SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4/A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
AZTEK INC.
(Exact Name of Registrant as Specified in its Charter)
NEVADA
(State or Other Jurisdiction of Incorporation or organization)
7371
(Primary Standard Industrial Classification Code Number)
88 0324260
(I.R.S. Employer Identification Number)
1575 DELUCCHI LANE, SUITE #40, RENO, NEVADA 89502, (702) 827-3639
(Address, including zip code, and telephone number,
including area code, or registrant's principal executive offices)
COPIES OF ALL COMMUNICATIONS TO:
STEVE LARSON-JACKSON, ESQUIRE
W. KWAME ANTHONY, ESQUIRE
LAW FIRM OF LARSON-JACKSON, P.C.
1275 K STREET, N.W., SUITE 1101
WASHINGTON, D.C. 20005
Tel. (202) 408-8180
Fax. (202) 789-2216
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE
SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of the registration
statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of
eachclass of Proposed maximum Proposed maximum Amount of
securities to be Amount to be offering price aggregate offering registra-
Registered registered(1) per unit(2) price(3) tion fee
<S> <C> <C> <C> <C>
Common stock,
$.001 par
value per
share 2,051,109 .995 2,040,853
$703.74
</TABLE>
(1) Represents the estimated maximum number of shares of common stock,
par value $.001 per share, of Aztek, Inc. (the "Company"), expected to be
issued in exchange for up to 2,051,109 shares of common stock, no par value
per share, of the Aztek Technologies Inc. ("ATI"), upon consummation of the
merger of ATI with the Company, described herein.
(2) The basis for calculating the fee is Rule 457(f). The market for the
securities to be received by Aztek, Inc. on July 31, 1998 was C$1.50. The
exchange rate on that date was 1 Canadian dollar = 0.6636 US Dollar.
(3) Estimated solely for the purpose of calculating the registration fee.
The registration fee has been computed pursuant to Rule 457(f) under the
Securities Act of 1933, as amended.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission acting
pursuant to said section 8(a), may determine.
<PAGE>
CROSS-REFERENCE SHEET FOR
REGISTRATION STATEMENT ON
FORM S-4 AND PROSPECTUS
Item No. Form S-4 Caption Heading in Prospectus
- ----- ----------------- ----------------------
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus. . Outside Front Cover Page
2. Inside Front And Outside Back Cover Pages
Of Prospectus . . . . . . . . . . . . . . Available Information
Table of Contents
Available Information
And Incorporation of
Certain Documents by
Reference
3. Risk Factors, Ratio of Earnings to Fixed
Charges And Other Information . . . . . . Summary; The
Companies; Risk
Factors
4. Terms Of The Transaction. . . . . . . . . The Transaction; Terms
of the Transaction;
Reasons for
the
Transaction;
Description
of
Securities; Material
Differences with Respect
to the Rights of Share-
Holders; Other Terms of
the transaction;
5. Pro Forma Financial Information . . . . Comparative Per
Share Data; Pro
Forma
Financial Information;
. .
6. Material Contacts With The Company Being
Acquired . . . . . . . . . . . . . . . . Material Contracts with
the Company
Being Acquired
7. Additional Information Required For
Reoffering By Persons and Parties Deemed
to be Underwriters . . . . . . . . . . . Not applicable
8. Interests of Named Experts And Counsel . Opinion Letter of
Steve Winters in
Reference to
Dissenters'
Rights; Exhibit 8
9. Disclosure of Commission Position On
Indemnification For Securities Act
Liabilities . . . . . . . . . . . . . . Disclosure of Commission
Position
on
Indemnification for
Securities
Act
Liabilities
10. Information with respect to S-3
Registrants. . . . . . . . . . . . . . Not Applicable
11. Incorporation of Certain Information By
Reference . . . . . . . . . . . . . . . Not Applicable
12. Information with Respect to S-2 or S-3
Registrants . . . . . . . . . . . . . . Not Applicable
13. Incorporation of Certain Information
by Reference . . . . . . . . . . . . . .Not Applicable
14. Information with Respect to Registrants
Other than S-2 or S-3 Registrants . . . Summary; The
Companies; Description
of the Business
of the Acquiring
Company.
15. Information with Respect to S-3
Companies . . . . . . . . . . . . . . Not Applicable
16. Information with Respect to S-2
or S-3 Companies . . . . . . . . . . . .Not Applicable
17. Information With Respect to Companies
Other Than S-2 or S-3 Companies . . . . The
Companies;
Information About
the Company Being
Acquired
18. Information if Proxies, Consents or
Authorizations Are to be Solicited . . .Voting and Management
Information
19. Information if Proxies, Consents
or Authorizations Are Not to be
Solicited in an Exchange offer . . . . .Not Applicable
<PAGE>
AZTEK TECHNOLOGIES INC.
246 LAWRENCE AVENUE, SUITE #5
KELOWNA, BRITISH COLUMBIA, CANADA V1Y 6L3
(250) 762-2333
_____________, 1998
Dear Stockholder:
You are invited to attend the Annual and Extraordinary Meeting of
stockholders (the "Special Meeting") of Aztek Technologies Inc. ("ATI")
to be held on _________, 1998 at the offices of Steven K. Winters at 1010
Burrard Building, 1030 West Georgia St., Vancouver, B.C. V6E 2Y3, Canada at
9:00 a.m. local time. Notice of the Annual and Extraordinary Meeting, a
Joint Proxy Statement-Prospectus and a Proxy Card are enclosed.
The Special Meeting has been called in connection with the proposed
acquisition of ATI by Aztek, Inc. (the "Company") through the merger of ATI
with the Company in accordance with the Merger Agreement dated as of July 2,
1998 by and between ATI and the Company (the "Merger Agreement"). Pursuant to
the Merger Agreement, ATI will merge with and into the Company with the
Company being the surviving corporation and each outstanding share of ATI's
common stock will be automatically converted into the right to receive shares
of the Company's Common Stock, based upon an exchange ratio of one-to-one.
The transaction is referred to herein as the "Merger."
ATI and its controlling shareholders are presently the sole shareholders
of the Company's common stock. These affiliates acquired their shares at the
nominal amount of US$.05 per share for one million shares, US$.01 per share
for one million shares, and own approximately 97% of the Company's
outstanding
shares.
Following the Merger, the Company will operate the business that is
presently known as Aztek Technologies Inc. Consummation of the Merger is
conditioned upon approval by ATI's stockholders.
At the Special Meeting, stockholders of ATI will consider and
vote upon approval of the Merger and the Merger Agreement. Your Board of
Directors has approved the Merger Agreement, including the Merger, and
believes that the Merger and the Merger Agreement are in the best interests
of ATI and its stockholders. Accordingly, your Board of Directors unanimously
recommends that you vote FOR approval of the Merger and the Merger Agreement.
You are urged to read the accompanying Joint Proxy
Statement-Prospectus, which provides detailed information concerning the
Merger and related matters.
Your vote is important, regardless of the number of shares you own.
ON BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE EVEN IF YOU CURRENTLY PLAN
TO ATTEND THE SPECIAL MEETING. This will not prevent you from voting in
person
but will assure that your vote is counted if you are unable to attend the
Special Meeting.
Sincerely,
Mike Sintichakis
President
<PAGE>
* PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME *
AZTEK TECHNOLOGIES INC.
246 LAWRENCE AVENUE, SUITE #5
KELOWNA, BRITISH COLUMBIA, CANADA V1Y 6L3
(250) 762-2333
-----------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON ____________, 1998
------------------------------
NOTICE IS HEREBY GIVEN that the Annual and Extraordinary Meeting of
stockholders (the "Special Meeting") of Aztek Technologies Inc. ("ATI") will
be held on __________, 1998 at the offices of Steven K Winters at 1010
Burrard Building, 1030
West Georgia St., Vancouver, B.C. V6E 2Y3, Canada at 9:00 a.m. local time,
for the following purposes:
(1) To approve the acquisition of ATI by Aztek, Inc. (the
"Company") through the merger of ATI with the Company, with the Company
continuing as the surviving corporation, pursuant to which each outstanding
share of ATI Common Stock will be converted into one share of the Company's
common stock, par value US$.001 per share ("the Company Common Stock"), the
Merger Consideration and to approve the Merger Agreement by and between ATI
and the Company, dated as of July 2, 1998 (the "Merger Agreement") which sets
forth the terms and conditions of the Merger.
(2) To approve the acquisition of Qdata Software Corp.
NOTE: ATI and its controlling shareholders are presently the sole shareholders
of the Company's common stock. These affiliates acquired their shares at the
nominal amount $.05 per share for one million shares, $.01 per share for one
million shares, and own approximately 97% of the Company's outstanding shares.
The Board of Directors of ATI is not aware of any other business to come
before the Special Meeting.
The Board of Directors of ATI has fixed the close of business on
_____________, 1998 as the record date for the determination of stockholders
entitled to notice of and to vote at the Special Meeting. Only stockholders of
record at the close of business on that date will be entitled to notice of and
to vote at the Special Meeting.
By Order of the Board of Directors,
Mike Sintichakis
President
- -----------------------------------------------------------------------------
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE,
WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE SPECIAL MEETING, PLEASE
DATE, SIGN AND COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE.
- ------------------------------------------------------------------------------
<PAGE>
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME
JOINT PROXY STATEMENT-PROSPECTUS
------------------------
AZTEK INC.
PROSPECTUS
2,051,109
SHARES OF COMMON STOCK
PAR VALUE $.001 PER SHARE
------------------------
------------------------
AZTEK TECHNOLOGIES INC.
PROXY STATEMENT
FOR ANNUAL AND EXTRAORDINARY MEETING OF STOCKHOLDERS
TO BE HELD ON ___________, 1998
------------------------
This Joint Proxy Statement-Prospectus is being furnished to the
stockholders of Aztek Technologies Inc. ("ATI") in connection with the
solicitation of proxies by the Board of Directors of ATI for use at its
Annual and Extraordinary Meeting of Stockholders to be held on __________,
1998. This Joint Proxy Statement-Prospectus was first mailed to security
holders of ATI on or about __________, 1998.
At their Meeting, the holders of common stock of ATI will be asked to
approve the Plan of Merger and the Merger Agreement, dated as of July 2, 1998
providing for a merger pursuant to which Aztek, Inc., a Nevada corporation
(the "Company") will be the surviving corporation and ATI will cease to exist
(the transaction is referred to hereinafter as the "Merger"). The Merger
Agreement is incorporated by reference and is not presented herein or
delivered herewith. The Company will provide without charge to each person
who receives a prospectus, upon written or oral request of such person, a
copy of the Merger Agreement. Upon consummation of the Merger, each
outstanding share of ATI common stock, no par value ("ATI Common Stock"),
other than shares held by ATI shareholders who perfect dissenters' rights,
will be converted into one share of The Company's common stock, par value
$.001 per share ("Company Common Stock"). The receipt of the Company Common
Stock pursuant to the Merger will be tax-free to U.S. holders of ATI Common
Stock.
The Company has filed a Registration Statement on Form S-4 pursuant to
the Securities Act of 1933, as amended (the "Securities Act"), for 2,051,109
shares of the Company Common Stock to be issued in connection with the
Merger. This Joint Proxy Statement-Prospectus also constitutes the
Prospectus of the Company filed as part of the Registration Statement. All
information concerning the Company included in this Joint Proxy
Statement-Prospectus has been furnished by the Company and all information
concerning ATI has been furnished by ATI.
THE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK.
PROSPECTIVE
PURCHASERS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER THE SECTION
"RISK FACTORS."
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
Price Underwriting Discounts Proceeds to issuer
to public(1) and commissions or other persons
<S> <C> <C> <C>
Per share One share N/A One share
Total 2,051,109 shares N/A 2,051,109 shares
</TABLE>
(1) The Company is issuing the shares in a one-for-one exchange such that the
price for one share of the Company's Common Stock is one share of ATI Common
Stock. Upon consummation of the Merger, the Company will receive all the
outstanding shares of ATI and ATI will cease to exist.
(2) This Joint Proxy Statement-Prospectus includes the following expenses:
Registration fees. . . . . . . . . . . . . . . $ 704
Transfer agents' fees . . . . . . . . . . $ 4,800
Printing and engraving cots. . . . . . . . $ 1,000
Legal and accounting . . . . . . . . . . . $25,000
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS JOINT PROXY STATEMENT-PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS JOINT PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE THE COMPANY COMMON
STOCK OFFERED BY THIS JOINT PROXY STATEMENT-PROSPECTUS, OR THE SOLICITATION
OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
JOINT PROXY STATEMENT-PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR ATI SINCE THE DATE OF
THIS JOINT PROXY STATEMENT-PROSPECTUS.
The date of this Joint Proxy Statement-Prospectus is __________, 1998.
AVAILABLE INFORMATION AND INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
This prospectus incorporates by reference the Merger Agreement between the
parties. Thus, the Merger Agreement is not presented herein or delivered
herewith. ATI will provide without charge to each person who receives a
prospectus, upon written or oral request of such person, a copy of the
Merger Agreement (not including exhibits to the Merger Agreement that is
incorporated by reference unless the exhibits are themselves specifically
incorporated by reference). Such request should be made to Mike Sintichakis,
#5-246 Lawrence Avenue, Kelowna, British Columbia, Canada V1Y 6L3, (250)
762-2333. In order to ensure timely delivery of the documents, any request
should be made by ________, 1998. The Company is not subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and therefore does not file proxy statements or any
other information with the Securities and Exchange Commission (the
"Commission"). ATI is subject to the informational requirements of the
Exchange Act and, in accordance therewith, ATI files reports and other
information with the Commission. However, no such reports or other
information filed with the Commission is incorporated by reference in this
Joint Proxy Statement-Prospectus. Reports and other information filed by
ATI can be inspected and copied at the Commission's public reference room
located at 450 Fifth Street, NW, Washington, DC 20549, and requested at the
following public reference facilities in the Commission's regional offices: 7
World Trade Center, Suite 1300, New York, NY 10048; and City Corp. Center,
500 West Madison Street, Suite 1400, Chicago, IL 60661-2511. Copies of such
material can be obtained at prescribed rates by writing to the Securities and
Exchange Commission, Public Reference section, 450 Fifth Street, NW,
Washington, D.C. 20549. Though the Company is not subject to the federal
reporting requirements, as a result of the merger with ATI, the Company will
assume ATI's status as being subject to the reporting requirements. This
Joint Proxy Statement-Prospectus does not contain all of the information set
forth in the Registration Statement on Form S-4 and exhibits thereto (the
"Registration Statement") which the Company has filed with the Commission
under the Securities Act and to which reference is hereby made.
The Company's shares are not listed on any U.S. exchange. The public
market for ATI's securities in Canada is on the Vancouver Stock Exchange
under the symbol "VSE-AZT." The public market for ATI's securities in the
United States is on the Over-the-Counter Bulletin Board (the "OTC Bulletin
Board") under the symbol "AZTKF."
ii
<PAGE>
TABLE OF CONTENTS
Letter To Stockholders
Notice Of Special Meeting
Available Information And Incorporation Of Certain Documents By Reference
Summary.................................................................ii
The Companies..............................................................2
Risk Factors...............................................................3
The Transaction............................................................7
Terms Of The Transaction...................................................7
Description Of Securities.................................................11
Material Differences with Respect to the Rights of Securities Holders.....11
Pro Forma Financial Information...........................................15
Disclosure Of Commission Position On Indemnification For Securities Act
Liabilities.............................................................17
Material Contracts With The Company Being Acquired........................17
Description Of The Business Of The Acquiring Company......................17
Description Of Property.................................................17
Legal Proceedings.......................................................17
Market For Common Equity And Related Stockholder Matters................17
Holders.................................................................18
Dividends...............................................................18
Management's Discussion And Analysis Or Plan Of Operation.................18
Year 2000 Issues..........................................................21
External Funding..........................................................22
Changes In And Disagreements With Accountants On Accounting And Financial
Disclosure..............................................................23
INFORMATION ABOUT THE COMPANY BEING ACQUIRED..............................23
Description Of Business..................................................23
Description Of Property..................................................28
Legal Proceedings........................................................28
Market For Common Equity And Related Stockholder Matters.................28
Holders Of Common Stock..................................................29
Dividends................................................................29
Management's Discussion And Analysis Or Plan Of Operation................29
External Funding.........................................................36
Disagreements With Accountants On Accounting And Financial Disclosure....36
PART D VOTING AND MANAGEMENT INFORMATION..................................36
Date, Time and Place Information.........................................36
Revocability of Proxy....................................................36
Dissenters' Rights of Appraisal..........................................36
Persons Making the Solicitation..........................................37
Interest Of Certain Person in Matters To Be Acted Upon...................37
Voting Securities and Principal Holders Thereof..........................39
Security Ownership of Certain Beneficial Owners and Management...........39
Security Ownership of Certain Beneficial Shareholders....................40
Voting Procedures........................................................42
Directors, Executive Officers, Promoters And Control Persons Of The
Surviving or Acquiring Company......................................43
Executive Compensation Of The Directors And
Executive Officers of ATI...........................................44
Executive Compensation Of The Directors And Executive Officers Of The
Surviving or Acquiring Company......................................45
Certain Relationships and Related Transactions...........................47
iii
<PAGE>
SUMMARY
This Joint Proxy Statement-Prospectus is being issued by Aztek, Inc., a
Nevada Corporation, and Aztek Technologies Inc., a British Columbia
corporation, to effect a merger of the two companies with the Nevada
corporation being the surviving entity. Aztek, Inc. is a dormant corporation
that has been in existence for four years. Aztek Technologies Inc. is a
company that develops and sells computer software and computer systems and
provides support services for its customers. Aztek, Inc. will issue one
common share of its stock for each outstanding share of Aztek Technologies
Inc.
The shareholders of Aztek, Inc. presently consist of Aztek Technologies
Inc. and the directors of Aztek Technologies Inc. (the "Affiliates") The
On June 24, 1998, the Affiliates acquired one million shares at US$.05 per
share and one million shares at $.01 per share. On June 23 and 25, 1998,
ATI's shares closed at C$.80 and C$.95 respectively. The shares purchased at
US$.01 per share are referred to as Bonus Shares and are discussed below.
For more information on the Bonus Shares, see "Certain Relationships and
Related Transactions" at page_____. The following table sets forth the
percentage change in ownership that will result from the merger.
<TABLE>
<CAPTION>
No. of Aztek No. Of No. Of Shares
Technology Aztek Inc. Held After
Shareholder Shares %(1) Shares % Merger %(1)
- ----------- ----------- --- ----------- --- ------------- ---
<S> <C> <C> <C> <C> <C> <C>
Total issued
& outstanding 2,051,109 100% 2,025,000 100% 4,076,109 100%
Mike Sintichakis 462,190 23 800,000 40 1,262,190 31
Nick Sintichakis 74,500 4 430,000 21 504,500 12
Daunna Potts 0 0 10,000 * 10,000 *
Eileen Keogh 37,000 2 320,000 16 357,000 9
Edson Ng 104,700 5 440,000 22 544,700 13
Aztek Tech-
nologies(2) 0 0 25,000 1 0 0
Non-affiliates 1,372,719 67 0 0 1,372,719 34
</TABLE>
(1) Percentages do not equal 100% because of rounding.
(2) Aztek Technologies Inc. presently owns 25% of the outstanding shares of
Aztek Inc. After the merger, the 25,000 shares will become authorized but
unissued shares of Aztek Inc.
*Less than one percent.
The Company issued common shares at US$.05 per share and certain Bonus
Shares at US$.01 per share in exchange for cash to pay anticipated legal and
corporate expenses and expenses associated with anticipated acquisitions of
Qdata Software Inc. discussed elsewhere in this Joint Proxy
Statement-Prospectus. For more information see Description of the Business of
the Acquiring Company Management's Discussion and Analysis or Plan of
Operation at page __. The Bonus Shares are not a separate class of shares
but are common shares, and serve as an incentive to the Directors and Officers
of the Company. The Bonus Shares are currently in escrow until the Company
meets several performance objectives over a period of five years. The
beneficial owners of the Bonus Shares may only receive delivery of the shares
to a maximum of 20% per year depending on the Company's performance. For
more detailed information, see "Market For Common Equity And Related
Stockholder Matters" below.
In addition to the increased interests of the Affiliates, the net effect
of the merger is that the business and operations of Aztek Technologies Inc.
will move from being a Canadian company to being a U.S. Company.
The primary addresses of the companies that are the parties to the
transaction for which the securities described in this Joint Proxy
Statement-Prospectus are being issued are as follows:
Aztek, Inc.
Suite #40 - 1575 Delucchi Lane
Reno, Nevada 89502
(702) 827-3639
Aztek Technologies Inc.
#5-246 Lawrence Ave.
Kelowna, B.C. V1Y 6L3
Canada
(250) 762-2333
THE COMPANIES
Aztek, Inc. (the "Company") was incorporated as Spectral Innovations
(1994) Inc. in 1994. ATI formed the Company as a wholly-owned subsidiary
intending to acquire Spectral Innovations, Inc., a California corporation
("Spectral California"). ATI subscribed for 25,000 shares of the Company at
$1.00 per share. The shares were subscribed and the Company continues to
carry the full amount of the purchase price as a subscription receivable due
to ATI's lack of funds to pay for the shares in cash. The acquisition of
Spectral California did not materialize. Shortly hereafter, ATI's management
decided it eventually would merge ATI into the Company but management declined
to effect the merger immediately. The Company has remained dormant since its
inception. The Merger Agreement described below resulted from the decision to
merge and the transaction is the subject of this Joint Proxy
Statement-Prospectus. The reasons for the Merger are described below
in the subsection, "Reasons for the Transaction" under "Terms of the
Transaction."
ATI was incorporated on July 11, 1979, by filing and registering its
articles with the British Columbia Registrar of Companies. Over the last
four years, ATI has expanded its business focus and capabilities following
acquisitions. On September 30, 1994, ATI acquired all of the issued and
outstanding shares of ResponseWare Corporation, a developer of municipal
government software including general accounting and payroll systems and
specialized systems such as property taxation, utility billing and building
permits. This acquisition allowed ATI to further diversify its operations
within the computer hardware, software and telecommunications market and to
expand the existing forty-five (45) municipal and private sector clients of
ResponseWare. ATI continues to support and service the ResponseWare software
and client base as its primary source of revenue. On August 21, 1995, ATI
acquired the assets and business of Helix Technologies Limited, a consulting
and systems integration firm specializing in technology for mobile work force
automation. ATI has completed contracted projects from the acquisition and
currently has no contracts for work in this area. Mobile work force
automation technologies will be incorporated into future ATI products that
have yet to be developed. ATI also continues to pursue further project-based
contracts in the area of mobile work force automation technologies.
ATI's shares are currently trading on the Vancouver Stock Exchange
("VSE") and the Over-The-Counter Bulletin Board ("OTC BB"). ATI announced
2
<PAGE>
the Merger on July 2, 1998. At that time, its shares closed at C$1.25 on the
VSE and there had been no trades on the OTC Bulletin Board.
RISK FACTORS
The securities offered hereby are speculative in nature and involve a
high degree of risk. Prospective investors should consider carefully the
following factors, among others, prior to making an investment decision.
OPERATING HISTORY. The Company has no operating history. The Company
was incorporated in the State of Nevada in 1994 as Spectral Innovations
(1994), Inc., but has been dormant since its inception. On June 8, 1998,
Spectral Innovations (1994) Inc. changed its name to Aztek Inc. by filing
with the State of Nevada an amendment to its articles of incorporation.
Following the merger, the Company will assume the business activities of ATI.
CHANGE IN BUSINESS FOCUS. ATI has been incorporated since July 11,
1979. Nevertheless, it has undergone several major changes in ownership and
its primary business focus. Following its inception, ATI was involved in the
exploration of oil, gas, and gold properties in North America. From 1989 to
1991 ATI was dormant. ATI's name has changed several times since its
inception to reflect its changing business emphasis. On September 1991, the
current president, Mr. Mike Sintichakis, became a director and ATI's
president. During the last six years, ATI has experienced substantial
structural and fiscal changes necessitated by the acquisition of other
companies and external capital raising efforts. As a result of the Merger,
ATI will cease to exist, the Company will be the surviving corporation, and
all of ATI's operations will be the business of the Company.
DISCONTINUANCE OF PRIMARY PRODUCT. ATI'S products consist solely of
computer programs developed by ATI's predecessor, ResponseWare Corporation.
ATI discontinued the product because the products cannot take advantage of
personal computer environments and was to expensive to maintain. As a result
of discontinuing the product, net sales decreased 26% from $459,937 in the
fiscal year ending 1997 to $339,784 in the fiscal year ending 1998. Sales
decreased 13% from $528,922 in the fiscal year ending in 1996 to $459,934 in
1997.
Even though ATI is not selling new ResponseWare products, it continues
to earn revenue by servicing, supporting, and developing product enhancements
(software upgrades) for the ResponseWare product line. ATI is contractually
obligated to provide maintenance services for the products already sold.
Customers pay an annual fee for the computer system maintenance. For those
customers who are not parties to an annual service contract, ATI provides
support and is compensated on a time and material basis. Support and
maintenance of ResponseWare products currently generate approximately 90% of
ATI's revenues. For more information see "Management's Discussion and
Analysis Or Plan of Operation."
RISKS OF DEVELOPING NEW SOFTWARE. The Company intends to design and
develop an entirely new suite of software products to replace ResponseWare's
obsolete products. The new products will be based on software licensed to
the Company by IBM. No guarantee exists as to the viability of the new
products. The software is new, untested, and therefore potentially unstable.
The products are subject to delays which could result in lost sales to new
customers and lost revenues from existing customers that move to other
vendors before new products are completed. Acquisitions will also affect new
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product development. ATI must design products in such a way that they can be
integrated with other products including those acquired through acquisitions
of companies. For more information on new products, see "Management's
Discussion and Analysis" below.
EXPECTATION OF LOSSES. The Company's management and ATI's management
believe the Company and its software and services will be a profitable
enterprise in the future. Therefore, the Company anticipates experiencing
future operating losses resulting primarily from marketing and recruitment of
Value Added Resellers ("VARs") and associated training costs. ATI has
operated at a loss for several years. To limit and reverse anticipated
operating losses the Company must successfully develop its distribution
network of VARs in the United States and Canada.
WORKING CAPITAL REQUIREMENTS. After the Merger, the Company will
require a substantial investment in working capital, principally to finance
its marketing activities, recruitment of VARs, hardware and software
development, and to increase its existing staff. ATI's working capital
balance as of June 30, 1998, was $-451,698. ATI has been attempting to raise
one million dollars in an offering. Without additional capital generated from
sale of the Company's stock, or from operations, the Company will be unable to
fund its business and will be unable to offer its services on an extensive
basis. Thus, the Company will be unable to expand its business. The Company
will require a minimum of approximately $400,000 in working capital over the
next twelve months. There can be no assurance that capital from private and
public offerings will be available, or if available, can be obtained on terms
advantageous to the Company. If the Company is successful in effecting its
anticipated private placement, the capital therefrom will be sufficient to
meet the expected working capital needs for the following twelve months. If
the Company is unable to raise sufficient capital either externally or from
operations it will not be able to sustain its operations. The Company will
have to reduce expenditures to keep in line with existing revenues generated
by maintenance and customized service contracts currently in place. For more
information on ATI's efforts to raise additional capital, see the subsection
"Current Business Status" under "Description of Business" which can be found
under "Information about the Company to be Acquired."
ARBITRARY OFFERING PRICE. No public market presently exists for the
Company's Common Stock and only a limited prior market has existed for ATI's
Common Stock. On a daily basis, ATI's trading volume on the Vancouver Stock
Exchange and the OTC Bulletin Board generally did not exceed 1,500 shares.
The one-for-one exchange offered in this Joint Proxy Statement-Prospectus
bears no relationship to the assets, book value, earnings, net worth, or any
other recognized criteria of value of ATI. Consequently, the share exchange
ratio, which can be deemed an offering price for ATI's securities, was
determined arbitrarily and solely by the Boards of Directors of the Company
and ATI. In establishing the offering price, the Boards considered such
matters as the limited financial resources of the Company and ATI and the
general condition of the securities markets. The exchange ratio of the
Merger should not, however, be considered an indication of the actual value
ATI.
CENTRALIZED MANAGEMENT. The Company's Board of Directors consists
solely of the directors of ATI and one relative of a director. The
Company has no other management. Upon completion of the Merger, ATI's
management will become the Company's management. The Company's key
management functions will be concentrated with ATI's current president, Mr.
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Mike Sintichakis. The loss of Mr. Sintichakis' services could significantly
impact the Company's future operations and profitability. ATI currently does
not have key management insurance on Mr. Mike Sintichakis.
INDEMNIFICATION OF DIRECTORS AND OFFICERS. The articles of
incorporation for both the Company and ATI indemnify directors and officers
of each and allow for ATI and the Company to secure insurance for the
liability of their respective directors and officers.
NO PUBLIC MARKET FOR SHARES. At the present time, no public market
exists for the Company's Common Stock and no market will, in fact, develop
after completion of the Merger. Although ATI's Common Stock is traded on
the Vancouver Stock Exchange, the daily volume is approximately 1,500
shares. ATI's listing on the OTC Bulletin Board is relatively recent, and no
reliable historical data exists upon which to project daily trading volume of
ATI's Common Stock. After the merger, the Company will seek to have its
shares listed on the OTC Bulletin Board but will not apply to have its shares
listed on any exchange. The Company will implement is acquisition plan
described below. Once the Company is qualified, it will seek listing on the
Nasdaq SmallCap.
NO DIVIDENDS. Neither the Company nor ATI has paid any dividends to
date and the Company has no plans to pay dividends in the foreseeable future.
LIMITED FINANCIAL RESOURCES AND NEED FOR ADDITIONAL FINANCING.
Other than the proceeds from an anticipated offering and possible future
revenues from the sale of the Company's services, the Company does not at
this
time, and may not in the future, have any additional sources of funds such as
operating funds or significant credit arrangements, from which to pay the
costs of its proposed operations. Although the Company believes that the
external fund raising efforts will be sufficient for the Company's short-term
needs after the Merger, the conduct of the Company's business will require
additional funds. The Company cannot assure it will be able to raise
additional capital in the future to support its operations, either from
operations or from external sources. Once the Company raises
additional funds and completes three anticipated acquisitions, it will begin
the process of acquiring real properties. The first step will be to re-zone
property in Kelowna B.C. before acquiring the property. The Company will
then seek to do a three million dollar offering to acquire property in
Kelowna B.C. that is presently owned by a non-affiliate. The parties have
only had preliminary discussions about the property thus far and information
about the economic effects is not currently available.
RISKS ASSOCIATED WITH ACQUISITIONS. The Company will use money raised
in its anticipated offering for acquisitions, completion of products under
development, financing expenses, marketing and working capital. Moreover,
inherent risks associated with the plan of acquisitions include the following
factors: acquisition targets tend to be small privately owned companies for
which information material to the acquisitions is unavailable prior to the
acquisitions; the size of the acquisitions is small such that substantial due
diligence is cost-prohibitive; the Company cannot assure that acquired
companies will be free of problems with their staffs, products or clients;
the Company can give no assurances that financial projections associated with
the acquisitions will be accurate; the Company cannot give assurances that
the acquired companies' clients will easily make the transitions from the
acquired companies' products to the Company's products. ATI experienced such
problems with its acquisition of Helix Technologies Limited ("Helix"). Helix
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<PAGE>
generated revenues from time and materials in consulting and custom
programming. Helix did not have its own proprietary products. Since ATI did
not have additional financing, ATI focused its limited resources on servicing
contracts assumed in its acquisition of ResponseWare Corp at the expense of
sustaining Helix or developing new opportunities for Helix. Thus, Helix's
business activities dwindled. For more information on pending acquisitions,
see "Management's Discussion and Analysis" under "Information About the
Acquiring Company."
ATI is presently negotiating to acquire Concord Consultants Ltd.,
Municipal Hardware Systems Ltd., and Qdata Software Inc. The companies to be
acquired are software designers and vendors. The acquisitions are
dependent on the Company 's ability to raise additional money in an offering
or offerings. ATI's pending offering has been unsuccessful thus far and ATI
cannot guarantee that it will be able to raise the money contemplated under
its offering.
DEBT TO AFFILIATES AND DEBT TO THIRD PARTIES. Pursuant to the Merger,
the Company will assume all of ATI's outstanding debt. Trade accounts payable
are interest-free. The royalties payable is without interest. The current
liabilities to officers and directors is without interest. ATI currently has
long term debt of approximately C$133,507 of which C$132,707 is due to
affiliates. The note payable to affiliates is without interest. The
remaining C$800 is an obligation under a capital lease. ATI has an accounts
payable balance of C$287,166, and total debt of C$657,759.
SUBSTANTIAL COMPETITION. ATI currently competes in a rigorous and
demanding business environment. The primary source of competition comes from
small to mid-sized municipal government marketers, regional vendors,
specialized departmental solution providers and in-house developed systems.
Approximately 100 significant regional software vendors are in the United
States and approximately 10 significant regional software vendors are in
Canada. The Company and ATI expect competition to increase in the
foreseeable future, which may or may not impact the Company's profitability
after the Merger. Mounting pressure to deliver current technology is
increasing at a time when funding for new development is difficult for the
Company to achieve. The Company's products are designed to take advantage of
business intelligence tools and software. Frequently, municipalities create
and maintain information and data with limited support staff. For additional
information, see "Competition" under "Description of Business" at page 23.
ATI's software applications can accommodate customer-developed
enhancements better than alternative technologies. Presently, many
proprietary products are designed as full-featured products that do not allow
users to extend the products or access the data that makes up the products.
These capabilities are desirable to provide options to the customer for
customizing the products by adding the functionality or tying in other
systems. Common requirements include adding ad-hoc query and reporting tools
or workflow management tools. ATI's products use object oriented
technologies and documented program interfaces to facilitate third party
extensions and access to data.
