. Upon entering
into these agreements, Caltron, Inc. acquired J-Bird Records, Inc. On October 8
1997, Caltron, Inc. changed its name to J-Bird Music Group LTD. J-Bird
Records, Inc. is a wholly owned subsidiary of J-Bird Music Group LTD.
As a result of this transaction, the former shareholders of Caltron, Inc. will
be the controlling shareholders of the Company. This transaction has been
accounted for as purchase of J-Bird Records, Inc. by Caltron, Inc.
J-Bird Records, Inc. is the first World Wide Web Recording Label (TM). The
Company was officially launched on November 1, 1996 to market, distribute and
sell music via a new medium - the Internet. At its Website, located at
http://www.j-birdrecords.com, the Company attracts and signs recording artists
through its on-line office and promotes, markets and sells their recordings
through its on-line record store.
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, J-Bird Records, Inc. Material intercompany
balances and transactions have been eliminated in consolidation.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year. The accompanying
financial statements should be read in conjunction with the Company's form
10-SB filed for the year ended December 31,1997.
Earnings (loss) per share are based on the weighted average number of shares
outstanding. Common stock equivalents have not been considered as their effect
would be anti-dilutive.
Note 2. J-Bird Records, Inc.
On October 7, 1997, Caltron, Inc. entered into a stock purchase agreement with
the shareholders of J-Bird Records, Inc. to purchase their shares of J-Bird
Records, Inc. for the equivalent number of shares of the Company. The total
number of common shares exchanged in this transaction was 4,358,000 and was
valued at $1,840,000 Certain cash payments made and expenses incurred of
$366,000 increased the purchase price to $ 2,206,000. This transaction has
been accounted for as a purchase. Cost in excess of net assets acquired will
be amortized over 15 years using the straight-line method. The financial
statements include the operations of J-Bird Records, Inc. since October 7,
1997, date of acquisition.
<TABLE>
The following table summarizes the unaudited pro forma results of operations of
the Company for the three months ended March 31, 1997 assuming the
acquisition of J-Bird Records, Inc. had occurred on January 1, 1997. The
unaudited pro forma financial information presented is not necessarily
indicative of the results of operations that would have occurred had the
acquisition taken place on January 1, 1997 or of future results of operations.
<CAPTION>
1997
<S> <C>
Net Sales $ 31,267
Net (Loss) $ (174,936)
Net (loss) per share $ (.02)
</TABLE>
Note 3. Disposition of Long Term Assets and Investments
Laminar Fluid Controls
On November 15, 1995, the Company entered into an agreement with Laminar Fluid
Controls to purchase seven patents relating to fluid control technologies and
equipment. Laminar Fluid Controls assigned all of its rights, title and
interest in said patents to the Company and in return received 100,000 shares
of the Company's common stock.
On April 22, 1997, the Company entered into an option agreement with Field
Technologies, LLC ("FTL"), a company based in Bangor, Maine. Under this
Agreement, the Company merged its patents into FTL for a five percent (5%)
equity position in FTL. FTL is an operating company run by the original
inventor of the patented valve technology.
In 1997 the Company wrote down the value of its patents to $-0- in accordance
with Statement of Financial Accounting Standard 121 "Accounting for the
Impairment of Long Lived Assets and for Long Lived Assets to be Disposed Of"
and recognized a loss of $701,000
Rhode Island Renal Institute
On May 3, 1996, the Company entered into an agreement with Rhode Island Renal
Institute ("RIRI") and Brooks Porter ("Porter"). RIRI and Porter entered into
a development and investment agreement and pursuant to this agreement, RIRI
agreed to provide financial support, clinical testing facilities and supplies
to Porter to assist his development of the Renal Ozone Sterilization System
("ROSS:"). Under the agreement with the Company, RIRI and Porter assigned to
the Company the right to manufacture and distribute ROSS and any interests
created by the development and investment agreement among Porter and RIRI. In
accordance with the agreement, RIRI received 125,000 shares of restricted
common stock of the Company.
In December 1997, the ROSS Corporation signed an agreement with the Company
where the ROSS Corporation is going to buy the Company's interest in the Ross
Project for $500, 000 and have executed an agreement and promissory note for
that amount. In connection with this transaction the Company recognized a loss
of $1,810,000.
Applied Advanced Technology
On June 14, 1996, the Company entered into an Agreement with Applied Advanced
Technologies, Inc. ("AAT") and Tovi Avnery ("Avnery") to acquire an interest in
AAT and for AAT to acquire an equity interest in the Company. Under the terms
of this agreement, the Company received an interest in the rights, title and
interest in and to an electron beam technology. Under this Agreement, the
Company was to advance a total of $300,000 dollars to AAT. AAT received a
total of $350,000. In return, the Company received 114,546 shares of common
stock of AAT, representing 45% ownership in the company. Avnery also received
130,000 shares of restricted common stock of the Company.
On July 15, 1997, the Company and AAT entered into a memorandum of
understanding to terminate its relationship whereby AAT will pay the Company
$350,000 plus interest, not to exceed $500,000, by July 31, 1999. In
September, 1997, the Company executed a release and assignment of interest in
AAT, to be held in escrow until said monies owed to the Company have been paid
in full. The Company and AAT entered into a pledge agreement in favor of the
Company, wherein AAT permitted the pledge of all issued and outstanding shares
of capital stock of AAT, as well as its patent/patent pending in a certain
electron beam accelerator, to secure AAT's obligation to make certain deferred
payments to the Company under the $350,000 promissory note. AAT also executed
a release and assignment of interest in the Company. All shares of common
stock of the Company owned by AAT or Avnery are to be returned to the Company
and are not included in the outstanding shares of the Company at December 31,
1997.
Note 4. Subsequent Event
In May 1998 the Company collected $205,000 for full settlement of the $350,000
note receivable from AAT described in footnote 3. The difference has been
recorded as a loss on disposition of assets in the three months ended March
31,1998.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Overview
- -----------
The following discussion and analysis provides information that management
believes is relevant to an assessment and understanding of J-Bird Music Group
LTD. and its subsidiary (collectively, the Company), consolidated results of
operations and financial condition for the three months ended March 31, 1998.
The discussion should be read in conjunction with the Company's consolidated
financial statements and accompanying notes.
J-Bird derives its revenues from four principle sources: (i) sales of compact
disks ("CDs") directly to the artists for resale to consumers, (ii) fees paid
by artists to sign recording contracts, (iii) CD sales on the J-Bird Website;
and (iv) retail CD sales.
J-Bird's strategy to develop products and services for the music entertainment
business was primarily responsible for its net loss for the three months ended
March 31,1998 and the years ended December 31, 1996 and 1997. The Company has
only a limited operating history in its operations upon which an evaluation of
J-Bird and its prospects can be based. Accordingly, J-Bird believes that the
results of its operations in the past during which time the Company had
minimal revenues, are not meaningful indications of future performance. J-Bird
incurred losses from continuing operations of $186,365 in the three months
ended March 31,1998 , $232,000 for the year ended December 31, 1996 and
$537,000 for the year ended December 31, 1997.
The Company currently intends to increase substantially its operating expenses
as a result of the Company's strategic alliances, to fund increased sales and
marketing, to enhance its existing website and to complete strategic
relationships important to the success of the Company. To the extent that such
expenses precede or are not subsequently followed by increased revenues, the
Company's business, results of operations and financial condition will be
materially adversely affected. There can be no assurance that the Company will
be able to generate sufficient revenues from the sale of music recordings,
related merchandise, advertising and sponsorship programs to achieve or
maintain profitability on a quarterly or annual basis in the future. The
Company expects negative cash flow from operations to continue for the
foreseeable future as it continues to develop and market its business.
Liquidity and Capital Resources
The Company has financed its operations and capital expenditures primarily from
equity financings and loans from shareholders. At March 31, 1998, the Company
had a cash balance of $ 1,919. The Company received $205,000 in May 1998 with
respect to the $350,000 note receivable from AAT The Company expects negative
cash flow from operations to continue for the foreseeable future, as it
continues to develop and market its operations. Inflation has not had any
material impact on the Company's operations.
While the Company has positive working capital at March 31, 1998 the $500,000
note receivable responsible for the positive working capital is due on December
31, 1998.
The Registrant is pursuing long term financing for its operating activities. No
source of financing has occurred to date and there can be no assurance that
financing will be available, or if available, that it will be on acceptable
terms. The ability to finance existing and future operations will be dependent
upon external sources.
<TABLE>
Results of Operations- Three months ended March 31, 1998 compared to three
months ended March 31, 1997
<CAPTION>
1998 1997
<S> <C> <C>
Net Sales $116,445 $ -0-
Cost of Sales $ 70,055 $ -0-
Selling, General and Administrative $232,755 $44,314
</TABLE>
Sales and cost of sales increased due to the operations of J-Bird Records, Inc.
The Registrant purchased J-Bird Records, Inc. in the fourth quarter of 1997.
Selling, general and administrative expenses increased primarily due to: an
increase in salaries from $17448 in 1997 to $51,700 in 1998: an increase in
advertising and promotion from $0 in 1997 to $51,164 in 1998: an increase in
amortization and depreciation from $0 in 1997 to $41,898 in 1998:an increase in
professional fees from $12,626 in 1997 to$37,066 in 1998 and an increase in
administrative expenses from $14,240 in 1997 to $42,049 in 1998. The increase
in all of the above expense categories is due to the operations of J- Bird
Records, Inc.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES
Not applicable
ITEM 3. DEFAULT UPON SENIOR SECUITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Not applicable
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
J-Bird Music Group LTD.
(Registrant)
Dated: May 19, 1998 By: John J. Barbieri
President
By: Hope D. Trowbridge
Treasurer
<TABLE>
J-BIRD MUSIC GROUP LTD.
BALANCE SHEET
JUNE 30, 1998
<CAPTION>
ASSETS
<S> <C>
Cash $ 401
Inventory 374,601
Accounts receivable 11,296
Loans receivable, shareholder 42,500
Recording advances 21,665
Notes receivable 500,000
------------
Total Current assets 950,463
Fixed assets, net 135,212
Cost in excess of net assets acquired 2,206,308
Accumulated amortization (97,998)
------------
2,108,310
Other assets 2,279
------------
Total Assets $ 3,196,264
------------
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 407,121
Notes payable 50,000
-----------
Total current liabilities 457,121
Due to shareholders and officers 7,330
-----------
Total Liabilities 464,451
Stockholders' Equity
Common stock $.001 par value
25,000,000 shares authorized, 10,780,475 issued
and outstanding 10,780
Paid in capital 6,905,379
Deficit (4,184,346)
------------
2,731,813
Total Liabilities and Equity $ 3,196,264
-----------
-----------
</TABLE>
<TABLE>
J-BIRD MUSIC GROUP LTD.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 AND 1997
<CAPTION>
1998 1997
<S> <C> <C>
Net sales $ 146,981 $ 0
Cost of sales 86,379 -
----------- ---------
60,602 -
Operating expenses:
Advertising and promotion 40,269 -
Professional fees 16,000 16,336
Amortization and depreciation 41,699
Salaries 67,844 27,231
Rent 7,912 -
Administrative expenses 52,738 16,589
----------- ----------
226,462 60,156
Net (loss) before other (expense) income (165,860) (60,156)
Net loss $ (165,860) $ (60,156)
---------- ----------
---------- ----------
Net loss per common share $ (0.02) $ (0.01)
---------- ----------
---------- ----------
Weighted average common shares outstanding 10,511,142 4,059,135
</TABLE>
<TABLE>
J-BIRD MUSIC GROUP LTD.
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
<CAPTION>
1998 1997
<S> <C> <C>
Net sales $ 263,426 $ 0
Cost of sales 156,434 -
----------- -----------
106,992 -
Operating expenses:
Advertising and promotion 91,433 -
Professional fees 53,066 28,962
Amortization and depreciation 83,597 -
Salaries 119,544 44,679
Rent 16,790 -
Administrative expenses 94,787 30,829
----------- -----------
459,217 104,470
Net (loss) before other
(expense) income (352,225) (104,470)
Other (expense) income:
Loss from disposition of assets (173,000) -
----------- -----------
(173,000) -
Net loss $ (525,225) $ (104,470)
----------- -----------
----------- -----------
Net loss per common share $ (0.05) $ (0.03)
----------- -----------
----------- -----------
Weighted average common shares outstanding 10,063,468 3,871,135
</TABLE>
<TABLE>
J-BIRD MUSIC GROUP LTD.