VOTING CONTROL BY INSIDERS. The Company's articles of incorporation and
ATI's articles prohibit cumulative voting in electing directors. The
Company's directors are presently the largest stockholders in ATI and all of
ATI's directors presently serve on the Company's Board of Directors. In this
regard, Mr. Mike Sintichakis, president and director, will continue to be the
largest single shareholder.
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THE TRANSACTION
The Company has entered into an agreement with ATI whereby each one
outstanding share of ATI Common Stock will be exchanged for one common share,
par value $.001 of the Company resulting in all shareholders of ATI becoming
shareholders of the Company. The transaction is subject to regulatory
acceptance and the approval of the shareholders of ATI and all regulatory
bodies having jurisdiction over the Company.
TERMS OF THE TRANSACTION
Background of the Transaction. ATI and the Company's principal, Mr.
Mike Sintichakis, concluded that ATI would be in a better position for growth
and expansion if it were a U.S. Company. After conferring on the matter, the
board resolved to change the domicile of ATI. At Mr. Sintichakis'
suggestion, since ATI had already formed a U.S. corporation, the board
concluded that it would be appropriate to merge ATI into the dormant
corporation. On June 30, 1998, the Company's Board officially approved the
acquisition of ATI in a one-for-one exchange. For the benefits of operating
as a U.S. company, see "Reasons for the Transaction" below. The only
agreement to which the Company and ATI are parties is the Merger Agreement.
Terms Of The Acquisition Agreement. The Merger Agreement provides for
the acquisition of ATI by the Company by ATI merging into the Company with
the Company being the surviving corporation. Each outstanding share of ATI's
common stock will be automatically converted into the right to one share of
the Company's Common Stock. This transaction is referred herein as the
"Merger." The Merger Agreement calls for the Company to issue its shares in
exchange for each outstanding share of ATI in a one-for-one exchange. The
parties have provided that the Company will issue Escrow Shares such that the
holders of ATI escrow shares will receive Escrow Shares in the Company's
Common Stock with the same rights that existed prior to the Merger. All
assets and liabilities of ATI will pass to the Company on the completion
of the Merger. Except for Mr. Sintichakis, the directors and officers are
required by the Merger Agreement to resign from ATI at the completion date.
They have already been duly elected as the directors and officers of ATI.
Treatment of Stock Options and Escrow Shares. At the Effective Date,
each option outstanding under ATI's stock option plan shall be converted into
an option to purchase the number of shares of Company Common Stock equal to
the number of shares of ATI Common Stock issuable immediately prior to the
Effective Date upon exercise of such option (without regard to restrictions on
exercisability) upon the same terms and conditions under the relevant option
as were applicable immediately prior to the Effective Time. At the Effective
Date, each ATI escrow share outstanding shall be converted into the number of
escrow shares of Company Common Stock equal to the number of escrow shares of
ATI Common Stock issuable immediately prior to the Effective Date upon the
same terms and conditions under the relevant escrow plan as were applicable
immediately prior to the Effective Time. The Escrow Shares are placed in
escrow on release upon ATI reaching certain milestones. The Escrow Shares
serve as an incentive to Mr. Sintichakis to cause ATI to reach these
milestones.
ATI currently has stock options outstanding and shares allotted
accordingly. Directors or employees may exercise the options for the total
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<PAGE>
shares allotted or a portion of the shares allotted. Directors and employees
are not under any obligation to take up and pay for any of the optioned
shares. The stock options are non-transferable and become null and void
thirty days after the director or employee ceases to be a director or
employee of ATI. 185,000 options with an exercise price of $1.82 are
outstanding and will expire on March 20, 1999.
Of the total shares of ATI Common Stock outstanding, 354,000 shares are
escrow shares that will be released to their owners at the rate of 1 share
for each $0.31 of cash flow from operations. Shares not released prior to
September 17, 2001 will be cancelled and treated as authorized but unissued
shares. The Directors own certain Bonus Shares that are also held in escrow
and referred to as escrow shares. The shares are placed in escrow and
released upon the Company meeting certain milestones. The Company issued the
Shares on the condition that they be placed in escrow to serve as an
incentive to the directors to maximize the Company's performance and
encourage the directors to continue serving in their capacities as the
Company
grows.
REASONS FOR THE TRANSACTION. The Board of Directors of ATI considered
the Merger and the terms of the Merger Agreement, including the Exchange
Ratio, in light of economic, financial, legal, market and other factors and
concluded that the Merger is in the best interests of ATI and its
stockholders. The primary purpose of the Merger is to change ATI's
domicile. By merging, the Company will acquire a going concern and move from
being a dormant corporation to an active corporation. The Company will own
all of ATI's assets, receive all its revenues and assume its liabilities and
expenses.
The Company's directors and officers have acquired the Company's
Common Stock at a price greater than the value of the shares to be tendered
by ATI's shareholders upon completion of the Merger. Upon the effective date
of the merger, the investors in ATI will benefit from an immediate increase
in per share value of $-0.23 to $-0.10 from the net tangible book value of
their ATI Common Stock when compared to the resulting net tangible book value
of the Company's Common Stock after the Merger.
In exchange for all the Common Stock of ATI, the Company will
issue its stock to ATI's shareholders. Upon completing the Merger, the
shareholders of ATI will become shareholders in an American corporation with
all the assets, future revenues, liabilities and expenses previously
associated with ATI. Management for both companies believe that significant
advantages exist with respect to the surviving company being an American
company. In the near future, the Company intends to do a significant amount
of business in the U.S. As an American company, it will not be vulnerable to
currency risk. Moreover, management believes that it will be better able to
attract U.S. municipal customers as an American company than as a Canadian
company.
As an American company, the surviving company will be able to attract
more investment capital as it continues to grow. Investors tend to be more
cautious with respect to investing in foreign companies partly because they
have less access to information and because such foreign companies may be
subject to less stringent accounting rules. Though ATI is currently a fully
reporting company under the Securities Exchange Act of 1934, investors still
tend to perceive that they enjoy less protections when investing in a foreign
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company. Future investors in the Company can be confident that they are
investing in a company that is subject to U.S. accounting procedures which
tend to be more strict than those of non-U.S. domiciles. The Company will
apply to have its shares traded on the OTC Bulletin Board and ATI's shares
will be de-listed from the Vancouver Stock Exchange. As a result of the
Merger and subsequent de-listing, the Company will no longer be subject to
different trading rules and requirements. Currently, ATI is subject to
different trading rules and requirements by virtue of its shares being traded
on Canadian exchanges and the OTC Bulletin Board.
At or around the time of the Merger, the Company will acquire the assets
of Qdata Software Inc., a Barbados corporation that distributes computer
software internationally. The acquisition of Qdata is not contingent on the
Merger. Management of the Company and Qdata are presently in negotiations.
The Company's management does not know whether the acquisition of Qdata will
take place before or after the Merger of ATI and the Company, but the Company
and Qdata expect to effect the acquisition as soon as they reach an agreement
on the acquisition terms. They have agreed in principal that the Company will
pay for Qdata by issuing shares of its Common Stock in exchange for Qdata's
assets, but will not assume Qdata's liabilities. The parties have not agreed
on the number of shares the Company will issue in the transaction. The
principals of Qdata are not affiliates of ATI or the Company. ATI's
shareholders will benefit from the transaction because shortly after the
Merger ATI's shareholders will own stock in a company with combined assets
and revenues of ATI and ultimately Qdata Software Corp. THE BOARD OF
DIRECTORS OF ATI UNANIMOUSLY RECOMMENDS THAT ATI'S STOCKHOLDERS
VOTE FOR APPROVAL OF THE MERGER AND THE MERGER AGREEMENT.
Exchange of Stock Certificates. Prior to the Effective Date, the
Company will appoint a stock transfer agent (the "Exchange Agent") to effect
the exchange of stock certificates in connection with the Merger. As soon as
practicable after the Effective Date, the Exchange Agent will send a notice
and letter of transmittal to each ATI stockholder of record at such date
advising such stockholder of the effectiveness of the Merger and the procedure
for surrendering to the Exchange Agent outstanding certificates formerly
evidencing ATI Common Stock in exchange for new certificates of Company
Common Stock. Promptly following receipt of such notice and transmittal form,
holders of ATI Common Stock certificates should surrender their certificates
in accordance with the specified procedures. Upon surrender, each ATI Common
Stock certificate will be canceled.
Conditions to the Merger. The obligations of the Company and ATI
to effect the Merger are solely and jointly subject to a number of conditions
including, among other things, the receipt of ATI stockholder and regulatory
approval of the Merger.
Required Regulatory Approvals. The Merger is subject to the approval of
the Vancouver Stock Exchange.
Interests of Certain Persons in the Merger. Certain members of
ATI's management and Board of Directors have interests in the Merger in
addition to their interests as stockholders of ATI generally. Those
interests relate to an increase in the directors' and officers' percentage
share of ownership in the surviving company relative to their percentage
share of ownership in ATI before the Merger. For additional information, see
"The Merger Interests of Certain Persons in the Merger" herein.
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ATI's shares are currently listed on the Vancouver Stock Exchange. The
Merger is subject to approval by the Vancouver Stock Exchange. If such
approval is not granted, ATI will voluntarily seek de-listing so that it may
proceed with the Merger. In addition to issuing one common share of the
Company's Common Stock for each share of ATI's Common Stock, the Company will
issue one share option and escrow share for each share of ATI's option shares
and escrow shares respectively such that the option shares and escrow shares
in the Company as the survivor will enjoy the same rights, privileges and
obligations as the option and escrow shares in ATI.
COMPARATIVE PER SHARE DATA
The following table sets forth the historical book value, cash dividends
declared per share and income or loss per share of the Company after giving
effect to the Merger. The information presented should be read in
conjunction with such pro forma combined financial information and notes
thereto and the separate historical consolidated financial statements of the
Company and notes thereto appearing elsewhere in this Joint Proxy
Statement-Prospectus, and the statements of ATI appearing in its annual
report to shareholders.
<TABLE>
<CAPTION>
June 30 June 30 June 30
1998 1997 1996
------- ------- -------
(In U.S. Dollars)
<S> <C> <C> <C>
The Company
Historical
Book Value per Share $0.03 N/A N/A
Cash Dividend per Share - - -
Income (Loss) per Share, from
Continuing Operations - - -
Equivalent
Book Value per Share 0.01 N/A N/A
Cash Dividend per Share - - -
Income (Loss) per Share, from
Continuing Operations - - -
ATI
Historical
Book Value per Share ($.16) N/A N/A
Cash Dividend per Share - - -
Income (Loss) per Share, from
Continuing Operations (0.16) (0.26) (0.14)
Equivalent
Book Value per Share (0.08) N/A N/A
Cash Dividend per Share - - -
Income (Loss) per Share, from
Continuing Operations (0.08) (0.13) (0.07)
Pooled
Pro Forma
Book Value per Share (0.06) N/A N/A
Cash Dividend per Share - - -
Income (Loss) per Share, from
Continuing Operations (0.06) (0.13) (0.14)
</TABLE>
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DESCRIPTION OF SECURITIES
The Company's authorized capital stock consists of 100,000,000 shares of
Common Stock, $.001 par value. The securities to be registered pursuant to
the Form S-4 and issued pursuant to this Joint Proxy Statement-Prospectus are
all of the authorized common stock of the Company. On June 30, 1998,
2,025,000 shares of Common Stock were outstanding and held of record by six
shareholders. Immediately following the Merger and upon the tender of all of
ATI's shares, 4,076,109 shares of Common Stock will be outstanding and held
of record by approximately three hundred forty-seven shareholders.
The holders of the Company's Common Stock are entitled to one vote per
share on all matters to be voted on by the shareholders and to receive
ratably dividends when and as declared by the Board of Directors from funds
legally available therefor. In the event of a liquidation, dissolution or
winding up of the Company, holders of its Common Stock are entitled to share
ratably in all assets available for distribution to stockholders after
payment of all liabilities. No preemptive, subscription, or redemption
rights relating to the Common Stock exists other than the Bonus shares
disclosed below. No cumulative voting rights in the election of directors
exist for the Company's Common Stock. The Company has no preferred shares.
MATERIAL DIFFERENCES WITH RESPECT
TO THE RIGHTS OF SECURITIES HOLDERS
Annual Meetings. ATI is a British Columbia (B.C.) corporation. B.C.
law requires a corporation to hold an annual meeting at least once a year and
not more than thirteen months after the prior annual meeting. If a
corporation fails to hold such a meeting, a shareholder can apply to the
court for relief. B.C. law requires ATI to give notice of a meeting at least
21 days in advance of the meeting, but the record date cannot exceed 49 days
before the date on which it will take an action. Under Nevada law, the
Company must notify the shareholders at least ten days but not more than
sixty days before the meeting. Moreover, the Company can cease delivering
notices of meetings, if notices for the prior two years, and at least two
dividend or interest payments for the prior one year have been returned
undeliverable. B.C. law requires annual meetings to be in B.C. whereas
Nevada law requires the annual meeting to held as specified in the bylaws.
Thus after the Merger, Canadian stockholders may be less able to attend
annual meetings. Under B.C. law, shareholders owning an aggregate of at
least
1/20 of the outstanding shares of ATI may compel the directors to call a
meeting. Nevada law contains no comparable provision. As a reporting
company, B.C. law requires ATI to provide an income statement, a balance
sheet
and statement of surplus for two years at the annual meeting. ATI must also
send financial statements to all shareholders. Nevada law contains no
comparable provisions.
Under B.C. law, ATI must keep a register of all debts to directors
exceeding C$5,000 and must keep a register of each debenture with
particulars. As explained below, shareholders have a right to see and copy
the register. Nevada law has no such provision.
Proxy Requirements. B. C. has specific laws to regulate proxies. Only
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a shareholder of ATI common stock or his or her attorney may execute a
proxy. In Nevada, the stockholder may authorize his officer, director,
employee or agent to execute the proxy. B.C. law provides that a proxy
ceases to be valid after one year. Nevada law provides that a proxy expires
after six months unless coupled with an interest, or unless the stockholder
specifies a length not to exceed seven years. B.C. law requires ATI to send
a proxy conforming to certain guidelines to each shareholder while Nevada law
has no requirements for proxy contents. However, the Company will be a
successor to a company with securities registered under Section 12(g), and
thus itself will become a reporting Company under Section 12(g). As such,
the Company will be subject to the proxy rules under Section 14 of the
Securities Exchange Act of 1934. Finally, B.C. law directors may require
proxies to be delivered a maximum of 48 hours in advance of a meeting.
As set forth elsewhere in this Joint Proxy Statement-Prospectus,
the directors of ATI hold options to purchase shares of ATI Common Stock.
Under B.C. law, the shareholders of ATI Common Stock must approve the
directors' exercising their shares. No such provision exists under Nevada
law.
Examination of Records. B.C. law requires ATI to keep at
its office the following registers of the following items: members
(shareholders); directors; debenture holders; debentures; indebtedness;
allotments; minutes of general meetings; minutes of directors; and several
other documents. B.C. also requires ATI to keep accounting records of all
transactions. Directors and former directors may examine the corporate
records and take extracts of those records without charge. Shareholders may
examine records and take extracts without charge with the exception of
directors' minutes, documents approved by the directors in the preceding ten
years and mortgages. Under B.C. law, ATI cannot close its stock ledger to
stock holders. As a reporting company, shareholders may take copies of the
same records for C$.50 or less, but in some cases C$.50 per page. Moreover,
any person can extract the same record as shareholders except minutes of
meetings. The cost is C$.50 or less per document and in some cases C$.50 per
page.
Nevada law only requires the Company to maintain its articles, bylaws
and stock ledger at its office. Stockholders may copy the articles, bylaws,
amendments and stock ledger if they have been stockholders of record for six
months preceding the demand, or are authorized by the shareholders of at
least 5% of the outstanding shares. However, the Company's bylaws provide
that at least ten days before a meeting, a list of shareholders entitled to
vote must be compiled and made available for inspection. The bylaws also
permit a shareholder to inspect and copy resolutions creating different
classes of stock, minutes of shareholders' meetings and actions without
meetings, communications to shareholders within three preceding years, the
names and addresses of current directors, and the most recent annual report.
For a proper purpose a shareholder may inspect minutes of directors'
meetings, accounting records and the record of shareholders. In Nevada,
persons must own at least 15% of the outstanding shares to examine the
financial records. The shareholder making the demand bears all costs and
must sign an affidavit that such inspection is not desired for any purpose
not related to his interest as a stockholder. Under Nevada law, the Company
may impose a reasonable charge.
Directors. Under B.C. law, a majority of directors must be Canadian and
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at least one director must be a resident of B.C. Directors are jointly and
severally liable for losses suffered as a result of the corporation losing
money by selling shares for less than par value, or for selling shares issued
where consideration has not been fully paid. Shareholders have a right to at
least 56 days advance notice of an election for directors. Shareholders
owning ten percent or more of the outstanding shares have a right to
nominate for directors. B.C. law has a "bad boy" statute that precludes a
person from serving as a director if he or she is an undischarged bankrupt,
has been convicted in connection to dealings with a corporation, or for
fraud. If the company is a reporting company, a person who has had a
registration cancelled cannot be a director. B.C. corporate law also
contains a provision that makes insiders liable for acting on confidential
information at the expense of the value of the securities.
Officers. B.C. law requires a president and secretary and they cannot
be the same person. B.C. law permits but does not require election of
officers. However, ATI's bylaws grant the directors the right to appoint the
officers. The duties of a secretary to maintain the records of the
corporation are set forth under Canadian law.
Nevada law requires a president, a secretary and a treasurer, and one
person can serve in all offices. Officers are appointed by the directors.
Articles and Bylaws. ATI has authorized 100,000,000 shares no par
value. The number of directors is determined by directors. If the directors
fail to determine a number of directors, the number to be elected is the same
as the number of directors whose terms expire. Directors may appoint
additional directors. ATI's articles provide for mandatory indemnification
of directors and the secretary, and permissible indemnification for officers
other than the secretary. A director may only be removed by other
directors and only for an indictable offense. The directors fill any
vacancies. ATI's board may appoint an Executive Committee that have the
powers vested in the board except to fill vacancies, or change the membership
of the Executive Committee. Directors can declare dividends without giving
notice to shareholders.
Annual meetings must be in B.C. ATI has specific provisions for the
conduct of meetings. If special business will be considered at a meeting,
ATI must inform shareholders that the document is available for inspection.
A
quorum for an annual meeting is two persons entitled to vote. ATI's articles
do not provide for a record date to determine shareholders entitled to vote
or receive a distribution.
The Company has authorized 100,000,000 shares, par value $.001. The
Company has four directors which may be increased to nine or decreased to one.
Directors are elected by the shareholders. The Company's bylaws prohibit
cumulative voting. The Company's articles provide for mandatory
indemnification of directors and officers. Shareholders may remove one
or more directors. Directors fill any vacancies in the board, except when
the vacancy results from an increase in the number of directors in which case
the shareholders fill the vacancy. The Company's board may appoint
committees but the bylaws do not specifically provide for an Executive
Committee. The directors may amend the bylaws.
Annual meetings can be anywhere and notice must comply with the 10
13
<PAGE>
day/60 day statutory rule. The Company's bylaws have no specific provisions
for the meetings. For special actions taken at a shareholder meeting, the
Company must provide a copy of the relevant document in the notice, or
provide a summary of the document or action to be taken. A quorum is the
majority of outstanding shares represented in person or by proxy. The
Company
may set record dates less than seventy days before an action to determine
shareholders entitled to vote or receive a distribution. The record dates
depend on the action to be taken and are as follow: for an annual or special
meeting, the day before the first notice to shareholders; for meetings
demanded by shareholders, the date of the first demand; for actions taken
without a meeting, the date any shareholder signs a consent; for a
distribution, the date the directors authorize the distribution. The
Company's bylaws permit shareholders to take action without a meeting if
shareholder consents are signed by one or more shareholders holding a
majority
of the shares.
The Company's bylaws provide for a president, secretary and treasurer.
ATI's bylaws do not designate specific officers. The Company's president,
among other things, presides over meetings of the shareholders.
Neither company's governing rules provides for preemptive rights.
OTHER TERMS OF THE TRANSACTION
ATI will merge with and into the Company with the Company being the
surviving corporation. ATI, as of the date of the merger, will have
2,051,109 shares issued and outstanding. ATI's shareholders will receive one
fully paid and non-assessable share of the Company's Common Stock.
Accounting Treatment. The Merger will be accounted for as a purchase
transaction, in accordance with generally accepted accounting principles.
The carrying value of ATI's assets and liabilities approximates their fair
market value so that there will not be any adjustments to the carrying value
of ATI's assets and liabilities reflecting their fair values at the date of
the Merger.
Federal Income Tax Consequences of the Transaction. The tax
consequences of the Merger are as follows: (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code (the "Code"); (ii) no gain or loss will be recognized by ATI or the
Company as a result of the Merger, (iii) no gain or loss will be recognized
by a stockholder of ATI who exchanges all of such stockholder's ATI Common
Stock solely for shares of Company Common Stock; (iv) the basis of shares of
Company Common Stock to be received by a stockholder of ATI will be the same
as the basis of the ATI Common Stock surrendered in exchange therefor; and
(v)the holding period of the shares of Company Common Stock to be received by
a stockholder of ATI will include the period during which the stockholder
held the shares of ATI Common Stock surrendered in exchange therefor,
provided that such ATI Common Stock is held as a capital asset by such
stockholder at the Effective Date.
Cash payments made to the U.S. residents who are holders of ATI
Common Stock upon the exchange thereof in connection with the Merger for
Dissenting Shares (other than certain exempt entities and persons) will be
subject to a 31.0% backup withholding tax under federal income tax law unless
certain requirements are met. Generally, the Company will be required to
deduct and withhold the tax upon the following events: (i) the stockholder
14
<PAGE>
fails to furnish a taxpayer identification number ("TIN") or fails to certify
under penalty of perjury that such TIN is correct; (ii) the Internal Revenue
Service ("IRS") notifies the Company that the TIN furnished by the
stockholder is incorrect; (iii) the IRS notifies the Company that the
stockholder has failed to report interest, dividends or original issue
discount in the past, or (iv) there has been a failure by the stockholder to
certify under penalty of perjury that such stockholder is not subject to the
31.0% backup withholding tax. Any amounts withheld in collection of the 31.0%
backup withholding tax will reduce the federal income tax liability of the
stockholders from whom such tax was withheld. The TIN of an individual
stockholder is that stockholder's Social Security number.
THE FOREGOING CONSTITUTES ONLY A GENERAL DESCRIPTION OF THE
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER, WITHOUT CONSIDERATION OF THE
PARTICULAR FACTS AND CIRCUMSTANCES OF EACH STOCKHOLDER'S SITUATION INCLUDING
TAXES THAT MAY OR MAY NOT BE IMPOSED IN CANADA. A GENERAL DESCRIPTION OF THE
TAX CONSEQUENCES TO CANADIAN SHAREHOLDERS WITHOUT CONSIDERATION OF THE
PARTICULAR FACTS AND CIRCUMSTANCES OF EACH CANADIAN STOCKHOLDER'S SITUATION
CAN BE FOUND IN THE OPINION OF THE INDEPENDENT ACCOUNTANTS ATTACHED HERETO.
EACH STOCKHOLDER IS ENCOURAGED TO CONSULT HIS OR HER OWN TAX AND FINANCIAL
ADVISORS AS TO PARTICULAR FACTS AND CIRCUMSTANCES WHICH MAY BE UNIQUE TO SUCH
STOCKHOLDER AND NOT COMMON TO STOCKHOLDERS AS A WHOLE AND ALSO AS TO ANY
ESTATE, GIFT, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES ARISING OUT OF THE
MERGER AND/OR ANY SALE THEREAFTER OF THE COMPANY COMMON STOCK RECEIVED IN THE
MERGER.
PRO FORMA FINANCIAL INFORMATION
PRO FORMA COMBINED CONDENSED BALANCE SHEET
JUNE 30, 1998
(Unaudited)
The following pro forma combined condensed balance sheet gives effect to
the proposed Merger between the Company and ATI described elsewhere herein.
This statement combines the audited June 30, 1998, balance sheet of the
Company and the audited June 30, 1998, balance sheet of ATI and assumes the
Merger was accounted for as a purchase. The terms of the Merger
call for the Company to exchange one share of its Common Stock for each ATI
common share. The pro forma data does not purport to be indicative of the
results that would actually have been reported if the Merger had been in
effect or which may be reported in the future. This statement should be read
in conjunction with the accompanying note, the pro forma combined condensed
statements of income and the respective historical consolidated financial
statements and related notes of the Company and ATI included elsewhere herein.
<TABLE>
ASSETS
<CAPTION>
June 30, 1998
______________________________________________________________________________
(U.S. Dollars)
Pro
Forma
The Company ATI Combined
________________________________________________________
<S> <C> <C> <C>
CURRENT ASSETS:
Cash 60,000 1,998 61,998
Receivables and 0 45,739 45,739
prepaid expenses 0 1,286 1,286
Total current ------- ------- -------
Assets 60,000 49,023 109,023
CAPITAL ASSETS 0 71,527 71,527
------- ------- -------
Total 60,000 120,550 180,550
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and
accrued liabilities 0 194,031 194,031
Deferred revenue 0 70,264 70,264
Current portion
of long-term debt 0 67,568 67,568
Current portion
of capital lease 0 22,361 22,361
Total current ------- ------- -------
Liabilities 0 354,224 354,224
LONG TERM DEBT
Deferred revenue and
Obligation 0 90,207 90,207
-------- ------- -------
Total liabilities 0 444,431 444,431
SHAREHOLDERS' EQUITY
(DEFICIENCY)
Share capital 60,000 2,824,001 2,884,001
Deficit 0 (3,147,882) (3,146,882)
Total shareholders' ------- ----------- -----------
Equity 60,000 (323,881) (263,881)
------- ----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 60,000 120,550 180,550
======= =========== ===========
</TABLE>
No material non-recurring charges or credits directly attributed to the
merger exist.
15
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME YEAR ENDED JUNE 30, 1998
(Unaudited)
The following pro forma combined condensed statement of income combines
the historical statements of income of ATI and the Company for the year ended
June 30, 1998. This pro forma statement assumes the Merger described
elsewhere herein was effective as of July 1, 1997, and that the Merger was
accounted for as a purchase. The pro forma data do not purport
to be indicative of the results that would actually have been reported if the
Merger had been in effect or which may be reported in the future. This
statement should be read in conjunction with the accompanying note, the pro
forma combined condensed balance sheet and the respective historical
consolidated financial statements and related notes of ATI and the Company
included elsewhere herein.
<TABLE>
<CAPTION>
Year Ended June 30, 1998
(U.S.
Dollars)
Pro
The Forma
Company ATI Combined
--------- ------ -----------
<S> <C> <C> <C>
REVENUES:
Sales 0 229,584 229,584
EXPENSES
Selling, general
and administrative,
depreciation and Other 0 476,694 476,694
Interest and other
Income 0 201 201
--------- --------- --------
Income from continuing
Operations 0 (246,909) (246,909)
INCOME (LOSS) PER SHARE FROM
CONTINUING OPERATIONS
Historical income (loss)
per share 0 (0.16) N/A
Pro forma income (loss)
Per share N/A N/A (0.14)
Number of shares used to
Calculate per
share data 129,110 1,534,974 1,664,084
</TABLE>
16
<PAGE>
Note To Pro Forma Combined Condensed Statement Of Income
Nonrecurring charges or credits directly attributable to the Merger
do not exist and therefore, were not considered in the pro forma condensed
income statement.
Material Contracts with the Company Being Acquired
Other than the Merger Agreement, no material contracts exist between the
Company and ATI. However, of the four directors of the Company, three are
directors of ATI and are the only directors of ATI. The common directors are
Mike Sintichakis, Edson Ng, and Eileen Keogh. The only remaining director of
the Company is Mr. Nick Sintichakis who is the son of Mike Sintichakis.
Moreover, Mike Sintichakis and Edson Ng own a controlling interest in ATI.
The Company has not hired an expert or counsel on a contingent basis in
connection with this Joint Proxy Statement-Prospectus or the Merger.
Disclosure Of Commission Position On Indemnification
For Securities Act Liabilities
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable.
DESCRIPTION OF THE BUSINESS OF THE ACQUIRING COMPANY
The Company was organized under the laws of the State of Nevada on
August 19, 1994 as Spectral Innovations (1994), Inc. and was organized as a
closely held corporation. Mike Sintichakis became the President at the
Company's inception and ATI was its sole shareholder until 1998.
The directors of the Company are Mike Sintichakis, Nick Sintichakis,
Edson Ng, and Eileen Keogh. Mike Sintichakis is the President and Nick
Sintichakis is the Secretary. On May 28, 1998, the directors and the sole
shareholder passed a resolution to change the name of Spectral Innovations
(1994), Inc. to Aztek Inc. The Amended and Restated Articles of
Incorporation effecting the name change were filed with the Secretary of
State of the State of Nevada and accepted on June 8, 1998. In addition to
effecting the name changes, the Amended and Restated Articles increased the
amount of shares authorized from twenty-five thousand shares to one hundred
million shares.
The Company has not transacted any business since its inception. It
currently has no principal products or services, no competition, no
customers and is not subject to any governmental regulations. The Company's
only intellectual property is the IBM San Francisco software license which is
described below in Management Discuss and Analysis or Plan of Operation.
After the Merger and the date its Registration Statement filed on this Form
S-4 becomes effective, the Company will be subject to the state and federal
securities laws. The Company has no employees other than its officers and
directors. Currently, the officers and directors receive no salary.
Description Of Property
The Company's headquarters is at 1575 Delucchi Lane, Suite #40, Reno,
Nevada 89502. The headquarters consist of approximately 150 square feet of
office space. The lease is on a month to month basis and is paid to Meadow
Wood Crown Plaza. The office is in a new office building located
conveniently to downtown Reno and the local airport.
Legal Proceedings
The Company is not aware of any legal proceedings involving any
director, director nominee, promoter or control person including criminal
convictions, pending criminal matters, pending or concluded administrative or
civil proceedings limiting one's participation in the securities or banking
industries, or findings of securities or commodities law violations.
Market For Common Equity And
Related Stockholder Matters
No public trading market exists for the Company's securities. The
Company was initially incorporated as a closely held corporation and became a
standard Corporation in June 1998. Subsequent to the Merger, the
17
<PAGE>
shareholders of ATI will be the shareholders of record of the Company and the
Company will seek to have its shares traded on the OTC Bulletin Board.
Approximately one million shares of the Company's Common Stock are
allotted as Bonus Shares issued to the following directors: Mike
Sintichakis; Edson Ng; Eileen Keogh; and Nick Sintichakis. The Bonus Shares
were issued at US$.01 per share to individual directors. Pursuant to the
subscription agreements for these shares, the Company place the shares in
escrow. The shares will be released at intervals based on the individual
owner's performance as a director or officer and upon the Company reaching
working capital in the following amounts per share at the following times:
Year one: $.05 per share of working capital
Year two: $.10 per share of working capital
Year three: $.20 per share of working capital
Year four: $.30 per share of working capital
Year five: $.40 per share of working capital
The maximum amount of Bonus Shares that may be issued in any one year is
20% of each director's allotted share or two hundred thousand shares.
The Company's outstanding shares for which there is no established
public market cannot be sold pursuant to Rule 144 under the Securities Act.
The Company has not agreed to register such shares under the Securities Act
for sale by security holders. The shares that are currently issued and
outstanding are not and have not been proposed to be publicly offered by the
Company and therefore, cannot have a material effect on the market price of
the Company's common equity.
Holders
On July 22, 1998, there were six holders of record of the Company's
Common Stock.
Dividends
The Company has declared no dividends, cash or otherwise, in the last
two fiscal years and does not plan to pay any dividends in the foreseeable
future. The payment of dividends will depend upon the Company's assumption
of ATI's debt and short-term and long-term cash availability, working capital
needs and other factors as determined by the Company's Board of Directors.
Management's Discussion And
Analysis Or Plan Of Operation
THIS JOINT PROXY STATEMENT-PROSPECTUS AND REGISTRATION STATEMENT ON FORM
S-4 CONTAINS FORWARD LOOKING REPRESENTATIONS THAT INVOLVE CERTAIN RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE
RESULTS DISCUSSED IN THE FORWARD LOOKING REPRESENTATIONS.
After the Merger, the Company will assume the obligations of ATI and
proceed in the course of business initiated by ATI. The Company anticipates
that after the Merger, sales will increase through the 1998-1999 period upon
meeting the following objectives: the Company completes new product
development initiated by ATI; the Company acquires the assets of Qdata
Software Inc.; and the Company completes the acquisitions of two small
vendors as initiated by ATI. The acquisitions are in progress to the extent
that brief letters of intent have been signed by ATI and two of the companies
to be acquired. The acquisitions are in progress to the extent that the
parties have come to terms with respect to the fact that one company has
agreed, in principle, to be acquired by another.
18
<PAGE>
The Company will pursue a market consolidation strategy that has already
been initiated by ATI. ATI has initiated several acquisitions and the Company
will assume the plan to move forward with the acquisitions. As such, it will
continue to acquire independent software companies such as it did with
ResponseWare Corp.
The independent software companies develop, market, and support their
own proprietary products. Once an acquired company is consolidated, the
Company must execute the preexisting contractual obligations of the former
independent company. Through the consolidation process, the various
proprietary products inherited through acquisition will be replaced by the
Company's new products. By consolidating products, the Company will
centralize product development and secondary support.
In addition to acquiring businesses, the Company will design and develop
an entirely new suite of software products to replace ResponseWare's products
and appropriate products acquired through acquisitions. The new products
will be based on IBM San Francisco software which IBM has already licensed to
the Company. The San Francisco software provides 40 - 60% of the programming
code necessary for new products. Programmers will incorporate desirable
features and functions from ResponseWare products and acquired products. To
date, ATI has completed rudimentary data modeling and high level
designs for the new software. ATI has completed technical evaluations of
several software development platforms including IBM VisualAge Smalltalk, Seer
Technologies, Progress, Synon Obsydian and IBM VisualAge Java Enterprise.
Neither ATI nor the Company will move forward with further product development
until after the Merger. Some product development will require financing to
fund the software development team.
With respect to acquisitions, the acquired companies will focus on new
sales, systems implementation, training and primary support within their
sales territories. The consolidation strategy also includes centralized
marketing programs and administration.
The Company will assume the obligations of two letters of intent signed
by ATI to acquire two independent computer software companies. The letters
of intent require ATI to complete its financing prior to the acquisitions.
Thus, the Company will have to effect and offering before moving forward with
the acquisitions. Then the Company and the companies to be acquired must
complete their respective due diligence and finalize the terms and conditions
of the purchase agreements.
At the present time, ATI has executed two letters of intent with
affiliated independent software producers, Concord Consultants Limited ("CCL")
of Richmond, British Columbia, and Municipal Hardware Systems Ltd. ("MHS") of
Edmonton, Alberta. Negotiations are continuing with both companies. A copy
of the two letters of intent are attached as exhibits to the registration
statement on Form S-4 as material contracts.
Both companies are closely held non-public Canadian entities. These
companies do not have audited financial statements. To date, they have only
released interim financial statements to ATI's management and will not release
any other financial information until ATI demonstrates its ability to acquire
the companies for cash. CCL and MHS' management are aware of ATI's efforts to
raise $1 million and the Company's intent to carry out the offering. The
parties anticipate that at the close of the offering, the parties will be
able to proceed with the acquisitions. At that point CCL and MHS will
19
<PAGE>
perform their due diligence review of the Company and the Company will
perform its due diligence review of CCL and MHS. Once the Company's
management is satisfied that the acquisition is in the best interest of the
shareholders and if management determines that shareholder approval is
required, it will hold a special meeting for the shareholders to approve the
acquisitions. At the present time, ATI's shareholders have no risk if the
Company ultimately does not proceed with the acquisitions.
Qdata Software Inc. The third acquisition will be an acquisition of
assets from Qdata Software Inc. ("Qdata"), a closely held Barbados
corporation. Qdata has acquired the exclusive South American rights for a
software program called Multiple Access Remote Control (MARC). MARC allows a
single personal computer to simultaneously monitor and control multiple
personal computers regardless of location. MARC is packaged under different
names depending on its use. Under the name Distant Learner 2.0, MARC is used
in education. Instructors can highlight areas on a student's screen where
attention needs to be addressed, or the instructor can engage in a direct
private conversation with a student. Under the name Call Center Manager 2.0,
the software will allow a supervisor in a call center to monitor data entry
activities of an operator and allow operators to interact with supervisors.
Under the name One-Up, MARC can be used by individuals to have access to
individual remote computers. Qdata is targeting industries such as banking,
airline, computer software and hardware, telecommunications and education.
Qdata Information Systems Ltd. ("QIS") owns the source code for MARC and
licensed it to Qdata for South American distribution. QIS provides support
for up to 25,000 MARC units. For each sale, Qdata pays QIS 1 British pound in
royalties, and 15% of gross revenues on sales which is defined as revenue less
direct pretax costs. If QIS fails to produce MARC according to Qdata's needs
and specifications, rights to other markets and to the source code pass to
Qdata.
Qdata has represented to the Company that it has a distribution
agreement with ARKA in Buenos Aires, Argentina. Under the agreement, ARKA
distributes the MARC software in Argentina, Uruguay and Brazil. Qdata has
represented that Argentina's Ministry of Finance has ordered $160,000 worth of
MARC software units, and the University of Belgrando has ordered $32,000 worth
of MARC software units.
Qdata and the Company are presently negotiating the terms of the asset
acquisition. The assets consist of the license Agreement between Qdata and
QIS which runs from March 10, 1998, through March 10, 2003. The assets also
include distribution rights for MARC and the associated products,
approximately 32,500 units of MARC software licenses to be sold to customers,
Qdata's work in progress, and software that can be marketed by the Company.
The Company will not assume Qdata's liabilities or ongoing expenses.
The parties have agreed in principle that the Company will issue a
combination of stock and warrants in exchange for the assets. The parties
have not agreed on the amount of stock to be issued. They expect that the
Company will issue 200,000 warrants with an exercise price of US$2.50 released
in biannual installments of 50,000 warrants. As consideration for the
license, the Company will issue a credit of $1 per warrant at the close of the
transaction.
Qdata relies on third party sales agents to service the South and
Central American markets. 95% of its sales have come through its sales agent
20
<PAGE>
in South America. Therefore, the Company will inherit a relationship with the
sales agent and will initially be dependent on the sales agent. Qdata also
relies on the MARC product that is developed by QIS. The acquisition will
not cause the Company to have an equity interest in QIS meaning the Company
will depend on its relationship with QIS to make the acquisition profitable.
Qdata is a privately held corporation and has not made financial
statements available to the Company. The Company must still perform a due
diligence review. The Company will not close the acquisition without
performing its due diligence review.
At the present time, management does not foresee any risk to the
Company's or ATI's shareholders if the Company is unable to acquire Qdata's
assets. Once management performs its due diligence review and if it
determine's that shareholder approval is necessary, it will hold a special
meeting so that the Company's shareholders can vote on the acquisition. The
asset acquisition will be accounted for as a purchase.
Year 2000 Issues
ATI has assessed all of its information technology and non-information
technology for Year 2000 readiness. ATI's Year 2000 exposure is limited to
its IBM AS/400 computer hardware and software, its ResponseWare software
applications, and possible Year 2000 exposure of businesses the Company plans
to acquire. ATI does not rely on imbedded systems in any of its operations.
Internally, ATI has addressed its Year 2000 exposure by implementing
plans to replace its existing IBM AS/400 operating system with the latest
model (Model 170) and latest release of the OS/400 operating system and
compilers (Release V4R3). IBM has certified the new systems to be Year 2000
ready. ATI is converting its ResponseWare products. Conversion work with
the new systems are approximately 60% complete and should be finished by the
end of December 1998. Thus far, ATI has spent approximately C$45,000 in
labor costs and expects to spend an additional C$30,000 on conversion and
testing. ATI also uses Simply Accounting which is Year 2000 compliant.
ATI acquired ResponseWare Corp., the producer of ResponseWare software
applications. The ResponseWare software as acquired by ATI was not Year 2000
compliant. Pursuant to software maintenance contracts, ATI continues to
service customers that purchased the software. ATI has developed a system to
address the Year 2000 issues and therefore does not anticipate any adverse
impact on the Company after the Merger. A key component of the conversion
effort is development of a conversion utility program to automate the
process. The conversion tool has been completed and is currently in use to
convert the ResponseWare applications. After the Merger, the Company will
assume ATI's obligations to supply the Year 2000 compliant products to all
ResponseWare customers who are under the software maintenance contracts. ATI
began supplying these products in March 1998 and the Company anticipates that
it will fulfill the obligations by June 1999.
ATI is modifying its ResponseWare applications at an estimated cost of
C$75,000 representing 18 man-months of programming effort. The cost estimate
is based on ATI's past experience in projects of a similar nature requiring
system wide analysis, code search and replacement, database conversion, and
testing. Fees earned from early delivery of the Year 2000 applications and
ATI's revenues from operations will fund the Year 2000 compliance.
ATI's customers are dependent on ATI to provide Year 2000 compliant
21
<PAGE>
ResponseWare accounting, payroll, and other core business software. ATI will
convert all ResponseWare software applications for Year 2000 compliance using
conversion tools it has developed. The conversion effort is in progress with
a target completion date for all of the applications by December 1998. ATI
will make the Year 2000 applications available to customers for early
delivery at a fee of C$2,000 - C$3,000 per module as completed. After June
1999, the applications will be generally available at no charge.
Certain risks exist with ATI's plan to convert and implement Year
2000 compliant versions of the ResponseWare software. ATI is confident it
will be successful in converting and testing its base products under its own
development and testing environment. However, each customer requires unique
product implementation and its own custom applications that work with or
replace parts of the ResponseWare applications. Therefore, it will be
essential for customers to implement and test the Year 2000 versions as soon
as they are available. Delays in implementation and testing at customer
sites may result in inadequate time and resources to rectify Year 2000
problems. To address this issue, ATI is keeping all clients aware of its
conversion activities and emphasizing the importance of early installation
and testing. If additional technical staff is necessary, ATI will hire or
contract additional resources. ATI has consulted with Group West Systems
about providing Year 2000 conversion services to third parties as an
alternative to ATI's own conversion effort. Group West is a consulting and
technical services company that specializes in Year 2000 conversion.
ATI has three pending acquisitions that are still subject to a due
diligence review. Until the Company, as ATI's successor, performs this
review, management cannot assess the acquirees' Year 2000 readiness. The
Company will not be in a position to perform this due diligence review until
it completes its financing. For a discussion of these acquisitions, see
"Management's Discussion and Analysis or Plan of Operation" above at page __.
Potential liability against ATI may result if its products are not Year
2000 compliant. In a worst case scenario, ATI may lose clients to another
vendor or face legal action for failing to service customers for Year 2000
requirements. Nevertheless, management believes these scenarios are remote
and cannot be quantified.
ATI's Year 2000 initiative has greatly impacted its business operations
by forcing ATI to assign technical resources to the conversion effort instead
of standard customer support, new software development and software
maintenance activities. The reassignment of technical employees has resulted
in lost revenues of approximately $60,000 in customer billable activities.
However, the Company has offset some of this lost revenue through the
collection of approximately $45,000 in fees for early delivery of Year 2000
compliant products and expects to collect an additional $105,000 in fees.
External Funding
The Company expected to benefit from a pending ATI offering under
Regulation D. In this offering, ATI was seeking to sell 406,504 shares of ATI
Common Stock, intending to net approximately US$1,000,000. To date the
funding has not materialized. For More Information, see "Management's
Discussion and Analysis" under "The Company to Be Acquired." Management is
currently seeking to effect an offering to replace the offering initiated by
ATI. The cash infusion will enhance the Company's efforts to resolve the
deficiency in operating capital that will exist after the Merger. The
22
<PAGE>
injection will finance the recruitment of VARs and enhance marketing
efforts. The injection of capital will allow the Company to substantially
reduce existing debt, complete the rewriting of existing software programs,
and result in a material improvement in the financial condition of the
Company.
Changes In And Disagreements With Accountants
On Accounting And Financial Disclosure
The Company has not transacted any business since its inception. As
such, the Company first engaged its accounting firm to audit its financial
statements for this Joint Proxy Statement-Prospectus and registration on Form
S-4. Thus, there has been no change in or disagreement with accountants.
INFORMATION ABOUT THE COMPANY BEING ACQUIRED
Description Of Business
ATI was incorporated on July 11, 1979, by filing and registering its
articles with the British Columbia Registar of Companies. Over the last
three years, ATI has expanded its business focus and capabilities following
several acquisitions. On September 30, 1994, ATI acquired all of the issued
and outstanding shares of ResponseWare Corporation, a developer of municipal
government software including general accounting and payroll systems and
specialized systems such as property taxation, utility billing and building
permits. This acquisition allowed ATI to further diversify its operations
within the computer hardware, software and telecommunications market and to
expand the existing forty-five (45) municipal and private sector clients of
ResponseWare. The software license agreement is the same for all forty-five
municipalities and does not differ in any material respects. ATI continues
to support and service the ResponseWare software and client base as its
primary source of revenue. On August 21, 1995, ATI acquired the assets and
business of Helix Technologies Limited, a consulting and systems integration
firm specializing in technology for mobile work force automation. ATI has
completed contracted projects from the acquisition and currently has no
contracts for work in this area. After the Merger, mobile work force
automation technologies will be incorporated into future products which have
yet to be developed. The Company also continues to pursue further
project-based contracts in the area of work force automation technologies.
ATI is a small Canadian computer software company with its headquarters
located in Kelowna, British Columbia, Canada. ATI employs fourteen people on
a full time basis. On December 9, 1996, ATI's name changed to Aztek
Technologies, Inc. from Consolidated McKinney Resources, Inc. On December 9,
1996, ATI received approval from the Vancouver Stock Exchange to resume
trading following a change in business focus. ATI changed it business focus
from mining to high technology. ATI develops and markets computer software
applications to municipal governments and to a lesser extent, the private
sector in Western Canada. In the private sector ATI's focus is primarily
human resources and payroll related software, service and maintenance. ATI
distributes its products through direct sales.
COMPETITION. ATI competes primarily in U.S. and Canadian municipalities
with populations of 250,000 or fewer. The customer base consists of municipal
governments that purchase software applications for financial systems and
departmental applications and are expanding into enterprise wide solutions.
Some municipalities rely on custom written applications developed and
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supported either in-house or through contractors. Due to the relatively high
licensing and support fees of international vendors, most small and mid-sized
municipalities tend to deal with regional software vendors. ATI's primary
source of competition comes from small to mid-sized municipal government
marketers and regional vendors, specialized departmental solution providers
and in-house developed systems.
Regional vendors dominate the majority of the market. Regional software
providers typically have up to 100 clients within a given market that has a
population of less than 250,000 people. Canada has about ten regional
vendors, the U.S. has about one hundred regional vendors, and North America as
a whole has approximately two hundred regional vendors. Most regional vendors
are privately owned. Mounting pressures on these vendors to deliver current
technology is increasing at a time when most of them are least able to fund
new development
HTE Inc. and American Management Systems are the largest competitors and
are dedicated to the government sector with annual sales in excess of US$100
million and US$300 million respectively. These organizations are considered
the leading suppliers of government systems in the US. Their products consist
of complete suites of integrated modules to address enterprise wide issues for
local governments. They have also moved to client/server oriented software
development. Product pricing ranges from $5,000 for single modules to over
$200,000 for complete systems. Those vendors market through direct channels
as well as through strategic alliances with other vendors such as IBM.
The primary competitive factors involve differences in principal
products and accompanying services, price, service warranty and other product
performance. Regional vendors have had success by offering customized
software solutions, local services and support, and reasonable prices.
Individual applications may work with products from other vendors. However,
they communicate to other applications at a lowest common denominator level.
Therefore, these products compromise inter-application functionality and
subject users to multiple application interfaces.
ATI's products are integrated application suites with high functionality
between applications, and a consistent user interface scheme. The products
that are most successful are comprehensive, integrated financial management
systems with a full array of features targeted at entry and mid-level
systems. Competitors have prohibitive costs to move current technology since
their applications are based on less flexible and proprietary third or fourth
generation languages. Competitors have increased burdens from the need to
customize applications for each client.
Another competitive factor involves servicing products that
municipalities have purchased. Vendors have a secure revenue source through
client dependency on the vendor for service and support. This dependency
breeds client frustration, a frustration that is exacerbated by relatively
small vendors' inability to deliver current technology and respond quickly to
client demands. Clients who have modified their applications extensively
create more difficulties and are costly to support.
ATI's products are designed to compete effectively with these
solutions in terms of functionality and offer the ability to become a single
source supplier for entire enterprises. Its products are designed to take
advantage of business intelligence tools for reports and queries. These tools
are ideal for municipalities to create and maintain their own queries and
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reports with minimal support staff. Aztek clients can also develop their own
enhancements using the same development tools used to develop the base ATI
products if so desired. Frequently, municipalities create and maintain
information and data with limited support staff. ATI's software applications
can accommodate customer-developed enhancements better than alternative
technologies. ATI generates annual support fees at the rate of 10-15% of
software license fees. ATI applies these fees to research and development to
support a gradual introduction of new technologies for its clients.
CUSTOMER BASE. ATI's customer base consists of diverse small
municipalities in various parts of western Canada. ATI is not dependent on a
few customers to generate revenue. ATI intends to expand its customer base
beyond its current level. The typical client for ATI is a municipality with
10,000 to 250,000 residents. Even though ATI works with municipal
governments, its principal products and services are not subject to
governmental approval. The effects of existing or probable existing
governmental regulations is not expected to have a material effect.
CURRENT BUSINESS STATUS. ATI has on-going contracts with municipal
vendors that were initially negotiated between ResponseWare and
ResponseWare's customers. Following the consolidation between ATI and
ResponseWare, ATI incurred the responsibility for performance of the duties
of the licensor pursuant to the terms and conditions set forth in the
agreements. The contact permits the licensees the nonexclusive use of ATI's
software in exchange for payment of fees. The license agreement also
addresses delivery of the software, installation and training, warranties, and
confidentiality provisions prohibiting the user from disclosing trade secrets
to any third parties.
ATI's current products, which consist solely of computer programs, were
developed by ResponseWare. Currently, these products are not being
manufactured because they cannot take advantage of personal computer
environments; however, ATI continues to provide support and maintenance for
the current product line. In addition, ATI's 3-Tier client server
architecture is still in the developmental stage. ATI intends to use part of
the proceeds of its $1 million offering to install its development team and
complete the product. ATI expects to finish developing the products within
eighteen months of completing the offering. ATI's products are sold directly
to the current customers. After the Merger, the Company will market and
distribute the products through direct sales, value-added resellers,
telemarketing and advertising through print media.
ATI has been pursuing financing through an agreement with Equitrade
Securities Corporation ("Equitrade") for US$1,000,000.00 (One Million
Dollars) to be used towards new product development and acquisitions. ATI is
withdrawing the offering. The $1 million offering arose in the Spring of
1997 out of ATI's relationship with Select Capital Advisors ("Select"). ATI
intended to effect the offering partially in the United States in a
transaction that would have been exempt from registration under Rule 504 of
Regulation D. While Select and ATI were working on the offering, ATI
voluntarily registered its shares under Section 12 of the Exchange Act. Once
the registration statement became effective, ATI had become subject to the
reporting requirements of the Exchange Act and was no longer eligible for the
Rule 504 exemption.
The offering has been delayed for several reasons. The process of
becoming a reporting company interrupted ATI's efforts to sell its shares in
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the exempt transaction. Because Select was not registered as a broker-dealer
under the federal securities laws, ATI then entered into an underwriting
agreement with Equitrade. However, ATI's fundamentals were not strong and
the market for small business offerings has been weak in recent months.
To date, the offering has not materialized due to the delays, ATI's
fundamentals, and the weak market for small business offerings. After the
Merger, the Company will continue trying to effect an offering for US$1
million.
Operating Divisions. ATI has four operating divisions. Unless
otherwise specified, the description of the services and products are
explained in the content of their usage in various Canadian municipalities.
Although ATI intends to expand to the U.S. markets, its products and services
are primarily used by Canadian municipalities. The business activities of
each division of ATI are set forth below.
Business Solutions Division
The Business Solutions Division is responsible for development and
support of core business software products. Products included are accounting
systems, payroll/human resource management systems, and specialized municipal
government systems such as utility billing, property taxation, building
permits, and tracking the issuance of various items for municipal
governments. This division maintains and supports the ResponseWare software
since they are all core business applications. The division is also
responsible for development of new products to replace ResponseWare products
and other proprietary software products that the Company will inherit through
future acquisitions. At present, the Business Solutions Division generates
over 90% of ATI's revenue.
Mobile Technologies Division
The Mobile Technologies Division is focused on software for workers in
field operations such as building code inspectors, parking and bylaws
enforcement officers and maintenance crews. Mobile technologies include
handheld computers, pen-based computers, bar code devices and wireless
communications. The division provides consulting and custom developed
software on a time and materials basis. No contracts for these services
exist at this time although ATI actively pursues opportunities. ATI intends
to develop mobile work force systems in the future to complement the new
systems developed by the Business Solutions Division. ATI has no completed
products at this time. Funding for these products will come from either cash
flow or future investment financing.
Electronic Commerce Division
ATI has pursued, and continues to pursue opportunities to develop
systems for electronic commerce using Internet and Electronic Data
Interchange ("EDI") technologies. To date, ATI has not secured contracts in
this area. ATI plans to enhance the capabilities of the existing and future
products from the Business Solutions Division to include support for
electronic commerce. For example, the Parking and Bylaw Enforcement system
could be enhanced to allow payments of fines on the Internet. Building
permits could be applied for and paid on the Internet. Funding for these
products will come from either cash flow or future investment financing. ATI
has not finalized the funding requirements.
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<PAGE>
Professional Services Division
The Professional Services Division is responsible for general
consulting, project management, and custom software development services.
ATI markets these services to its own clients that use products from the
Business Solutions Division. The division also pursues general consulting and
software development opportunities to customers that use products from the
Business Solutions Division but are not in ATI's client base. The division
also pursues general consulting and software development opportunities
outside of its client base. At present, the Professional Services Division
generates less than 10% of ATI's revenues.
Current Status of ATI. On September 30, 1994, ATI acquired all of the
issued and outstanding shares of ResponseWare Corp. This acquisition allowed
ATI to further diversify its operations with the computer hardware, software
and telecommunications market to expand the existing forty-five (45)
municipal and private sector clients of ResponseWare. ResponsWare designed
its software primarily for use by small to medium-sized municipal governments
and corporations to meet their human resources and payroll applications.
In January 1995, ATI discontinued sales of existing ResponseWare
computer systems due to maintenance costs and the system's inability to take
advantage of personal computer environments. ATI is proceeding to rewrite its
existing municipal applications using client server and object oriented
technologies. ATI has already complete the architectural design of the new
software, but still must complete the actual programming. Once the
programming is complete, ATI will have a finished product that it can
market. Client server technology refers to the relationship between two
types
of computers - a server computer and a client computer. The server is a
high-powered computer that stores both software applications and files. The
server can be a mainframe, mini-computer, or a personal computer. The client
computer is a personal computer with software that handles functions such as
the appearance on the computer screen, sorting data, and performing
calculations.
In client server technology, the software runs on both the server and
client computers. Software on the server allows client computers to access
information, and sometimes applications, on the server. The server software
manages the client computers' access to information. Multiple client
computers can access the server at the same time. Client server technology
takes advantage of the power and flexibility of personal computers while
providing centralized control of data. The technology also allows a client
computer to pass on "heavy duty" computing tasks to the server. Object
oriented technology is a computer software programming technique supported by
a number of common programming technologies. The most common technology is
known as Java. The benefit of object oriented technology is increased
productivity through building programs by copying or modifying existing parts
and easier software maintenance.
ATI's products are based on a 3-Tier client server architecture. The
3-Tier architecture extends the client server concept such that a client
computer may access multiple servers simultaneously. A client computer may
access certain information from a corporate server, other information from a
departmental server, and integrate the information from both sources.
Customers use certain mouse and graphical user interface oriented
applications. A graphical user interface is a technology that gives software
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programs a user-friendly appearance on the computer screen. An example of a
graphical user interface is the commonly used Windows operating system. A
commonly known non-graphical user interface is MS-DOS. The products are
designed to operate as independent systems and together as integrated
solutions. The products offer ease of use and flexible configuration to meet
customer demands and expectations. Configuration refers to a specific
combination of software programs contained in a specific software
application. The new products are designed to address both public and private
sector markets.
ATI's products are software applications commonly referred to as
computer programs. The software programs are designed to execute tasks
described by the name of the program. The names of ATI's computer software
programs are as follows: General Accounting & Fund Accounting; Accounts
Payable; Purchase Order Control; Payroll; Cash Receipts, Job & Project
Accounting; Budgeting; Financial Reporting; Taxation; Personnel Data; Human
Resource Management; Property Information System; Street Guide; Geographic
Information System Interface; Facilities Booking; Parks and Recreation
Management; Utility Customer Information; Inspection Management; Permit
Systems; Animal Licenses; Business Licenses; Election Management; Parking
Enforcement; Maintenance Management; Request for Service; Voter Registration
and Local Improvement. As mentioned above, ATI is rewriting the software and
has already finished the architectural design. ATI may sell an individual
product, "Payroll" for example, as soon as the programming is complete.
Description Of Property
ATI's headquarters is located at 246 Lawrence Avenue, Kelowna, British
Columbia V1Y 6L3, Canada. The headquarters consist of approximately 1,500
square feet. The lease is month-to-month and ATI pays rent to a company
controlled by the spouse of an ATI director. ATI also leases 4,000 square
feet of office space at 6450 Roberts Street, Burnaby, British Columbia V5G
4EI, Canada.
Legal Proceedings
ATI is not a party to any legal proceedings.
Market For Common Equity And
Related Stockholder Matters
On September 12, 1980, ATI's Common Stock began trading on the Vancouver
Stock Exchange under the symbol CKY. On July 29, 1997, ATI obtained the
approval to trade on the OTC Bulletin Board under the symbol AZTKF.
Management decided to list ATI on the OTC Bulletin Board because of a
combination of the perceived prestige factor, the potential for a greater
investor base and the possibility of participation in a new market. The dual
listing on the Vancouver Stock Exchange and the OTC Bulletin Board allows
investors to trade the securities in Canada and the United States. With
respect to the OTC Bulletin Board, there is no established public trading
market for ATI's Common Stock notwithstanding limited or sporadic quotes.
The following table sets forth the high and low bid prices for each quarter
within the last two fiscal years. The prices are depicted in Canadian
dollars.
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<TABLE>
<CAPTION>
Common Stock
Period Low Bid High Bid
<S> <C> <C>
Fiscal 1998
First Quarter 1.06 2.45
Second Quarter 0.72 1.75
Third Quarter .75 1.26
Fourth Quarter .62 1.80
Fiscal 1997
First Quarter No trading
Second Quarter 1.20 1.55
Third Quarter 1.75 2.40
Fourth Quarter 1.25 1.80
</TABLE>
ATI's stock was listed on the OTC Bulletin Board on September 30, 1997,
at US$1.50. The quotation reflects inter-dealer prices, without retail
mark-ups, mark-downs or commissions and may not represent an actual
transaction.
Holders Of Common Stock
On June 30, 1998, there were approximately 347 holders of record of ATI's
Common Stock. Some shares are held in trust by broker-dealers for the
shareholders of ATI's predecessor, Consolidated McKinney. Following the name
change and business reorganization, several shareholders failed to tender
their Consolidated McKinney stock certificates in exchange for ATI stock
certificates.
Dividends
ATI has declared no dividends, cash or otherwise, in the last five years
and does not plan to pay any dividends prior to the Merger.
Management's Discussion And
Analysis Or Plan Of Operation
IN REVIEWING THE MANAGEMENT'S DISCUSSION AND ANALYSIS, REFERENCE SHOULD BE
MADE TO ATI'S FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED AS AN EXHIBIT
TO
THE REGISTRATION STATEMENT ON FORM S-4 AND IN ATI'S ANNUAL REPORT. THE
REFERENCES TO MONETARY UNITS OR DOLLARS IN THE INSTANT JOINT PROXY
STATEMENT-PROSPECTUS AND SUPPORTING FINANCIAL STATEMENTS SHALL MEAN CANADIAN
DOLLARS UNLESS OTHERWISE SPECIFIED. THE FINANCIAL STATEMENTS FOR ATI ARE
PREPARED IN ACCORDANCE WITH CANADIAN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES. PROVISIONS FOR DIFFERENCES IN REPORTING IN CANADA AND THE UNITED
STATES ARE PROVIDED FOR BELOW THE AUDITOR'S REPORT IN THE FINANCIAL
STATEMENTS
AND IN NOTE 11 TO THE FINANCIAL STATEMENTS.
TWELVE MONTHS ENDED JUNE 30, 1998 (THE "1998 PERIOD"), COMPARED WITH
TWELVE MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD"). THE 1998 PERIOD IS
DEFINED AS THE FISCAL YEAR FOR ATI, WHICH IS JULY 1,1997, TO JUNE 30, 1998.
The loss in the 1998 Period decreased to ($365,426) from ($557,906) in
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the 1997 Period. Loss per share decreased to ($.18) in the 1998 Period from
a loss of ($.38) in the 1997 Period. The 1997 period is July 1, 1996, to
June 30, 1997.
REVENUES
The Company licenses software under noncancellable license agreements
and provides maintenance services, consisting of product support services and
periodic updates. License fee revenues are generally recognized when a
noncancellable license agreement as been signed, the software product has been
shipped, there are no uncertainties surrounding product acceptance, there are
no significant vendor obligations, the fees are fixed and determinable, and
collection is considered probable. Revenues from maintenance agreements are
recognized ratably over the maintenance period, which in most instances is one
year. Revenues for training or consulting services are recognized as services
are performed.
Net sales decreased $120,153 (26%) to $339,784 in the 1998 Period, from
$459,937 in the 1997 Period. In January 1995, ATI discontinued sales of
existing ResponseWare computer systems due to maintenance costs and
the system's inability to take advantage of personal computer environments.
Discontinuance of selling these systems caused the decline in sales.
In the 1998 Period, the entire $340,081 in sales was attributed to maintenance
and customization services. ATI's cost of sales was $98,784 and the gross
profit was $241,297. In the 1997 Period $442,656 were attributed to
maintenance and customization services and $22,910 were attributed to new
product sales. The 1997 gross margins were $393,249 for maintenance and
customization and $2,043 for new product sales.
Contractors fees declined significantly due to ATI's discontinuance of
selling the ResponseWare software. With no software sales, ATI had no
need for employees and contractors to provide installation services. The
reduction also caused a decrease in customization services. Fees paid for
contractors in the 1998 Period were solely for maintenance services.
The maintenance cost is the expense incurred by ATI to support existing
ResponseWare Products. Even though ATI is not selling new ResponseWare
products, it continues to service, support, and develop product enhancements
(software upgrades) for the ResponseWare product line. The ResponseWare
products are software applications designed to address various financial and
operational needs of municipal governments such as general ledger and funding
accounting, accounts payable, purchase order control, payroll, budgeting,
human resource management and voter registration in Canada. ATI is
contractually obligated to provide maintenance services for the products
already sold. Limited support is provided for one year terms provided
customers pay an annual fee for computer system maintenance. Customers may
reinstate lapsed support by paying the annual support fee plus an additional
charge.
Despite the outdated nature of the ResponseWare products, they are
reliable and ATI has a stable customer base that continues to pay the annual
support fees. For those customers who are not parties to an annual service
contract, ATI provides support and is compensated on a time and material
basis. In the last three years, ATI has experienced no reduction in the
number of licensees that have maintenance contracts. In 1996, 66 2/3 % of
outstanding licenses were supported by maintenance contracts. In 1997 and
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<PAGE>
1998, 69.2% of outstanding licenses were supported by maintenance contracts.
The percentage increase resulted from an 11% reduction in the number of
outstanding licenses that were not supported by maintenance contracts.
Support and maintenance of ResponseWare products presently generate
100% of ATI's revenues. The revenues generated from the
maintenance software is substantially less than the revenue formerly
generated by the sale of the software. Management's decision to cease the
sales of new ResponseWare systems resulted in the loss of 26% or $120,153 of
ATI's revenue for the last fiscal year. ATI has purposefully and
substantially reduced its efforts to market its current software because new
software is under current development.
Moreover, the additional expenses of developing the new systems continue
to be substantial relative to the current revenue generated by ATI. In the
1998 Period, research and development costs for new product development was
$354,069. ATI has budgeted $1 million over the next eighteen months for
research and development, of which $500,000 will come from the proceeds of the
anticipated offering, and $500,000 will come from future revenues.
An inability to produce the new systems could cause a further and
substantial decline in revenues. Possible difficulties in hiring and
retaining highly qualified software developers could cause delays or prevent
ATI from developing a commercially marketable product. Should ATI be unable
to rewrite the ResponseWare software, customers may continue paying software
maintenance fees for increasingly outdated software, or they may continue
using the existing software without maintaining their systems. Customers may
also replace the ResponseWare software with products from other vendors. ATI
has also incurred additional expenses including but not limited to legal and
accounting fees in connection with the listing on the OTC Bulletin Board.
As discussed above, the Company, as the surviving entity of the Merger,
anticipates that sales will increase in the 1998-1999 Period once the new
product development is completed and after the pending acquisitions of small
vendors.
OPERATING INCOME
ATI experienced a decrease in operating expenses. Advertising and
promotion expenses decreased to $4,382 (84%) for the 1998 Period from $27,770
for the 1997 Period. Prior to the 1997 Period, ATI did not advertise in the
U.S. markets. Management decided to advertise its services and products in
the U.S. print media causing a substantial increase in the advertising
expense in the 1997 Period. Subsequently, ATI's operating capital did not
allow for continued advertising. In the 1998 Period, ATI discontinued its
product advertising in all publications causing the substantial decrease in
advertising expense. Filing and transfer fees decreased by $34,285 (82%) for
the 1998 Period from $41,641 for the 1997 Period. The 1997 figure was
extraordinary due to one-time fees paid to Standard and Poor's and the
Vancouver Stock Exchange.
Selling and marketing expenses decreased by $60,873 (98%) in the 1998
Period, from $61,914 for the 1997 Period. In 1997, ATI had attempted to
market a product called Cognos, an accounting software program, and thereby
incurred additional selling and marketing expenses. ATI reduced office and
administration expenses by $19,217 (45%) for the 1998 Period, from $42,823
for the 1997 Period. The 1997 figure resulted from a reinstatement of
trading on the Vancouver Stock Exchange.
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Amortization expenses decreased 50% in the 1998 Period as compared to
the 1997 Period. Amortization in the 1997 Period were abnormally high due to
$24,000 of amortization that ATI should have claimed in prior years.
Moreover, the 1997 Period was the final year ATI amortized $8,000 of
goodwill. Thus, the decrease reflects a return to normal amortization costs.
Management fees increased by $108,467 (119%) to $199,589 during the 1998
Period. The increased management fees resulted from a change in accounting
for the work of ATI's managers. Previously, certain managers were on ATI's
payroll. The expenses for paying these employees were accounted for as
"wages, salaries and benefits." In the 1998 Period, these expenses were
transferred to the account for management fees, and were paid to independent
contractors. The transfer between accounts caused the increase in management
fees and part of the reduction in the "wages, salaries and benefits" account.
The total reduction in "wages, salaries and benefits" was $152,147 (51%) from
$298,082 during the 1997 Period. The balance of the reduction was from
layoffs. When ATI discontinued development of its new systems, some employees
were laid off due to a shortage of funds with which to pay those employees.