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
<CAPTION>
1998 1997
<S> <C> <C>
Cash flows from (used in)
operating activities
Net (loss) $ (525,225) $ (104,470)
Adjustments to reconcile net (loss)
to net cashfrom (used in)
operating activities:
Amortization and depreciation 83,597 -
Stock issued for services 6,000 -
Loss on sale of assets 173,000 -
Increase in accounts receivable (1,201) -
Increase in inventory (320,835) -
Increase in accounts payable 61,805 -
----------- ------------
Net cash (used in) operating activities (522,859) (104,470)
Cash flows from (used in) investing activities
Cash paid for investments - (122,381)
----------- ------------
Net cash (used in) investing activities - (122,381)
Cash flows from (used in) financing activities
Stock issued for cash 381,810 117,000
Collection of note receivable 205,000 -
Due to shareholder (23,550) 108,700
Notes payable (40,000) -
----------- ------------
Net cash from (used in) financing activities 523,260 225,700
Net increase in cash 401 (1,151)
Cash, beginning of year - 1,458
Cash, end of year $ 401 $ 307
----------- ------------
----------- ------------
Stock issued for liabilities $47,000 -
</TABLE>
J- Bird Music Group LTD.
Notes to Unaudited Financial Statements June 30, 1998
Note 1. Organization
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the provisions of Regulation SB. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Certain
reclassification and restatements of prior year numbers have been made to
conform to the current year presentations.
On October 7, 1997, Caltron, Inc. entered into a stock purchase agreement with
the shareholders of J-Bird Records, Inc. to purchase their shares of J-Bird
Records, Inc. for the equivalent number of shares of Caltron Inc. The total
number of shares exchanged in this transaction was 4,358,000. Upon entering
into these agreements, Caltron, Inc. acquired J-Bird Records, Inc. On October 8
1997, Caltron, Inc. changed its name to J-Bird Music Group LTD. J-Bird
Records, Inc. is a wholly owned subsidiary of J-Bird Music Group LTD.
As a result of this transaction, the former shareholders of Caltron, Inc. will
be the controlling shareholders of the Company. This transaction has been
accounted for as purchase of J-Bird Records, Inc. by Caltron, Inc.
J-Bird Records, Inc. is the first World Wide Web Recording Label (TM). The
Company was officially launched on November 1, 1996 to market, distribute and
sell music via a new medium - the Internet. At its Website, located at
http://www.j-birdrecords.com, the Company attracts and signs recording artists
through its on-line office and promotes, markets and sells their recordings
through its on-line record store.
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, J-Bird Records, Inc. Material intercompany
balances and transactions have been eliminated in consolidation.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year. The accompanying
financial statements should be read in conjunction with the Company's form
10-SB filed for the year ended December 31,1997.
Earnings (loss) per share are based on the weighted average number of shares
outstanding. Common stock equivalents have not been considered as their effect
would be anti-dilutive.
Note 2. J-Bird Records, Inc.
On October 7, 1997, Caltron, Inc. entered into a stock purchase agreement with
the shareholders of J-Bird Records, Inc. to purchase their shares of J-Bird
Records, Inc. for the equivalent number of shares of the Company. The total
number of common shares exchanged in this transaction was 4,358,000 and was
valued at $1,840,000 Certain cash payments made and expenses incurred of
$366,000 increased the purchase price to $ 2,206,000. This transaction has
been accounted for as a purchase. Cost in excess of net assets acquired will
be amortized over 15 years using the straight-line method. The financial
statements include the operations of J-Bird Records, Inc. since October 7,
1997, date of acquisition.
<TABLE>
The following table summarizes the unaudited pro forma results of operations of
the Company for the three months and six months ended June 30, 1997 assuming
the acquisition of J-Bird Records, Inc. had occurred on January 1, 1997. The
unaudited pro forma financial information presented is not necessarily
indicative of the results of operations that would have occurred had the
acquisition taken place on January 1, 1997 or of future results of operations.
<CAPTION>
Six months Three months
ended June 30,1997 ended June 30,1997
<S> <C> <C>
Net Sales $ 42,990 $ 11,723
Net (Loss) $(230,928) $ (55,992)
Net (loss) per share $ (.03) $ (.01)
</TABLE>
Note 3. Disposition of Long Term Assets and Investments
Laminar Fluid Controls
On November 15, 1995, the Company entered into an agreement with Laminar Fluid
Controls to purchase seven patents relating to fluid control technologies and
equipment. Laminar Fluid Controls assigned all of its rights, title and
interest in said patents to the Company and in return received 100,000 shares
of the Company's common stock.
On April 22, 1997, the Company entered into an option agreement with Field
Technologies, LLC ("FTL"), a company based in Bangor, Maine. Under this
Agreement, the Company merged its patents into FTL for a five percent (5%)
equity position in FTL. FTL is an operating company run by the original
inventor of the patented valve technology.
In 1997 the Company wrote down the value of its patents to $-0- in accordance
with Statement of Financial Accounting Standard 121 "Accounting for the
Impairment of Long Lived Assets and for Long Lived Assets to be Disposed Of"
and recognized a loss of $701,000
Rhode Island Renal Institute
On May 3, 1996, the Company entered into an agreement with Rhode Island Renal
Institute ("RIRI") and Brooks Porter ("Porter"). RIRI and Porter entered into
a development and investment agreement and pursuant to this agreement, RIRI
agreed to provide financial support, clinical testing facilities and supplies
to Porter to assist his development of the Renal Ozone Sterilization System
("ROSS:"). Under the agreement with the Company, RIRI and Porter assigned to
the Company the right to manufacture and distribute ROSS and any interests
created by the development and investment agreement among Porter and RIRI. In
accordance with the agreement, RIRI received 125,000 shares of restricted
common stock of the Company.
In December 1997, the ROSS Corporation signed an agreement with the Company
where the ROSS Corporation is going to buy the Company's interest in the Ross
Project for $500, 000 and have executed an agreement and promissory note for
that amount. In connection with this transaction the Company recognized a loss
of $1,810,000.
Applied Advanced Technology
On June 14, 1996, the Company entered into an Agreement with Applied Advanced
Technologies, Inc. ("AAT") and Tovi Avnery ("Avnery") to acquire an interest in
AAT and for AAT to acquire an equity interest in the Company. Under the terms
of this agreement, the Company received an interest in the rights, title and
interest in and to an electron beam technology. Under this Agreement, the
Company was to advance a total of $300,000 dollars to AAT. AAT received a
total of $350,000. In return, the Company received 114,546 shares of common
stock of AAT, representing 45% ownership in the company. Avnery also received
130,000 shares of restricted common stock of the Company.
On July 15, 1997, the Company and AAT entered into a memorandum of
understanding to terminate its relationship whereby AAT will pay the Company
$350,000 plus interest, not to exceed $500,000, by July 31, 1999. In
September, 1997, the Company executed a release and assignment of interest in
AAT, to be held in escrow until said monies owed to the Company have been paid
in full. The Company and AAT entered into a pledge agreement in favor of the
Company, wherein AAT permitted the pledge of all issued and outstanding shares
of capital stock of AAT, as well as its patent/patent pending in a certain
electron beam accelerator, to secure AAT's obligation to make certain deferred
payments to the Company under the $350,000 promissory note. AAT also executed
a release and assignment of interest in the Company. All shares of common
stock of the Company owned by AAT or Avnery are to be returned to the Company
and are not included in the outstanding shares of the Company at December 31,
1997.
In May 1998 the Company collected $205,000 for full settlement of the $350,000
note receivable from AAT.The difference has been recorded as a loss on
disposition of assets in the three months ended March 31,1998.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Overview
- -----------
The following discussion and analysis provides information that management
believes is relevant to an assessment and understanding of J-Bird Music Group
LTD. and its subsidiary (collectively, the Company), consolidated results of
operations and financial condition for the six months ended June 30, 1998. The
discussion should be read in conjunction with the Company's consolidated
financial statements and accompanying notes.
J-Bird derives its revenues from four principle sources: (i) sales of compact
disks ("CDs") directly to the artists for resale to consumers, (ii) fees paid
by artists to sign recording contracts, (iii) CD sales on the J-Bird Website;
and (iv) retail CD sales.
J-Bird's strategy to develop products and services for the music entertainment
business was primarily responsible for its net loss for the six months ended
June 30,1998 and the years ended December 31, 1996 and 1997. The Company has
only a limited operating history in its operations upon which an evaluation of
J-Bird and its prospects can be based. Accordingly, J-Bird believes that the
results of its operations in the past during which time the Company had
minimal revenues, are not meaningful indications of future performance. J-Bird
incurred losses from continuing operations of $ 352,000 in the six months ended
June 30,1998 , $232,000 for the year ended December 31, 1996 and $537,000 for
the year ended December 31, 1997.
The Company currently intends to increase substantially its operating expenses
as a result of the Company's strategic alliances, to fund increased sales and
marketing, to enhance its existing website and to complete strategic
relationships important to the success of the Company. To the extent that such
expenses precede or are not subsequently followed by increased revenues, the
Company's business, results of operations and financial condition will be
materially adversely affected. There can be no assurance that the Company will
be able to generate sufficient revenues from the sale of music recordings,
related merchandise, advertising and sponsorship programs to achieve or
maintain profitability on a quarterly or annual basis in the future. The
Company expects negative cash flow from operations to continue for the
foreseeable future as it continues to develop and market its business.
Liquidity and Capital Resources
The Company has financed its operations and capital expenditures primarily from
equity financings and loans from shareholders. At June 30,1998 , the Company
had a cash balance of $ 401. The Company received $205,000 in May 1998 with
respect to the $350,000 note receivable from AAT. The Company also received
$382,000 in cash from the sale of stock through subscription agreements. The
Company expects negative cash flow from operations to continue for the
foreseeable future, as it continues to develop and market its operations.
Inflation has not had any material impact on the Company's operations.
While the Company has positive working capital at June 30,1998 the $500,000
note receivable responsible for the positive working capital is due on December
31, 1998.
The Registrant is pursuing long term financing for its operating activities. No
source of financing has occurred to date and there can be no assurance that
financing will be available, or if available, that it will be on acceptable
terms. The ability to finance existing and future operations will be dependent
upon external sources.
<TABLE>
Results of Operations- Six months ended June 30,1998 compared to six months
ended June 30,1997
<CAPTION>
1998 1997
<S> <C> <C>
Net Sales $ 263,426 $ -0-
Cost of Sales $ 156,434 $ -0-
Selling, General and Administrative $ 459,217 $104,470
</TABLE>
Sales and cost of sales increased due to the operations of J-Bird Records, Inc.
The Registrant purchased J-Bird Records, Inc. in the fourth quarter of 1997.
Selling, general and administrative expenses increased primarily due to: an
increase in salaries from $44,679 in 1997 to $119,544 in 1998: an increase in
advertising and promotion from $0 in 1997 to $91,433 in 1998: an increase in
amortization and depreciation from $0 in 1997 to $83,597 in 1998:an increase in
professional fees from $28,962 in 1997 to$53,066 in 1998 and an increase in
administrative expenses from $30,829in 1997 to $94,787 in 1998. The increase
in all of the above expense categories is due to the operations of J- Bird
Records, Inc.
<TABLE>
Results of Operations- Three months ended June 30,1998 compared to three months
ended June 30,1997
<CAPTION>
1998 1997
<S> <C> <C>
Net Sales $ 146,981 $ -0-
Cost of Sales $ 86,379 $ -0-
Selling, General and Administrative $ 226,462 $ 60,156
Sales and cost of sales increased due to the operations of J-Bird Records, Inc.
The Registrant purchased J-Bird Records, Inc. in the fourth quarter of 1997.
Selling, general and administrative expenses increased primarily due to: an
increase in salaries from $27,231 in 1997 to $68,844 in 1998: an increase in
advertising and promotion from $0 in 1997 to $40,269 in 1998: an increase in
amortization and depreciation from $0 in 1997 to $41,699 in 1998 and an
increase in administrative expenses from $16,589 in 1997 to $52,738 in 1998.
The increase in all of the above expense categories is due to the operations of
J-Bird Records, Inc.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES
Not applicable
ITEM 3. DEFAULT UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Not applicable
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
J-Bird Music Group LTD.
(Registrant)
Dated: May 19, 1998 By: John J. Barbieri
President
By: Hope D. Trowbridge
Treasurer
</TABLE>
PENNSYLVANIA DEPARTMENT OF STATE
CORPORATION BUREAU
ROOM 308 NORTH OFFICE BUILDING
P.O. BOX 8722
HARRISBURG, PA 17105-8722
J-BIRD MUSIC GROUP LTD.
THE CORPORATION BUREAU IS HAPPY TO SEND YOU YOUR FILED DOCUMENT. PLEASE NOTE
THE FILE DATE AND THE SIGNATURE OF THE SECRETARY OF THE COMMONWEALTH. THE
CORPORATION BUREAU IS HERE TO SERVE YOU AND WANTS TO THANK YOU FOR DOING
BUSINESS IN PENNSYLVANIA. IF YOU HAVE ANY QUESTIONS PERTAINING TO THE
CORPORATION BUREAU, CALL (717) 787-1057.
ENTITY NUMBER: 2028267
MICROFILM NUMBER: 09775
0556-0557
H D TROWBRIDGE
CALTRON INC
P0 BOX 721
SOUTHPORT CT 06490
Microfilm Number: 9775- 556 Filed with the Department of State on: 10-09-97
Entity Number: 2028267 Yvette Kane
(Signed)
Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB:15-1915 (Rev 91)
In compliance with the requirements of 15 Pa.C.S. 1915 (relating to articles
of amendment), the undersigned business corporation desiring to amend its
Articles, hereby states that:
1.The name of the corporation is: Caltron, Inc
2.The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and the
county of venue is (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
(a) 407 North Front Street Harrisburg, PA 17101
(b) c/o:_____________________________________________________________
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
3.The statute by or under which it was incorporated is: 15Pa. C.S. 1306
4.The date of its incorporation is: ____________________________________
5.(Check, and if appropriate, complete one of the following):
X The amendment shall be effective upon filing these Articles of Amendment
in the Department of State.
___The amendment shall be effective on:_____________________at_____________
Date Hour
6.(Check one of the following):
___The amendment was adopted by the shareholders (or members) pursuant to 15
Pa.C.S. 1914(a) and (b).
X The amendment was adopted by the board of directors pursuant to 15 PaCS.
1914(c).
7. (Check, and if appropriate, complete one of the following):
X The amendment adopted by the corporation, set forth in full, is as
follows:
To change the name of the corporation from Caltron, Inc. to J-Bird Music Group
LTD.
____The amendment adopted by the corporation as set forth in full in Exhibit A
attached hereto and made a part hereof.
DSCB:15-1915 (Rev 91)-2
8.(Check If the amendment relates to the Articles):
X The restated Articles of Incorporation supersede the original Articles
and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles of
Amendment to be signed by a duly authorized officer thereof this 8th day of
October, 1997.
CALTRON, INC.
(Name Of Corporation)
BY: Hope D. Trowbridge
(Signature)
TITLE: President
PENNSYLVANIA DEPARTMENT OF STATE
191 CORPORATION BUREAU
ROOM 308 NORTH OFFICE BUILDING
P.O. BOX 8722
HARRISBURG, PA 17105-8722
CALTRON, INC.
THE CORPORATION BUREAU IS HAPPY TO SEND YOU YOUR FILED DOCUMENT. PLEASE NOTE
THE FILE DATE AND THE SIGNATURE OF THE SECRETARY OF THE COMMONWEALTH. THE
CORPORATION BUREAU IS HERE TO SERVE YOU AND WANTS TO THANK YOU FOR DOING
BUSINESS IN PENNSYLVANIA. IF YOU HAVE ANY QUESTIONS PERTAINING TO THE
CORPORATION BUREAU, CALL (717) 787-1057.
ENTITY NUMBER: 2028267
MICROFILM NUMBER: 09517
1237-1238
NEAL E FITZPATRICK JR
CLARKS VALLEY INC
P0 BOX 721
SOUTHPORT, CT 06490
Microfilm Number: 9517-1237 Filed with the Department of State on 03-17-95
Entity Number: 2028267 Yvette Kane
(Signed)
ACTING Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB:15-1915 (Rev 90)
In compliance with the requirements of 15 Pa. C.S. 1915 (relating to articles
of amendment), the undersigned business corporation, desiring to amend its
Articles, hereby states that:
1. The name of the corporation is: CLARKS VALLEY, INC.
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and the
county of venue is (the Department is hereby authorized to correct the
following
information to conform to the records of the Department):
(a) 407 North Front Street Harrisburg, PA 17101
(b) c/o:__________________________________________________
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
3. The statute by or under which it was incorporated is: 15Pa. C.S. 1306
4. The date of its incorporation is: June 7, 1991
5. (Check, and if appropriate, complete one of the following):
X The amendment shall be effective upon filing these Articles of Amendment
in the Department of State.
___ The amendment shall be effective on: __________________
at_________________
Date Hour
6. (Check one of the following):
___ The amendment was adopted by the shareholders (or members) pursuant to
15 Pa.C.S. 1914(a) and (b).
X The amendment was adopted by the board of directors pursuant to 15 Pa.C.S.
1914(c).
7. (Check, and if appropriate, complete one of the following):
X The amendment adopted by the Corporation, set forth in full, is as follows:
To change the name of the corporation from Clarks Valley, Inc. to
Caltron, Inc.
___ The amendment adopted by the corporation is set forth in full in Exhibit A
attached hereto and made a part hereof.
8. (Check if the amendment restates the Articles):
X The restated Articles of Incorporation supersede the original Articles and
all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles of
Amendment to be signed by a duly authorized officer thereof this 16th day of
March, 1995.
CLARKS VALLEY, INC.
(Name of Corporation)
By: Neal E. Fitzpatrick, Jr.
(Signature)
TITLE: President
PENNSYLVANIA DEPARTMENT OF STATE
82 CORPORATION BUREAU
ROOM 308 NORTH OFFICE BUILDING
P.O. BOX 8722
HARRISBURG, PA 17105-8722
CLARKS VALLEY, INC.
THE CORPORATION BUREAU IS HAPPY TO SEND YOU YOUR FILED DOCUMENT. PLEASE NOTE
THE FILE DATE AND THE SIGNATURE OF THE SECRETARY OF THE COMMONWEALTH. THE
CORPORATION BUREAU IS HERE TO SERVE YOU AND WANTS TO THANK YOU FOR DOING
BUSINESS IN PPENNSYLVANIA. IF YOU HAVE ANQUESTIONS PERTAINING TO THE
CORPORATION BUREAU, CALL (717) 787-1057.
ENTITY NUMBER: 2028267
MICROFILM NUMBER: 09503
1489-1490
NEAL E FITZPATRICK JR
CLARKS VALLEY INC
P0 BOX 721
SOUTHPORT, CT 06490
Microfilm Number: 9503-1489 Filed with the Department of State on 01-05-95
Entity Number: 2028267 Robert M. Grant
(Signed)
Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB:15-1915 (Rev 91)
In compliance with the requirements of 15 Pa.C.S. 1915 (relating to articles
of amendment), the undersigned business corporation, desiring to amend its
Articles, hereby states that:
1. The name of the corporation is: CLARKS VALLEY, INC.
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and the
county of venue is (the Department is hereby authorized to correct the
following
information to conform to the records of the Department):
(a) 407 North Front Street, 1st Floor, Harrisburg, PA 17101
(b) c/o:_____________________________________________________________________
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
3. The statute by or under which it was incorporated is 15 Pa. C.S. 1306
4. The date of its incorporation is: June 7, 1991
5. (Check, and if appropriate, complete one of the following):
X The amendment shall be effective upon filing these Articles of Amendment in
the Department of State.
___ The amendment shall be effective on:___________________ at________________
Date Hour
6. (Check one of the following):
___ The amendment was adopted by the shareholders (or members) pursuant to 15
Pa.C.S. 1914(a) and (b).
X The amendment was adopted by the board of directors pursuant to 15
Pa.C.S. 1914(c).
7. (Check, and if appropriate, complete one of the following):
X The amendment adopted by the Corporation, set forth in full, is as follows:
To change the aggregate number of shares authorized from 1,000 shares to
25,000,000.
___ The amendment adopted by the corporation as set forth in full in Exhibit A
attached hereto and made a part hereof.
8. (Check if the amendment restates the Articles):
X The restated Articles of Incorporation supersede the original Articles and
all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles of
Amendment to be signed by a duly authorized officer thereof this 3rd day
of January, 1995
CLARKS VALLEY, INC.
(Name of Corporation)
By: Neal E. Fitzpatrick, Jr.
(Signature)
Title: President
Microfilm Number________________ Filed with the Department of State
on 06-07-91
Entity Number___________________ Christopher A. Lewis
(Signed)
Secretary of the Commonwealth
ARTICLES OF INCORPORATION
DSCB:15-1306(Rev 89)
Indicate type of domestic corporation (check one):
x Business-stock (15 Pa. C.S. 1306) ___Professional (15 Pa. C.S.
2903)
___ Business-nonstock (15 Pa. C.S. 2102) ___Management (15 Pa. C.S.
2701)
___ Business-statutory close (15 Pa. C.S. ___Cooperative (15 Pa. C.S.
2304a is applicable) 7701)
1. The name of the corporation is: CLARKS VALLEY, INC.
This corporation is incorporated under the provisions of the Business
Corporation Law of 1988.
2. The (a) address of this corporation's initial registered office in this
Commonwealth or (b) commercial registered office provider and the county of
venue is:
(a) 814 Monroe Street Stroudsburg, PA 18360
(b)__________________________________________________________________________
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
3. The aggregate number of shares authorized is: 1000 shares
4. The name and address, including street and number, if any, of each
incorporator is:
Name Address Signature Date
R.W. Worthington 105 N. Watts Street R.W. Worthington 6-7
Philadelphia, PA 19107
5. The specified effective date, if any, is: June 06, 1991 3:32 PM
month day year hour, if any
6. Any additional provisions of the articles, if any, attach an 8 1/2 x 11
sheet.
7. Statutory close corporation only: Neither the corporation nor any
shareholder shall make an offering of any of its shares of any class that would
constitute a "Public Offering" within the meaninq of the Securities Act of 1933
(15U.S.C. 77A et seq.).
8. Business cooperative corporations only: (Complete and strike out
inapplicable term) The common bond of membership among its members/shareholders
is:________________________________________________________________________
BY-LAWS OF
CLARKS VALLEY, INC.
(a Pennsylvania corporation)
ARTICLE I
_________
OFFICES AND FISCAL YEAR
Section 1.01. REGISTERED OFFICE.
The registered office of the corporation in Pennsylvania shall be at 814 Monroe
Street, Stroudsburg, PA 18360 until otherwise established by an amendment of
the articles or by the Board of Directors and a record of such change is filed
with the Department of State in the manner provided by law.
Section 1.02. OTHER OFFICE.
The corporation may also have offices at such other places within or without
Pennsylvania as the Board of Directors may from time to time appoint or the
business of the corporation may require.
Section 1.03 FISCAL YEAR.
The fiscal year of the corporation shall begin on the first day of January in
each year.
ARTICLE II
__________
NOTICE - WAIVERS - MEETINGS GENERALLY
Section 2.01. MANNER OF GIVING NOTICE.
(a) General rule.
Whenever written notice is required to be given to any person under the
provisions of the Business Corporation Law or by the articles or these bylaws,
it may be given to the person either personally or by sending a copy thereof by
first class or express mail, postage prepaid, or by telegram (with messenger
service specified), telex or TWX (with answerback received) or courier service,
charges prepaid, or by telecopier, to the address (or to the telex, TWX,
telecopier or telephone number) of the person appearing on the books of the
corporation or, in the case of directors, supplied by the directors to the
corporation for the purpose of notice. If the notice is sent by mail; telegraph
or courier service, it shall be deemed to have been given to the person
entitled thereto when deposited in the United States mail or with a telegraph
office or courier service for delivery to that person or, in the case of telex
or TWX, when dispatched or, in the case of telecopier, when received. A notice
of meeting shall specify the place, day and hour of the meeting, and any other
information required by any other provision of the Business Corporation Law,
the articles or these bylaws.