As part of its efforts to make the existence of ATI known to the
investing public, ATI paid $32,309 to investor relations firms. These firms
undertook to disseminate information about ATI persons and entities int the
stock brokerage and investment communities including investment management
firms brokers, for the purpose of increasing awareness about ATI. ATI
incurred the major portion of the expense during the 1998 Period. The
contracts with the investment relations firms expired during the 1998 Period.
OTHER INCOME (DEDUCTIONS) AND TAXES.
The total interest ATI received decreased to $297 (95%) for the 1998
Period, from $5,629 for the 1997 Period. This is the interest charged on the
outstanding accounts receivable. ATI was more aggressive in collecting
receivables. ATI has losses available for income tax purposes totaling,
approximately $1,252,000. The losses can be used to reduce taxable income of
future years. The tax losses have not been used for the 1998 Period or the
1997 Period.
ASSETS AND LIABILITIES
Cash and receivables changes resulted from several transactions. Though
ATI ceased selling computer systems, it continues to provide support services
for the systems it has already sold. ATI has support contracts with its
customers, each expiring on a date certain. Upon the expiration of the
support services contract, ATI receives a cash payment from the customer for
the ensuing year. During the 1998 Period, ATI became more aggressive in
terms of collecting on receivables in that it applied strict enforcement of
demanding full payment by the first day of the maintenance period. At the
request of several cities and municipalities, ATI began delivering invoices
two months in advance of the new service periods. Cities and municipalities
need approximately two months to get departmental approval to make payments.
Advance invoicing provides cities and municipalities the necessary
documentation to secure payment approval in time for a new maintenance
period. Prior to receiving the payment, ATI carries the amount due on the
contract as a receivable due in sixty days. However, the work does not begin
until ATI actually receives payment. The change to the sixty-day cycle
contributed to the increase in the accounts receivable balance at the end of
the 1998 Period.
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<PAGE>
Prepaid expenses included software consultants' fees, insurance
premiums, storage, etc. In several cases, ATI prepays expenses by 12
months. ATI's major prepaid expense, insurance, begins in February.
The 1,038% increase in accounts payable to officers and directors and
the increase in loans to related parties resulted from several transactions.
See "Certain Relationships and Related Transactions."
Since the 1997 Period, ATI's current liability for royalties increased
by $30,000 (30%) to $100,000 in the 1998 Period. When ATI acquired
ResponseWare, it assumed ResponseWare's debt to International Business
Machines ("IBM"). IBM financed the cost of ResponseWare installing new
systems. The debt is $100,000 payable over ten months. ATI was scheduled to
begin paying the debt in December 1997. As of September 1997 the total amount
of the debt was due within one year. At the present time, ATI is in default
on repayment and is negotiating a revised payment schedule. Management does
not expect the default to have an adverse effect on ATI's financial position
or results of future operations.
ATI did not incur any additional royalties in the period. Rather, the
$30,000 that caused the increase had been carried as a long-term debt in the
1997 Period. ATI is presently in default on repayment and is currently
negotiating a revised payment schedule. ATI does not believe the debt will
have an adverse effect on ATI's financial position or the results of future
operations. IBM has agreed to wait until ATI completes an equity offering to
collect royalties due. ATI has a good working relationship with IBM as shown
by IBM's willingness to enter into a licensing agreement for new software in
July 1998.
ATI's long-term obligation under capital lease was reduced by C$32,832
(98%) to $800 in the 1998 Period. The change came as a result of C$33,095
becoming a current liability for the 1998 Period.
ATI reduced its current portion of long-term debt by $136,241 (58%) by
repaying its debt to ATI's president's spouse. The principal on the debt was
C$150,000. ATI satisfied the debt by issuing 120,465 shares at C$1.38. The
Vancouver Stock Exchange approved the transaction on July 30, 1997, and the
Company paid the debt on July 30, 1997.
The amount due to related parties increased $129,018 to $132,707
(3,497%) from $3,689 the previous year. The amount due represents loans made
by Mr. Mike Sintichakis and members of his family to ATI to maintain levels
of working capital sufficient for ATI to continue operating. The loans are
not repayable prior to July 1999. For specific information, see "Certain
Relationships and Related Transactions."
LIQUIDITY AND CAPITAL RESOURCES
In the 1998 Period, ATI used $212,823 for operating activities. In
addition to the net loss in the 1998 Period (365,426), the loss per share
decreased to (0.18) from (0.38). In the 1998 Period, the end of year deficit
increased to (4,658,867) compared to ($4,293,440) for the 1997 Period.
ATI made a commitment to spend $75,000 to $100,000 for capital
expenditures in connection with research and development of its new products
for the 1998 Period. Actual expenditures totaled $61,235.80. Of this
amount, ATI spent $20,533 for development of the Year 2000 tool. These
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<PAGE>
expenditures are accounted for as part of wages, salaries and benefits. The
products are expected to be completed and commercially available within 18
months subject to additional financing. ATI plans to operate exclusively
through the support and maintenance of its existing software programs. There
are 45 municipal and private sector customers using the existing programs.
As of June 30, 1998, ATI had a working capital balance of C$(451,698).
ATI expects to use approximately $400,000 in working capital over the next
twelve months. Therefore, ATI has to either raise additional capital in an
offering or reduce expenses to keep in line with its current revenues.
The first component of the external funding via Equitrade Securities
Corp. has not materialized to date, and ATI cannot be certain such funding
will become available to ATI in the 1999 Period. ATI estimates the
anticipated cost of the acquisitions to be less than $200,000. ATI and the
companies to be acquired have agreed, in principal, to the acquisitions.
But, the specific terms or purchase price amounts have yet to be negotiated.
In the absence of the equity funding through external funding sources, ATI
will not be able to complete two of the three acquisitions.
TWELVE MONTHS ENDED JUNE 30, 1997 (THE "1997 PERIOD"), COMPARED WITH
TWELVE MONTHS ENDED JUNE 30, 1996 (THE "1996 PERIOD"). THE 1997 PERIOD IS
DEFINED AS THE FISCAL YEAR FOR THE COMPANY, WHICH IS JULY 1,1996, TO JUNE 30,
1997.
RESULTS OF OPERATIONS
The loss in 1997 Period increased to (C$557,906) from (C$227,656) in the
1996 Period. Loss per share increased to (C$.38) in the 1997 Period from a
loss of (C$.04) in the 1996 Period. The 1996 Period is defined as July 1,
1995, to June 30, 1996.
REVENUES
Net sales decreased $68,985 (13%) to $459,937 in the 1997 Period, from
$528,922 in the 1996 Period. Sales continued to decline because ATI
discontinued the sales of existing ResponseWare computer systems. Even
though ATI was not selling new ResponseWare products, it continued to
service, support, and develop product enhancements (software upgrades) for
the ResponseWare product line. The Company was contractually obligated to
provide maintenance services for the products already sold. Customers pay an
annual fee for computer system maintenance. Despite the outdated nature of
the ResponseWare products, they are reliable and the Company has a stable
customer base that continued to pay the annual support fees. For those
customers who were not parties to an annual service contract, ATI provided
support where it was compensated on a time and material basis.
Approximately, 90% of ATI's revenue was generated by support and maintenance
of the ResponseWare products. Management's decision to cease the sales of new
ResponseWare systems resulted in the loss of 13% or $68,895 of ATI's revenue
for the last fiscal year. Moreover, the additional expenses of developing
the new systems continued to be substantial relative to the revenue generated
by ATI at that time. ATI also incurred additional expenses including but not
limited to legal and accounting in connection with the listing on the
over-the-counter bulletin board.
OPERATING INCOME
34
<PAGE>
Although the revenues continued to decrease, ATI experienced an
increase in operating expenses. Advertising and promotion expenses increased
to $27,769 (950%) for the 1997 Period from $1,285 for the 1996 Period. In the
past ATI did not advertise in the U.S. markets. Management decided to
advertise its services and products in the U.S. print media thereby incurring
a substantial increase in advertising expenses. Filing and transfer fees
increased by $37,611 (968%) for the 1997 Period from $4,030 for the 1996
Period for fees paid to Standard and Poor's and the Vancouver Stock
Exchange.
Selling and marketing expenses increased by $55,329 (890%) in the 1997
Period, from $6,585 for the 1996 Period. ATI attempted to market a product
called Cognos, an accounting software program, and incurred additional
selling and marketing expenses. The product was marketed as a complement to
accounting systems to allow users to easily view and analyze budgets and
forecasts without the need for custom programming. ATI spent $15,024 on
Cognos and only sold the product to two customers. The sales generated
revenues of only $10,455.93. ATI discontinued the product. The activities
related to the reinstatement of trading on the Vancouver Stock Exchange
resulted in an increase in office and administration expenses: $31,998 (75%)
for the 1997 Period, from $10,824 for the 1996 Period. Wages, salaries and
benefits increased $170,432 (57%) to $298,083 for the 1997 Period, from
$127,651 for the 1996 Period. The wages, salaries and benefits increased due
to payment of employees in connection with the development of new software
programs.
OTHER INCOME (DEDUCTIONS) AND TAXES
The total interest received by ATI decreased to $5,629 (70%) for the
1997 Period, from $19,079 for the 1996 Period. This is the interest charged
on the outstanding accounts and ATI was more aggressive collecting amounts to
which is was due. ATI had losses available for income tax purposes totaling,
approximately $1,343,000. The losses can be used to reduce taxable income of
future years. The tax losses were not used for the 1997 Period or the 1996
Period.
LIQUIDITY AND CAPITAL RESOURCES
In the 1997 Period, $491,653 was used for operating activities of ATI.
(Due to a clerical error, ATI reported in its registration statement on Form
SB-10 that $1,024,472 was used during this period.) In addition to the net
loss in the 1997 Period ($557,906), the loss per share increased to ($.38)
from ($.04). In the 1997 Period, the end of year deficit increased to
($4,293,440) compared to ($3,735,534) for the 1996 Period.
Financing activities in the 1997 Period provided cash of $754,870
through the issuance of share capital in the amount of 1,042,130 shares. In
the 1997 Period ATI received approval from the Vancouver Stock Exchange to
convert the total loan amount of $166,243 into 120,465 shares of ATI's Common
Stock. The loan was incurred to provide the necessary capital to acquire a
small computer company in Canada. The shares have been issued and the debt
has been fully satisfied. ATI did not incur any other long-term debt in the
1997 Period. As of September 30, 1997, ATI's long term debt was $13,196.
ATI had also incurred expenses of $105,000 for legal and accounting fees
related to registration and the sale of its shares, listing on the OTC
Bulletin Board, and other offering costs.
35
<PAGE>
External Funding
ATI entered into an underwriting agreement with Equitrade Securities
Corp. to infuse capital into ATI in an equity offering subject to the
provisions of Regulation D. ATI has offered 406,504 or 20% of its Common
Shares. To date, this offering has not materialized and ATI does not expect
to raise the funds prior to the Merger. For more information, see
"Description of Business."
Disagreements With Accountants
On Accounting And Financial Disclosure
ATI has not had any changes in or disagreements with its accountants.
VOTING AND MANAGEMENT INFORMATION
Date, Time And Place Information
The meeting of security holders of ATI Common Stock will be on
_______,1998, in the offices of Stephen K. Winters Law Corporation, 1010
Burrard Building, 1030 West Georgia St., Vancouver, B.C. V6E 2Y3, Canada at
9:00 a.m. The address of ATI is as follows: #5-246 Lawrence Ave., Kelowna,
British Columbia, V1Y 6L3. On June 30, 1998, the shareholders and directors
of the Company held their annual and special meetings and unanimously approved
the Merger.
The approximate date on which the proxy statement and form of proxy are
first to be sent or given to security holders is ___________, 1998.
Proposals of stockholders intended to be presented at the 1999 annual meeting
of Stockholders of the Company must be received by the Company no later than
May 14, 1999, in order to be included in the proxy statement and form of
proxy relating to such annual meeting. After July 28, 1998, a notice of a
shareholder proposal submitted to the Company outside the processes of Rule
14a-8 of the Exchange Act shall be considered untimely.
Revocability Of Proxy
If the enclosed Proxy is executed and returned, it will be voted on the
proposals as indicated by the shareholder. The Proxy may be revoked by the
shareholder at any time prior to its use by notice in writing to the Secretary
of ATI, by executing a later dated proxy and delivering it to the ATI prior
to the meeting or by voting in person at the meeting.
Dissenters' Rights of Appraisal
Any shareholder of ATI on ___________, 1998, (the record date for
purposes of determining who is entitled to notice of and to vote at the
Annual and Extraordinary Meeting of Shareholders of the Company) who objects
to the Merger may dissent from the Merger. Any such shareholder may demand
in writing prior to the shareholders' meeting that, if the Merger is
consummated, ATI pay to him or her in cash the value of his or her present
common stock. The dissenting shareholder must deliver the demand to ATI's
registered office within 14 days after the date of this Joint
Proxy-Statement Prospectus. The dissenting shareholder should deliver the
demand to Mr. Mike Sintichakis, Aztek Technologies Inc., Suite #5-246 Lawrence
Ave. Kelowna, B.C. V1Y 6L3. On delivery of the notice and the accompanying
share certificates, the dissenting shareholder is bound to sell those shares
to ATI and ATI will purchase the shares. The shareholder must not then vote
36
<PAGE>
in favor of the Merger. As described in the section "Voting Procedures"
below, failure to return a properly executed proxy card or to vote
in person will have the same effect as a vote in favor of the Merger. Such
failure will constitute a waiver of dissenters' rights. Moreover, beneficial
shareholders whose names are not on the company's register of members cannot
give a notice of dissent and trigger the appraisal remedy. If the shares are
held by a broker, the broker's name being listed on ATI's register of
members, the broker may dissent with respect to the shares it holds as the
registered owner, if the broker lists such shares on the notice of dissent.
The cash value to which such shareholder will be entitled is the value agreed
upon or court determined, in the manner set forth below ("Dissenter's
Value"). ATI has no obligation to institute any court proceeding to have a
court determine the value of the shares. If a shareholder applies to a court
to determine the value of the shares, the shareholder will bear his or her
owns costs of such application. This statutory dissenter's right to payment
of the Dissenter's Value of his or her common stock is mandated by section
207 of the British Columbia Company Act (the "Company Act") a copy of which
is attached to this Joint Proxy Statement-Prospectus.
ATI will provide the funds necessary to pay any holders of Common Stock
who perfect their statutory dissenter's rights.
Any such shareholder who contemplates the exercise of such dissenter's
rights is urged to review carefully the provisions of the Company Act,
particularly the procedural steps required to perfect the right to
Dissenter's Value. The rights of dissenting shareholders to Dissenter's
Value will be lost if the procedural requirements of the Company Act are not
fully and precisely satisfied. If the right to Dissenter's Value is lost,
the shareholder will be entitled to receive for each share of ATI Common
Stock the number of shares of the Company's Common Stock as provided in the
Merger Agreement.
The procedural steps are set forth in the legal opinion of Mr. Steven K.
Winters attached hereto as Annex B (to be read in conjunction with the full
text of the Company Act and is qualified in its entirety by reference to the
statute.
Persons Making the Solicitation
This proxy statement is furnished in connection with the solicitation by
the Board of Directors of Aztek Technologies Inc. ("ATI") of proxies for use
at the Annual and Extraordinary Meeting of Stockholders of the Company to be
held on __________ 1998, and any adjournments thereof.
There were outstanding at the close of business on __________, 1998, the
record date for determination of the stockholders of ATI entitled to notice
of and to vote at the Annual Meeting, 2,051,109 shares of Common Stock of ATI
entitled to one vote per share. Only stockholders of record on __________,
1998, are entitled to notice of and to vote at the meeting. The proxy does
not affect the right to vote in person at the meeting, and may be revoked at
any time prior to the voting thereof. The presence of two persons entitled to
vote will constitute a quorum. The affirmative vote of the holders of shares
present or represented by proxy at the meeting must exceed the negative
votes cast for the adoption of the proposals described in this Proxy
Statement.
The Board of Directors knows of no other matters likely to be brought
before the Annual Meeting other than those mentioned above. However, if any
other matters not now known or determined, properly come before the meeting
37
<PAGE>
or any adjournments thereof, the persons named in the enclosed form of proxy
will vote such proxy in accordance with their best judgment in such matters
pursuant to discretionary authority granted in the proxy.
Stockholders are urged to sign the accompanying form of proxy, solicited
on behalf of the Board of Directors of ATI, and to return it at once in the
envelope provided for that purpose. Proxies will be voted in accordance with
the stockholders directions. If no direction is given, proxies will be voted
in accordance with the recommendations of the Board of Directors set forth in
this Proxy Statement. A stockholder who wishes to designate a person or
persons to act as his or her proxy at the meeting, other than the proxies
designated by the Board of Directors, may strike out the names appearing on
the enclosed form of proxy, insert the name of any other such person or
person, sign the form and transmit it directly to such other designated
person or persons for use at the meeting.
The expense of the Board of Directors' proxy solicitation will be borne
by ATI. In addition to the solicitation of proxies by use of the mails, some
of the officers, directors and regular employees of ATI (none of whom will
receive additional compensation therefor) may solicit proxies by telephone,
telegraph or personal interview. ATI will, upon request, reimburse nominees,
custodians, and fiduciaries for the expenses in forwarding proxy material to
their principals.
Interest Of Certain Person In Matters To Be Acted Upon
Certain members of ATI's management and its Board of Directors may be
deemed to have certain interests in the Merger in addition to their interests
as stockholders of ATI generally. ATI's Board of Directors was aware of
these interests and considered them, among other matters, in unanimously
approving the Merger Agreement.
OFFICERS AND BOARD OF DIRECTORS. Mike Sintichakis, Edson Ng, and Eileen
Keogh constitute the entire Board of Directors of ATI and are also directors
of the Company. The sole remaining director of the Company is Nick
Sintichakis who is the son of Mike Sintichakis.
COMMON SHARES. In June 1998, the directors and officers named in the
preceding paragraph purchased one million shares of the common stock of the
Company at $.05 per share. The shares are to be distributed in twenty-four
monthly installments beginning in June 1998. The total number of shares that
will be distributed pursuant to the purchase constitute the total amount of
shares that are issued and outstanding. The Company has no existing business
at this time and will begin transacting business when it assumes the
operations of ATI upon consummation of the Merger. Since ATI will cease to
exist upon completion of the Merger, the net result will be that the
above-named directors will each own a larger percentage in the combined
company than they previously owned in ATI.
INDEMNIFICATION. To the extent permitted by law, the Articles of
Incorporation of the Company and ATI contain an indemnification clause such
that the Company or ATI will indemnify all directors and officers of the
Company or ATI if any such directors or officers are named as a party or
parties to a lawsuit as a result of serving as officers or directors of the
Company or ATI. For limitations on indemnification, see "Disclosure of
Commission Position on Indemnification for Securities Act Liabilities.
38
<PAGE>
Voting Securities And Principal Holders Thereof
ATI's Shareholders of record at the close of business on __________, 1998
will be entitled to vote on all matters. On the record date ATI had 2,051,109
shares of ATI Common Stock outstanding. The holders of ATI Common Stock are
entitled to one vote per share. ATI has no class of voting securities
outstanding other than the ATI Common Stock.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
(Pre-Merger)
Security Ownership of ATI Shares
By Certain Beneficial Shareholders
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Title of Name and Address of Amount and Nature Percentage of
Class Beneficial Owner of Beneficial Owner Class
______________________________________________________________________________
<S> <C> <C> <C>
Voting Mike Sintichakis
Common 1802 Lipsett Crt.
Kelowna, BC V1V 1X3 462,190 27%
" Maria Sintichakis
1802 Lipsett Crt.
Kelowna, BC V1V 1X3 255,928 12%
" Tony Pantazopoulos 21,333 1%
1807 Lipsetet Court
Kelowna, BC V1V 1X3
" Edson Ng
623 Alpine Court
North Vancouver, BC V7R 2L7 104,700 7%
______________________________________________________________________________
822,818 40%
</TABLE>
Mike Sintichakis has the right to acquire 90,000 shares at the exercise price
of $1.82 within sixty days.
Edson Ng has the right to acquire 40,000 shares at the exercise price of
$1.82 within sixty days.
Eileen Keogh has the right to acquire 40,000 shares at the exercise price of
$1.82 within sixty days.
Maria Sintichakis is Mr. Sintichakis' wife. Mr. Sintichakis does not exercise
shared voting or dispositive powers with Mrs. Sintichakis.
39
<PAGE>
Security Ownership of Company Shares
By Certain Beneficial Shareholders
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Title of Name and Address of Amount and Nature Percentage of
Class Beneficial Owner of Beneficial Owner Class
______________________________________________________________________________
<S> <C> <C> <C>
Voting Mike Sintichakis
Common 1802 Lipsett Crt.
Kelowna, BC V1V 1X3 800,000 40%
" Nick Sintichakis
1802 Lipsett Crt.
Kelowna, BC V1V 1X3 430,000 21%
" Eileen Keogh
508-2012 Fullerton Ave.
Vancouver, BC V7P 3E3 320,000 16%
" Edson Ng
623 Alpine Court
North Vancouver, BC V7R 2L7 440,000 22%
- ------------------------------------------------------------------------------
Beneficial Shareholders as a Group 1,990,000 100%
</TABLE>
Under the terms of the subscription agreements, the Company will place
one million outstanding common shares in a trust and distribute the shares in
twenty-four monthly installments beginning in June 1998. One million shares
are bonus shares to be distributed as described in the section "Market for
Common Equity and Related Stockholders Matters" at page _____.
Security Ownership of Management
<TABLE>
ATI
<CAPTION>
(1) (2) (3) (4)
Title of Name and Address of Amount and Nature Percentage of
Class Beneficial Owner of Beneficial Owner Class
______________________________________________________________________________
<S> <C> <C> <C>
Voting Mike Sintichakis
Common 1802 Lipsett Crt.
Kelowna, BC V1V 1X3 462,190 27%
" Eileen Keogh
508-2012 Fullerton Ave.
Vancouver, BC V7P 3E3 37,000 4%
" Edson Ng
623 Alpine Court
North Vancouver, BC V7R 2L7 104,700 7%
- ------------------------------------------------------------------------------
Directors and Management as a Group 603,890 30%
</TABLE>
40
<PAGE>
See notes to Security Ownership of ATI shares of Certain Beneficial
Shareholders
<TABLE>
The Company
<CAPTION>
(1) (2) (3) (4)
Title of Name and Address of Amount and Nature Percentage of
Class Beneficial Owner of Beneficial Owner Class
______________________________________________________________________________
<S> <C> <C> <C>
Voting Mike Sintichakis
Common 1802 Lipsett Crt.
Kelowna, BC V1V 1X3 800,000 40%
" Nick Sintichakis
1802 Lipsett Crt.
Kelowna, BC V1V 1X3 430,000 21%
" Eileen Keogh
508-2012 Fullerton Ave.
Vancouver, BC V7P 3E3 320,000 16%
" Edson Ng
623 Alpine Court
North Vancouver, BC V7R 2L7 440,000 22%
- ------------------------------------------------------------------------------
Directors and Management as a Group 1,990,000 100%
</TABLE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Pro Forma Security Ownership of
Certain Beneficial Shareholders
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Title of Name and Address of Amount and Nature Percentage of
Class Beneficial Owner of Beneficial Owner Class
______________________________________________________________________________
<S> <C> <C> <C>
Voting Mike Sintichakis
Common 1802 Lipsett Crt.
Kelowna, BC V1V 1X3 1,262,190 33%
" Maria Sintichakis
1802 Lipsett Crt.
Kelowna, BC V1V 1X3 255,928 6%
" Nick Sintichakis
1802 Lipsett Crt.
Kelowna, BC V1V 1X3 504,500 12%
" Eileen Keogh
508-2012 Fullerton Ave.
Vancouver, BC V7P 3E3 357,000 10%
" Edson Ng
623 Alpine Court
North Vancouver, BC V7R 2L7 544,000 13%
- ------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
Mike Sintichakis has the right to acquire 90,000 shares at the exercise price
of $1.82 within sixty days.
Edson Ng has the right to acquire 40,000 shares at the exercise price of
$1.82 within sixty days.
Eileen Keogh has the right to acquire 40,000 shares at the exercise price of
$1.82 within sixty days.
Security Ownership of Management
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Title of Name and Address of Amount and Nature Percentage of
Class Beneficial Owner of Beneficial Owner Class
______________________________________________________________________________
<S> <C> <C> <C>
Voting Mike Sintichakis
Common 1802 Lipsett Crt.
Kelowna, BC V1V 1X3 1,262,190 33%
" Nick Sintichakis
1802 Lipsett Crt.
Kelowna, BC V1V 1X3 504,500 12%
" Eileen Keogh
508-2012 Fullerton Ave.
Vancouver, BC V7P 3E3 357,000 10%
" Edson Ng
623 Alpine Court
North Vancouver, BC V7R 2L7 544,000 13%
- ------------------------------------------------------------------------------
Directors and Management as a Group 2,667,690 68%
</TABLE>
See notes to Pro Forma Security Ownership of Certain Beneficial
Shareholders.
Voting Procedures
Two persons present and entitled to vote constitute a quorum at any
general shareholders' meeting. A member may by proxy appoint a proxy holder
to vote for him or her on a poll. Every shareholder who is present in person
and entitled to vote at that occurrence shall have one vote and on a poll
every member present in person or represented by proxy or other proper
authority shall have one vote for each share of which he or she is the
registered holder. ATI has no class of voting securities outstanding other
than its Common Stock. Adoption of the Merger and the Merger Agreement will
require that the votes cast favoring the Merger must exceed the votes cast
opposing the Merger. The failure to return a properly executed proxy card or
to vote in person ("abstention") at the Special Meeting will have the same
42
<PAGE>
effect as a vote in favor of the Merger. Similarly, "broker non-votes"
(referring to instances where a broker or other nominee physically indicates
on the proxy that, because it has not received instructions from beneficial
owners, it does not have discretionary authority as to certain shares of
ATI's Common Stock to vote on the proposal) will have the same effect as a
vote in favor of the Merger. The proxies named in the enclosed proxy card
may, at the direction of the Board, vote to adjourn or postpone the Special
Meeting to another time or place for the purpose of soliciting additional
proxies necessary for approval of a proposal or otherwise.
If the accompanying proxy card is properly executed and returned to ATI
in time to be voted at the Special Meeting, the shares represented thereby
will be voted in accordance with the instructions marked thereon. EXECUTED
BUT UNMARKED PROXIES WILL BE VOTED FOR APPROVAL OF THE MERGER AND
THE MERGER AGREEMENT. Except for procedural matters incident to the conduct
of
the Special Meeting, the Board of Directors of ATI does not know of any
matters other than those described in the Notice of Special Meeting that are
to come before the Special Meeting. If any other matters are properly brought
before the Special Meeting, the persons named in the ATI proxy will vote the
shares represented by such proxy on such matters as determined by a majority
of ATI's Board of Directors.
<TABLE>
Directors, Executive Officers, Promoters And
Control Persons Of The Surviving Or Acquiring Company
<CAPTION>
Name Age Position Director Since
<S> <C> <C> <C>
Mike Sintichakis 60 Director August 1994
President
Nick Sintichakis 33 Director July 1994
Secretary
Treasurer
Edson Ng 34 Director July 1998
Eileen Keogh 51 Director July 1998
</TABLE>
Each director serves for a term of one year and is elected at the annual
meeting of shareholders. The Company's officers are appointed by the Board
of Directors and hold office at the discretion of the Board.
Mike Sintichakis. Mr. Sintichakis has over 27 years of experience as an
entrepreneur and professional business manager. He has owned and operated
seven corporations and presided as president of three other corporations. He
received an Industrial Electrician Diploma from Greece in 1958. He has since
specialized in acquiring, restructuring and growing small and mid-sized
businesses in the hospitality, consumer services, automotive, leisure and
manufacturing industries. He recently managed over 450 employees and
consistently guided companies successfully through tremendous revenue growth.
He has served as a director and president of ATI since 1991. Mr. Sintichakis
has also served as a director and president of Aztek Inc. since its inception
in 1994. From 1995 to 1997, he served as a director and president of ATI's
wholly-owned subsidiary, ResponseWare Corp. From 1993 to 1994, he served as
43
<PAGE>
director and president of ATI's wholly-owned subsidiary Nu-Crest Sportswear
Inc., a designer of customer embroidered and silk-screen sportswear.
Edson Ng. Mr. Ng has earned a B.Sc. Degree in Mechanical Engineering
from the University of Alberta. He is a registered Professional Engineer
(P.Eng.) and a Certified Management Consultant. His career includes 7 years
of systems engineering, marketing, consulting experience with IBM Canada
Ltd., and 4 years as founder and president of Advance Mobility Systems
Integration Inc. where he served from 1992 to 1995. Advance Mobility Systems
Integration was a consulting and computer integration business. Mr. Ng has
been involved with various business ventures throughout his career. He has
been with ATI since 1995 and currently serves as a director and vice president
of operations.
Eileen Keogh. Ms. Keogh received a B.A. degree in Mathematics from
Dickinson College, Pennsylvania. She has over 29 years of consulting
experience in information systems design, development, and implementation.
Throughout her career in the computer industry she has served as Director of
Development, Systems Architect, Project Manager, Team Leader, Data and Press
Modeler, Methodologies Expert, Technical Designer, Systems and Applications
Programmer/analyst, Trainer and Mentor. Ms. Keogh is an expert in
client/server and object oriented software design and development on a
variety of platforms. She gained seven years of software development
experience with IBM Canada Ltd., IBM UK and IBM Corporation in New York. Her
consulting projects include working for Prologic Computer Company from 1994 to
1995. Prologic is a designer of senior systems. From 1991 to 1995, she was
self-employed as a computer consultant. In that capacity, she provided
services to Solutions for Government, Fletcher Challenge, Alcan Canada,
Insurance Bureau of Canada, Toronto Stock Exchange and the Bank of Montreal.
She has been with ATI since 1995 and she serves as a director. She also is in
charge of research and development.
Nick Sintichakis. Mr. Nick Sintichakis is the Secretary of Aztek Inc.
He presently serves as President of Christopher's Steak & Seafood Restaurant
and has held that position for the past nine years. He was also a director
of Yamas Taverna Inc., a restaurant in Kelowna, British Columbia for over
five years. For ten years he was the manager of Caribou Restaurant. He
currently spends about eight to ten hours per week as Secretary of the
Company.
Executive Compensation Of The Directors And
Executive Officers of ATI
The members of the Board of Directors of the Company and the officers of
the Company presently do not receive compensation for serving as directors
and officers. Upon consummation of the Merger, the Company will assume the
obligations of ATI for executive compensation. The table below sets forth
the compensation of the key executives of ATI.
<TABLE>
<CAPTION>
Long Term
Compensation
- ------------------------------------------------------------------------------
Annual Compensation Awards Payouts
- ------------------------------------------------------------------------------
Securities
Underlying
Name and Principal Position Year Salary(1) Bonus Options/SARs(#)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mike Sintichakis, 1998 $70,872 0 0
President, Director 1997 $30,000 0 90,000 options
Edson Ng
Vice Pres. President of
Operations 1998 $59,169 0 0
1997 $60,000 0 40,000 options
Eileen Keogh(2) 1998 $20,750 0 0
Director, R&D 1997 $60,000 0 40,000 options
</TABLE>
44
<PAGE>
(1) The salary is reflected in Canadian dollars and was paid in Canadian
dollars.
(2)Compensation paid to Ms. Keogh was paid to her through her company as an
independent contractor
Retirement plan. ATI does not have a retirement plan at present, but
the Company intends to implement one after the Merger once the Company
becomes profitable.
Employment contracts, Termination of Employment and Change in Control
Agreements. At present, ATI has no employment contract with any of its
employees.
Compensation Committee, Interlocks and Insider Participation. Neither
ATI or the Company has a compensation committee; rather the Boards of
Directors perform the functions that would otherwise be performed by a
compensation committee.
Executive Compensation Of The Directors And
Executive Officers of the Company
The members of the Board of Directors of the Company and the officers of
the Company presently do not receive compensation for serving as directors
and officers. Upon consummation of the Merger, the Company will assume the
obligations of ATI for executive compensation. The table below sets forth
the compensation of the key executives of the Company.
Summary Compensation Table for the Company
<TABLE>
<CAPTION>
Long Term
Compensation
- ------------------------------------------------------------------------------
Annual Compensation Awards Payouts
- ------------------------------------------------------------------------------
Name and Principal Position Year Salary Bonus
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Mike Sintichakis, CEO 1998 $0 $0
1997 $0 $0
Edson Ng, Director 1998 *
1997 *
Eileen Keogh, Director 1998 *
1998 *
Nick Sintichakis 1998 $0 $0
1997 $0 $0
</TABLE>
*Edson Ng and Eileen Keogh were first elected to the Board of Directors on
June 30, 1998, to serve as directors for the ensuing year.
The Company has not paid any compensation to its officers or directors since
the Company's inception.
45
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised
Options/SARs at
FY-End (#)
Name Exercisable/Unexercisable
<S> <C>
Mike Sintichakis 90,000
Edson Ng 40,000
Eileen Keogh 40,000
</TABLE>
Long Term Incentive Plans
<TABLE>
<CAPTION>
Name Number of Shares Performance
Units or Other Or Other Period
Rights (#) Until Maturation Threshold Maximum
Or Payout ($ or #) ($ or #)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
<C>
Mike Sintichakis 400,000 .40* 80,000 400,000
" 354,000 109,740** 1 354,000
Edson Ng 200,000 .40* 40,000 200,000
Eileen Keogh 200,000 .40* 40,000 200,000
Nick Sintichakis 200,000 .40* 40,000 200,000
- ------------------------------------------------------------------------------
</TABLE>
*Amount of working capital per share
** Mr. Mike Sintichakis currently has 354,000 shares of ATI Common Stock in
escrow to be released as ATI generates positive cash flow from operations.
The shares will be released to Mr. Sintichakis at the rate of one share for
every C$.31 of cash flow generated by ATI. Mr. Sintichakis purchased the
shares for C$.01 per share. Mr. Sintichakis enjoys full voting rights
attributable to the shares.