(b) Adjourned shareholder meetings.
When a meeting of shareholders is adjourned, it shall not be necessary to give
any notice of the adjourned meeting or of the business to be transacted at an
adjourned meeting, other than by announcement at the meeting at which the
adjournment is taken, unless the board fixes a new record date for the
adjourned meeting.
Section 2.02. NOTICE OF MEETINGS OF BOARD OF DIRECTORS.
Notice of a regular meeting of the board of directors need not be given. Notice
of every special meeting of the board of directors shall be given to each
director by telephone or in writing at least 24 hours (in the case of notice by
telephone, telex, TWX or telecopier) or 48 hours (in the case of notice by
telegraph, courier service or express mail) or five days (in the case of notice
by first class mail) before the time at which the meeting is to be held. Every
such notice shall state the time and place of the meeting. Neither the
business to be transacted at, nor the purpose of, any regular or special
meeting of the board need be specified in a notice of a meeting.
Section 2.03. NOTICE OF MEETINGS OF SHAREHOLDERS.
(a) General rule.
Written notice of every meeting of the shareholders shall be given by, or at
the direction of, the secretary to each shareholder of record entitled to vote
at the meeting at least:
(1) ten days prior to the day named for a meeting called to consider a
fundamental transaction under 15 Pa.C.S. Chapter 19 regarding amendments of
articles of incorporation, mergers, consolidations, share exchanges, sale of
assets, divisions, conversions, liquidations and dissolution; or
(2) five days prior to the day named for the meeting in any other case.
If the secretary neglects or refuses to give notice of a meeting, the person or
persons calling the meeting may do so. In the case of a special meeting of
shareholders, the notice shall specify the general nature of the business to be
transacted.
(b) Notice of action by shareholders on By-laws.
In the case of a meeting of shareholders that has as one its purposes action on
the By-laws, written notice shall be given to each shareholder that the
purpose, or one of the purposes, of the meeting is to consider the adoption,
amendment or repeal of the bylaws. There shall be included in, or enclosed
with, the notice a copy of the proposed amendment or a summary of the changes
to be effected thereby.
Section 2.04. WAIVER OF NOTICE
(a) Written waiver.
Whenever any written notice is required to be given under the provisions of the
Business Corporation Law, the articles or these bylaws, a waiver thereof in
writing, signed by the person or persons entitled to the notice, whether before
or after the time stated therein, shall be denied equivalent to the giving of
the notice. Except as otherwise required by this subsection, neither the
business to be transacted at, nor the purpose of, a meeting need be specified
in the waiver of notice of the meeting. In the case of a special meeting of
shareholders, the waiver of notice shall specify the general nature of the
business to be transacted.
(b) Waiver by attendance.
Attendance of a person at any meeting shall constitute a waiver of notice of
the meeting except where a person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any
business because the meeting was not lawfully called or convened.
Section 2.05. MODIFICATION OF PROPOSAL CONTAINED IN NOTICE.
Whenever the language of a proposed resolution is included in a written notice
of a meeting required to be given under the provisions of the Business
Corporation Law or the articles or these bylaws, the meeting considering the
resolution may without further notice adopt it with such clarifying or other
amendments as do not enlarge its original purpose.
Section 2.06. EXCEPTION TO REQUIREMENT OF NOTICE.
(a) General rule.
Whenever any notice or communication is required to be given to any person
under the provisions of the Business Corporation Law or by the articles or
these bylaws or by the terms of any agreement or other instrument or as a
condition precedent to taking any corporate action and communication with that
person is then unlawful, the giving of the notice or communication to that
person shall not be required.
(b) Shareholders without forwarding addresses.
Notice or other communications shall not be sent to any shareholder with whom
the corporation has been unable to communicate for more than 24 consecutive
months because communications to the shareholder are returned unclaimed or the
shareholder has otherwise failed to provide the corporation with a current
address. Whenever the shareholder provides the corporation with a current
address, the corporation shall commence sending notices and other
communications to the shareholder in the same manner as to other shareholders.
Section 2.07. USE OF CONFERENCE TELEPHONE AND SIMILAR EQUIPMENT.
One or more persons may participate in a meeting of the Board of Directors or
the shareholders of the corporation by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this
section shall constitute presence in person at the meeting.
ARTICLE III
___________
SHAREHOLDERS
Section 3.01. PLACE OF MEETING.
All meetings of the shareholders of the corporation shall be held at the
registered office of the corporation unless another place is designated by the
Board of Directors in the notice of a meeting.
Section 3.02. ANNUAL MEETING.
The Board of Directors may fix the date and time of the annual meeting of the
shareholders, but if no such date and time is fixed by the board, the meeting
for any calendar year shall be held on the second Tuesday of February in such
year, if not a legal holiday under the laws of Pennsylvania, and, if a legal
holiday, then on the next succeeding business day, not a Saturday, at 1:00
o'clock P.M., and at said meeting the shareholders then entitled to vote shall
elect directors and shall transact such other business as may properly be
brought before the meeting. If the annual meeting shall not have been called
and held within six months after the designated time, any shareholder may call
the meeting at any time thereafter.
Section 3.03. SPECIAL MEETINGS.
(a) Call of special meetings.
Special meetings of the shareholders may be called at any time:
(1) by the Board of Directors; or
(2) unless otherwise provided in the articles, by shareholders entitled to cast
at least 20% of the vote that all shareholders are entitled to cast at the
particular meeting.
(b) Fixing of time for meeting.
At any time, upon written request of any person who has called a special
meeting, it shall be the duty of the secretary to fix the time of the meeting
which shall be held not more than 60 days after the receipt of the request. If
the secretary neglects or refuses to fix a time of the meeting, the person or
persons calling the meeting may do so.
Section 3.04. QUORUM AND ADJOURNMENT.
(a) General rule.
A meeting of shareholders of the corporation duly called shall not be organized
for the transaction of business unless a quorum is present. The presence of
shareholders entitled to cast at least a majority of the votes that all
shareholders are entitled to cast on a particular matter to be acted upon at
the meeting shall constitute a quorum for the purposes of consideration and
action on the matter. Shares of the corporation owned, directly or indirectly,
by it and controlled, directly or indirectly, by the board of directors of this
corporation, as such, shall not be counted in determining the total number of
outstanding shares for quorum purposes at any given time.
(b) Withdrawal of a quorum.
The shareholders present at a duly organized meeting can continue to do
business until adjournment notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
(c) Adjournment for lack of quorum.
If a meeting cannot be organized because a quorum has not attended, those
present may, except as provided in the Business Corporation Law, adjourn the
meeting to such time and place as they may determine.
(d) Adjournments generally.
Any meeting at which directors are to be elected shall be adjourned only from
day to day, or for such longer periods not exceeding 15 days each as the
shareholders present and entitled to vote shall direct, until the directors
have been elected. Any other regular or special meeting may be adjourned for
such period as the shareholders present and entitled to vote shall direct.
(e) Electing directors at adjourned meeting.
Those shareholders entitled to vote who attend a meeting called for the
election of directors that has been previously adjourned for lack of a quorum,
although less than a quorum as fixed in this section, shall nevertheless
constitute a quorum for the purpose of electing directors.
(f) Other action in absence of quorum.
Those shareholders entitled to vote who attend a meeting of shareholders that
has been previously adjourned for one or more periods aggregating at least 15
days because of an absence of a quorum, although less than a quorum as fixed in
this section, shall nevertheless constitute a quorum for the purpose of acting
upon any matter set forth in the notice of the meeting if the notice states
that those shareholders who attend the adjourned meeting shall nevertheless
constitute a quorum for the purpose of acting upon the matter.
Section 3.05. ACTION BY SHAREHOLDERS
(a) General rule.
Except as otherwise provided in the Business Corporation Law or the articles or
these bylaws, whenever any corporate action is to be taken by vote of the
shareholders of the corporation, it shall be authorized by a majority of the
votes cast at a duly organized meeting of shareholders by the holders of shares
entitled to vote thereon.
(b) Interested shareholders.
Any merger or other transaction authorized under l5Pa.C.S. Subchapter 19C
between the corporation or subsidiary thereof and a shareholder of this
corporation, or any voluntary liquidation authorized under 15 Pa.C.S.
Subchapter 19F in which a shareholder is treated differently from other
shareholders of the same class (other than any dissenting shareholders), shall
require the affirmative vote of the shareholders entitled to cast at least a
majority of the votes that all shareholders other than the interested
shareholder are entitled to cast with respect to the transaction, without
counting the vote of the interested shareholder. For the purposes of the
preceding sentence, interested shareholder shall include the shareholder who is
a party to the transaction or who is treated differently from other
shareholders and any person, or group of persons, that is acting jointly or in
concert with the interested shareholder and any person who, directly or
indirectly, controls, is controlled by or is under common control with the
interested shareholder. An interested
shareholder shall not include any person who, in good faith and not for the
purpose of circumventing this subsection, is an agent, bank, broker, nominee or
trustee for one or more other persons, to the extent that the other person or
persons are not interested shareholders.
(c) Exceptions.
Subsection (b) shall not apply to a transaction:
(1) that has been approved by a majority vote of the board of directors without
counting the vote of directors who:
(i) are directors or officers of, or have a material equity interest in, the
interested shareholder; or
(ii) were nominated for election as a director by the interested
shareholder, and first elected as a director, within 24 months of the date of
the vote on the proposed transaction: or
(2) in which the consideration to be received by the shareholders for shares of
any class of which shares are owned by the interested shareholder is not less
than the highest amount paid by the interested shareholder in acquiring shares
of the same class.
(d) Additional approvals.
The approvals required by subsection (b) shall be in addition to, and not in
lieu of, any other approval required by the Business Corporation Law, the
articles or these bylaws, or otherwise.
Section 3.06. ORGANIZATION.
At every meeting of the shareholders, the chairman of the board, if there be
one, or, in the case of vacancy in office or absence of the chairman of the
board, one of the following officers present in the order stated: the vice
chairman of the board, if there be one, the president, the vice presidents in
their order of rank and seniority, or a person chosen by vote of the
shareholders present, shall act as chairman of the meeting. The secretary or,
in the absence of the secretary, an assistant secretary, or in the absence of
both the secretary and assistant secretaries, a person appointed by the
chairman of the meeting, shall act as secretary.
Section 3.07. VOTING RIGHTS OF SHAREHOLDERS.
Unless otherwise provided in the articles, every shareholder of the corporation
shall be entitled to one vote for every share standing in the name of the
shareholder on the books of the corporation.
Section 3.08. VOTING AND OTHER ACTION BY PROXY.
(a) General rule.
(1) Every shareholder entitled to vote at a meeting of shareholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person to act for the shareholder by proxy.
(2) The presence of, or vote or other action at a meeting of shareholders, or
the expression of consent or dissent to corporate action in writing, by a proxy
of a shareholder shall constitute the presence of, or vote or action by, or
written consent or dissent of the shareholder.
(3) Where two or more proxies of a shareholder are present, the corporation
shall, unless otherwise expressly provided in the proxy, accept as the vote of
all shares represented thereby the vote cast by a majority of them and, if a
majority of the proxies cannot agree whether the shares represented shall be
voted or upon the manner of voting the shares, the voting of the
shares shall be divided equally among those persons.
(b) Minimum requirements.
Every proxy shall be executed in writing by the shareholder or by the duly
authorized attorney-in-fact of the shareholder and filed with the secretary of
the corporation. A proxy, unless coupled with an interest, shall be revocable
at will, notwithstanding any other agreement or any provision in the proxy to
the contrary, but the revocation of a proxy shall not be effective until
written notice thereof has been given to the secretary of the corporation. An
unrevoked proxy shall not be valid after three years from the date of its
execution unless a longer time is expressly provided therein. A proxy shall
not be revoked by the death or incapacity of the maker unless, before the vote
is counted or the authority is exercised, written notice of the death or
incapacity is given to the secretary of the corporation.
(c) Expenses.
Unless otherwise restricted in the articles, the corporation shall pay the
reasonable expenses of solicitation of votes, proxies or consents of
shareholders by or on behalf of the board of directors or its nominees for
election to the board, including solicitation by professional proxy solicitors
and otherwise.
Section 3.09. VOTING BY FIDUCIARIES AND PLEDGEES.
Shares of the corporation standing in the name of a trustee or other fiduciary
and shares held by an assignee for the benefit of creditors or by a receiver
may be voted by the trustee, fiduciary, assignee or receiver. A shareholder
whose shares are pledged shall be entitled to vote the shares until the shares
have been transferred into the name of the pledgee, or a nominee of the
pledgee, but nothing in this section shall affect the validity of a proxy given
to a pledgee or nominee.
Section 3.10. VOTING BY JOINT HOLDERS OF SHARES.
(a) General rule.
Where shares of the corporation are held jointly or as tenants in common by two
or more persons, as fiduciaries or otherwise:
(1) if only one or more of such persons is present in person or by proxy, all
of the shares standing in the names of such persons shall be deemed to be
represented for the purpose of determining a quorum and the corporation shall
accept as the vote of all the shares the vote cast by a joint owner or a
majority of them; and
(2) if the persons are equally divided upon whether the shares held by them
shall be voted or upon the manner of voting the shares, the voting of the
shares shall be divided equally among the persons without prejudice to the
rights of the joint owners or the beneficial owners thereof among themselves.
(b) Exception.
If there has been filed with the secretary of the corporation a copy, certified
by an attorney at law to be correct, of the relevant portions of the agreement
under which the shares are held or the instrument by which the trust or estate
was created or the order of court appointing them or of an order of court
directing the voting of the shares, the persons specified as having such voting
power in the document latest in date of operative effect so filed, and only
those persons, shall be entitled to vote the shares but only in accordance
therewith.
Section 3.01. VOTING BY CORPORATIONS
(a) Voting by corporate shareholders.
Any corporation that is a shareholder of this corporation may vote by any of
its officers or agents, or by proxy appointed by any officer or agent, unless
some other person, by resolution of the board of directors of the other
corporation or provision of its articles or bylaws, a copy of which resolution
or provision certified to be correct by one of its officers has been filed with
the secretary of this corporation, is appointed its general or special proxy in
which case that person shall be entitled to vote the shares.
(b) Controlled shares.
Shares of this corporation owned, directly or indirectly, by it and controlled,
directly or indirectly, by the board of directors of this corporation, as such,
shall not be voted at any meeting and shall not be counted in determining the
total number of outstanding shares for voting purposes at any given time.
Section 3.12. DETERMINATION OF SHAREHOLDERS OF RECORD.
(a) Fixing record date.
The board of directors may fix a time prior to the date of any meeting of
shareholders as a record date for the determination of the shareholders
entitled to notice of, or to vote at, the meeting, which time, except in the
case of an adjourned meeting, shall be not more than 90 days prior to the date
of the meeting of shareholders. Only shareholders of record on the date fixed
shall be so entitled notwithstanding any transfer of shares on the books of the
corporation after any record date fixed as provided in this subsection. The
board of directors may similarly fix a record date for the determination of
shareholders of record for any other purpose. When a determination of
shareholders of record has been made as provided in this section for purposes
of a meeting, the determination shall apply to any adjournment thereof unless
the board fixes a new record date for the adjourned meeting.
(b) Determination when a record date is not fixed.
If a record date is not fixed:
(1) The record date for determining shareholders entitled to notice of or
to vote at a meeting of shareholders shall be at the close of business on the
date next preceding the day on which notice is given or, if notice is waived,
at the close of business on the day immediately preceding the day on which the
meeting is held.
(2) The record date for determining shareholders entitled to express
consent or dissent to corporate action in writing without a meeting, when prior
action by the board of directors is not necessary, shall be the close of
business on the day on which the first written consent or dissent is filed with
the secretary of the corporation.
(3) The record date for determining shareholders for any other purpose
shall be at the close of business on the day on which the board of directors
adopts the resolution relating thereto.
Section 3.13. VOTING LISTS.
(a) General rule.
The officer or agent having charge of the transfer books for shares of the
corporation shall make a complete list of the shareholders entitled to vote at
any meeting of shareholders, arranged in alphabetical order, with the address
of and of the number of shares held by each. The list shall be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any shareholder during the whole time of the meeting for the
purposes thereof.
(b) Effect of list.
Failure to comply with the requirements of this section shall not effect the
validity of any action taken at a meeting prior to a demand at the meeting by
any shareholder entitled to vote thereat to examine the list. The original
share register or transfer book, or a duplicate thereof kept in this
Commonwealth, shall be prima facie evidence as to who are the shareholders
entitled to examine the list or share register or transfer book or to vote at
any meeting of shareholders.
Section 3.14. JUDGES OF ELECTION.
(a) Appointment.
In advance of any meeting of shareholders of the corporation, the board of
directors may appoint judges of election, who need not be shareholders, to act
at the meeting or any adjournment thereof. If judges of election are not so
appointed, the presiding officer of the meeting may, and on the request of any
shareholder shall, appoint judges of election at the meeting. The number of
judges shall be one or three. A person who is a candidate for office to be
filled at the meeting shall not act as a judge.
(b) Vacancies.
In case any person appointed as a judge fails to appear or fails or refuses to
act, the vacancy may be filled by appointment made by the board of directors in
advance of the convening of the meeting or at the meeting by the presiding
officer thereof.
(c) Duties.
The judges of election shall determine the number of shares outstanding and the
voting power of each, the shares represented at the meeting, the existence of a
quorum, the authenticity, validity and effect of proxies, receive votes or
ballots, hear and determine all challenges and questions in any way arising in
connection with the right to vote, count and tabulate all votes, determine the
result and do such acts as may be proper to conduct the election or vote with
fairness to all shareholders. The judges of election shall perform their
duties impartially, in good faith, to the best of their ability and as
expeditiously as is practical. If there are three judges of election, the
decision, act or certificate of a majority shall be effective in all respects
as the decision, act or certificate of all.
(d) Report.
On request of the presiding officer of the meeting, or of any shareholder, the
judge shall make a report in writing of any challenge or question or matter
determined by them, and execute a certificate of any fact found by them. Any
report or certificate made by them shall be prima facie evidence of the facts
stated therein.
Section 3.15. CONSENT OF SUAREHOLDERS IN LIEU OF MEETING.
(a) Unanimous written consent.
Ally action required or permitted to be taken at a meeting of the shareholders
or of a class of shareholders may be taken without a meeting if, prior or
subsequent to the action, a consent or consents thereto by all of the
shareholders who would be entitled to vote at a meeting for such purpose shall
be filed with the secretary of the corporation.
(b) Partial written consent.
Any action required or permitted to be taken at a meeting of the shareholders
or of a class of shareholders may be taken without a meeting upon the written
consent of shareholders who would have been entitled to cast the minimum number
of votes that would be necessary to authorize the action at a meeting at which
all shareholders entitled to vote thereon were present and voting. The
consents shall be filed with the secretary of the corporation. The action
shall not become effective until after at least ten days' written notice of the
action has been given to each shareholder entitled to vote thereon who has not
consented thereto.
Section 3.16. MINORS AS SECURITY HOLDERS.
The corporation may treat a minor who holds shares or obligations of the
corporation as having capacity to receive and to empower others to receive
dividends, interest, principal and other payments or distributions, to vote or
express consent or dissent and to make elections and exercise rights relating
to such shares or obligations unless, in the case of payments or distributions
on shares, the corporate officer responsible for maintaining the list of
shareholders or the transfer agent of the corporation or, in the case of
payments or distributions on obligations, the treasurer or paying officer or
agent has received written notice that the holder is a minor.
ARTICLE IV
__________
BOARD OF DIRECTORS
Section 4.01. POWERS; PERSONAL LIABILITY.
(a) General rule.
Unless otherwise provided by statute all powers vested by law in the
corporation shall be exercised by or under the authority of, and the business
and affairs of the corporation shall be managed under the direction of, the
board of directors.
(b) Standard of care; justifiable reliance.
A director shall stand in a fiduciary relation to the corporation and shall
perform his or her duties as a director, including duties as a member of any
committee of the board upon which the director may serve, in good faith, in a
manner the director reasonably believes to be in the best interests of the
corporation and with such care, including reasonable inquiry, skill and
diligence, as a person of ordinary prudence would use under similar
circumstances. In performing his or her duties, a director shall be entitled
to rely in good faith on information, opinions, reports or statements,
including financial statements and other financial data, in each case prepared
or presented by any of the following:
(1) One or more officers or employees of the corporation whom the director
reasonably believes to be reliable and competent in the matters presented.
(2) Counsel, public accountants or other persons as to matters which the
director reasonably believes to be within the professional or expert competence
of such person.
(3) A committee of the board upon which the director does not serve, duly
designated in accordance with law, 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 the director
has knowledge concerning the matter in question that would cause his or her
reliance to be unwarranted.
(c) Consideration of factors.
In discharging the duties of their respective positions, the board of
directors, committees of the board and individual directors may, in considering
the best interests of the corporation, consider the effects of any action upon
employees, upon suppliers and customers of the corporation and upon communities
in which offices or other establishments of the corporation are located, and
all other pertinent factors. The consideration of those factors shall not
constitute a violation of subsection (b).
(d) Presumption.
Absent breach of fiduciary duty, lack of good faith or self-dealing, actions
taken as a director or any failure to take any action shall be presumed to be
in the best interests of the corporation.
(e) Personal liability of directors.
(1) A director shall not be personally liable, as such, for monetary
damages for any action taken, or any failure to take any action, unless:
(i) the director has breached or failed to perform the duties of his
or her office under this section; and
(ii) the breach or failure to perform constitutes self-dealing,
willful misconduct or recklessness.
(2) The provisions of paragraph (1) shall not apply to the responsibility
or liability of a director pursuant to any criminal statute, or the liability
of a director for the payment of taxes pursuant to local, State or Federal law.
(f) Notation of dissent.
A director who is present at a meeting of the board of directors, or of a
committee of the board, at which action on any corporate matter is taken shall
be presumed to have assented to the action taken unless his or her dissent is
entered in the minutes of the meeting or unless the director files a written
dissent to the action with the secretary of the meeting before the adjournment
thereof or transmits the dissent in writing to the secretary of the corporation
immediately after the adjournment of the meeting. The right to dissent shall
not apply to a director who voted in favor of the action. Nothing in this
section shall bar a director from asserting that minutes of the meeting
incorrectly omitted his or her dissent if, promptly upon receipt of a copy of
such minutes, the director notifies the secretary in writing, of the asserted
omission or inaccuracy.
Section 4.02. QUALIFICATION AND SELECTION OF DIRECTORS.
(a) Qualifications.
Each director of the corporation shall be a natural person of full age who need
not be a resident of Pennsylvania or a shareholder of the corporation.
(b) Election of directors.
Except as otherwise provided in these bylaws, directors of the corporation
shall be elected by the shareholders. In elections for directors, voting need
not be by ballot, except upon demand made by a shareholder entitled to vote at
the election and before the voting begins. The candidates receiving the highest
number of votes from each class or group of classes, if any, entitled to elect
directors separately up to the number of directors to be elected by the class
or group of classes shall be elected. If at any meeting of shareholders,
directors
of more than one class are to be elected, each class of directors shall be
elected in a separate election.
(c) Cumulative voting.
Unless the articles provide for straight voting, in each election of directors
every shareholder entitled to vote shall have the right to multiply the number
of votes to which the shareholder may be entitled by the total number of
directors to be elected in the same election by the holders of the class or
classes of shares of which his or her shares are a part and the shareholders
may cast the whole number of his or her votes for one candidate or may
distribute them among two or more candidates.
Section 4.03. NUMBER AND TERM OF OFFICE.
(a) Number.
The Board of Directors shall consist of such number of directors, not less than
one (1) nor more than five (5), as may be determined from time to time by
resolution of the Board of Directors.
(b) Term of office.
Each director shall hold office until the expiration of the term for which he
or she was elected and until a successor has been selected and qualified or
until his or her earlier death, resignation or removal. A decrease in the
number of directors shall not have the effect of shortening the term of any
incumbent director.
(c) Resignation.
Any director may resign at any time upon written notice to the corporation.
The resignation shall be effective upon receipt thereof by the corporation or
at such subsequent time as shall be specified in the notice of resignation.
Section 4.04. VACANCIES.
(a) General rule.