46
<PAGE>
The long term incentive plan consists of 1,000,000 shares of the Company
Common Stock referred to as Bonus Shares under the agreement. The directors
purchased the Bonus Shares, par value $.001, at $.01 per share. The shares
were placed in escrow to be released upon two conditions. Each director may
receive his or her Bonus Shares upon his or her satisfactory performance.
However, in addition to the individual director's performance, the Company
must accumulate working capital in the following amounts per year:
Year one: $.05 per share
Year two: $.10 per share
Year three: $.20 per share
Year four: $.30 per share
Year five: $.40 per share
A maximum of 20% of each purchaser's Bonus Shares may be issued in any
one year. Thus, the table above shows the threshold at which the Company
will release the Bonus Shares to an individual holder and the maximum number
of shares the Company may release to a holder. Unissued Bonus Shares expire
June 12, 2003, and carry full voting rights. If an owner of Bonus Shares is
no longer employed by the Company, including by termination, the Board of
Directors, in its discretion, may transfer any Bonus Shares that have not
been issued to a new director, officer or employee. The transferee must pay
the original purchaser US$.01 per share including six percent interest per
annum within thirty days.
Certain Relationships And Related Transactions
Nick Sintichakis, a director of the Company, is the son of Mike
Sintichakis, the president and a director of the Company. No other family
relationships exist among directors, executive officers or persons nominated
or chosen by the Company to become officers or executive officers and no such
relationships exist among the directors and officers of ATI.
ATI engaged in several transactions with its directors and a director's
immediate family member causing an increase in current liabilities. The
directors and an individual director's family member had a material
interest. These changes caused the increase in accounts payable to directors
and loans to related parties. Mike Sintichakis has not received his full
salary for the 1998 Period. ATI accrued Mr. Sintichakis' salary as an
accounts payable in the amount of $45,871.29 and actually paid Mr.
Sintichakis
$6,270.97. Messrs. Sintichakis and Edson Ng, and Ms. Eileen Keogh have made
several payments on ATI's behalf totaling approximately $39,353.59. ATI has
repaid $14,914.41. These transactions caused the entire increase in accounts
payable to directors from the 1997 Period to the 1998 Period.
The increase in long term debt to related parties resulted from a series
of transactions. ATI leases space from Mike Sintichakis' wife, Maria
Sintichakis. To date, ATI has accrued its rental payments totaling $13,500.
For more information see "Description of Property." Mrs. Sintichakis has
also made several payments to vendors on ATI's behalf and she has loaned
money directly to ATI so that it could meet its expenses. The total amount
due to Mrs. Sintichakis is $62,171.50. Mike Sintichakis is due $5,607.13 for
similar types of advances to ATI.
Christopher's Restaurant ("Christopher's") is an establishment owned by
Mrs. Maria Sintichakis. From November 1997 to May 1998, Christopher's loaned
ATI approximately $21,682.50 so that ATI could meet its working capital
needs. Mike Sintichakis' son-in-law, Tony Pantazopoulus loaned ATI
$42,998.74 from November 1997 to May 1998 so that ATI could meet its working
capital requirements. ATI issues interest free demand notes for the loans it
receives from the Affiliates. However, the notes provide that no payments
are due prior to July 1999.
With respect to ATI, in 1995 the spouse of the president of ATI loaned
approximately $150,000 (plus interest of $16,241) for a sum total of $166,241
to ATI. ATI used the loan proceeds to acquire a small Canadian computer
vendor. ATI sought the approval of the Vancouver Stock Exchange to issue
120,465 shares of common stock at $1.38 CND to satisfy the then existing
debt. The Vancouver Stock Exchange granted approval on July 30, 1997 and the
debt was satisfied on July 30, 1997.
47
<PAGE>
Transactions with Promoters. The promoters of the Company are Mike
Sintichakis, Nick Sintichakis, Dauna Potts, Eileen Keogh and Edson Ng. The
following table sets forth the amounts received by the promoters and the
Company.
<TABLE>
<CAPTION>
Name and address of Amount of Amount of
Of Promoter Shares Bonus Shares
- ----------------------- --------- ------------
<S> <C> <C>
Mike Sintichakis
1802 Lipsett Crt.
Kelowna, BC V1V 1X3 400,000 400,000
Nick Sintichakis
1802 Lipsett Crt.
Kelowna, BC V1V 1X3 230,000 200,000
Dauna Potts
882 Toovey Rd.
Kelowna, BC 10,000 0
Eileen Keogh
508-2012 Fullerton Ave.
Vancouver, BC V7P 3E3 120,000 200,000
Edson Ng
623 Alpine Court
North Vancouver, BC V7R 2L7 240,000 200,000
</TABLE>
The promoters purchased the Common Shares, par value $.001, at $.05 per
share. The directors set the price at Mike Sintichakis's suggestion, which
her determined arbitrarily, and issued the shares to cover anticipated
expenses such as legal fees and accounting fees. Though the shares
were fully paid for in advance, they are subject to a restriction by which the
shares are placed into a trust to be released in twenty-four monthly
installments. Each promoter is serving as a director or officer. If a
promoter leaves for any reason including termination, the undistributed shares
can be distributed to another employee, director or officer. The recipient in
such a transfer must pay the prior shareholder US$.05 per share plus six
percent interest per annum effective on the day of transfer. The promoters
purchased the Bonus Shares, par value $.001, at $.01 per share. The directors
set the price at Mike Sintichakis' suggestion, which he determined
arbitrarily. The terms of the agreement between the holders of the Bonus
Shares and the Company are discussed above in the table "Long Term Incentive
Plans."
48
<PAGE>
AZTEK, INC.
Financial Statements
For the Years Ended June 30, 1996, 1997 and 1998
Contents
- ------------------------------------------------------------------------------
Auditors' Report 2
Financial Statements
Balance Sheets 3
Statements of operations 4
Statements of Cash Flow 5
Notes to Financial Statements 6-7
<PAGE>
<AUDIT-REPORT>
[Letterhead of BDO Dunwoody]
Auditors' Report
To the Shareholders of
Aztek, Inc.
We have audited the balance sheets of Aztek, Inc. as at June30, 1998,
1997 and 1996 and the statements of operations and cash flow for the years
then ended. 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 have conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at June 30, 1998, 1997
and 1996 and the results of its operations and its cash flows for the years
the ended in accordance with generally accepted accounting principles.
/s/BDO Dunwoody
- ----------------------------
Chartered Accountants
Penticton, British Columbia
July 23, 1998
</AUDIT-REPORT>
F-2
<PAGE>
<TABLE>
<CAPTION>
Aztek, Inc.
Balance Sheet
(U.S. Dollars)
June 30 1998 1997 1996
Assets
<S> <C> <C> <C>
Current
Cash $ 60,000 $ - $ -
------ ------ ----
$ 60,000 $ 0 $ 0
----------- ------ ----
Shareholders' Equity
Share capital (Note 2)
Authorized - 100,000,000 shares
of common stock
Issued and fully paid -
2,000,000 shares $ 60,000
Subscribed for and unpaid 25,000 25,000 25,000
Share subscriptions receivable (25,000) (25,000) (25,000)
-------- -------- -------
$ 60,000 $ 0 $ 0
======= ====== =======
</TABLE>
Approved on behalf of the Board:
/s/ Director
/s/ Director
F-3
<PAGE>
<TABLE>
<CAPTION>
Aztek, Inc.
Statements of Operations
(U.S. Dollars)
For the year ended June 30 1998 1997 1996
<S> <C> <C> <C>
Revenue $ 0 0 0
Expenses 0 0 0
--- --- ---
Net income for the year 0 0 0
Retained Earnings, beginning of year 0 0 0
--- --- ---
Retained Earnings, end of year 0 0
0
=== === ===
</TABLE>
The company has conducted no operations since incorporation
F-4
<PAGE>
<TABLE>
<CAPTION>
Aztek, Inc.
Statements of Cash Flow
(U.S. Dollars)
For the year ended June 30 1998 1997 1996
<S> <C> <C> <C>
Cash provided by (used in)
Financing activities
Issuance of share capital $ 60,000 $ - -
------ ---- -----
Increase in cash 60,000 - -
Cash, beginning of year - - -
------ ---- -----
Cash, end of year $ 60,000 $ - $
====== ==== =====
</TABLE>
F-5
<PAGE>
Aztek, Inc.
Notes to Financial Statements
(U.S. Dollars)
June 30, 1998, 1997 and 1996
- -----------------------------------------------------------------------------
1. Nature of Business
The company was incorporated under the laws of the state of Nevada on August
19, 1994, and has not carried on any business activities since incorporation.
- ----------------------------------------------------------------------------
2. Share Capital
Authorized
100,000,000 common shares with a par value of $0.001. During the year
ended June 30, 1998 the articles of incorporation were amended to increase
the authorized share capital to 100,000,000 common shares from 25,000 common
shares.
<TABLE>
<CAPTION>
1998 1997 1996
Number of Amount Number of Amount Number of Amount
Shares Shares Shares
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Issued and fully paid
Balance,
Beginning
Of year - $ - - $ - - $ -
Issued for cash
Private
Placement 2,000,000 60,000 - - - -
Balance
End of year 2,000,000 $ 60,000 - $ - - $ -
Subscribed and unpaid
Private
Placement 25,000 25,000 25,000 25,000 25,000 25,000
--------- ------ ------ ------ ------ ------
2,025,000 85,000 25,000 25,000 25,000 25,000
Share subscriptions
receivable 25,000 25,000 25,000 25,000 25,000 25,000
--------- ------ ------ ------ ------ ------
2,000,000 $ 60,000 0 $ 0 0 $ 0
</TABLE>
F-6
<PAGE>
2. Share Capital - Continued
(a) Escrow Shares - The Issued share capital includes 1,000,000 escrow shares
(1997 and 1996 - nil). These shares will be released from escrow to a
maximum number of 20% per year of the original number at the rate of 1 share
for the following accumulated working capital, as defined in the agreement;
Year one $0.05 per share of working capital
Year two $0.10 per share of working capital
Year three $0.20 per share of working capital
Year four $0.30 per share of working capital
Year five $0.40 per share of working capital
These escrow shares are due to expire June 12, 2003 and any shares remaining
in escrow at that date will be cancelled.
F-7
<PAGE>
ANNEX A
Dissenters' Rights Statute
The following exhibit is the selected statute, Section 207 of the British
Columbia Company Act, relating to dissenters' rights.
Division 2 - Dissent Proceedings
Dissent procedure
207 (1) If,
(a) being entitled to give notice of dissent to a resolution as
provided in section 37, 103, 126, 222, 244, 249 or 289, a member of a company
(in this Act called a "dissenting member") gives notice of dissent,
(b) the resolution referred to in paragraph (a) is passed, and
(c) the company or its liquidator proposes to act on the authority
of the resolution referred to in paragraph (a),the company or the liquidator
must first give to the dissenting member notice of the intention to act and
advise the dissenting member of the rights of dissenting members under this
section.
(2) On receiving a notice of intention to act in accordance with
subsection (1), a dissenting member is entitled to require the company to
purchase all of the dissenting member's shares in respect of which the notice
of dissent was given.
(3) The dissenting member must exercise the right given by subsection
(2) by delivering to the registered office of the company, within 14 days
after the company, or the liquidator, gives the notice of intention to act.
(a) a notice that the dissenting member requires the company to
purchase all of the dissenting member's shares referred to in subsection (2),
and
(b) the share certificates representing all of those shares, and on
delivery of that notice and those share certificates, the dissenting member
is bound to sell those shares to the company and the company is bound to
purchase them.
(4) A dissenting member who has complied with subsection (3), the
company, or, if there has been an amalgamation, the amalgamated company, may
apply to the court, and the court may
(a) require the dissenting member to sell, and the company or the
amalgamated company to purchase, the shares in respect of which the notice of
dissent has been given,
(b) set the price and terms of the purchase and sale, or order that
the price and terms be established by arbitration, in either case having due
regard for the rights of creditors,
(c) joint in the application any other dissenting member who has
complied with subsection (3), and
(d) make consequential orders and give directions it considers
appropriate.
(5) The price that must be paid to a dissenting member for the shares
referred to in subsection (2) is their fair value as of the day before the
date on which the resolution referred to in subsection (1) was passed,
including any appreciation or depreciation in anticipation of the vote on the
resolution, and every dissenting member who has complied with subsection (3)
must be paid the same price.
(6) The amalgamation or winding up of the company, or any change in its
capital. Assets or liabilities resulting from the company acting on the
authority of the resolution referred to in subsection (1), does not affect
the right of the dissenting member and the company under this section or the
price to be paid for the shares.
(7) Every dissenting member who has complied with subsection (3)
(a) may not vote, or exercise or assert any rights of a member, in
respect of the shares for which notice of dissent has been given, other than
under this section,
(b) may not withdraw the requirement to purchase the shares, unless
the company consents, and
(c) until the dissenting member is paid in full, may exercise and
assert all the rights of a creditor company.
(8) If the court determines that a person is not a dissenting member, or
is not otherwise entitled to the right provided by subsection (2), the court,
without prejudice to any acts or proceedings that the company, its members,
or any class of members may have taken during the intervening period, may
make the order it considers appropriate to remove the limitations imposed on
the person by subsection (7).
(9) The relief provided by this section is not available if, subsequent
to giving notice of dissent, the dissenting member acts inconsistently with
the dissent, but a request to withdraw the requirement to purchase the
dissenting member's shares is not an act in consistent with the dissent.
(10) A notice of dissent ceases to be effective if the dissenting member
consents to or votes in favour of the resolution of the company to which the
dissent relates unless the consent or vote is given solely as a proxy holder
for a person whose proxy required an affirmative vote.
<PAGE>
ANNEX B
Opinion Letter of Steve Winters in Reference to Dissenters' Rights.
[LETTERHEAD OF STEPHEN K WINTERS LAW CORPORATION]
August 5, 1998
Board of Directors
Aztek Technologies Inc.
#5 - 246 Lawrence Ave.
Kelowna, B.C. V1Y 6L3
Re: Joint Policy Statement - Prospectus on Form S-4 and Dissenters' Rights
We are rendering this opinion to you at your request and in our capacity
as Canadian Counsel to Aztek Technologies Inc. ("ATI") in connection with the
Joint Proxy Statement - Prospectus pursuant to which ATI is issuing the proxy
statement to its shareholders for approval of the proposed merger between ATI
and Aztek, Inc. wherein ATI will cease to exist and Aztek, Inc. will be the
surviving corporation. If the merger is approved, Aztek, Inc. will issue one
share of its common stock in exchange for each share of ATI common stock (the
"Merger"). We are rendering this opinion to provide you with a description
of the dissent provisions of the British Columbia Company Act (the "Act")
which apply to the Merger.
Any holder of common shares of Aztek ("Aztek Shares") is entitled to be
paid the fair market value of such shares in accordance with the section 207
of the British Columbia Company Act (the "Act") if the shareholder dissents
to the special resolution authorizing the Amalgamation, and if the
Amalgamation becomes effective. A holder of Aztek Shares is not entitled to
object with respect to his shares if he votes any of such shares in favour of
the special resolution authorizing the Merger.
The dissenting shareholder is required to send a written objection to
the special resolution to be received within two days prior to the meeting.
A vote against a special resolution or an abstention does not constitute a
written objection. Within fourteen days after the special resolution is
adopted by the shareholders, the dissenting shareholder is required to send
to the corporation a written notice containing his name and address, the
number of shares in respect of which he dissents and demand payment of the
fair value of such shares, and the appropriate share certificate or
certificates. The dissenting shareholder is bound to sell these shares to the
corporation and the corporation is bound to purchase them. The price to be
paid is the fair value as of the day before the resolution was passed
including any appreciation or depreciation in anticipation of the vote, and
all dissenting shareholders shall be paid the same price. Either party may
apply to the court to fix the fair value of the shares. There is no
obligation on the corporation to apply to the court. If the application is
made by either party, the dissenting shareholder will be entitled to be paid
the amount fixed by the court which may be greater or less than the value of
the shares which the shareholder would otherwise consent to by the
corporation. A dissenting shareholder loses his rights of dissent if he votes
in favour of the resolution (unless he is doing so as a proxyholder) or
otherwise acts inconsistent with his dissent (a request to withdraw a notice
of dissent is not acting inconsistent with a dissent).
Yours truly,
STEPHEN K. WINTERS
LAW CORPORATION
/s/ Stephen K. Winters
- -----------------------
Per: Stephen K. Winters
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company
Officers and Directors are indemnified and held harmless by the Company
to the fullest extent authorized by the Nevada General Corporation Law
against expense liability and loss where named a party or threatened to be
named a party to any type of action or proceeding. The officer or directors
who make such claim must be reimbursed by the Company within ninety days.
Failure by the Company to make such payment entitles the officer or director
to bring suit against the Company and if a judgment is rendered in favor of
the officer or director, the Company will be responsible for such costs. The
Company may claim as a defense that the officer of director did not meet the
standards of conduct which makes indemnification permissible under the Nevada
General Corporation Law but the burden of proving such a defense rests with
the Company.
Nevada General Corporation Law Section 78.7502 provides that a
corporation may indemnify a director or an officer against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with the action. The director
or officer must have acted in good faith or believed his or her actions were
not unlawful. The corporation cannot indemnify the officer or director where
the officer or director has been adjudged to be liable to the corporation.
If the director or officer is successful on the merits or in defense of
either of the aforementioned types of action, the corporation must indemnify
that officer of director.
ATI
Subject to the provisions of the Companies Act, British Columbia's
corporate law, ATI must indemnify its directors and former directors, and may
indemnify the directors of companies in which ATI is a shareholder, if the
director is named as a party in an action as a result of being a director.
ATI's board of directors may cause ATI to indemnify its officers or officers
of companies in which ATI is a shareholder, who are named as a party or as
parties in an action as result of serving as an officer or ATI. The articles
of incorporation also provide for mandatory indemnification of the Secretary
or Assistant Secretary if he or she is not a full time employee of ATI.
Failure of the directors or officers to comply with the Companies Act or the
articles of incorporation does not invalidate the indemnity clause.
ITEM 601. Exhibits
1. Underwriting Agreement Between ATI and Equitrade Securities Corporation
2.1 Directors' Minutes Approving the Merger
2.2 Plan of Reorganization through Merger
3(i).1 Articles of Incorporation of Aztek, Inc.
3(i).2 Amended And Restated Articles Of Incorporation Of Aztek, Inc.
3(ii). By-Laws Of Aztek Inc.
4.1 Minutes Approving Issuance Of Shares And Bonus Shares
4.2 Standard Subscription Agreement for Bonus Shares
4.3 Standard Subscription Agreement for Common Shares
5. Opinion re: legality
8. Opinion re: tax matters
10.1 Escrow Agreement
10.2 Option Agreement
10.3 Demand Notes
23.1 Consent Of Independent Accountants
23.2 Consent of Stephen K. Winters
24.1 Directors' Resolution of Signature by Power of Attorney
24.2 Power of attorney (included in the registration statement and not as an
exhibit.
27. Financial Data Schedule
99.1 Merger Agreement
99.2 Letter Of Intent For ATI To Acquire Harrison Muirhead Systems Inc. And
Q-Data
Smart Investments Inc.
99.3 Letter of Intent for ATI to acquire Concord Consultants
99.4 Minutes Of Shareholders Of Aztek Inc. To Approve Merger
99.5 Financial Statements of Aztek Technologies Inc. For the Years Ended
1998 and 1997
99.6 Schedule II Valuation and Qalifying Accounts
99.7 Opinion Letter of Independent Accountants in Reference to Canadian
Tax Consequences
99.8 Proxy
ITEM 22.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to:
(i) include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement;
(iii) Include any material information on the plan of distribution.
(2) that for determining liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement of
the securities offered, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the small business issuer will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Kelowna, Province of
British Columbia, on November 6, 1998
Aztek, Inc.
By /s/Mike Sintichakis
Mike Sintichakis
President
POWER OF ATTORNEY
We, the undersigned directors and officers of Aztek, Inc. (the Company),
do hereby severally constitute and appoint Mike Sintichakis, our true and
lawful attorney and agent, to do any and all things and acts in our names in
the capacities indicated below and to execute any and all instruments for us
and in our names in the capacities indicated below which said Mike
Sintichakis may deem necessary or advisable to enable the Company to comply
with the Securities Act of 1933, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with
the registration statement on Form S-4 relating to the offering of the
Company's Common Stock, including specifically, but not limited to, power and
authority to sign for us in our names in the capacities indicated below the
registration statement and any and all amendments (including post-effective
amendments) thereto; and we hereby ratify and confirm all that said Mike
Sintichakis shall do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
- --------- -------- ----
<S> <C> <C>
/s/ Mike Sintichakis November 6, 1998
- --------------------
Mike Sintichakis President, Director, principal
executive officer, principal
financial officer, and principal
accounting officer
/s/ Nick Sintichakis November 6, 1998
- --------------------
Nick Sintichakis Director, Treasurer and Secretary
/s/ Edson Ng November 6, 1998
- -------------------
Edson Ng Director
/s/ Eileen Keogh November 6, 1998
- -------------------
Eileen Keogh Director
UNTIL ____________, 1998 ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY
BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATIONS
OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
</TABLE>
EXHIBIT 1. Underwriting Agreement between ATI and Equitrade Securities
Corporation.
UNDERWRITING AGREEMENT
406,504 Common Stock
July 2, 1998
Mr. Kim Carroll
Compliance Officer
Equitrade Securities Corporation
23736 Birtcher Drive
Lake Forest, California 92630
Dear Mr. Kim Carroll:
1. Introduction. AZTEK Technologies, Inc., a Vancouver, British
Columbia corporation (the "Company"), has an authorized capitalization of
100,000,000 shares of Common Stock, no par value. The Company has issued
and outstanding 2,072,109 shares of Common Stock. This Agreement
contemplates that you will use your best efforts to sell, for the account of
the Company, 406,504 Common Shares at a price of $ 2.46 per Common Share.
The term "Shares," as used herein, includes as many of the Common Shares as
are issued and sold pursuant to the terms hereof unless the context indicates
otherwise.
The Company hereby agrees with you as follows:
2. Representations, Warranties and Agreements of the Company. The
Company represents and warrants to, and agrees with, you that:
(a) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement (File No.
0-29540) on Form 10-SB and prepared and filed one or more amendments thereto
covering the registration of the Shares under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
(b) The Registration Statement (and any post effective
amendment thereto) will fully comply with the applicable provisions of the
Exchange Act and the Rules and Regulations thereunder, and that Registration
Statement does not contain any untrue statement of a material fact and does
not omit to state any material fact required to be stated therein or
necessary in order to make the statement therein not misleading, and at all
subsequent times thereto up to and including the Closing Date. The
Registration Statement (and the Offering Circular as amended or supplemented)
complies with the provisions of the Exchange Act and the Rules and
Regulations
thereunder and does not contain any untrue statement of a material fact and
does not omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of Vancouver,
British Columbia and the Company has full power and authority (corporate and
other) to own its properties and conduct its business as described in the
Offering Circular and as being conducted, and is in compliance in all
material
respects with the laws requiring its qualification to do business as a
foreign
corporation in all other jurisdictions in which it owns or leases substantial
properties or in which the conduct of its business requires such
qualification.
(d) The Shares have been duly authorized, and when issued and
delivered as contemplated by this Agreement, will have been validly issued
and will be fully paid and nonassessable, and conform to the description
thereof contained in the Offering Circular. No further approval or authority
of the stockholders or the Board of Directors of the Company will be required
for the issuance and sale of the Shares as contemplated herein.
(e) This Agreement has been duly authorized, executed and
delivered by the Company and this Agreement constitutes a legal, valid and
binding obligation of the Company, enforceable in accordance with its terms
and is in all respects in full compliance with all applicable provisions of
the securities laws.
(f) The execution and delivery of this Agreement, and the
performance by the Company hereunder and thereunder will not conflict with,
result in a breach or violation of or constitute a default under any
agreement or instrument to which the Company is a party or the corporate
charter or by-laws of the Company or any law, order, rule, regulation, decree
or injunction of any jurisdiction, court or governmental agency or body, and
no consent, approval, authorization or order of, or filing with any
governmental agency or body is required for the performance by the Company of
this Agreement, with the exception of the filing with the Vancouver Stock
Exchange.
(g) The Registration Statement, as originally filed or as
amended and supplemented, if the Company shall have filed with the Commission
any amendment thereof or supplement thereto complies with the applicable
provisions of the Securities Exchange Act and the Rules and Regulations
thereunder and does not contain any untrue statement of a material fact and
does not omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(h) The Company has not given any information or made any
representations in connection with the offering of the Shares, written or
oral, other than as contained in the Offering Circular or the Registration
Statement.
3. Offering and Sale of the Shares. On the basis of the
representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company appoints you as its
exclusive agent to effect sales of the Shares for the account of the Company
at the offering price of $2.46 per Share and upon the other terms and
conditions set forth herein and in the Offering Circular, and you agree to
use your best efforts as such agent to sell the Shares during the term of
this Agreement upon the terms and conditions set forth herein and in the
Offering Circular.
As compensation for your services hereunder, the Company will, at the
Closing (as hereinafter defined), pay Equitrade commissions of $0.1476 per
Share (i.e., 6% percent of the gross proceeds of the offering) resulting from
the sale of Shares pursuant to the offering contemplated herein. Your
appointment shall commence upon the date of the execution of this Agreement,
and shall continue for a period (such period, including any extension thereof
as hereinafter provided, being herein called the "Offering Period") of 30
days (and for a period of up to 30 additional days if extended by agreement
of
the Company and you), unless all of the Shares have previously been subscribed
for.
The parties hereto specifically acknowledge the past role of a company
called Select Capital Advisors ("Select"). In a prior offering circular, as
well as the initial filing of the Form 10-SB with the U. S. Securities
Exchange Commission ("Commission"), the original agreement between the issuer
and Select was disclosed as a material agreement. The Commission raised
substantial concerns about the role of Select because the company is not an
NASD member firm, nor is the company registered with the Commission as a
broker-dealer/ underwriter and, as such, it is not authorized to sale
securities in the United States. The prior agreement between Aztek and Select
is null and void. The issuer herein recognizes and acknowledges Select has
extended considerable time, effort and funds on its behalf. Aztek agrees
reimburse Select for expenses in an amount not to exceed $40,000.00 (Forty
Thousand Dollars). Said reimbursement shall be paid from current or future
revenues of the Company and not from the proceeds of the instant offering.
Under no circumstances shall Select execute any trades or sales of the
Company's securities in connection with the instant offering. The issuer
believes the investors will be comprised of natural persons or corporate
entities that were initially identified by Select during the existence of the
former agreement, which is now null and void. The purchasers of the shares
must represent that they are "accredited investors" as that term is
understood pursuant to the federal securities laws (and set forth at 17
C.F.R. § 230.501 (a)(1998)). Any and all sales or trades shall be
conducted and consummated by Equitrade The parties hereto expressly agree
Select is not an underwriter and shall not engage in conduct relative to the
instant offering that may cause one to consider its activities to be
consistent with those of an underwriter.
All checks received by you from applicants to purchase shall be made
payable to "AZTEK TECHNOLOGIES, INC. ACCOUNT. The brokerage account shall be
established by Aztek Technologies, Inc., after the execution of the instant
agreement by both parties hereto. Equitrade Securities Corporation shall
maintain insurance for the account for an amount not to exceed one million
dollars. You will promptly deliver to the Company one photocopy of each
Subscription Agreement, the Company will mail an interim receipt to each such
applicant to purchase for the amount deposited in the Account on behalf of
such applicant to purchase. Any entity selected by you to process orders for
Shares on behalf of applicants to purchase may deliver cash or checks and
Subscription Agreements received from such applicants and you deliver to the
company an executed photocopy of the Subscription Agreement and appendix 16
A of the offering circular.
It is understood that you shall have the right to refuse to forward any
Subscription Agreement, and in such event you shall promptly remit all funds
received by you to the person on whose behalf such funds were submitted to
you.
4. Closing. Subject to the prior termination of the offering as
provided herein, there shall be a closing (the "Closing") at the offices of,
Equitrade Securities Corporation located at 23736 Birtcher Drive, Lake
Forest, California 92630, or via international teleconference not later than
five days immediately following the termination of the Offering Period (the
"Closing Date"). Such Closing shall include the following: (i) payment for
the Shares to the Company by release of funds and delivery to the Company of
properly completed and executed Subscription Agreements to each purchaser;
(ii) deliver by the Company of certificates for the Shares purchased by each
purchaser; and (iii) payment by the Company to you, out of the proceeds of
the offering the commission referred to in Section 3 for each Share sold.
The certificates for Shares to be delivered at the Closing will be in
definitive form in such denominations and registered in such names as you
request at least three business days prior to the Closing Date and will be
made available at the above office for checking and packaging at least one
full business day prior to the Closing Date.
5. Covenants of the Company. The Company covenants and agrees with
you that:
(a) The Company has caused the registration statement as filed
and any subsequent amendments thereto to become effective.
(b) The Company has furnished to you true and accurate copies
of the Registration Statement filed with the U.S. Securities and Exchange
Commission.
(c) During the period of two years from the date hereof, the
Company will furnish to you, as soon as practicable after the end of each
fiscal year, a copy of its annual report to security holders for such fiscal
year, and during such period the Company will also furnish to you as soon as
available, a copy of each report and such other information concerning the
Company as you may reasonably request.
(d) The Company will apply the net proceeds from the sale of
the Shares to be sold by it hereunder for the purposes set forth in the
Offering Circular.
(e) During the course of the offering of the Shares the Company
will not take directly or indirectly any action designed to or that might, in
the future, reasonably be expected to cause or result in stabilization or
manipulation of the price of the Shares.
(f) The Company has been approved for listing on the over the
counter bulletin board.
6. Expenses. Any and all expenses of the offering shall be borne by
the underwriter.
7. This Agreement has been duly authorized, executed and delivered by the
Company, and (assuming due authorization, execution and delivery by you)
constitutes a legal, valid and binding agreement of the Company, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws affecting enforcement of
creditors rights generally and to equitable principles that may restrict the
availability of remedies and except as rights to indemnity hereunder may be
limited under the provisions of the federal securities laws.
8. The required action has been taken by the Company under the
Securities Exchange Act to make the public offering and consummate the sale
of the Shares pursuant to this Agreement; the issue and sale by the Company
of the Shares and the execution and delivery of this Agreement and the
performance by the Company of its obligations hereunder and thereunder will
not conflict with, result in a breach of, or constitute a default under any
agreement or instrument known to such counsel to which the Company is a party
or any applicable law, order, rule, regulation, decree or injunction of any
jurisdiction, court or governmental agency or body or the corporate charter
or by-laws of the Company; and no consent, approval, authorization or order
of, or filing with, any court or body is required in connection with the
issuance or sale of the Shares by the Company or for the performance by the
Company of this Agreement.
No notice of disapproval has been issued or proceedings for that purpose
has been instituted by the Commission, the NASD, or any state securities or
Blue Sky authority with respect to the distribution arrangements relating to
the offering of the Shares.
9. Indemnification and Contribution. (a) The Company will indemnify
and hold harmless you and each person, if any, who you control within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act against
any damages or liabilities to which the Company or any such director, officer
or controlling person may become subject, insofar as such losses, claims,
damages or liabilities or actions are caused by untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement, the Offering Circular, or any amendment or supplement thereto or
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company by you specifically for use therein.
(c) Promptly after receipt by an indemnified party under this Section
9 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section 9, notify the indemnifying party of the commencement
thereof; but the omission to so notify the indemnifying party will relieve it
from any liability which it may have to any indemnified party otherwise than
under this Section 9. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and,
to the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory
to such indemnified party, and after notice from the indemnifying party to
such indemnified party of its election to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 9 for legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable
costs of investigation.
10. Termination. You shall have the right to terminate this
Agreement and the offering of the Shares at any time prior to the Closing if,
between the date hereof and the Closing Date, there shall have been any
declaration of war by the Government of the United States, an event resulting
in (i) the general establishment of minimum prices by either the Commission
or the National Association of Securities Dealers, or (ii) the declaration of
a bank moratorium by authorities of the United States or of the State of
California, the effect of which in your judgment makes it impracticable or
inadvisable to proceed with the offering.
11. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of Company and its officers set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of and
investigation, or statement as to the results thereof, made by or on behalf
of you, the Company or any of its officers, directors or controlling persons,
and will survive payment to the Company for the Shares. If this Agreement is
terminated pursuant to Section 10 hereof or if for any reason the sale of the
Shares is not consummated, the Company shall not be responsible for the
expenses incurred by you.
12. Notices. All communications hereunder will be in writing and, if
sent to you, will be mailed, delivered, or faxed (714-699-1183) and confirmed
to you at Equitrade Securities Corporation, 23736 Birtcher Drive, Lake
Forest, California 92630. All communications hereunder to the issuer shall be
in writing and, will be mailed, delivered, or faxed (250) 762-7933 and
confirmed to you at Aztek Technologies, Inc. 246 Lawrence Avenue, Suite # 5,
Kelowna, British Columbia V1Y 6L3.
13. Successors. This Agreement will inure to the benefit and be
binding upon the parties hereto and their respective successors and the
officers, directors and controlling persons referred to in Section 9, and no
other person will have any right or obligation hereunder.
14. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California.
15. Counterparts and Facsimile . This Agreement may be executed in
counterparts, all of which, taken together, shall constitute a single
agreement. In the event the appropriate parties execute the facsimile
version of the instant agreement, said facsimile shall have the same force
and
effect as the hard copy.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the instant Agreement, whereupon it
will become a binding agreement among the Company and you in accordance with
its terms.
Very truly yours,
AZTEK TECHNOLOGIES, INC.
By: /s/ Mike Sintichakis
--------------------------------
Michael Sintichakis, President
The foregoing Underwriting Agreement is herein confirmed and accepted as of
the date first above written.