Vacancies in the Board of Directors, including vacancies resulting from an
increase in the number of directors, may be filled by a majority vote of the
remaining members of the board though less than a quorum, or by a sole
remaining director, and each person so selected shall be a director to serve
for the balance of the unexpired term, and until a successor has been selected
and qualified or until his or her earlier death, resignation or removal.
(b) Action by resigned directors.
When one or more directors resign from the board effective at a future date,
the directors then in office, including those who have so resigned, shall have
power by the applicable vote to fill the vacancies, the vote thereon to take
effect when the resignations become effective.
Section 4.05. REMOVAL OF DIRECTORS.
(a) Removal by the shareholders.
The entire Board of Directors, or any class of the board, or any individual
director may be removed from office without assigning any cause by the vote
of shareholders, or of the holders of a class or series of shares, entitled to
elect directors, or the class of directors. In case the board or a class of
the board or any one or more directors are so removed, new directors may be
elected at the same meeting. The board of directors may be removed at any time
with or without cause by the unanimous vote or consent of shareholders entitled
to. vote thereon.
(b) Removal by the board.
The board of directors may declare vacant the office of a director who has been
judicially declared of unsound mind or who has been convicted of an offense
punishable by imprisonment for a term of more than one year or if, within 60
days after notice of his or her selection, the director does not accept the
office either in writing or by attending a meeting of the board of directors.
(c) Removal of directors elected by cumulative voting.
An individual director shall not be removed (unless the entire board or class
of the board is removed) if sufficient votes are cast against the resolution
for his removal which, if cumulatively voted at an annual or other regular
election of directors, would be sufficient to elect one or more directors to
the board or to the class.
Section 4.06. PLACE OF MEETINGS.
Meetings of the board of directors may be held at such place within or without
Pennsylvania as the board of directors may from time to time appoint or as may
be designated in the notice of the meeting.
Section 4.07. ORGANIZATION OF MEETINGS.
At every meeting of the board of directors, the chairman of the board, if there
be one, or, in the case of a vacancy in the office or absence of the chairman
of the board, one of the following officers present in the order stated: the
vice chairman of the board, if there be one, the president, the vice presidents
in their order of rank and seniority, or a person chosen by a majority of the
directors present, shall act as chairman of the meeting. The secretary or, in
the absence of the secretary, an assistant secretary, or, in the absence of the
secretary and the assistant secretaries, any person appointed by the chairman
of the meeting, shall act as secretary.
Section 4.08. REGULAR MEETINGS.
Regular meetings of the board of directors shall be held at such time and place
as shall be designated from time to time by resolution of the board of
directors.
Section 4.09. SPECIAL MEETINGS.
Special meetings of the board of directors shall be held whenever called by the
chairman or by two or more of the directors.
Section 4.10. QUORUM OF AND ACTION BY DIRECTORS
(a) General rule.
A majority of the directors in office of the corporation shall be necessary to
constitute a quorum for the transaction of business and the acts of a majority
of the directors present and voting at a meeting at which a quorum is present
shall be the acts of the board of directors.
(b) Action by written consent.
Any action required or permitted to be taken at a meeting of the directors may
be taken without a meeting if, prior or subsequent to the action, a consent or
consents thereto by all of the directors in office is filed with the secretary
of the corporation.
Section 4.11. EXECUTIVE AND OTHER COMMITTEES.
(a) Establishment and powers.
The board of directors may, by resolution adopted by a majority of the
directors in office, establish one or more committees to consist of one or more
directors of the corporation. Any committee, to the extent provided in the
resolution of the board of directors, shall have and may exercise all of the
powers and authority of the board of directors except that a committee shall
not have any power or authority as to the following:
(1) The submission to shareholders of any action requiring approval of
shareholders under the Business Corporation Law.
(2) The creation or filling of vacancies in the board of directors.
(3) The adoption, amendment or repeal of these bylaws.
(4) The amendment or repeal of any resolution of the board that by its
terms is amendable or repealable only by the board.
(5) Action on matters committed by a resolution of the board of directors
to another committee of the board.
(b) Alternate committee members.
The board may designate one or more directors as alternate members of any
committee who may replace any absent or disqualified member at any meeting of
the committee or for the purposes of any written action by the committee. In
the absence or disqualification of a member and alternate member or members of
a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not constituting a quorum, may unanimously
appoint another director to act at the meeting in the place of the absent or
disqualified member.
(c) Term.
Each committee of the board shall serve at the pleasure of the board.
(d) Committee procedures.
The term "board of directors" or "board," when used in any provision of these
bylaws relating to the organization or procedures of or the manner of taking
action by the board of directors, shall be construed to include and refer to
any executive or other committee of the board.
Section 4.12. COMPENSATION.
The board of directors shall have the authority to fix compensation of
directors for their services as directors and a director may be a salaried
officer of the corporation.
ARTICLE V
_________
OFFICERS
Section 5.01. OFFICERS GENERALLY.
(a) Number, qualifications and designation.
The officers of the corporation shall be a president, a secretary, a treasurer,
and such other officers as may be elected in accordance with the provisions of
Section 5.03. Officers may but need not be directors or shareholders of the
corporation. The president and secretary shall be natural persons of full age.
The treasurer may be a corporation, but if a natural person shall be of full
age. The board of directors may elect from among the members of the board a
chairman of the board and a vice-chairman of the board who shall be officers of
the corporation. Any number of offices may be held by the same person.
(b) Resignations.
Any officer may resign at any time upon written notice to the corporation. The
resignation shall be effective upon receipt thereof by the corporation or at
such subsequent time as may be specified in the notice of resignation.
(c) Bonding.
The corporation may secure the fidelity of any or all of its officers by bond
or otherwise.
(d) Standard of care.
Except as otherwise provided in the articles, an officer shall perform his or
her duties as an officer in good faith, in a manner he or she reasonably
believes to be in the best interests of the corporation and with such care,
including reasonable inquiry, skill and diligence, as a person of ordinary
prudence would use under similar circumstances. A person who so performs his
or her duties shall not be liable by reason of having been an officer of the
corporation.
Section 5.02. ELECTION AND TERM OF OFFICE.
The officers of the corporation, except those elected by delegated authority
pursuant to Section 5.03, shall be elected annually by the board of directors,
and each such officer shall hold office for a term of one year and until a
successor has been selected and qualified or until his or her earlier death,
resignation or removal.
Section 5.03. SUBORDINATE OFFICERS, COMMITTEES AND AGENTS.
The board of directors may from time to time elect such other officers and
appoint such committees, employees or other agents as the business of the
corporation may require, including one or more assistant secretaries, and one
or more assistant treasurers, each of whom shall hold office for such period,
have such authority, and perform such duties as are provided in these bylaws or
as the board of directors may from time to time determine. The board of
directors may delegate to any officer or committee the power to elect
subordinate officers and to retain or appoint employees or other agents, or
committees thereof and to prescribe the authority and duties of such
subordinate officers, committees, employees or other agents.
Section 5.04. REMOVAL OF OFFICERS AND AGENTS.
Any officer or agent of the corporation may be removed by the board of
directors with or without cause. The removal shall be without prejudice to the
contract righhts, if any, of any person so removed. Election or appointment of
an officer or agent shall not of itself create contract rights.
Section 5.05. VACANCIES.
A vacancy in any office because of death, resignation, removal,
disqualification, or any other cause, shall be filled by the board of directors
or by the officer or committee to which the power to fill such office has been
delegated pursuant to Section 5.03, as the case may be, and if the office is
one for which these bylaws prescribe a term, shall be filled for the unexpired
portion of the term.
Section 5.06. AUTHORITY.
All officers of the corporation, as between themselves and the corporation,
shall have such authority and perform such duties in the management of the
corporation as may be provided by or pursuant to resolution or orders of the
board of directors or in the absence of controlling provisions in the
resolutions or orders of the board of directors, as may be determined by
or pursuant to these bylaws.
Section 5.07. THE CHAIRMAN OF THE BOARD.
The chairman of the board if there be one, or in the absence of the chairman,
the vice chairman of the board, shall preside at all meetings of the
shareholders and of the board of directors and shall perform such other duties
as may from time to time be requested by the board of directors.
Section 5.08. THE PRESIDENT.
The president shall be the chief executive officer of the corporation and shall
have general supervision over the business and operations of the corporation,
subject however, to the control of the board of directors. The president shall
sign, execute, and acknowledge, in the name of the corporation, deeds,
mortgages, contracts or other instruments authorized by the board of directors,
except in cases where the signing and execution thereof shall be expressly
delegated by the board of directors, or by these bylaws, to some other officer
or agent of the corporation; and, in general, shall perform all duties incident
to the office of president and such other duties as from time to time may be
assigned by the board of directors.
Section 5.09. THE SECRETARY.
The secretary or an assistant secretary shall attend all meetings of the
shareholders and of the board of directors and shall record all votes of the
shareholders and of the directors and the minutes of the meetings of the
shareholders and of the board of directors and of committees of the board in a
book or books to be kept for that purpose; shall see that notices are given and
records and reports properly kept and filed by the corporation as required by
law; shall be the custodian of the seal of the corporation and see that It is
affixed to all documents to be executed on behalf of the corporation under its
seal; and, in general, shall perform all duties incident to the office of
secretary, and such other duties as may from time to time be assigned by the
board of directors or the president.
Section 5.10. THE TREASURER.
The treasurer or an assistant treasurer shall have or provide for the custody
of the funds or other property of the corporation; shall collect and receive or
provide for the collection and receipt of moneys earned by or in any manner due
to or received by the corporation; shall deposit all funds in his or her
custody as treasurer in such banks or other places of deposit as the board of
directors may from time to time designate; shall, whenever so required by the
board of directors, render an account showing all transactions as treasurer and
the financial condition of the corporation; and, in general, shall discharge
such other duties as may from time to time be assigned by the board of
directors or the president.
Section 5.11. SALARIES.
The salaries of the officers elected by the board of directors shall be fixed
from time to time by the board of directors or by such officer as may be
designated by resolution of the board. The salaries or other compensation of
any other officers, employees and other agents shall be fixed from time to time
by the officer or committee to which the power to elect such officers or to
retain or appoint such employees or other agents has been delegated pursuant to
Section 5.03. No officer shall be prevented from receiving such salary or
other compensation by reason of the fact that the officer is also a director of
the corporation.
Section 5.12. DISALLOWED COMPENSATION.
Any payments made to an officer or employee of the corporation such as a
salary, commission, bonus, interest, rent, travel or entertainment expense
incurred by him, which shall be disallowed in whole or in part as a deductible
expense by the Internal Revenue Service, shall be reimbursed by such officer or
employee to the corporation to the full extent of such disallowance. It shall
be the duty of the directors, as a Board, to enforce payment of each such
amount disallowed. In lieu of payment by the officer or employee, subject to
the determination of the directors, proportionate amounts may be withheld from
future compensation payments until the amount owed to the corporation has been
recovered.
ARTICLE VI
__________
CERTIFICATES OF STOCK, TRANSFER, ETC.
Section 6.01. SHARE CERTIFICATES.
Certificates for shares of the corporation shall be in such form as approved by
the board of directors, and shall state that the corporation is incorporated
under the laws of Pennsylvania, the name of the person to whom issued, and the
number and class of shares and the designation of the series (if any) that the
certificate represents. The share register or transfer books and blank share
certificates shal1 be kept by the secretary or by any transfer agent or
registrar designated by the board of directors for that purpose.
Section 6.02. ISSUANCE.
The share certificates of the corporation shall be numbered and registered in
the share register or transfer books of the corporation as they are issued.
They shall be signed by the president or a vice president and by the secretary
or an assistant secretary or the treasurer or an assistant treasurer, and shall
bear the corporate seal, which may be a facsimile, engraved or printed; but
where such certificate is signed by a transfer agent or a registrar the
signature of any corporate officer upon such certificate may be a facsimile,
engraved or printed. In case any officer who has signed, or whose facsimile
signature has been placed upon, any share certificate shall have ceased to be
such officer because of death, resignation or otherwise, before the certificate
is issued, it may be issued with the same effect as if the officer had not
ceased to be such at the date of its issue. The provisions of this Section
6.02 shall be subject to any inconsistent or contrary agreement at the time
between the corporation and any transfer agent or registrar.
Section 6.03. TRANSFER.
Transfers of shares shall be made on the share register or transfer books of
the corporation upon surrender of the certificate therefor, endorsed by the
person named in the certificate or by an attorney lawfully constituted in
writing. No transfer shall be made inconsistent with the provisions of the
Uniform Commercial Code, 13 Pa.C.S. 8101 et seq., and its amendments and
supplements.
Section 6.04. RECORD HOLDER OF SHARES.
The corporation shall be entitled to treat the person in whose name any share
or shares of the corporation stand on the books of the corporation as the
absolute owner thereof, and shall not be bound to recognize any equitable or
other claim to, or interest in, such share or shares on the part of any other
person.
Section 6.05. LOST, DESTROYED OR MUTILATED CERTIFICATES.
The holder of any shares of the corporation shall immediately notify the
corporation of any loss, destruction or mutilation of the certificate therefor,
and the board of directors may, in its discretion, cause a new certificate or
certificates to be issued to such holder, in case of mutilation of the
certificate, upon the surrender of the mutilated certificate or, in case of
loss or destruction of the certificate, upon satisfactory proof of such loss or
destruction and, if the board of directors shall so determine, the deposit of a
bond in such form and in such sum, and with such surety or sureties, as it may
direct.
ARTICLE VII
___________
INDEMNIFICATION OF DIRECTORS, OFFICERS AND
OTHER AUTHORIZED REPRESENTATIVES
Section 7.01. SCOPE OF INDEMNIFICATION.
(a) General rule.
The corporation shall indemnify an indemnified representative against any
liability incurred in connection with any proceeding in which the indemnified
representative may be involved as a party or otherwise by reason of the fact
that such person is or was serving in an indemnified capacity, including,
without limitation, liabilities resulting from any actual or alleged breach or
neglect of duty, error, misstatement or misleading statement, negligence, gross
negligence or act giving rise to strict or products liability, except:
(1) where such indemnification is expressly prohibited by applicable law;
(2) where the conduct of the indemnified representative has been finally
determined pursuant to Section 7.06
or otherwise:
(i) to constitute willful misconduct or recklessness within the
meaning of 15 Pa.C.S. 513(b) and 1746(b) and 42 Pa.C.S. 8365(b) or any
superseding provision of law sufficient in the circumstances to bar
indemnification against liabilities arising from the conduct; or
(ii) to be based upon or attributable to the receipt by the
indemnified representative from the corporation of a personal benefit to which
the indemnified representative is not legally entitled; or
(3) to the extent such indemnification has been finally determined in a
final adjudication pursuant to Section 7.06 to be otherwise unlawful.
(b) Partial payment.
If an indemnified representative is entitled to indemnification in respect of a
portion, but not all, of any liabilities to which such person may be subject,
the corporation shall indemnify such indemnified representative to the maximum
extent for such portion of the liabilities.
(c)Presumption.
The termination of a 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 indemnified representative is not entitled to
indemnification.
(d) Definitions.
For purposes of this Article:
(1) "indemnified capacity" means any and all past, present and future
service by an indemnified representative in one or more capacities as a
director, officer, employee or agent of the corporation, or, at the request of
the corporation, as a director, officer, employee, agent, fiduciary or trustee
of another corporation, partnership, joint venture, trust, employee benefit
plan or other entity or enterprise ;
(2) "indemnified representative" means any and all directors and officers
of the corporation and any other person designated as an indemnified
representative by the board of directors of the corporation (which may, but
need not, include any person serving at the request of the corporation, as a
director, officer, employee, agent, fiduciary or trustee of another
corporation, partnership, joint venture, trust, employee benefit plan or other
entity or enterprise):
(3) "liability" means any damage, judgment, amount paid in settlement,
fine, penalty, punitive damages, excise tax assessed with respect to an
employee benefit plan, or cost or expense, of any nature (including, without
limitation, attorneys' fees and disbursements); and
(4) "proceeding" means any threatened, pending or completed action, suit,
appeal or other proceeding of any nature, whether civil, criminal,
administrative or investigative, whether formal or informal, and whether
brought by or in the right of the corporation, a class of its security holders
or otherwise.
Section 7.02. PROCEEDINGS INITIATED BY INDEMNIFIED REPRESENTATIVES.
Notwithstanding any other provision of this Article, the corporation shall not
indemnify under this Article an indemnified representative for any liability
incurred in a proceeding initiated (which shall not be deemed to include
counter-claims or affirmative defenses) or participated in as an intervenor or
amicus curiae by the person seeking indemnification unless such initiation of
or participation in the proceeding is authorized, either before or after its
commencement, by the affirmative vote of a majority of the directors in office.
This section does not apply to a reimbursement of expenses incurred in
successfully prosecuting or defending an arbitration under Section 7.06 or
otherwise successfully prosecuting or defending the rights of an indemnified
representative granted by or pursuant to this Article.
Section 7.03. ADVANCING EXPENSES.
The corporation shall pay the expenses (including attorneys' fees and
disbursements) incurred in good faith by an indemnified representative in
advance of the final disposition of a proceeding described in Section 7.01 or
the initiation of or participation in which is authorized pursuant to Section
7.02 upon receipt of an undertaking by or on behalf of the indemnified
representative to repay the amount if it is ultimately determined pursuant to
Section 7.06 that such person is not entitled to be indemnified by the
corporation pursuant to this Article. The financial ability of an indemnified
representative to repay an advance shall not be a prerequisite to the making of
such advance.
Section 7.04. SECURING OF INDEMNIFICATION OBLIGATIONS.
To further effect, satisfy or secure the indemnification obligations provided
herein or otherwise, the corporation may maintain insurance, obtain a letter of
credit, act as self-insurer, create a reserve, trust, escrow, cash collateral
or other fund or account, enter into indemnification agreements, pledge or
grant a security interest in any assets or properties of the corporation, or
use any other mechanism or arrangement whatsoever in such amounts, at such
costs, and upon such other terms and conditions as the board of directors shall
deem appropriate. Absent fraud, the determination of the board of directors
with respect to such amounts, costs, terms and conditions shall be conclusive
against all security holders, officers and directors and shall not be subject
to voidability.
Section 7.05. PAYMENT OF INDEMNIFICATION.
An indemnified representative shall be entitled to indemnification within 30
days after a written request for indemnification has been delivered to the
secretary of the corporation.
Section 7.06. ARBITRATION.
(a) General rule.
Any dispute related to the right to indemnification, contribution or
advancement of expenses as provided under this Article, except with respect to
indemnification for liabilities arising under the Securities Act of 1933 that
the corporation has undertaken to submit to a court for adjudication, shall be
decided only by arbitration in the metropolitan area in which the principal
executive offices of the corporation are located at the time, in accordance
with the commercial arbitration rules then in effect of the American
Arbitration Association, before a panel of three arbitrators, one of whom shall
be selected by the corporation, the second of whom shall be selected by the
indemnified representative and third of whom shall be selected by the other two
arbitrators. In the absence of the American Arbitration Association, or if for
any reason arbitration under the arbitration rules of the American Arbitration
Association cannot be initiated, or if one of the parties fails or refuses to
select an arbitrator or if the arbitrators selected by the corporation and the
indemnified representative cannot agree on the selection of the third
arbitrator within 30 days after such time as the corporation and the
indemnified representative have each been notified of the selection of the
other's arbitrator, the necessary arbitrator or arbitrators shall be selected
by the presiding judge of the court of general jurisdiction in such
metropolitan area.
(b) Burden of proof.
The party or parties challenging the right of an indemnified representative to
the benefits of this Article shall have the burden of proof.
(c) Expenses.
The corporation shall reimburse an indemnified representative for the expenses
(including attorneys' fees and disbursements) incurred in successfully
prosecuting or defending such arbitration.
(d) Effect.
Any award entered by the arbitrators shall be final, binding and nonappealable
and judgment may be entered thereon by any party in accordance with applicable
law in any court of competent jurisdiction, except that the corporation shall
be entitled to interpose as a defense in any such judicial enforcement
proceeding any prior final judicial determination adverse to the indemnified
representative under Section 7.01(a)(2) in a proceeding not directly involving
indemnification under this Article. This arbitration provision shall be
specifically enforceable.
Section 7.07. CONTRIBUTION.
If the indemnification provided for in this Article or otherwise is unavailable
for any reason in respect of any liability or portion thereof, the corporation
shall contribute to the liabilities to which the indemnified representative may
be subject in such proportion as is appropriate to reflect the intent of this
Article or otherwise.
Section 7.08. MANDATORY INDEMNIFICATION OF DIRECTORS, OFFICERS, ETC.
To the extent that an authorized representative of the corporation has been
successful on the merits or otherwise in defense of any action or proceeding
referred to in 15 Pa.C.S. 1741 or 1742 or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees and disbursements) actually and reasonably incurred by such
person in connection therewith.
Section 7.09. CONTRACT RIGHTS; AMENDMENT OR REPEAL.
All rights under this Article shall be deemed a contract between the
corporation and the indemnified representative pursuant to which the
corporation and each indemnified representative intend to be legally bound.
Any repeal, amendment or modification hereof shall be prospective only and
shall not affect any rights or obligations then existing.
Section 7.10. SCOPE OF ARTICLE.
The rights granted by this Article shall not be deemed exclusive of any other
rights to which those seeking indemnification, contribution or advancement of
expenses may be entitled under any statute, agreement, vote of shareholders or
disinterested directors or otherwise both as to action in an indemnified
capacity and as to action in any other capacity. The indemnification,
contribution and advancement of expenses provided by or granted pursuant to
this Article shall continue as to a person who has ceased to be an indemnified
representative in respect of matters arising prior to such time, and shall
inure to the benefit of the heirs, executors, administrators and personal
representatives of such a person.
Section 7.11. RELIANCE OF PROVISIONS.
Each person who shall act as an indemnified representative of the corporation
shall be deemed to be doing so in reliance upon the rights provided in this
Article.
Section 7.12. INTERPRETATION.
The provisions of this Article are intended to constitute bylaws authorized by
15 Pa.C.S. 513 and 1746 and 42 Pa.C.S. 8365.
ARTICLE VIII
____________
MISCELLANEOUS
Section 8.01. CORPORATE SEAL.
The corporation seal shall have inscribed thereon the name of the corporation,
the year of its organization and the words "Corporate Seal, Pennsylvania
Section 8.02. CHECKS.
All checks, notes, bills of exchange or other orders in writing shall be signed
by such person or persons as the board of directors or any person authorized by
resolution of the board of directors may from time to time designate.
Section 8.03. CONTRACTS.
(a) General rule.
Excepts as otherwise provided in the Business Corporation Law in the case of
transactions that require action by the shareholders, the board of directors
may authorize any officer or agent to enter into any contract or to execute or
deliver any instrument on behalf of the corporation, and such authority may be
general or confined to specific instances.
(b) Statutory form of execution of instruments.
Any note, mortgage, evidence of indebtedness, contract or other document, or
any assignment or endorsement thereof, executed or entered into between the
corporation and any other person, when signed by one or more officers or agents
having actual or apparent authority to sign it, or by the president or vice
president and secretary or assistant secretary or treasurer or assistant
treasurer of the corporation, shall be held to have been properly executed for
and in behalf of the corporation, without prejudice to the rights of the
corporation against any person who shall have executed the instrument in excess
of his or her actual authority.
Section 8.04. INTERESTED DIRECTORS OR OFFICERS; QUORUM.
(a) General rule.
A contract or transaction between the corporation and one or more of its
directors or officers or between the corporation and another corporation,
partnership, joint venture, trust or other enterprise in which one or more of
its directors or officers are directors or officers or have a financial or
other interest, shall not be void or voidable solely for that reason, or solely
because the director or officer is present at or participates in the meeting of
the board of directors that authorizes the contract or transaction, or solely
because his, her or their votes are counted for that purpose, if:
(1) the material facts as to the relationship or interest and as to the
contract or transaction are disclosed or are known to the board of directors
and the board authorizes the contract or transaction by the affirmative votes
of a majority of the disinterested directors even though the disinterested
directors are less than a quorum;
(2) the material facts as to his or her relationship or interest and as to the
contract or transaction are disclosed or are known to the shareholders entitled
to vote thereon and the contract or transaction is specifically approved in
good faith by vote of those shareholders; or
(3) the contract or transaction is fair as to the corporation as of the time it
is authorized, approved or ratified by the board of directors or the
shareholders.