/s/ Kim F. Carroll
-------------------------------------------
Kim F. Carroll, Senior Compliance
Officers Equitrade Securities
Corporation
EXHIBIT 2.1 Minutes Approving the Merger
A meeting of the Directors of AZTEK, INC., a Nevada corporation, was held at
the Company's office on the 30th day of June, 1998, via teleconference at the
hour of 10:00 o'clock a.m., for the purpose of approving a merger between
Aztek, Inc. and Aztek Technologies Inc., a Canadian company.
Mike Sintichakis, Chairman of the Board, called the meeting to order and
Nick Sintichakis, Director and Secretary, recorded the minutes of the meeting.
Upon motion duly made, seconded and unanimously carried, the reading
correcting and approval of the minutes of the last meetings was waived.
Upon motion duly made, the Directors of the Company unanimously agreed
to an approved a merger between the Company and Aztek Technologies Inc., a
Canadian based company, by way of a share exchange. The Directors of the
Company further agreed that the exchange of shares will be on a one for one
basis, subject to the approval of the shareholders of Aztek, Inc. and subject
to the approval of the shareholders of Aztek Technologies Inc.
There being no further business to come before the meeting at this time,
the meeting was, upon motion duly made and seconded, adjourned at 11:30 a.m.
/s/ Mike Sintichakis
------------------------------
Mike Sintichakis, Director
EXHIBIT 2.2 Plan Of Acquisition
PLAN FOR REORGANIZATION THROUGH MERGER
This Plan of Reorganization through Merger dated as of October 1, 1998 (the
"Merger Plan"), among Aztek Technologies Inc., a Canadian corporation
("ATI"),
and Aztek Inc., a Nevada corporation (the "Company") (ATI and the Company
being sometimes referred to hereinafter collectively as the "Constituent
Corporations").
Witnesseth:
WHEREAS, ATI, as of this date, is authorized to issue an aggregate of
100,000,000 shares of stock, consisting wholly of shares of Common Stock,
without par value ("ATI Common Stock");
WHEREAS, ATI, as of this date, has issued and there are outstanding
2,051,109 shares of ATI Common Stock;
WHEREAS, as of this date, the Company is authorized to issue 100,000,000
shares of common stock, without par value (the "Company Common Stock"), of
which two million twenty-five thousand shares are issued and outstanding; and
WHEREAS, the Boards of Directors of the Constituent Corporations deem it
advisable and in the best interests of such corporations that a
reorganization
of the corporate structure of such corporations as herein contemplated be
consummated; and, in accordance therewith, that ATI be merged with and into
the Company (the "Merger"), and that the Company, as the surviving
corporation
(as such, the "Surviving Corporation"), shall keep the name "Aztek, Inc."
Now, therefore, the parties hereby plan and agree as follows:
ARTICLE I
MERGER
1.1. Merger. Subject to the terms and conditions of this Plan of
Merger, ATI shall be merged with and into the Company in accordance with the
92A.100 et seq. of the Nevada Mergers and Exchanges of Interest Law, the
separate existence of ATI shall cease, and the Company, as the Surviving
Corporation, shall continue its corporate existence under the laws of the
State of Nevada and the United States. The Company shall operate an office
in
Reno, Nevada, offices where ATI currently operates, and such other places as
the Company deems appropriate. The Company, as the Surviving Corporation,
shall succeed, insofar as provided by law, to all rights, assets, liabilities
and obligations of ATI in accordance with the Nevada General Corporation Law.
1.2. Effective Date. Subject to the approval of the Merger by the
requisite resolution of the shareholders of ATI, the Merger shall become
effective as of the date and time on which this Plan of Merger or an
appropriate certificate of merger is filed with the Secretary of State of the
State of Nevada, as required by the Nevada Mergers and Exchanges of Interest
Law (the "Effective Date").
ARTICLE II
Name, Certificate of Incorporation, Bylaws
and Directors and Officers of the Surviving Corporation
2.1. Name. The name of the Surviving Corporation shall be "Aztek,
Inc."
on the Effective Date.
2.2. Bylaws. The Bylaws of the Company in existence and in effect
immediately prior to the Effective Date shall be the Bylaws of the Surviving
Corporation.
2.3. Directors and Officers. The directors and officers of the Company
immediately prior to the Effective Date shall be the directors and officers,
respectively, of the Surviving Corporation until expiration of the current
terms as such, or prior resignation, removal or death.
ARTICLE III
CONVERSION AND EXCHANGE OF SECURITIES
3.1. Conversion. At the Effective Date, each of the following
transactions shall be deemed to occur simultaneously:
(a) Each share of ATI Common Stock issued and outstanding
immediately prior to the Effective Date shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
become one fully paid and non-assessable share of the Company Common Stock.
(b) Each share of the Company Common Stock issued and outstanding
immediately prior to the Effective Date shall remain unchanged.
3.2. Exchange.
(a) After the Effective Date, each certificate representing issued
and outstanding shares of ATI Common Stock, shall represent the same number
of
shares of the Company Stock.
(b) At any time on or after the Effective Date, each holder of
certificates evidencing ownership of shares of ATI Common Stock, upon
surrender of such certificates to the Company, shall receive in exchange
therefor one or more new stock certificates evidencing ownership of the
number
of shares of the Company Common Stock into which such securities shall have
been converted in the Merger.
AZTEK TECHNOLOGIES INC.
By:_/s/ Mike Sintichakis
---------------------------
Mike Sintichakis
Director
By: /s/ Eileen Keogh
---------------------------
Eileen Keogh
Director
By: /s/ Edson Ng
--------------------------
Edson Ng
Director
Corporate Seal
AZTEK INC.
By: /s/ Mike Sintichakis
-------------------------
Mike Sintichakis
Director
By: /s/ Nick Sintichakis
-------------------------
Nick Sintichakis
Director
By: /s/ Eileen Keogh
------------------------
Eileen Keogh
Director
By: /s/ Edson Ng
-----------------------
Edson Ng
Director
EXHIBIT 3(i).2
AMENDED AND RESTATED ARTICLES OF INCORPORATION OF AZTEK, INC.
(formerly Spectral Innovations (1994), Inc.)
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
SPECTRAL INNOVATIONS (1994). INC.
The undersigned, being the President and Secretary of Spectral
Innovations (1994), Inc., hereby declare that the original Articles of the
corporation were filed with the Secretary of State of the State of Nevada on
August 19, 1994. Pursuant to the provisions of NRS 78.385-390, at a duly
noticed and convened meeting on May 28, 1998, the sole Shareholder of the
corporation, representing 100% of the of the voting power of the company's
common stock, unanimously voted for the following amendment to the Articles
of
Incorporation.
FIRST. The name of the corporation is: AZTEK, INC.
SECOND. The location of the registered office of this corporation
within
the State of Nevada is 1025 Ridgeview Drive, Suite 400, Reno, Nevada 89509;
this corporation may maintain an office or offices in such other place
within
or without the State of Nevada as may be from time to time designated by the
Board of Directors or by the By-Laws of the corporation; and this
corporation
may conduct all corporation business of every kind or nature including the
holding of any meetings of directors or shareholders, inside or outside the
State of Nevada as well as without the State of Nevada.
The Resident Agent for the corporation shall be Michael J. Morrison,
Esq.
1025 Ridgeview Drive, Suite 400, Reno, Nevada 89509.
THIRD The purpose for which this corporation is formed is: To engage
in any lawful activity.
FOURTH The amount of the total authorized capital stock of the
corporation shall be One Hundred Thousand Dollars ($100,000.00), consisting
of
One Hundred Million (100,000,000) shares of Common Stock, par value $.001 pre
share.
FIFTH The governing board of this corporation shall be known as
directors, and the Board shall consist of four (4) directors.
The number of directors may, pursuant to the By-Laws, be increased or
decreased by the board of Directors, provided there shall be no less than one
(1) nor more than nine (9) Directors.
The name and post office address of the four (4) Directors constituting
the
Board of Directors is as follows:
NAME POST OFFICE ADDRESS
- ----- --------------------
Mike Sintichakis 246 Lawrence Avenue, Suite 5
Kelowna, B.C., Canada V1Y 6L3
Nick Sintichakis 246 Lawrence Avenue, Suite 5
Kelowna, B.C., Canada V1Y 6L3
Edson Ng 623 Alpine Court
N. Vancouver, B.C., Canada V7R 2L7
Eileen Keogh 3579 West 1st Avenue
Vancouver, B.C., Canada V7R 1G9
SIXTH The capital stock, or the holders thereof, after the amount of
the subscription price has been paid in shall not be subject to any
assessment whatsoever to pay the debts of the corporation.
SEVENTH No cumulative voting shall be permitted in the election of
directors.
EIGHTH The corporation is to have perpetual existence.
NINTH Shareholders shall not be entitled to preemptive rights.
TENTH. Each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a
"proceeding"),
by reason of the fact that he or she, or a person for whom he or she is the
legal representative, is or was a director of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans whether the basis of such proceeding is
alleged action in an official capacity as an officer or director or in any
other capacity while serving as an officer or director shall be indemnified
and held harmless by the Corporation to the fullest extent authorized by the
Nevada General Corporation Law, as the same exists or may hereafter be
amended, (but, in the case of any such amendment, only to the extent that
such
amendment permits the Corporation to provide broader indemnification rights
than said law permitted the Corporation to provide prior to such amendment),
against all expense, liability and loss (including attorney's fees,
judgments,
fines, ERISA excise taxes or penalties and amounts to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith and
such indemnification shall continue as to a person who has ceased to be an
officer or director and shall inure to the benefit of his or her heirs,
executors and administrators provided, however, that except as provided
herein
with respect to proceedings seeking to enforce rights to indemnification, the
Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only
if such proceeding (or part thereof) was authorized by the Board of Directors
of the Corporation. The right to indemnification conferred in this Section
shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance
of its final disposition; provided however, that, if the Nevada General
Corporation Law requires the payment of such expenses incurred by an officer
or director in his or her capacity as an officer or director (and not in any
other capacity in which service was or is rendered by such person while an
officer or director, including without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding , payment
shall be made only upon delivery to the Corporation of an undertaking, by or
on behalf of such officer or director, to repay all amounts so advanced if it
shall ultimately be determined that such officer or director is not entitled
to be indemnified under this Section or otherwise.
If a claim hereunder is not paid in full by the Corporation within
ninety days after a written claim has been received by the Corporation, the
claimant may, at any time thereafter, bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful, in whole or in
part, the claimant shall be entitled to be paid the expenses of prosecuting
such claim. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in defending any proceeding
in advance of its final disposition where the required undertaking, if any,
is
required, has been tendered to the Corporation) that the claimant has not met
the standards of conduct which make it permissible under the Nevada General
Corporation Law for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant
is proper in the circumstances because he or she has met the applicable
standard of conduct set forth in the Nevada General Corporation Law, nor an
actual determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
The right to indemnification and the payment of expenses incurred in
defending
a proceeding in advance of its final disposition conferred in this Section
shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-Law, agreement, vote of Stockholders or disinterested
directors or otherwise.
The Corporation may maintain insurance, at its expense, to protect itself and
any officer, director, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against
any
expense, liability or loss, whether or not the corporation would have the
power to indemnify such person against such expense, liability or loss under
the Nevada General Corporation Law.
The Corporation may, to the extent authorized from time to time by the Board
of Directors, grant rights to indemnification to any employee or agent of the
Corporation to the fullest extent of the provisions of this section with
respect to the indemnification and advancement of expenses of officers and
directors of the Corporation or individuals serving at the request of the
Corporation as an officer, director, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise.
The UNDERSIGNED, being the President and Secretary of Spectral Innovations
(1994), Inc. hereby declare and certify that the facts herein stated are true
and, accordingly, have hereunto set their hands this 28th day of May, 1998.
/s/ Mike Sintichakis /s/ Nick Sintichakis
- -------------------------- -------------------------------
Mike Sintichakis, President Nick Sintichakis, Secretary
Province of British Columbia )
) ss:
County Yale )
On this 28th day of May, 1998, before me, a Notary Public, personally
appeared Mike Sintichakis, personally known to me, and who acknowledged to me
that he is the President of Spectral Innovations (1994), Inc. and that he
executed the above instrument.
/s/ Euan M. Gilmour
---------------------------------
Notary Public
Euan M. Gilmour
Barrister & Solicitor
207-478 Bernard Avenue
Kelowna, BC V1Y 6N7
Province of British Columbia )
) ss:
County Yale )
On this 28th day of May, 1998, before me, a Notary Public, personally
appeared Nick Sintichakis, personally known to me, and who acknowledged to me
that he is the Secretary of Spectral Innovations (1994), Inc. and that he
executed the above instrument.
/s/ Euan M. Gilmour
---------------------------------
Notary Public
Euan M. Gilmour
Barrister & Solicitor
207-478 Bernard Avenue
Kelowna, BC V1Y 6N7
THIS FORM SHOULD ACCOMPANY AMENDED AND/OR RESTATED
ARTICLES OF INCORPORATION FOR A NEVADA CORPORATION
SPECTRAL INNOVATIONS (1994) INC. !..q r.
1. Name of corporation: SPECTRAL INNOVATIONS (1994) INC.
2. Date of adoption of Amended and/or Restated Articles: Jun 08 1998
3. If the articles were amended, please indicate what changes have been made:
(a) Was there a name change? Yes [x] No [ ]. If yes, what is the new
name? AZTEK INC.
(b) Did you change your resident agent? Yes[ ] No [x]. If yes, please
indicate new address:
(c) Did you change the purposes? Yes[x] No [ ]. Did you add Banking? [ ],
Gaming? [ ], Insurance? [ ], None of these? [x].
(d) Did you change the capital stock? Yes [x] No [ ]. If yes, what is the
new capital stock? 100,000,000 Shares of Common Stock, par value $.001.
(e) Did you change the directors? Yes [x] No [ ]. If yes, indicate the
change: Increased the Board to 4 Directors from 2.
(f) Did you add the directors liability provision? Yes [x] No [ ].
(g) Did you change the period of existence? Yes [x] No [ ]. If yes, what is
the new existence? Perpetual
(h) If none of the above apply, and you have amended or modified the
articles,
how did you change your articles? The status of the corporation was changed
from a close corporation to a statutory corporation under NRS Ch. 78.
/s/ Mike Sintichakis
------------------------------------
Mike Sintichakis, President
Date: May 28, 1998
Province of British Columbia)
) ss:
County of Yale )
On May 28th, 1998 personally appeared before me, a Notary Public, Mike
Sintichakis, who acknowledged that he executed the above document.
/s/ Euan M. Gilmour
---------------------------------
Notary Public
Euan M. Gilmour
Barrister & Solicitor
207-478 Bernard Avenue
Kelowna, BC V1Y 6N7
EXHIBIT 3(i).1
ARTICLES OF INCORPORATION OF AZTEK, INC.
(formerly Spectral Innovations (1994), Inc.)
ARTICLES OF INCORPORATION
OF
SPECTRAL INNOVATIONS (1994), INC.
A Close Corporation
The undersigned, to form a Nevada close corporation, pursuant to NRS 78A.020,
certifies that:
FIRST. The name of the corporation is Spectral Innovations (1994) Inc.
SECOND. Its principal office in the State of Nevada is located at 1025
Ridgeview Drive, Suite 400, Reno, Washoe County, Nevada 89509. The name and
address of its resident agent is Michael J. Morrison, Esq., 1025 Ridgeview
Drive, Suite 400, Reno, Nevada BC 89509.
THIRD. The nature of the business, or objects or purposes proposed to be
transacted, promoted or carried on are:
To engage in any lawful activity and to market, purchase or otherwise acquire,
invest in, own, mortgage, pledge, sell, assign and transfer or otherwise
dispose of, trade, deal in and deal with goods, wares and merchandise and
personal property of every class and description.
To hold, purchase and convey real and personal estate and to mortgage or
lease
any such real and personal estate with its franchises and to take the same by
devise or bequest.
To acquire, and pay for in cash, stock or bonds of this corporation or
otherwise, the good will, rights, assets and property, and to undertake or
assume the whole or any part of the obligations or liabilities of any person,
firm, association or corporation.
To acquire, hold, use, sell, assign, lease, grant licenses in respect of,
mortgage, or otherwise dispose of letters patent of the United States or any
foreign country, patent rights, licenses and privileges, inventions,
improvements and processes, copyrights, trademarks and trade names, relating
to or useful in connection with any business in this corporation.
To guarantee, purchase, hold, sell, assign, transfer, mortgage, pledge or
otherwise dispose of the shares of the capital stock or of any bonds,
securities or evidences of the indebtedness created by another corporation or
corporations of this state, or any other state or government, and while owner
of such stock, bonds, securities or evidences of indebtedness, to exercise
all
the rights, powers and privileges of ownership, including the right to vote,
if any.
To borrow money and contract debts when necessary for the transaction of its
business, or for the exercise of its corporate rights, privileges or
franchises, or for any other lawful purpose of its incorporation; to issue
bonds, promissory notes, bills of exchange, debentures and other obligations
and evidences of indebtedness, payable at specified time or times, or payable
upon the happening of a specified event or events, whether secured by
mortgage, pledge, or otherwise, or unsecured, for money borrowed, or in
payment for property purchased, or acquired, or for any other lawful objects.
To purchase, hold, sell and transfer shares of its own capital stock, and use
therefor its capital surplus, surplus or other property or funds; provided it
shall not use its funds or property for the purchase of its own shares of
capital stock when such use would cause any impairment of its capital; and
provided further, that shares of its own capital stock belonging to it shall
not be voted upon, directly or indirectly, nor counted as outstanding, for
the
purpose of computing any stockholders' quorum or vote.
To conduct business, have one or more offices, and hold, purchase, mortgage
and convey real and personal property in this state, and in any of the
several
states, territories, possessions and dependencies of the United States, the
District of Columbia and in any foreign countries.
To do all and everything necessary and proper for the accomplishment of the
objects hereinbefore enumerated or necessary or incidental to the protection
and benefit of the corporation and, in general, to carry on any lawful
business necessary or incidental to the attainment of the objects of the
corporation, whether, or not such business is similar in nature to the
objects
hereinbefore set forth.
The objects and purposes specified in the foregoing clauses shall, except
where otherwise expressed, be in nowise limited or restricted by reference
to,
or inference from, the terms of any other clause in these Articles of
Incorporation, but the objects and purposes specified in each of the
foregoing
clauses of this Article shall be regarded as independent objects and purposes.
FOURTH. The amount of the total authorized capital stock of the corporation
is TWENTY-FIVE THOUSAND DOLLARS (S25,000.00). The total number of shares of
stock which the corporation shall have the authority to issue is TWENTY-FIVE
THOUSAND (25,000) shares, which will consist of the following:
A. Common Stock. Twenty-Five Thousand (25,000) shares with a par value of
Sl.00 each, amounting to an aggregate of Twenty-Five Thousand Dollars
($25,000.00).
No holder of any shares of any class of the corporation shall be entitled
to
the preemptive rights to subscribe for, purchase or receive any part of any
new or additional shares of any class, whether now or hereafter authorized,
or
any securities exchangeable for or convertible into such shares, or any
warrants or other instruments evidencing rights or options to subscribe for,
purchase or otherwise acquire such shares.
No shares of stock shall have cumulative voting rights.
Any class of stock may be held by any person or entity.
The number of stockholders of the corporation may not exceed 30.
An interest in the shares may not be transferred except to the extent
permitted by NRS 78A.050.
FIFTH. The governing board of this corporation shall be known as directors
and the number of directors may from time to time be increased or decreased
in
such manner as shall be provided by the By-laws of this corporation.
The names and post office addresses of the first Board of Directors, which
shall be three (3) in number, are as follows:
NAME POST OFFICE ADDRESS
----- -------------------
Mike Sintichakis 242 Lawrence Avenue
Kelowna, B.C., Canada VlY 6L3
Richard Evans 1400-400 Burrard Street
Vancouver, B.C., Canada V6C 3G2
Nick Sintichakis 242 Lawrence Avenue
Kelowna, B.C., Canada VlY 6L3
SIXTH. The capital stock, after the amount of the subscription price or par
value has been paid in, shall not be subject to assessment to pay the debts
of
the corporation.
SEVENTH. The name and post office address of the Incorporator signing these
Articles of Incorporation is as follows:
Michael J. Morrison 1025 Ridgeview Drive, Suite 400
Reno, Nevada 8-0509
EIGHTH. The corporation is to have perpetual existence.
NINTH. In furtherance, and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
Subject to the By-laws, if any, adopted by the stockholders, to make, alter
or
amend the By-laws of the corporation.
To fix the amount to be reserved as working capital over and above its
capital
stock paid in, to authorize and cause to be executed, mortgages and liens
upon
the real and personal property of this corporation.
By resolution passed by a majority of the whole board, to designate one or
more committees, each committee to consist of one or more of the directors of
the corporation, which, to the extent provided in the resolution or in the
By-laws of the corporation, shall have and may exercise the powers of the
Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to
all papers which may require it. Such committee or committees shall have
such name or names as may be stated in the By-laws of the corporation or as
may be determined from time to time by resolution adopted by the Board of
Directors.
When and as authorized by the affirmative vote of stockholders holding stock
entitling them to exercise at least a majority of the voting power given at a
stockholders' meeting called for that purpose, or when authorized by the
written consent of the holders of at least a majority of the voting stock
issued and outstanding, the Board of Directors shall have power and authority
at any meeting to sell, lease or exchange all of the property and assets of
the corporation, including its goodwill and its corporate franchises, upon
such terms and conditions as its Board of Directors deem expedient and for
the
best interests of the corporation.
TENTH. The corporation shall indemnify and hold all of its officers,
directors, agents and employees harmless from and against any and all claims,
suits, actions, damages and liabilities of whatsoever nature arising from
their actions on behalf of the corporation. This indemnification shall be to
the fullest extent permitted under N.R.S. 78.751, as amended from time to
time.
THE UNDERSIGNED, being the Incorporator hereinbefore named for the purpose
of forming a corporation pursuant to the General Corporation Law of the State
of Nevada, does make and file these Articles of Incorporation, hereby
declaring and certifying the facts herein stated are true, and, accordingly,
has hereunto set his hand this 18th day of August, 1994.
/s/ Michael J. Morrison
------------------------
Michael J. Morrison
STATE OF NEVADA )
)ss
COUNTY OF WASHOE )
On this 18th day of August, 1994, before me, a Notary Public, personally
appeared, Rita S. Dickson, who acknowledged she executed the above instrument.
/s/ Rita Sue Dickson RITA SUE DICKSON
--------------------- Notary Public- State of Nevada
Notary Public Appointment Recorded in Washoe County
MY APPOINTMENT EXPIRES APRIL 21, 1997
ACCEPTANCE OF APPOINTMENT BY RESIDENT AGENT
IN THE MATTER OF Spectral Innovations (1994) Inc., I, Michael J. Morrison,
hereby certify that on the 18th day of August, 1994, 1 accepted the
appointment as Resident Agent of the above-entitled corporation in accordance
with Sec. 78.090, NRS 1957.
Furthermore, that the principal office in this State is located at 1025
Ridgeview Drive, Suite 400, Reno, Washoe County, Nevada 89509.
IN WITNESS WHEREOF, I have hereunto set my hand this 18th day of August,
1994.
/s/ Michael J.
Morrison
-------------------------------------------
Michael J. Morrison, Resident Agent
I hereby certify that this is a true and complete copy of the document as
filed in this office
DATED: AUG 19 1994
/s/ Chaeryl A. Lau
---------------------
CHERYL A. LAU
Secretary of State
By: /s/ Margaret *****
EXHIBIT 3(ii)
BY-LAWS OF AZTEK INC.
(formerly Spectral Innovations (1994), Inc.)
BYLAWS
OF
SPECTRAL INNOVATIONS(1994), INC.
ARTICLE 1.
OFFICES
1.1 Business Office
The principal business office ("principal office") of the corporation
shall be located at any place either within or without the State of Nevada as
designated in the corporation's most current Annual Report filed with the
Nevada Secretary of State. The corporation may have such other offices,
either within or without the State of Nevada, as the Board of Directors may
designate or as the business of the corporation may require from time to
time. The corporation shall maintain at its principal office a copy of
certain records, as specified in Section 2.14 of Article 2.
1.2 Registered Office
The registered office of the corporation shall be located within Nevada
and may be, but need not be, identical with the principal office, provided
the
principal office is located within Nevada. The address of the registered
office may be changed from time to time by the Board of Directors.
ARTICLE 2. SHAREHOLDERS
2.1 Annual Shareholder Meeting
The annual meeting of the shareholders shall be held on the 30th day of
June each year, beginning with the year 1995 or at such other time on such
other day within such month as shall be fixed by the Board of Directors, for
the purpose of electing directors and for the transaction of such other
business as may come before the meeting. If the day fixed for the annual
meeting shall be a legal holiday in the State of Nevada, such meeting shall
be
held on the next succeeding business day.
If the election of directors shall not be held on the day designated
herein for any annual meeting of the shareholders, or at any subsequent
continuation after adjournment thereof, the Board of Directors shall cause
the
election to be held at a special meeting of the shareholders as soon
thereafter as convenient.
2.2 Special Shareholder Meetings.
Special meetings of the shareholders, for any purpose or purposes
described in the notice of meeting, may be called by the president, or by the
Board of Directors, and shall be called by the president at the request of
the
holders of not less than one-tenth of all outstanding shares of the
corporation entitled to vote on any issue at the meeting.
2.3 Place of Shareholder Meetings
The Board of Directors may designate any place, either within or
without
the State of Nevada, as the place for any annual or any special meeting of
the
shareholders, unless by written consent, which nay be in the form of waivers
of notice or otherwise, all shareholders entitled to vote at the meeting
designate a different place, either within or without the State of Nevada, as
the place for the holding of such meeting. If no designation is made by
either the Board of Directors or unanimous action of the voting shareholders,
the place of meeting shall be the principal office of the corporation in the
State of Nevada.
2.4 Notice of Shareholder Meeting
(a) Required Notice. Written notice stating the place, day and hour of
any annual or special shareholder meeting shall be delivered not less than 10
nor more than 60 days before the date of the meeting, either personally or by
mail, by or at the direction of the president, the Board of Directors, or
other persons calling the meeting, to each shareholder of record entitled to
vote at such meeting and to any other shareholder entitled by the laws of the
State of Nevada governing corporations (the "Act") or the Articles of
Incorporation to receive notice of the meeting. Notice shall be deemed to be
effective at the earlier of: (1) when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the stock
transfer books of the corporation, with postage thereon prepaid; (2) on the
date shown on the return receipt if sent by registered or certified mail,
return receipt requested, and the receipt is signed by or on behalf of the
addressee; (3) when received; or (4) 5 days after deposit in the United
States
mail, if mailed postpaid and correctly addressed to an address, provided in
writing by the shareholder, which is different from that shown in the
corporation's current record of shareholders.
(b) Adjourned Meeting. If any shareholder meeting is adjourned to a
different date, time, or place, notice need not be given of the new date,
time, and place if the new date, time, and place is announced at the meeting
before adjournment. But if a new record date for the adjourned meeting is,
or
must be fixed (see Section 2.5 of this Article 2) then notice must be given
pursuant to the requirements of paragraph (a) of this Section 2.4, to those
persons who are shareholders as of the new record date.
(c) Waiver of Notice. A shareholder may waive notice of the meeting (or
any notice required by the Act, Articles of Incorporation, or Bylaws), by a
writing signed by the shareholder entitled to the notice, which is delivered
to the corporation (either before or after the date and time stated in the
notice) for inclusion in the minutes of filing with the corporate records.
A shareholder's attendance at a meeting:
(1) waives objection to lack of notice or defective notice of the
meeting unless the shareholder, at the beginning of the meeting, objects to
holding the meeting or transacting business at the meeting; and
(2) waives objection to consideration of a particular matter at the
meeting that is not within the purpose or purposes described in the meeting
notice, unless the shareholder objects to consideration of the matter when it
is presented.
(d) Contents of Notice. The notice of each special shareholder meeting
shall include a description of the purpose or purposes for which the meeting
is called. Except as provided in this Section 2.4(d), or as provided in the
corporation's articles, or otherwise in the Act, the notice of an annual
shareholder meeting need not include a description of the purpose or purposes
for which the meeting is called.
If a purpose of any shareholder meeting is to consider either:(1) a
proposed amendment to the Articles of Incorporation(including any restated
articles requiring shareholder approval);(2) a plan of merger or share
exchange; (3) the sale, lease, exchange or other disposition of all, or
substantially all of the corporation's property; (4) the dissolution of the
corporation; or (5) the removal of a director, the notice must so state and
be
accompanied by, respectively, a copy or summary of the: (a)articles of
amendment; (b) plan of merger or share exchange; and(c) transaction for
disposition of all, or substantially all, of the corporation's property. If
the proposed corporate action creates dissenters' rights, as provided in the
Act, the notice must state that shareholders are, or may be entitled to
assert
dissenters' rights, and must be accompanied by a copy of relevant provisions
of the Act. If the corporation issues, or authorizes the issuance of shares
for promissory notes or for promises to render services in the future, the
corporation shall report in writing to all the shareholders the number of
shares authorized or issued, and the consideration received with or before
the
notice of the next shareholder meeting. Likewise, if the corporation
indemnifies or advances expenses to an officer or a director, this shall be
reported to all the shareholders with or before notice of the next
shareholder
meeting.
2.5 Fixing of Record Date
For the purpose of determining shareholders of any voting group
entitled
to notice of or to vote at any meeting of shareholders, or shareholders
entitled to receive payment of any distribution or dividend, or in order to
make a determination of shareholders for any other proper purpose, the Board
of Directors may fix in advance a date as the record date. Such record date
shall not be more than 70 days prior to the date on which the particular
action requiring such determination of shareholders entitled to notice of, or
to vote at a meeting of shareholders, or shareholders entitled to receive a
share dividend or distribution. The record date for determination of such
shareholders shall be at the close of business on:
(a) With respect to an annual shareholder meeting or any special
shareholder meeting called by the Board of Directors or any person
specifically authorized by the ' Board of Directors or these Bylaws to call a
meeting, the day before the first notice is given to shareholders;
(b) With respect to a special shareholder meeting demanded by the
shareholders, the date the first shareholder signs the demand;
(c) With respect to the payment of a share dividend, the date the Board of
Directors authorizes the share dividend;
(d) With respect to actions taken in writing without a meeting (pursuant
to
Article 2, Section 2.12), the first date any shareholder signs a consent; and
(e) With respect to a distribution to shareholders, (other than one
involving a repurchase or reacquisition of shares), the date the Board of
Directors authorizes the distribution.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made, as provided in this section, such determination
shall apply to any adjournment thereof unless the Board of Directors fixes a
new record date, which it must do if the meeting is adjourned to a date more
than 120 days after the date fixed for the original meeting.
If no record date has been fixed, the record date shall be the date the
written notice of the meeting is given to shareholders.
2.6 Shareholder List
The officer or agent having charge of the stock transfer books for
shares
of the corporation shall, at least ten (10) days before each meeting of
shareholders, make a complete record of the shareholders entitled to vote at
each meeting of shareholders, arranged in alphabetical order, with the
address
of and the number of shares held by each. The list must be arranged by class
or series of shares. The shareholder list must be available for inspection
by
any shareholder, beginning two business days after notice of the meeting is
given for which the list was prepared and continuing through the meeting.
The
list shall be available at the corporation's principal office or at a place
in
the city where the meeting is to be held, as set forth in the notice of
meeting. A shareholder, his agent, or attorney is entitled, on written
demand, to inspect and, subject to the requirements of Section 2.14 of this
Article 2, to copy the list during regular business hours and at his expense,
during the period it is available for inspection. The corporation shall
maintain the shareholder list in written form or in another form capable of
conversion into written form within a reasonable time.
2.7 Shareholder Quorum and Voting Requirements
A majority of the outstanding shares of the corporation entitled to
vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders. If less than a majority of the outstanding shares are
represented at a meeting, a majority of the shares so represented may adjourn
the meeting from time to time without further notice. At such adjourned
meeting at which quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. The shareholders present at a duly organized meeting may continue
to transact business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum.
Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting, unless a new record date is or must be set for
that adjourned meeting.
If a quorum exists, a majority vote of those shares present and voting
at
a duly organized meeting shall suffice to defeat or enact any proposal unless
the Statutes of the State of Nevada, the Articles of Incorporation or these
Bylaws require a greater-than-majority vote, in which event the higher vote
shall be required for the action to constitute the action of the corporation.
2.8 Increasing Either quorum or Voting Requirements
For purposes of this Section 2.8, a "supermajority" quorum is a
requirement that more than a majority of the votes of the voting group be
present to constitute a quorum; and a "supermajority" voting requirement is
any requirement that requires the vote of more than a majority of the
affirmative votes of a voting group at a meeting.
The shareholders, but only if specifically authorized to do so by the
Articles of Incorporation, may adopt, amend, or delete a Bylaw which fixes a
"supermajority" quorum or "supermajority" voting requirement.
The adoption or amendment of a Bylaw that adds, changes, or deletes a
"supermajority" quorum or voting requirement for shareholders must meet the
same quorum requirement and be adopted by the same vote required to take
action under the quorum and voting requirement then if effect or proposed to
be adopted, whichever is greater.
A Bylaw that fixes a supermajority quorum or voting requirement for
shareholders may not be adopted, amended, or repealed by the Board of
Directors.
2.9 Proxies
At all meetings of shareholders, a shareholder may vote in person, or
vote by written proxy executed in writing by the shareholder or executed by
his duly authorized attorney-in fact. Such proxy shall be filed with the
secretary of the corporation or other person authorized to tabulate votes
before or at the time of the meeting. No proxy shall be valid after eleven
(11) months from the date of its execution unless otherwise specifically
provided in the proxy or coupled with an interest.
2.10 Voting of Shares
Unless otherwise provided in the articles, each outstanding share
entitled to vote shall be entitled to one vote upon each matter submitted to
a
vote at a meeting of shareholders.
Shares held by an administrator, executor, guardian or conservator may
be
voted by him, either in person or by proxy, without the transfer of such
shares into his name. Shares standing in the name of a trustee may be voted
by him, either in person or by proxy, but no trustee shall be entitled to
vote
shares held by him without transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver maybe voted by such
receiver without the transfer thereof into his name if authority to do so is
contained in an appropriate order of the Court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares are transferred into the name of the pledgee, and
thereafter, the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the corporation or held by it in a
fiduciary capacity shall not be voted directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding
shares
at any given time.
Redeemable shares are not entitled to vote after notice of redemption is
mailed to the holders and a sum sufficient to redeem the shares has been
deposited with a bank, trust company, or other financial institution under an
irrevocable obligation to pay the holders the redemption price on surrender
of
the shares.
2.11 Corporation's Acceptance of Votes
(a) If the name signed on a vote, consent, waiver, or proxy appointment
corresponds to the name of a shareholder, the corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver, or proxy appointment
and give it effect as the act of the shareholder.
(b) If the name signed on a vote, consent, waiver, or proxy appointment
does not correspond to the name of its shareholder, the corporation, if
acting
in good faith, is nevertheless entitled to accept the vote, consent, waiver,
or proxy appointment and give it effect as the act of the shareholder if:
(1) the shareholder is an entity, as defined in the Act, and the name
signed purports to be that of an officer or agent of the entity;
(2) the name signed purports to be that of an administrator, executor,
guardian or conservator representing the shareholder and, if the corporation
requests, evidence of fiduciary status acceptable to the corporation has been
presented with respect to the vote, consent, waiver, or proxy appointment;
(3) the name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder and, if the corporation requests, evidence of
this status acceptable to the corporation has been presented with respect to
the vote, consent, waiver or proxy appointment;
(4) the name signed purports to be that of a pledgee, beneficial owner,
or attorney-in- fact of the shareholder and, if the corporation requests,
evidence acceptable to the corporation of the signatory's authority to sign
for the shareholder has been presented with respect to the vote, consent,
waiver, or proxy appointment; or
(5) the shares are held in the name of two or more persons as
co-tenants
or fiduciaries and the name signed purports to be the name of at least one of
the co-owners and the person signing appears to be acting on behalf of all
the
co-owners.
(c) The corporation is entitled to reject a vote, consent, waiver, or
proxy
appointment if the secretary or other officer or agent authorized to tabulate
votes, acting in good faith, has reasonable basis for doubt about the
validity
of the signature on it or about the signatory's authority to sign for the
shareholder.
(d) The corporation and its officer or agent who accepts or rejects a
vote,
consent, waiver, or proxy appointment in good faith and in accordance with
the
standards of this Section 2.11 are not liable in damages to the shareholder
for the consequences of the acceptance or rejection.
(e) Corporation action based on the acceptance or rejection of a vote,
consent, waiver, or proxy appointment under this section is valid unless a
court of competent jurisdiction determines otherwise.
2.12 Informal Action by Shareholders
Any action required or permitted to be taken at a meeting of the
shareholders may be taken without a meeting if one or more written consents,
setting forth the action so taken, shall be signed by shareholders holding a
majority of the shares entitled to vote with respect to the subject matter
thereof, unless a "supermajority" vote is required by these Bylaws, in which
case a "supermajority" vote will be required. Such consent shall be
delivered
to the corporation secretary for inclusion in the minute book. A consent
signed under this Section has the effect of a vote at a meeting and may be
described as such in any document.
2.13 Voting for Directors
Unless otherwise provided in the Articles of Incorporation, directors are
elected by a plurality of the votes cast by the shares entitled to vote in
the
election at a meeting at which a quorum is present.
2.14 Shareholders' Rights to Inspect Corporate Records
Shareholders shall have the following rights regarding inspection of
corporate records:
(a) Minutes and Accounting Records - The corporation shall keep, as
permanent records, minutes of all meetings of its shareholders and Board of
Directors, a record of all actions taken by the shareholders or Board of
Directors without a meeting, and a record of all actions taken by a committee
of the Board of Directors in place of the Board of Directors on behalf of the
corporation. The corporation shall maintain appropriate accounting records.
(b) Absolute Inspection Rights of Records Required at Principal Office -
If
a shareholder gives the corporation written notice of his demand at least
five
business days before the date on which he wishes to inspect and copy, he, or
his agent or attorney, has the right to inspect and copy, during regular
business hours, any of the following records, all of which the corporation is
required to keep at its principal office:
(1) its Articles or restated Articles of Incorporation and all
amendments
to them currently in effect;
(2) its Bylaws or restated Bylaws and all amendments to them currently
in
effect;
(3) resolutions adopted by its Board of Directors creating one or more
classes or series of shares, and fixing their relative rights, preferences
and
limitations, if shares issued pursuant to those resolutions are outstanding;
(4) the minutes of all shareholders' meetings, and records of all action
taken by shareholders without a meeting, for the past three years;
(5) all written communications to shareholders within the past three
years, including the financial statements furnished for the past three years
to the shareholders;
(6) a list of the names and business addresses of its current directors
and officers; and
(7) its most recent annual report delivered to the Nevada Secretary of
State.
(c) Conditional Inspection Right - In addition, if a shareholder gives the
corporation a written demand, made in good faith and for a proper purpose, at
least five business days before the date on which he wishes to inspect and
copy, describes with reasonable particularity his purpose and the records he
desires to inspect, and the records are directly connected to his purpose, a
shareholder of a corporation, or his duly authorized agent or attorney, is
entitled to inspect and copy, during regular business hours at a reasonable
location specified by the corporation, any of the following records of the
corporation:
(1) excerpts from minutes of any meeting of the Board of Directors;
records of any action of a committee of the Board of Directors on behalf of
the corporation; minutes of any meeting of the shareholders; and records of
action taken by the shareholders or Board of Directors without a meeting, to
the extent not subject to inspection under paragraph (a) of this Section 2.14;
(2) accounting records of the corporation; and
(3) the record of shareholders (compiled no earlier than the date of the
shareholder's demand).
(d) Copy Costs - The right to copy records includes, if reasonable, the
right to receive copies made by photographic, xerographic, or other means.
The corporation may impose a reasonable charge, to be paid by the shareholder
on terms set by the corporation, covering the costs of labor and material
incurred in making copies of any documents provided to the shareholder.
(e) "Shareholder" Includes Beneficial owner - For purposes of this Section
2.14, the term "shareholder" shall include a beneficial owner whose shares
are
held in a voting trust or by a nominee on his behalf.
2.15 Financial Statements shall Be Furnished to the Shareholders.
(a) The corporation shall furnish its shareholders annual financial
statements, which may be consolidated or combined statements of corporation
and one or more of its subsidiaries, as appropriate, that include a balance
sheet as of the end of the fiscal year, an income statement for that year,
and
a statement of changes in shareholders' equity for the year, unless that
information appears elsewhere in the financial statements. If financial
statements are prepared for the corporation on the basis of generally
accepted
accounting principles, the annual financial statements for the shareholders
must also be prepared on that basis.
(b) If the annual financial statements are reported upon by a public
accountant, his report must accompany them. If not, the statements must be
accompanied by a statement of the president or the person responsible for the
corporation's accounting records:
(1) stating his reasonable belief that the statements were prepared on
the basis of generally accepted accounting principles and, if not, describing
the basis of preparation; and
(2) describing any respects in which the statements were not prepared on a
basis of accounting consistent with the Statements prepared for the preceding
year.
(c) A corporation shall mail the annual financial statements to each
shareholder within 120 days after the close of each fiscal year. Thereafter,
on written request from a shareholder who was not mailed the statements, the
corporation shall mail him the latest financial statements.
2.16 Dissenters' Rights.
Each shareholder shall have the right to dissent from and obtain payment for
his shares when so authorized by the Act, Articles of Incorporation, these
Bylaws, or a resolution of the Board of Directors.
2.17 Order of Business.
The following order of business shall be observed at all meetings of the
shareholders, as applicable and so far as practicable:
(a) Calling the roll of officers and directors present and determining
shareholder quorum requirements;
(b) Reading, correcting and approving of minutes of previous meeting;
(c) Reports of officers;
(d) Reports of Committees;
(e) Election of Directors;
(f) Unfinished business;
(g) New business; and
(h) Adjournment.
ARTICLE 3. BOARD OF DIRECTORS
3.1 General Powers.
Unless the Articles of Incorporation have dispensed with or limited the
authority of the Board of Directors by describing who will perform some or
all
of the duties of a Board of Directors, all corporate powers 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.
3.2 Number, Tenure and Qualification of Directors.
Unless otherwise provided in the Articles of Incorporation, the authorized
number of directors shall be not less than 1 (minimum number) nor more than
11
(maximum number). The initial number of directors was established in the
original Articles of Incorporation. The number of directors shall always be
within the limits specified above, and as determined by resolution adopted by
the Board of Directors. After any shares of this corporation are issued,
neither the maximum nor minimum number of directors can be changed, nor can a
fixed number be substituted for the maximum and minimum numbers, except by a
duly adopted amendment to the Articles of Incorporation duly approved by a
majority of the outstanding shares entitled to vote. Each director shall
hold
office until the next annual meeting of shareholders or until removed.
However, if his term expires, he shall continue to serve until his successor
shall have been elected and qualified, or until there is a decrease in the
number of directors. Unless required by the Articles of Incorporation,
directors do not need to be residents of Nevada or shareholders of the
corporation.
3.3 Regular Meetings of the Board of Directors.
A regular meeting of the Board of Directors shall be held without other
notice than this Bylaw immediately after, and at the same place as, the
annual
meeting of shareholders. The Board of Directors may provide, by resolution,
the time and place for the holding of additional regular meetings without
other notice than such resolution. (If permitted by Section 3.7, any regular
meeting may be held by telephone).
3.4 Special Meeting of the Board of Directors.
Special meetings of the Board of Directors may be called by or at the
request of the president or any one director. The person or persons
authorized to call special meetings of the Board of Directors may fix any
place, either, within or without the State of Nevada, as the place for
holding any special meeting of the Board of Directors or, if permitted by
Section 3.7, any special meeting may be held by telephone.
3.5 Notice of, and Waiver of Notice of, Special Meetings of the Board of
Directors.
Unless the Articles of Incorporation provide for a longer or shorter
period, notice of any special meeting of the Board of Directors shall be
given
at least two days prior thereto, either orally or in writing. If mailed,
notice of any director meeting shall be deemed to be effective at the earlier
of: (1) when received; (2) five days after deposited in the United States
mail, addressed to the director's business office, with postage thereon
prepaid; or (3) the date shown on the return receipt, if sent by registered
or
certified mail, return receipt requested, and the receipt is signed by or on
behalf of the director. Notice may also be given by facsimile and, in such
event, notice shall be deemed effective upon, transmittal thereof to a
facsimile number of a compatible facsimile machine at the director's business
office. Any director may waive notice of any meeting. Except as otherwise
provided herein, the waiver must be in writing, signed by the director
entitled to the notice, and filed with the minutes or corporate records. The
attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express
purpose of objecting to the transaction of any business and at the beginning
of the meeting, or promptly upon his arrival, objects to holding the meeting
or transacting business at the meeting, and does not thereafter vote for or
assent to action taken at the meeting. Unless required by the Articles of
Incorporation or the Act, neither the business to be transacted at, nor the
purpose of, any special meeting of the Board of Directors need be specified
in
the notice or waiver of notice of such meeting.
3.6 Director Quorum.
A majority of the number of directors fixed, pursuant to Section3.2 of
this Article 3, shall constitute a quorum for the transaction of business at
any meeting of the Board of Directors, unless the Articles of Incorporation
or
the Act require a greater number for a quorum.
Any amendment to this quorum requirement is subject to the provisions of
Section 3.8 of this Article 3.
Once a quorum has been established at a duly organized meeting, the
Board
of Directors may continue to transact corporate business until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a
quorum.
3.7 Actions By Directors.
The act of the majority of the directors present at a meeting at which a
quorum is present when the vote is taken shall be the act of the Board of
Directors, unless the Articles of Incorporation or the Act require a greater
percentage. Any amendment which changes the number of directors needed to
take action is subject to the provisions of Section 3.8 of this Article 3.
Unless the Articles of Incorporation provide otherwise, any or all
directors may participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting. Minutes
of any such meeting shall be prepared and entered into the records of the
corporation. A director participating in a meeting by this means is deemed
to
be present in person at the meeting.
A director who is present at a meeting of the Board of Directors or a
committee of the Board of Directors when corporate action is taken is deemed
to have assented to the action taken unless: (1)he objects at the beginning
of
the meeting, or promptly upon his arrival, to holding it or transacting
business at the meeting; or(2) his dissent or abstention from the action
taken
is entered in the minutes of the meeting; or (3) he delivers written notice
of
his dissent or abstention to the presiding officer of the meeting before its
adjournment or to the corporation within 24 hours after adjournment of the
meeting. The right of dissent or abstention is not available to a director
who votes in favor of the action taken.
3.8 Establishing a "supermajority" Quorum or Voting Requirement for the
Board of Directors.
For purposes of this Section 3.8, a "supermajority" quorum is a
requirement that more than a majority of the directors in office constitute a
quorum; and a "supermajority" voting requirement is one which requires the
vote of more than a majority of those directors present at a meeting at which
a quorum is present to be the act of the directors.
A Bylaw that fixes a supermajority quorum or supermajority voting
requirement
may be amended or repealed:
(1) if originally adopted by the shareholders, only by the shareholders
(unless otherwise provided by the shareholders); or
(2) if originally adopted by the Board of Directors, either by the
shareholders or by the Board of Directors.
A Bylaw adopted or amended by the shareholders that fixes a supermajority
quorum or supermajority voting requirement for the Board of Directors may
provide that it may be amended or repealed only by a specified vote of either
the shareholders or the Board of Directors.
Subject to the provisions of the preceding paragraph, action by the
Board
of Directors to adopt, amend, or repeal a Bylaw that changes the quorum or
voting requirement for the Board of Directors must meet the same quorum
requirement and be adopted by the same vote required to take action under the
quorum and voting requirement then in effect or proposed to be adopted,
whichever is greater.
3.9 Director Action Without a Meeting
Unless the Articles of Incorporation provide otherwise, any action
required or permitted to be taken by the Board of Directors at a meeting may
be taken without a meeting if all the directors sign a written consent
describing the action taken. Such consents shall be filed with the records
of
the corporation. Action taken by consent is effective when the last director
signs the consent, unless the consent specifies a different effective date.
A
signed consent has the effect of a vote at a duly noticed and conducted
meeting of the Board of Directors and may be described as such in any
document.
3.10 Removal of Directors.
The shareholders may remove one or more directors at a meeting called
for
that purpose if notice has been given that a purpose of the meeting is such
removal. The removal may be with or without cause unless the Articles of
Incorporation provide that directors may only be removed for cause. If
cumulative voting is not authorized, a director may be removed only if the
number of votes cast in favor of removal exceeds the number of votes cast
against removal.
3.11 Board of Director Vacancies.
Unless the Articles of Incorporation provide otherwise, if a vacancy
occurs on the Board of Directors, excluding a vacancy resulting from an
increase in the number of directors, the director(s) remaining in office
shall
fill the vacancy. If the directors remaining in office constitute fewer than
a quorum of the Board of Directors, they may fill the vacancy by the
affirmative vote of a majority of all the directors remaining in office.
If a vacancy results from an increase in the number of directors, only
the shareholders may fill the vacancy.
A vacancy that will occur at a specific later date (by reason of a
resignation effective at a later date) may be filled by the Board of
Directors
before the vacancy occurs, but the new director may not take office until the
vacancy occurs.
The term of a director elected to fill a vacancy expires at the next
shareholders' meeting at which directors are elected. However, if his term
expires, he shall continue to serve until his successor is elected and
qualifies or until there is a decrease in the number of directors.
3.12 Director Compensation.
Unless otherwise provided in the Articles of Incorporation, by resolution of
the Board of Directors, each director may be paid his expenses, if any, of
attendance at each meeting of the Board of Directors, and may be paid a
stated
salary as director or a fixed sum for attendance at each meeting of the Board
of Directors, or both. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor.
3.13 Director Committees.
(a) Creation of Committees. Unless the Articles of Incorporation
provide otherwise, the Board of Directors may create one or more committees
and appoint members of the Board of Directors to serve on them. Each
committee must have two or more members, who serve at the pleasure of the
Board of Directors.
(b) Selection of Members. The creation of a committee and appointment
of members to it must be approved by the greater of (1) a majority of all the
directors in office when the action is taken, or (2) the number of directors
required by the Articles of Incorporation to take such action.
(c) Required Procedures. Sections 3.4, 3.5, 3.6, 3.7, 3.8 and 3.9 of
this Article 3 apply to committees and their members.
(d) Authority. Unless limited by the Articles of Incorporation or the
Act, each committee may exercise those aspects of the authority of the Board
of Directors which the Board of Directors confers upon such committee in the
resolution creating the committee. Provided, however, a committee may not:
(1) authorize distributions to shareholders;
(2) approve or propose to shareholders any action that the Act
requires be approved by shareholders;
(3) fill vacancies on the Board of Directors or on any of its
committees;
(4) amend the Articles of Incorporation;
(5) adopt, amend, or repeal Bylaws;
(6) approve a plan of merger not requiring shareholder approval;
(7) authorize or approve reacquisition of shares, except according
to
a formula or method prescribed by the Board of Directors; or
(8) authorize or approve the issuance or sale, or contract for sale
of shares, or determine the designation and relative rights, preferences, and
limitations of a class or series of shares; except -that the Board of
Directors may authorize a committee to do so within limits specifically
prescribed by the Board of Directors.
ARTICLE 4. OFFICERS
4.1 Designation of Officers.
The officers of the corporation shall be a president, a secretary, and a
treasurer, each of whom shall be appointed by the Board of Directors. Such
other officers and assistant officers as may be deemed necessary, including
any vice-presidents, may be appointed by the Board of Directors. The same
individual may simultaneously hold more than one office in the corporation.
4.2 Appointment and Term of office.
The officers of the corporation shall be appointed by the Board of Directors
for a term as determined by the Board of Directors. If no term is specified,
they shall hold office until the first meeting of the directors held after
the
next annual meeting of share holders. If the appointment of officers is not
made at such meeting, such appointment shall be made as soon thereafter as is
convenient. Each officer shall hold office until his successor has been duly
appointed and qualified, until his death, or until here signs or has been
removed in the manner provided in Section 4.3of this Article 4.
The designation of a specified term does not grant to the officer any
contract rights, and the Board of Directors can remove the officer at any
time
prior to the termination of such term. Appointment of an officer shall not
of
itself create any contract rights.
4.3 Removal of officers.
Any officer may be removed by the Board of Directors at anytime, with or
without cause. Such removal shall be without prejudice to the contract
rights, if any, of the person so removed.
4.4 President.
The president shall be the principal executive officer of the
corporation
and, subject to the control of the Board of Directors, shall generally
supervise and control all of the business and affairs of the corporation. He
shall, when present, preside at all meetings of the shareholders. He may
sign, with the secretary or any other proper officer of the corporation
thereunto duly authorized by the Board of Directors, certificates for shares
of the corporation and deeds, mortgages, bonds, contracts, or other
instruments which the Board of Directors has authorized to be executed '
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, or shall be required by law to be otherwise
signed or executed. The president shall generally perform all duties
incident
to the office of president and such other duties as may be prescribed by the
Board of Directors from time to time.
4.5 Vice-President.
If appointed, in the absence of the president or in the event of the
president's death, inability or refusal to act, the vice-president (or in the
event there be more than one vice-president, the vice-presidents in the order
designated at the time of their election, or in the absence of any
designation, then in the order of their appointment) shall perform the duties
of the president, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the president. If there is no
vice-president, then the treasurer shall perform such duties of the
president. Any vice-president may sign with the secretary or an assistant
secretary, certificates for shares of the corporation the issuance of which
have been authorized by resolution of the Board of Directors. A
vice-president shall perform such other duties as from time to time may be
assigned to him by the president or by the Board of Directors.
4.6 Secretary.
The secretary shall (a) keep the minutes of the proceedings of the
shareholders and of the Board of Directors in one or more books provided for
that purpose; (b) see that all notices are duly given accordance with the
provisions of these Bylaws or as required by law; (c) be custodian of the
corporate records and of any seal of the corporation and, if there is a seal
of the corporation, see that it is affixed to all documents, the execution of
which on behalf of the corporation under its seal is duly authorized; (d)when
requested or required, authenticate any records of the corporation; (e) keep
a
register of the post office address of each shareholder, as provided to the
secretary by the shareholders; (f)sign with the president, or a
vice-resident,
certificates for shares of the corporation, the issuance of which has been
authorized by resolution of the Board of Directors; (g) have general charge
of
the stock transfer books of the corporation; and(h) generally perform all
duties incident to the office of secretary and such other duties as from time
to time may be assigned to him by the president or by the Board of Directors.
4.7 Treasurer.
The treasurer shall (a) have charge and custody of and be responsible
for
all funds and securities of the corporation; (b) receive and give receipts
for
moneys due and payable to the corporation from any source whatsoever, and
deposit all such moneys in the name of the corporation in such banks, trust
companies, or other depositaries as may be selected by the Board of
Directors;
and (c) generally perform all of the duties incident to the office of
treasurer and such other duties as from time to time may be assigned to him
by
the president or by the Board of Directors.
If required by the Board of Directors, the treasurer shall give a bond for
the faithful discharge of his duties in such sum and with such surety or
sureties as the Board of Directors shall determine.
4.8 Assistant Secretaries and Assistant Treasurers.
The assistant secretaries, when authorized by the Board of Directors, may
sign with the president, or a vice-president, certificates for shares of the
corporation, the issuance of which has been authorized by a resolution of the
Board of Directors. The assistant treasurers shall respectively, if required
by the Board of Directors, give bonds for the faithful discharge of their
duties in such sums and with such sureties as the Board of Directors shall
determine. The assistant secretaries and assistant treasurers, generally,
shall perform such duties as may be assigned to them by the secretary or the
treasurer, respectively, or by the president or the Board of Directors.
4.9 Salaries.
The salaries of the officers, if any, shall be fixed from time to time
by the Board of Directors.
ARTICLE 5. INDEMNIFICATION OF DIRECTORS,
OFFICERS, AGENTS, AND EMPLOYEES
5.1 Indemnification of officers, Directors, Employees and Agents.
Unless otherwise provided in the Articles of Incorporation, the
corporation shall indemnify any individual made a party to a proceeding
because he is or was an officer, director employee or agent of the
corporation
against liability incurred in the proceeding, all pursuant to and consistent
with the provisions of NRS 78.751, as amended from time to time.
5.2 Advance Expenses for Officers and Directors.
The expenses of officers and directors incurred in defending a civil or
criminal action, suit or proceeding shall be paid by the corporation as they
are incurred and in advance of the final disposition of the action, suit or
proceeding, but only after receipt by the corporation of an undertaking by or
on behalf of the officer or director on terms set by the Board of Directors,
to repay the expenses advanced if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
corporation.
5.3 Scope of Indemnification.
The indemnification permitted herein is intended to be to the fullest
extent permissible under the laws of the State of Nevada, and any amendments
thereto.
ARTICLE 6. CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.1 Certificates for Shares.
(a) Content
Certificates representing shares of the corporation shall at minimum,
state on their face the name of the issuing corporation; that the corporation
is formed under the laws of the State of Nevada; the name of the person to
whom issued; the certificate number; class and par value of shares; and the
designation of the series, if any, the certificate represents. The form of
the certificate shall be as determined by the Board of Directors. Such
certificates shall be signed (either manually or by facsimile) by the
president or a vice-president and by the secretary or an assistant secretary
and may be sealed with a corporate seal or a facsimile thereof. Each
certificate for shares shall be consecutively numbered or otherwise
identified.
(b) Legend as to Class or series
If the corporation is authorized to issue different classes of shares
or
different series within a class, the designations, relative rights,
preferences, and limitations applicable to each class and the variations in
rights, preferences, and limitations determined for each series (and the
authority of the Board of Directors to determine variations for future
series)
must be summarized on the front or back of the certificate indicating that
the
corporation will furnish the shareholder this information on request in
writing and without charge.
(c) Shareholder List
The name and address of the person to whom the shares are issued, with
the number of shares and date of issue, shall be entered on the stock
transfer
books of the corporation.
(d) Transferring Shares
All certificates surrendered to the corporation for transfer shall be
canceled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and canceled, except
that in case of a lost, destroyed, or mutilated certificate, a new one may be
issued therefor upon such terms as the Board of Directors may prescribe,
including indemnification of the corporation and bond requirements.
6.2 Registration of the Transfer of Shares.
Registration of the transfer of shares of the corporation shall be made
only on the stock transfer books of the corporation. In order to register a
transfer, the record owner shall surrender the share certificate to the
corporation for cancellation, properly endorsed by the appropriate person or
persons with reasonable assurances that the endorsements are genuine and
effective. Unless the corporation has established a procedure by which a
beneficial owner of shares held by a nominee is to be recognized by the
corporation as the owner, the person in whose name shares stand on the books
of the corporation shall be deemed by the corporation to be the owner thereof
for all purposes.
6.3 Restrictions on Transfer of Shares Permitted.
The Board of Directors may impose restrictions on the transferor
registration of transfer of shares, including any security convertible into,
or carrying a right to subscribe for or acquire shares. A restriction does
not affect shares issued before the restriction was adopted unless the
holders
of the shares are parties to the restriction agreement or voted in favor of
the restriction.
A restriction on the transfer or registration of transfer of shares may
be authorized:
(1) to maintain the corporation's status when it is dependent on the
number or identity of its shareholders;
(2) to preserve exemptions under federal or state securities law; or
(3) for any other reasonable purpose.
A restriction on the transfer or registration of transfer of shares may:
(1) obligate the shareholder first to offer the corporation or other
persons (separately, consecutively, or simultaneously) an opportunity to
acquire the restricted shares;
(2) obligate the corporation or other persons (separately,
consecutively, or simultaneously) to acquire the restricted shares;
(3) require the corporation, the holders or any class of its shares, or
another person to approve the transfer of the restricted shares, if the
requirement is not manifestly unreasonable; or
(4) prohibit the transfer of the restricted shares to designated
persons
or classes of persons, if the prohibition is not manifestly unreasonable.
A restriction on the transfer or registration of transfer of shares is
valid and enforceable against the holder or a transferee of the holder if the
restriction is authorized by this Section 6.3 and its existence is noted
conspicuously on the front or back of the certificate. Unless so noted, a
restriction is not enforceable against a person without knowledge of the
restriction.
6.4 Acquisition of Shares.
The corporation may acquire its own shares and unless otherwise provided
in the Articles of Incorporation, the shares so acquired constitute
authorized
but unissued shares.
If the Articles of Incorporation prohibit the reissue of shares
acquired
by the corporation, the number of authorized shares is reduced by the number
of shares acquired, effective upon amendment of the Articles of
Incorporation,
which amendment shall be adopted by the shareholders, or the Board of
Directors without shareholder action (if permitted by the Act). The
amendment
must be delivered to the Secretary of State and must set forth:
(1) the name of the corporation;
(2) the reduction in the number of authorized shares, itemized by class and
series; and
(3) the total number of authorized shares, itemized by class and series,
remaining after reduction of the shares.
ARTICLE 7. DISTRIBUTIONS
7.1 Distributions.
The Board of Directors may authorize, and the corporation may make,
distributions (including dividends on its outstanding shares) in the manner
and upon the terms and conditions provided by law.
ARTICLE 8. CORPORATE SEAL
8.1 Corporate Seal.
The Board of Directors may adopt a corporate seal which may be circular in
form and have inscribed thereon any designation, including the name of the
corporation, Nevada as the state of incorporation, and the words "Corporate
Seal."
ARTICLE 9. EMERGENCY BYLAWS
9.1 Emergency Bylaws.
Unless the Articles of Incorporation provide otherwise, the following
provisions shall be effective during an emergency, which is defined as a time
when a quorum of the corporation's directors cannot be readily assembled
because of some catastrophic event.
During such emergency:
(a) Notice of Board Meetings
Any one member of the Board of Directors or any one of the following
officers: president, any vice-president, secretary, or treasurer, may call a
meeting of the Board of Directors. Notice of such meeting need be given only
to those directors whom it is practicable to reach, and may be given in any
practical manner, including by publication and radio. Such notice shall be
given at least six hours prior to commencement of the meeting.
(b) Temporary Directors and Quorum
One or more officers of the corporation present at the emergency board
meeting, as is necessary to achieve a quorum, shall be considered to be
directors for the meeting, and shall so serve in order of rank, and within
the
same rank, in order of seniority. In the event that less than a quorum (as
determined by Section 3.6 of Article 3) of the directors are present
(including any officers who are to serve as directors for the meeting) ,
those
directors present (including the officers serving as directors) shall
constitute a quorum.
(c) Actions Permitted To Be Taken
The Board of Directors, as constituted in paragraph (b), and after
notice as set forth in paragraph (a), may:
(1) OFFICERS' POWERS
Prescribe emergency powers to any officer of the corporation;
(2) DELEGATION OF ANY POWER
Delegate to any officer or director, any of the powers of the
Board of Directors;
(3) LINES OF SUCCESSION
Designate lines of succession of officers and agents, in the event
that any of them are unable to discharge their duties;
(4) RELOCATE PRINCIPAL PLACE OF BUSINESS
Relocate the principal place of business, or designate successive or
simultaneous principal places of business;
(5) ALL OTHER ACTION
Take any other action which is convenient, helpful, or necessary
to carry on the business of the corporation.
ARTICLE 10. AMENDMENTS
10.1 Amendments.
The Board of Directors may amend or repeal the corporation's Bylaws unless:
(1) the Articles of Incorporation or the Act reserve this power
exclusively to the shareholders, in whole or part; or
(2) the shareholders, in adopting, amending, or repealing a particular
Bylaw, provide expressly that the Board of Directors may not amend or repeal
that Bylaw; or
(3) the Bylaw either establishes, amends or deletes a "supermajority"
shareholder quorum or voting requirement, as defined in section 2.8 of
Article
2.
Any amendment which changes the voting or quorum requirement for the
Board
of Directors must comply with Section 3.8 of Article 3,and for the
shareholders, must comply with Section 2.8 of Article 2.
The corporation's shareholders may also amend or repeal the corporation's
Bylaws at any meeting held pursuant to Article 2.
CERTIFICATE OF SECRETARY
I hereby certify that I am the Secretary of SPECTRAL INNOVATIONS(1994),
INC. and that the foregoing Bylaws, consisting of twenty-seven (27) pages,
constitutes the Code of SPECTRAL INNOVATIONS(1994), INC. as duly adopted by
the Board of Directors of the corporation on this 30th day of August, 1994.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 30th day of
August, 1994
/s/ Nick Sintichakis
-------------------------------
Secretary
EXHIBIT 4.1. Minutes Approving Issuance Of Shares And Bonus Shares
MINUTES OF THE BOARD OF DIRECTORS
A meeting of the Directors of AZTEK, INC., a Nevada corporation, was
held
at the Company's offices on the 12th day of June, 1998, at the hour of 10:00
o'clock a.m., for the purpose of the sale of a determined number of shares
for
startup purposes.
Mike Sintichakis Chairman of the Board called the meeting to order and
Nick Sintichakis Director recorded the minutes of the meeting.
On motion duly made, seconded and unanimously carried the reading
correcting and approval of the minutes of the last meeting was waived.
Upon motion duly made it was resolved that the Company allot an
aggregate
of 1,000,000 common shares par value $0.001 at a price of US$0.05 per share
to
the following directors, officers and employees of the Company:
Name No. & Class of Shares
Mike Sintichakis (director) 400,000 common shares, par value $0.001
Edson Ng (director) 200,000 common shares, par value $0.001
Eileen Keogh (director) 200,000 common shares, par value $0.001
Nick Sintichakis (director) 190,000 common shares, par value $0.001
Dauna Potts (employee) 10,000 common shares, par value $0.001
the ("Shares")
Upon motion duly made, it was resolved that the issuance and release of
the Shares be subject to the following terms and conditions:
1. The total number of Shares shall be paid for in advance by the purchasers
prior to issuance at a price of $0.05 per share. The payment must be made by
a
cashier's or certified cheque, payable to Aztek, Inc.
2. All purchasers agree to place all of their Shares in the Company's trust
account and the Shares will be released in 24 equal monthly installments.
All
of the directors of the Company agree to sign a resignation letter which
shall
be used if the board of directors decide to cease a director's services for
failure to execute his duties and to avoid additional expenses to the Company
for a director's dismissal through shareholder meetings.
3. In the event that any director, officer or employee is released by the
Company, based on the board of directors recommendations or leaves through
their own free will for any reason, the Company has the power and authority
to
sell and transfer all remaining Shares held in the individual's trust account
to an existing or new employee, director or officer of the Company.
4. All purchasers agree to sign a power of attorney authorizing the Company
to
sell the balance of the Shares remaining in their trust account as described
in paragraph 4 herein.
5. The new purchaser shall pay the original owner US$0.05 for each Share
transferred plus 6% per annum interest effective on the day of purchase. If
the Company fails to make a decision on the new purchaser within thirty days,
the Company will advance the funds to the seller on behalf of the future
purchaser.
Upon motion duly made, it was resolved that the Company allot an
aggregate of 1,000,000 common shares, par value $0.001, at a price of US$0.01
per share to be issued as Bonus Shares to the following directors of the
Company:
Name No. & Class of Shares
Mike Sintichakis 400,000 common shares, par value $0.001
Edson Ng 200,000 common shares, par value $0.001
Eileen Keogh 200,000 common shares, par value $0.001
Nick Sintichakis 200,000 common shares, par value $0.001
(the "Bonus Shares")
Upon motion duly made, it was resolved that issuance of any of the Bonus
Shares be subject to the following terms and conditions:
1. All of the Bonus Shares must be paid for in advance at a price of US$0.01
per Bonus Share. The payment must be made by a cashier's or certified cheque,
payable to Aztek, Inc.