(b) Quorum.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the board which authorizes a contract or transaction
specified in subsection (a).
Section 8.05. DEPOSITS.
All funds of the corporation shall be deposited from time to time to the credit
of the corporation in such banks, trust companies or other depositaries as the
board of directors may approve or designate, and all such funds shall be
withdrawn only upon checks signed by such one or more officers or employees as
the board of directors shall from time to time determine.
Section 8.06. CORPORATE RECORDS.
(a) Required records.
The corporation shall keep complete and accurate books and records of account,
minutes of the proceedings of the incorporators, shareholders and directors and
a share register giving the names and addresses of all shareholders and the
number and class of shares held by each. The share register shall be kept at
either the registered office of the corporation in Pennsylvania or at its
principal place of business wherever situated or at the office of its registrar
or transfer agent. Any books, minutes or other records may be in written form
or any other form capable of being converted into written form within a
reasonable time.
(b) Right of inspection.
Every shareholder shall, upon written verified demand stating the purpose
thereof, have a right to examine, in person or by agent or attorney, during the
usual hours for business for any proper purpose, the share register, books and
records of account, and records of the proceedings of the incorporators,
shareholders and directors and to make copies or extracts therefrom. A
proper purpose shall mean a purpose reasonably related to the interest of the
person as a shareholder. In every instance where an attorney or other agent is
the person who seeks the right of inspection, the demand shall be accompanied
by a verified power of attorney or other writing that authorizes the attorney
or other agent to so act on behalf of the shareholder. The demand shall be
directed to the corporation at its registered office in Pennsylvania or at its
principal place of business wherever situated.
Section 8.07. FINANCIAL REPORTS.
Unless otherwise agreed between the corporation and a shareholder, the
corporation shall furnish to its shareholders annual financial statements,
including at least a balance sheet as of the end of each fiscal year and a
statement of income and expenses for the fiscal year. The financial statements
shall be prepared on the basis of generally accepted accounting principles, if
the corporation prepares financial statements for the fiscal year on that basis
for any purpose, and may be consolidated statements of the corporation and one
or more of its subsidiaries. The financial statements shall be mailed by the
corporation to each of its shareholders entitled thereto within 120 days after
the close of each fiscal year and, after the mailing and upon written request,
shall be mailed by the corporation to any shareholder or beneficial owner
entitled thereto to whom a copy of the most recent annual financial statements
has not previously been mailed. Statements that are audited or reviewed by a
public accountant shall be accompanied by the report of the accountant; in
other cases, each copy shall be accompanied by a statement of the person in
charge of the financial records of the corporation:
(1) Stating his reasonable belief as to whether or not the financial
statements were prepared in accordance with generally accepted accounting
principles and, if not, describing the basis of presentation.
(2) Describing any material respects in which the financial statements
were not prepared on a basis consistent with those prepared for the previous
year.
Section 8.08. RESTRICTION ON TRANSFER OF SHARES
(a) Any shareholder desiring to sell, assign, transfer, pledge or otherwise
dispose of his shares, or the representative of any deceased shareholder within
a reasonable time after the death of the shareholder, must offer his shares in
writing, first to the corporation for a period of 30 days, at fair market value
as determined by the corporation's accountant. Any shares not purchased by the
corporation within the 30 day period shall then be offered to the remaining
shareholders in proportion to their holdings of such shares in the same manner
and at the same price for a further period of 30 days. Any shares not
purchased by the shareholders within the 30 day period may then be offered for
sale in the open market, at a price no lower than that at which the shares were
previously offered. If all of the shares have not been disposed of in the open
market within a period of six months, the shares remaining unsold must again be
offered for sale to the corporation and to the remaining shareholders in the
same manner as hereinbefore set forth before they may be offered for sale to
other than the corporation and the shareholders.
Notwithstanding the provisions of ARTICLE VIII, Section 8.09 this By-law may be
amended or repealed only by unanimous vote at any regular or special meeting of
the shareholders duly convened after notice to the shareholders of that purpose.
Section 8.09. AMENDMENT OF BY-LAWS.
These bylaws may be amended or repealed, or new bylaws may be adopted, either
(i) by vote of the shareholders at any duly organized annual or special meeting
of shareholders, or (ii) with respect to those matters that are not by statute
committed expressly to the shareholders and regardless of whether the
shareholders have previously adopted or approved the bylaw being amended or
repealed, by vote of a majority of the board of directors of the corporation in
office at any regular or special meeting of directors. Any change in these
bylaws shall take effect when adopted unless otherwise provided in the
resolution effecting the change. See Section 2.03(b) (relating to notice of
action by shareholders on bylaws).
Schnitzer & Kondub P.C.
Certified Public Accountants
550 Mamaroneck Avenue
Harrison, New York 10528
Board of Directors
J-Bird Records, Inc.
We have audited the accompanying of statements of operations and changes in
stockholders' equity and cash flows of J-Bird Records, Inc. for each of the
years in the two-year period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by the Company's management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, J-Bird Records, Inc.'s results of operations and cash
flows for each of the years in the two year period ended December 31, 1997 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements the Company is in the process of raising capital to fund its
operations. Although management believes that the financing will occur and it
will become profitable, no assurance can be given that the financing will occur
and the Company will become profitable. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Schnitzer & Kondub P.C.
Harrison, New York
February 18, 1998
<TABLE>
<CAPTION>
J-BIRD RECORDS, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
<S> <C> <C>
Net sales $ 145,248 $ 6,376
Cost of sales 299,010 1,707
__________ _________
(153,762) 4,669
Operating expenses:
Advertising and promotion 160,777 46,424
Professional fees 113,393 48,000
Amortization and depreciation 25,751 6,589
Salaries 61,175 6,358
Consulting fees 53,266 57,863
Rent 6,204 7,212
Travel and entertainment 33,400 13,303
Selling expenses 23,138 3,000
Administrative expenses 151,680 47,897
__________ _________
628,784 236,646
__________ _________
Net (loss) ($782,546) ($231,977)
</TABLE>
<TABLE>
J-BIRD RECORDS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<CAPTION>
(IN DOLLARS, EXCEPT NUMBER OF SHARES)
Common Retained
Common Stock Paid-in Earnings
Shares Amount Capital (Deficit) Total
________________________________________________
<S> <C> <C> <C> <C> <C>
BALANCE AT
JANUARY 1, 1996 - - - - -
Net loss - - - (231,977) (231,977)
Stock issued for cash 167,500 167,500 - - 167,500
Stock issued for services 145,600 145,600 - - 145,600
________________________________________________
BALANCE AT
DECEMBER 31, 1996 313,100 313,100 - (231,977) 81,123
Net loss - - - (782,546) (782,546)
Stock issued for cash 343,570 343,570 - - 343,570
Stock issued for services 60,000 60,000 - -
60,000
________________________________________________
BALANCE AT
DECEMBER 31, 1997 716,670 716,670 - (1,014,523)(297,853)
</TABLE>
<TABLE>
J-BIRD RECORDS, INC.
STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<CAPTION>
(ALL AMOUNTS IN DOLLARS)
1997 1996
____________ ____________
<S> <C> <C>
Cash flows from (used in) operating activities
Adjustments to reconcile net (loss) to net
Cash from (used in) operating activities:
Net (loss) (782,546) (231,977)
Amortization and depreciation 25,751 6,589
Stock issued for services 60,000 118,351
Decrease in accounts receivable (8,143) (1,952)
Increase in inventory (5,501) (48,265)
Increase in recording advances (19,665) -
Increase in accounts payable 347,060 85,475
___________ ___________
Net cash (used in) operating activities (383,044) (71,779)
Cash flows from (used in) investing activities
Fixed assets acquired (85,606) (90,827)
___________ ____________
Net cash (used in) investing activities (85,606) (90,827)
Cash flows from (used in) financing activities
Stock issued for cash 343,570 167,500
Due to shareholder 20,380 30,500
Notes payable 70,000 -
Officer loan 13,719 (13,719)
___________ ___________
Net cash from (used in) financing activities 447,669 184,281
Net increase in cash (20,981) 21,675
Cash, beginning of year 21,675 -
___________ ___________
Cash, end of year $ 694 $ 21,675
</TABLE>
J-Bird Records, Inc.
Notes to Statements of Operations, Changes in
Stockholders' Equity and Cash Flows
Years Ended December 31, 1997 and 1996
Note 1. Organization and Significant Accounting Policies
J-Bird Records, Inc., a Connecticut corporation, is the first World Wide Web
Recording Label (TM). The Company was officially launched on November 1, 1996
to market, distribute and sell music via a new medium - the Internet. At its
Website, located at http://www.j-birdrecords.com, the Company attracts and
signs recording artists through its on-line office and promotes, markets and
sells their recordings through it's on-line record store.
The Company has experienced operating losses since its inception and has
experienced significant cash flow problems. The Company is in the processing
of raising capital through various services to fund its operations and has
implemented certain operating strategies to obtain profitably.
On October 7, 1997, Caltron, Inc. entered into a stock purchase agreement with
the shareholders of J-Bird Records, Inc. to purchase their shares of J-Bird
Records, Inc. for the equivalent number of shares of Caltron , Inc. The total
number of shares exchanged in this transaction was 4,358,000. Upon entering
into these agreements, Caltron, Inc. acquired J-Bird Records, Inc. On October
8, 1997, Caltron, Inc. changed its name to J-Bird Music Group LTD. J-Bird
Records, Inc., is a wholly owned subsidiary of J-Bird Music Group LTD.
As a result of this transaction, the former shareholders of Caltron, Inc. will
be the controlling shareholders of the Company. This transaction has been
accounted for as purchase of J-Bird Records, Inc. by Caltron, Inc.
Fixed Assets
Fixed assets are recorded at cost and are being depreciated over their
estimated useful lives ( 5 to 15 years).
Cash
For purposes of the statement of cash flows, the Company considers cash as cash
held in operating accounts and all highly liquid investments with a maturity of
three months or less to be cash equivalents.
Inventory
Inventory stated at the lower of cost or market (first in, first out) consists
of musical CDs.
Revenue Recognition
Revenue is recorded when CDs are shipped from its fulfillment center. The
Company maintains its inventory at a fulfillment center, which provides the
shipping to customers.
Recording Advances
Recording advances represent advances against future royalties of certain
recording artists. Royalties are accrued at 12% of an artist's sales.
Income Taxes
Prior to being acquired by Caltron, Inc. the Company elected to be taxed as a
Subchapter S Corporation under the provisions of the Internal Revenue Code.
Accordingly, taxable income will be reported on the tax returns of the
individual shareholders. The Company is liable for certain state and local
corporate taxes.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Note 2. J-Bird Records, Inc./ Caltron Inc.
On October 7, 1997, Caltron, Inc. entered into a stock purchase agreement with
the shareholders of J-Bird Records, Inc. to purchase their shares of J-Bird
Records, Inc. for the equivalent number of shares of the Company. The total
number of common shares exchanged in this transaction was 4,358,000 and was
valued at $1,840,000 Certain cash payments made and expenses incurred of
$366,000 increased the purchase price to $ 2,206,000.
Note 3. Related Party Transactions
Certain shareholders perform legal and accounting services for the Company. The
Company issued 55,000 and 75,000 shares of stock valued at $55,000 and $75,000
for services performed in 1997 and 1996 respectively.
Note 4. Commitments and Contingencies
(a) Leases
The Company has an operating lease agreement for an office condominium.
Aggregate annual minimum future rental payments under the lease are $31,650, in
1998: $ 31,650, in 1999: and $ 18,466 in 2000. The Company has an option to
purchase the office condominium for $379,800 at the end of the lease.
Fifty percent of the aggregate lease payments would be applied to the purchase
price.
(b) Operating Agreements
The Company has a one year agreement with a public relations firm that requires
monthly payments of $4,500 in 1998.
( c) Royalty Agreements
The Company typically has three year agreements with recording artists that
require royalty payments at 12% of the artists' sales.
(d) Common Stock
During the years ended December 31, 1997 and 1996, the Company issued shares of
its common stock. These shares were not registered under the Securities Act of
1933 based on the exemption from registration thereunder provided by section 4
(2), thereof for offerings not involving a public offering.
At December 31, 1997 options to purchase 60,000 shares of stock at $1 per share
were outstanding.