2. The release of the Bonus Shares shall be subject to the director's,
officer's or employee's satisfactory performance and certain conditions being
met as described herein;
3. Any outstanding Bonus Shares will expire at the end of the term of five
(5) years from the date of the resolution of the board of directors approving
the granting of the Bonus Shares and shall be automatically cancelled;
4. The maximum number of Bonus Shares to be released to any director,
officer or employee in any one year shall be restricted to 20% of the
original
amount of Bonus Shares awarded;
5. In order for the Company to authorize the issuance of any Bonus Shares
to any director, officer or employee the Bonus Shares shall be released only
if the Company accumulates the following working capital per year:
Year one: $0.05 per share of working capital
Year two: $0.10 per share of working capital
Year three: $0.20 per share of working capital
Year four: $0.30 per share of working capital
Year five: $0.40 per share of working capital
6. In the event that any director, officer or employee ceases to serve the
Company in any capacity for any reason, the remaining Bonus Shares shall be
transferred to a new director, officer or employee of the Company at the
board
of director's discretion. The new purchaser shall, as a condition of
receiving the Bonus Shares, pay to the original beneficial owner US$0.01 for
each Bonus Share transferred to him including 6% interest effective on the
day
of purchase within thirty days. In the event that the Company fails to make
a
decision of the new beneficial owner within thirty days, the Company will
advance the funds and recover the same from the future beneficial owner.
7. All beneficiaries agree to sign a power of attorney authorizing the
Company to transfer the balance of the Bonus Shares remaining in their
account. The balance of the Bonus Shares described herein, at the board of
director's discretion, will be sold or transferred to several or one existing
or new director, employee or officer of the Company. The power of attorney
will be effective if a beneficiary, based on the board of director's
discretion, does not provide satisfactory services to the Company and in
result they cease their services to the Company.
Upon motion duly made, it was agreed that the funds collected from the
issuance of the Shares and the Bonus Shares be used for the Company's
start-up costs and working capital.
There being no further business to come before the meeting at this time,
the meeting was, upon motion duly made and seconded, adjourned at 11:30 a.m.
/s/ Mike Sintichakis
----------------------------
Mike Sintichakis, Director
EXHIBIT 4.2 Standard Subscription Agreement for Bonus Shares
Investment Letter
Aztek, Inc.
Suite #5 - 246 Lawrence Avenue
Kelowna, B.C.
V1Y 6L3
Dear Sirs:
In connection with the acquisition by the undersigned of ____________________
(_________) shares as Bonus of Common Stock (the "Bonus Shares") of Aztek,
Inc. a Nevada corporation ("Aztek" or the "Company"), at a price of US$0.01
per share, from the Company, the undersigned hereby covenants, represents and
warrants to you that:
1. The undersigned is acquiring the Bonus Shares in good faith for the purpose
of an investment in the Company and not for the purpose of distributing or
publicly selling the Bonus Shares to others, reselling, assigning, pledging or
hypothecating the Bonus Shares; or dividing his participation with others in
the Shares or any portion thereof except as described herein.
2. As of the date of this letter, the undersigned is not aware of any
particular occasion, event or circumstance upon the occurrence or happening of
which he or she intends to sell the Bonus Shares except as described herein.
3. The Bonus Shares are being acquired by the undersigned for his or her own
account and there is a present arrangement or agreement for the possible
transfer of the Bonus Shares to other persons employed by the Company.
4. The Shares covered by the above covenants, warranties and representations
shall also include any securities into which the above Bonus Shares may become
converted, subdivided, or split up, in connection with a merger,
re-classification, recapitalization or reorganization of the Company.
5. The undersigned further acknowledges that he is familiar with the
operations of the Company; that he has received information of the Company,
that he is capable of evaluating the merits and risks of the prospective
investment; and that he has had the opportunity to ask questions and receive
answers concerning the terms and conditions of the issuance of the Shares.
6. The undersigned understands that he or she will issue a cheque for the full
amount of the purchase price of the Bonus Shares of Common Stock purchased,
payable to the order of "Aztek, Inc." This investment letter must be executed
and delivered to Aztek, Inc., Suite #5 - 246 Lawrence Avenue, Kelowna, B.C.
V1Y 6L3.
7. The undersigned understands and agrees that the Bonus Shares shall be
released to a maximum number of 20% per year of the original number of Bonus
Shares purchased. The undersigned also understands that the Bonus Shares shall
only be released only if the Company accumulates the working capital per annum
as follows:
Year one: $0.05 per share of working capital
Year two: $0.10 per share of working capital
Year three: $0.20 per share of working capital
Year four: $0.30 per share of working capital
Year five: $0.40 per share of working capital
8. The undersigned acknowledges and agrees that any Bonus Shares not released
to the undersigned within five (5) years from the date of this letter shall be
returned to the Company for cancellation.
9. The undersigned acknowledges and agrees that in the event that he or she
ceases to be a director officer or employee of the Company, based on the board
of directors recommendations or for any other reason, the balance remaining of
the Bonus Shares not so released to the undersigned shall be transferred to a
new director, officer or employee. The undersigned hereby authorizes the
Company to transfer or assign the balance of Bonus Shares remaining in the
undersigned's account to a new director of the Company. The new beneficial
holder of the Bonus Shares shall cause to be paid to the undersigned US$0.01
for each share transferred or assigned together with 6% interest effective on
the day of approval by the Company of the share transfer or assignment.
10. The undersigned agrees to indemnify the Company against, and hold it harmles
s from, all losses, liabilities, costs and expenses (including reasonable
attorney's fees) which arise as a result of a sale, exchange or other transfer
of the Shares other than as permitted hereunder.
Yours truly,
By: ____________________________________
________________________________________
Address
Date____________________________________
Telephone No.____________________________
Accepted this ______ day of ________________________, 1998.
AZTEK, INC.
Per:____________________________________
EXHIBIT 4.3 Standard Subscription Agreement for Common Shares
Investment Letter
Aztek, Inc.
Suite #5 - 246 Lawrence Avenue
Kelowna, B.C.
V1Y 6L3
Dear Sirs:
In connection with the acquisition by the undersigned of ____________________
(_________) shares of Common Stock (the "Bonus Shares") of Aztek, Inc. a
Nevada corporation ("Aztek" or the "Company"), at a price of US$0.05 per
share, from the Company, the undersigned hereby covenants, represents and
warrants to you that:
1. The undersigned is acquiring the Shares in good faith for the purpose of an
investment in the Company and not for the purpose of distributing or publicly
selling the Shares to others, reselling, assigning, pledging or hypothecating
the Shares; or dividing his participation with others in the Shares or any
portion thereof except as described herein.
2. As of the date of this letter, the undersigned is not aware of any
particular occasion, event or circumstance upon the occurrence or happening of
which he or she intends to sell the Shares except as described herein.
3. The Shares are being acquired by the undersigned for his or her own account
and there is a present arrangement or agreement for the possible transfer of
the Shares to other persons employed by the Company.
4. The Shares covered by the above covenants, warranties and representations
shall also include any securities into which the above Shares may become
converted, subdivided, or split up, in connection with a merger,
re-classification, recapitalization or reorganization of the Company.
5. The undersigned further acknowledges that he is familiar with the
operations of the Company; that he has received information of the Company,
that he is capable of evaluating the merits and risks of the prospective
investment; and that he has had the opportunity to ask questions and receive
answers concerning the terms and conditions of the issuance of the Shares.
6. The undersigned understands that he or she will issue a cheque for the full
amount of the purchase price of the Shares of Common Stock purchased, payable
to the order of "Aztek, Inc." This investment letter must be executed and
delivered to Aztek, Inc., Suite #5 - 246 Lawrence Avenue, Kelowna, B.C. V1Y
6L3.
7. The undersigned understands and agrees that the Shares so purchased shall
be held in trust by Aztek, Inc. and released to the undersigned in 24 equal
monthly installments.
8. The undersigned acknowledges and agrees that in the event that he or she
ceases to be a director, officer or employee of the Company, or is released by
the Board of Directors for any reason, the balance remaining of the Shares not
so released to the undersigned shall be transferred to a new holder. The
undersigned hereby authorizes the Board of Directors of the Company to
transfer or assign the balance so remaining to a new director officer or
employee of the Company. As a condition of receiving the Shares, the new
beneficial holder of the Shares shall cause to be paid to the undersigned
US$0.05 for each share so transferred or assigned together with 6% interest.
9. The undersigned agrees to indemnify the Company against, and hold it
harmless from, all losses, liabilities, costs and expenses (including
reasonable attorney's fees) which arise as a result of a sale, exchange or
other transfer of the Shares other than as permitted hereunder.
Yours truly,
By: ____________________________________
________________________________________
Address
Date____________________________________
Telephone No.____________________________
Accepted this ______ day of ________________________, 1998.
AZTEK, INC.
Per:____________________________________
See also Articles six, seven and nine of the Company's Amended And
Restated Articles Of Incorporation set forth in this Form S-4 as Exhibit
3(i).2 and Article 2 of the Company's By-laws set forth in this Form S-4 as
Exhibit 3(ii).
EXHIBIT 5. Opinion On Legality
[LETTERHEAD OF LAW FIRM OF LARSON-JACKSON, P.C.]
August 1, 1998
Board of Directors
the Company Inc.
1575 Deluccchi Lane, Suite #40
Reno, Nevada 89502
RE: Registration Statement on Form S-4
Ladies and Gentlemen:
This opinion is rendered in connection with the Registration Statement on
Form S-4 (the "Registration Statement") filed by Aztek, Inc. (the "Company")
with the Securities and Exchange Commission under the Securities Act of 1933,
as amended, and the Joint Proxy Statement-Prospectus (the "Prospectus"),
relating to the issuance by the Company of up to 2,051,109 shares of common
stock, par value $0.001 per share (the "Common Stock"), in the manner set
forth in the Registration Statement and the Prospectus. As counsel, we have
reviewed the Registration Statement, the Prospectus and the Company's
Articles
of Incorporation and By-Laws, Records of the Company's corporate proceedings
relative to the issuance of the Common Stock and such other legal matters as
we have deemed appropriate for the purposes of this opinion. We are
rendering
this opinion as of the time the Registration Statement becomes effective.
Based upon the foregoing, and having a regard for such legal
considerations as we have deemed relevant, we are of the opinion that the
shares of Common Stock will be, upon issuance, against full payment therefor
as contemplated in the Registration Statement and the Prospectus, legally
issued, fully paid and non-assessable shares of Common Stock of the Company.
We consent to the filing of our opinion as an exhibit to the Registration
Statement and to the reference to our firm and our opinion in the
Registration
Statement and all amendments thereto.
Very truly yours,
LAW FIRM OF LARSON-JACKSON, P.C.
BY: /s/ Steve Larson-Jackson
- -------------------------------------
Steve Larson-Jackson
November ____, 1998
Board of Directors
Aztek Inc.
1575 Delucchi Lane, Suite #40
Reno, Nevada 89502
Board of Directors
Aztek Technologies Inc.
Suite #5 - 246 Lawrence Ave.
Kelowna, B.C. V1Y 6L3
Re: Certain Material Federal Income Tax Consequences Relating
to the Acquisition of Aztek Technologies Inc.
-------------------------------------------------------------
Ladies and Gentlemen:
We are rendering this opinion to you at your request and in our capacity
as special counsel to Aztek, Inc. (the "Company"), a Nevada corporation
headquartered in Reno, Nevada in connection with the Merger Agreement dated
as of July 2, 1998 (the "Agreement"), entered into between the Company and
Aztek Technologies Inc. ("ATI"), a computer software company in British
Columbia, Canada. Terms used herein, whether capitalized or not, shall have
the meanings given to them in the Agreement.
ATI will be merged with and into the Company (the "Merger"). Each
issued and outstanding share of common stock of ATI, no par value ("ATI
Common Stock"), shall automatically be converted into a number of shares of
common stock of the Company, par value $.001 per share (the "Company Common
Stock") according in a one-for-one exchange as specified in Section 5.3 of
the
Agreement.
1. Each issued and outstanding share of ATI common stock shall be
converted into an equal number of newly issued shares of the Company Common
Stock.
2. The Company will survive the Merger and will operate under
its present name and title with its own board of directors for a period of at
least _______ months thereafter.
3. We are rendering this opinion at the request of the Boards of the
Company and ATI. For purposes of this opinion, we have examined and are
familiar with originals or copies, certified or otherwise identified to our
satisfaction, including but not limited to the Merger Agreement and such
other documents as we have deemed necessary or appropriate in order to enable
us to render the opinions below.
4. In our examination, we have assumed the genuineness of all
signatures where due execution and delivery are requirements to the
effectiveness thereof, the legal capacity of all natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified, conformed
or photostatic copies and the authenticity of the originals of such copies.
5. In rendering our opinions, we have considered applicable
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury regulations, pertinent judicial authorities, interpretive rulings of
the Internal Revenue Service, and such other authorities as we have
considered relevant. We have also assumed that the transactions contemplated
by the Agreement will be consummated strictly in accordance with the Merger
Agreement.
Based solely upon and subject to the foregoing, it is our opinion that,
under presently applicable U.S. law:
(i) provided the proposed merger of ATI with and into the
Company qualifies under federal law, the Merger will qualify as a
"reorganization" under Section 368(a) of the Code, and
ATI and the Company will be parties to the reorganization;
(ii) no gain or loss will be recognized by the Company or ATI
by reason of the Merger;
(iii) no gain or loss will be recognized by stockholders of
ATI
in the Merger to the extent they receive solely shares of the Company Common
Stock in exchange for their shares of ATI Common Stock;
(iv) when cash is received by a U.S. resident who is a
dissenting stockholder of ATI, such cash will be treated as received by the
dissenting stockholder as a distribution in redemption of the stockholder's
ATI Common Stock subject to the provisions and limitations of Section 302 of
the Code.
Our opinion is limited to the U.S. federal income tax matters described
above and does not address any other federal income tax considerations or any
state, local, foreign, or other federal tax considerations. If any of the
information upon which we have relied is incorrect, or if changes in the
relevant facts occur after the date hereof, our opinion could be affected
thereby. Moreover, our opinion is based on the case law, Code, Treasury
Regulations thereunder, and Internal Revenue Service rulings as they now
exist. These authorities are all subject to change, and such change may be
made with retroactive effect. We can give no assurance that, after such
change, our opinion would not be different. We undertake no responsibility to
update or supplement our opinion subsequent to consummation of the Merger.
Prior to that time, we undertake to update or supplement our opinion in the
event of a material change in the federal income tax consequences set forth
above and to file such revised opinion as an exhibit to the Agreement. This
opinion is not binding on the Internal Revenue Service and there can be no
assurance, and none is hereby given, that the Internal Revenue Service will
not take a position contrary to one or more of the positions reflected in the
foregoing opinion, or that our opinion will be upheld by the courts if
challenged by the Internal Revenue Service.
We hereby consent to the filing of this opinion with the SEC as an
exhibit to the Registration Statement on Form S-4 of which the Joint Proxy
Statement-Prospectus is a part and the reference to our firm in the Joint
Proxy Statement-Prospectus under the headings "Summary--Federal Income Tax
Consequences of the Transaction.
Very truly yours,
LAW FIRM OF LARSON-JACKSON, P.C.
By:_________________________________________
Steve Larson-Jackson
ESCROW AGREEMENT
AMONG
MONTREAL TRUST COMPANY OF CANADA
4th Floor - 510 Burrard Street
Vancouver, B.C. V6C 3B9
(The "Escrow Agent");
AND
CONSOLIDATED MCKINNEY RESOURCES INC
#5 - 246 Lawrence Avenue
Kelowna, B.C. V1Y 6l3
(the "Issuer");
AND:
EACH SHAREHOLDER as defined in this Agreement
(Collectively, the "Parties").
WHEREAS the Shareholder has acquired or is about to acquire shares of the
Issuer;
AND WHEREAS the Escrow Agent has agreed to act as escrow agent in respect of
the shares upon the acquisition of the shares by the shareholder;
AND WHEREAS the shareholders of the Company approved a share consolidation of
the shares of the Company on a five to one basis at the Annual General Meeting
of the Company held on December 9, 1994.
NOW THEREFORE in consideration of the covenants contained in this agreement
and other good and valuable consideration (the receipt and sufficiency of
which is acknowledged), the Parties agree as follows:
1. INTERPRETATION
In this agreement:
(a) "Acknowledgment" means the acknowledgment and agreement to be bound in
the form attached as Schedule A to this agreement;
(b) "Act" means the Securities Act, S.B.C. 1985, c.83
(c) "Exchange" means the Vancouver Stock Exchange;
(d) "IPO" means the initial public offering of common shares of the Issuer
under a prospectus which has been filed with, and for which a receipt has been
obtained from the Superintendent under section 42 of the Act;
(e) "Local Policy Statement 3-07" means the Local Policy Statement 3-07 in
effect as of the date of reference of this agreement and attached as Schedule
B to this agreement;
(f) "Shareholder" means a holder of shares of the Issuer who executes this
agreement or an Acknowledgment;
(g) Shares" means the post-consolidation shares of the Shareholder described
in Schedule C to this agreement, as amended from time to time in accordance
with section 9;
(i) "Superintendent or the Exchange" means the Superintendent, if the shares
of the Issuer are not listed on the Exchange, or the Exchange, if the shares
of the Issuer are listed on the Exchange.
2. PLACEMENT OF SHARES IN ESCROW
The Shareholder places the Shares in escrow with the Escrow Agent and shall
deliver the certificates representing the Shares to the Escrow Agent as soon
as practicable.
3. VOTING OF SHARES IN ESCROW
Except as provided by section 4(a), the Shareholder may exercise all voting
rights attached to the Shares.
4. WAIVER OF SHAREHOLDER'S RIGHTS
The Shareholder waives the rights attached to the Shares.
(a) to vote the Shares on a resolution to cancel any of the Shares,
(b) to receive dividends, and
(c) to participate in the assets and property of the Issuer on a winding
up or dissolution of the Issuer.
5. ABSTENTION FROM VOTING AS A DIRECTOR
A Shareholder that is or becomes a director of the Issuer shall abstain from
voting on a directors' resolution to cancel any of the Shares.
6. TRANSFER WITHIN ESCROW
(1) The Shareholder shall not transfer any of the Shares except in
accordance with Local Policy Statement 3-07 and with the consent of the
Superintendent of the Exchange.
(2) The Escrow Agent shall not effect a transfer of the Shares within
escrow unless the Escrow Agent has received
(a) a copy of an Acknowledgment executed by the person to whom the
Shares are to be transferred, and
(b) a letter from the Superintendent or the Exchange consenting to
the transfer.
(3) Upon the death or bankruptcy of a Shareholder, the Escrow Agent shall
hold the Shares subject to this agreement for the person that is legally
entitled to become the registered owner of the Shares.
(4) In the event that a Shareholder
(a) ceases to be a principal of the Issuer, as that term is defined
in Local Policy Statement 3-07, the directors of the Issuer have the express
right to decide whether the Shareholder may retain or must transfer or
surrender any Shares, subject to the terms and conditions of Local Policy
Statement 3-07; or
(b) dies or becomes bankrupt, the directors of the Issuer have the
express right to decide whether the Estate or Receiver of the Shareholder or
any person that is legally entitled to become the registered owner of the
Shares may retain or must transfer or surrender any Shares, subject to the
terms and conditions of Local Policy Statement 3-07.
7. RELEASE FROM ESCROW
(1) The Shareholder irrevocably directs the Escrow Agent to retain the
Shares until the Shares are released from escrow pursuant to subsection (2) or
surrendered for cancellation pursuant to section 8.
(2) The Shares will be released from escrow on the basis of cash flow from
operations as derived from the audited financial statements of the Company and
any subsidiary. "Cash Flow" means net income or loss before tax, adjusted to
add back the following expenses:
(a) depreciation
(b) amortization of goodwill and deferred research and development
costs, excluding general and administrative costs;
(c) expensed research and development costs, excluding general and
administrative costs;
(d) any other amounts permitted or required by the Superintendent.
Cumulative cash flow means at any time the aggregate cash flow of an issuer up
to that time from a date no earlier than the issuer's financial year end
immediately preceding the date of its initial public offering, net of any
negative cash flow. The number of shares released from escrow in that year
will be that number of shares computed by taking the cumulative cash flow not
previously applied toward a release and dividing the same by $0.31. The
Escrow Agent shall not release the Shares from escrow unless the Escrow Agent
has received a letter from the Superintendent or the Exchange consenting to
the release.
(3) The approval of the Superintendent or the Exchange to a release from
escrow of any of the Shares shall terminate this agreement only in respect of
the Shares so released.
8. SURRENDER FOR CANCELLATION
The Shareholder shall surrender the Shares for cancellation and the Escrow
Agent shall deliver the certificates representing the Shares to the Issuer:
(a) at the time of a major reorganization of the Issuer, if required
as a condition of the consent to the reorganization by the Superintendent or
the Exchange,
(b) where the Issuer's shares have been subject to a cease trade
order issued under the Act for a period of 2 consecutive years,
(c) 5 years from the date the Exchange has accepted this Agreement
for filing.
(d) where required by section 6(4).
9. AMENDMENT OF AGREEMENT
(1) Subject to subsection (2) this agreement may be amended only by a
written agreement among the Parties and with the written consent of the
Superintendent or the Exchange.
(2) Schedule C to this agreement shall be amended upon
(a) a transfer of Shares pursuant to section 6,
(b) a release of Shares from escrow pursuant to section 7, or
(c) a surrender of Shares for cancellation pursuant to section 8,
and the Escrow Agent shall note the amendment on the Schedule C in its
possession.
10. INDEMNIFICATION OF ESCROW AGENT
The Issuer and the Shareholders, jointly and severally, release, indemnify and
save harmless the Escrow Agent from all costs, charges, claims, demands,
damages, losses and expenses resulting from the Escrow Agent's compliance in
good faith with this agreement.
11. RESIGNATION OF ESCROW AGENT
(1) If the Escrow Agent wishes to resign as escrow agent in respect of the
Shares, the Escrow Agent shall give notice to the Issuer.
(2) If the Issuer wishes the Escrow Agent to resign as escrow agent in
respect of the Shares, the Issuer shall give notice to the Escrow Agent.
(3) A notice referred to in subsection (1) or (2) shall be in writing and
delivered to
(a) the Issuer at #5-246 Lawrence Avenue, Kelowna, B.C. V1Y 6L3, or
(b) the Escrow Agent at 4th Floor - 510 Burrard Street, Vancouver,
B.C. V6C 3B9
and the notice shall be deemed to have been received on the date of
delivery. The Issuer or the Escrow Agent may change its address for notice by
giving notice to the other party in accordance with this subsection.
(4) A copy of a notice referred to in subsection (1) or (2) shall
concurrently be delivered to the Superintendent or the Exchange.
(5) The resignation of the Escrow Agent shall be effective and the Escrow
Agent shall cease to be bound by this agreement on the date that is 180 days
after the date of receipt of the notice referred to in subsection (1) or (2)
or on such other date as the Escrow Agent and the Issuer may agree upon (the
"resignation date").
(6) The Issuer shall, before the resignation date and with the written
consent of the Superintendent or the Exchange, appoint another escrow agent
and that appointment shall be binding on the Issuer and the Shareholders.
12. FURTHER ASSURANCES
The Parties shall execute and deliver any documents and perform any acts
necessary to carry out the intent of this agreement.
13. TIME
Time is of the essence of this agreement.
14. GOVERNING LAWS
This agreement shall be construed in accordance with and governed by the laws
of British Columbia and the laws of Canada applicable in British Columbia.
15. COUNTERPARTS
This agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original and all of which shall constitute one
agreement.
16. LANGUAGE
Wherever a singular expression is used in this agreement, that expression is
deemed to include the plural or the body corporate where required by the
context.
17. INUREMENT
This Agreement enures to the benefit of and is binding on the Parties and
their heirs, executors, administrators, successors and permitted assigns.
The Parties have executed and delivered this agreement as of the date of
reference of this agreement.
The Common Seal of MONTREAL
TRUST COMPANY OF CANADA
was affixed in the presence of:
/s/
- --------------------
/s/
- ------------------------
The Common Seal of CONSOLIDATED
MCKINNEY RESOURCES INC
was affixed in the presence of:
/s/
- -------------------------------
/s/
- -------------------------------
Signed, sealed and delivered by
MIKE SINTICHAKIS in the
presence of:
/s/ Debbie L. Kent
- -----------------------
Name
325 - 3535 McCulloch Rd /S/ Mike Sintichakis
- ------------------------ --------------------------
Address MIKE SINTICHAKIS
Kelowna, B.C. V1W 4R8
Accounting Clerk
- ----------------------
Occupation
<PAGE>
SCHEDULE A TO ESCROW AGREEMENT
ACKNOWLEDGMENT AND AGREEMENT TO BE BOUND
TO: Vancouver Stock Exchange
4th Floor - 609 Granville Street
Vancouver, B.C.
V7Y 1H1
I acknowledge that:
(a) I have entered into an agreement with _______________ under which
______________ shares of Consolidated McKinney Resources Inc. (The "Shares")
will be transferred to me upon receipt of regulatory approval, and
(b) the Shares are held in escrow subject to an escrow agreement dated for
reference __________, 19___ (the "Escrow Agreement"), a copy of which is
attached as Schedule A to this Acknowledgment.
In consideration of $1.00 and other good and valuable consideration (the
receipt and sufficiency of which is acknowledged) I agree, effective upon
receipt of regulatory approval of the transfer to me of the Shares, to be
bound by the Escrow Agreement in respect of the Shares as if I were an
original signatory to the Escrow Agreement.
Dated at __________________ on ________________, 19 ____.
Signed, sealed and delivered by
_____________________ in the
presence of:
____________________
Name
______________________ ____________________
Address
______________________
______________________
Occupation
<PAGE>
SCHEDULE C TO ESCROW AGREEMENT
NAME OF SHAREHOLDER NUMBER OF SHARES HELD IN ESCROW
Mike Sintichakis 354,000
Exhibit 10.2 Standard Option Agreement between ATI and Directors
DIRECTORS STOCK OPTION AGREEMENT dated the 20th day of March, 1997.
BETWEEN:
AZTEK TECHNOLOGIES INC., a body corporate duly incorporated in the
Province of British Columbia and having its head office at Suite #5, 246
Lawrence Avenue, Kelowna, British Columbia, V1Y 7L3
(The "Company")
ON THE FIRST PART
AND:
MIKE SINTICHAKIS of 1802 Lipsett Court, Kelowna, B.C. V1V 1X3
(the "Director")
ON THE SECOND PART
WHEREAS the Company wishes to encourage the best efforts of the Director
and to recognize the Director's efforts and risk in performing the functions
of a director of the Company by granting to the Director an option to
purchase shares in the capital stock of the Company.
NOW THEREFORE the parties hereto agree as follows:
1. The Company hereby grants to the Director an option to purchase all or
any portion of 90,000 fully paid common shares (the "Optioned Shares") of the
Company from the treasury, exercisable ta the price of $1.82 per share, on or
before March 20, 1999.
2. The Option is exercisable by notice in writing to the Company
accompanied by a certified cheque in favour of the Company for the full
amount of the purchase price of the shares being then purchased. When such
payment is received, the Company covenants and agrees to issue and deliver to
the Director share certificates in the name of the Director for the number of
shares so purchased.
3. This is an option agreement only and does not impose upon the Director
any obligation to take up and pay for any of the Optioned Shares.
4. The Option shall not be transferable or assignable by the Director
otherwise than by Will or the law of intestacy and the Option may be exercised
during the lifetime of the Director only by the Director.
5. If the Director should die while a director of the Company, the Option
may then be exercised by the legal heirs or personal representatives of the
Director, to the same extent as if the Director were alive and a director of
the Company for a period not exceeding one year after the death of the
Director but only for such shares as the Director was entitled to at the date
of the death of the Director.
6. Subject to paragraph 5 hereof, the Option shall cease and become null
and void 30 days after the Director ceases to act as a director of the
Company.
7. In the event of any subdivision, consolidation or other change in the
share capital of the Company while any portion of the Option is outstanding,
the number of shares under option to the Director and the price thereof shall
be adjusted in accordance with such subdivision, consolidation or other change
in the share capital of the Company.
8. The Company hereby covenants and agrees that it will reserve in its
treasury sufficient shares to permit the issuance and allotment of shares to
the Director in the event the Option is exercised.
9. Time shall be of the essence of this Agreement.
10. The granting of the herein Stock Option and any amendment thereto,
shall be subject to the approval of the Vancouver Stock Exchange and the
shareholders of the Company.
11. Shareholder approval to the grant of the options shall be obtained
prior to the exercise of options granted to insiders (as defined in the
Securities Act of British Columbia).
12. Shareholder approval shall be obtained in respect of amendments to the
agreement if the option as originally constituted was approved by the
shareholders of the optionee is an insider of the Company at the time of the
amendment.
13. This Agreement shall enure to the benefit of or be binding upon the
Company, its successors and assigns and the Director and the Director's
personal representatives to the extend provided in paragraph 5.
IN WITNESS WHEREOF the parties have hereunto caused these presents to be
executed as of the day and year first above written.
The COMMON SEAL OF
AZTEK TECHNOLOGIES INC.
was hereunto affixed in the presence of:
/s/ Glen Naka [Corporate Seal]
- ------------------------ C/S
Glen Naka
SIGNED, SEALED AND DELIVERED
in the presence of:
/s/ Dauna Potts /s/ Mike Sintichakis
- ----------------------- ---------------------------
Name MIKE SINTICHAKIS
5-246 Lawrence Ave.
- ----------------------
Address
Kelowna, B.C.
Exhibit 10.3 Demand Note
Aztek Technologies Inc.
Suite #5-246 Lawrence Avenue
Kelowna, British Columbia
V1Y 6L3
DEMAND NOTE
($94,000)
(September 4, 1997)
ON DEMAND, after the above date the company promises to pay to the order of
Maria Sintichakis of 1802 Lipsett Court, Kelowna, BC V1V 1X3
NINETY-FOUR THOUSAND DOLLARS ($94,000) with the following provisions for
interest and repayment.
INTEREST:
Without interest
REPAYMENT TERMS:
No payments shall become due and owing prior to July 1999
FOR VALUE RECEIVED:
Aztek Technologies Inc.
REGISTERED ADDRESS:
1010 Burrard Building
1030 West Georgia Street
Vancouver, British Columbia
V6E 2Y3
LENDER: AZTEK TECHNOLOGIES INC.:
/s/ Maria Sintichakis Per: /s/ Edson Ng
- --------------------- ----------------------
Name Edson Ng, Director
1802 Lipsett Court, Kelowna, BC V1V 1X3 September 4, 1997
- --------------------------------------- ------------------
ADDRESS DATE
September 4
- -----------
DATE
EXHIBIT 23.1 Consent Of Independent Accountants
[LETTERHEAD OF BDO DUNWOODY, CHARTERED ACCOUNTANTS APPEARS HERE]
INDEPENDENT AUDITORS' CONSENT
We hereby consent to the use of our report to the shareholders of Aztek Inc.,
dated July 23, 1998 on the audit of the financial statements described
therein, in the Joint Proxy Statement-Prospectus and Registration Statement on
Form S-4, relating to shares of Common Stock of Aztek, Inc., to be issued to
shareholders of Aztek Technologies Inc., as filed with the Securities and
Exchange Commission.
We hereby consent to the use of our report to the shareholders of Aztek
Technologies Inc., dated July 10, 1998 on the audit of the financial
statements described therein, in this Registration Statement on Form S-4,
relating to the annual and extraordinary meeting of the shareholders of Aztek
Technologies Inc., as filed with the Securities and Exchange Commission.
We hereby consent to the use of our opinion on the income tax effect on
Canadian resident shareholders, of Aztek Technologies Inc., of the proposed
merger of Aztek Technologies Inc. with Aztek, Inc. described in this
Registration Statement on Form S-4.
/s/BDO Dunwoody
- ------------------
CHARTERED ACCOUNTANTS
Penticton, British Columbia
November 3, 1998
EXHIBIT 23.2 Consent of Stephen K. Winters
[LETTERHEAD OF STEPHEN K WINTERS LAW CORPORATION]
November 5, 1998
Board of Directors
Aztek Technologies Inc.
#5 - 246 Lawrence Ave.
Kelowna, B.C.
V1Y 6L3
Re: Aztek Technologies Inc. ("ATI") - Consent
Members of the Board:
We hereby consent to the use of our legal opinion dated August 5, 1998, on the
Dissenter's Rights described therein of ATI's Proxy Statement to be sent to
the shareholders of ATI as filed with the Securities and Exchange Commission.
We also consent to the reference to our firm under the caption "Experts" in
the Prospectus.
Yours truly,
STEPHEN K WINTERS
LAW CORPORATION
/s/ Stephen K. Winters
- ----------------------
Per: Stephen K. Winters
MINUTES OF PROCEEDING OF THE BOARD
CONSENT AND RESOLUTION OF
BOARD OF DIRECTORS
OF
AZTEK, INC.
Held on August 12, 1998
PRESENT: MIKE SINTICHAKIS
NICK SINTICHAKIS
EDSON NG
EILEEN KEOGH
Being all of the Directors of Aztek, Inc. (the "Company"). All of the
Directors being present in person and having waived notice of the meeting as
evidenced by their signatures at the bottom of these minutes, notice calling
the meeting was dispensed with and the meeting declared to be regularly
constituted.
WHEREAS, the Company will file a Registration Statement on Form S-4 with the
U.S. Securities & Exchange Commission in connection with the merger of the
Company and Aztek Technologies Inc. of Canada, to comply with the Securities
Act of 1933, as amended, and any rules, regulations and requirement of the
Securities and Exchange Commission, it is
RESOLVED, That Mike Sintichakis, as an officer of the Company, will sign the
registration statement for the directors and officers by power of attorney.
AZTEK, INC.
By:/s/ Mike Sintichakis Date: 8/12/98
---------------------- -------------------
Mike Sintichakis, Director
By:/s/ Nick Sintichakis Date: 8/12/98
------------------------ --------------------
Nick Sintichakis, Director
By:/s/ Edson Ng Date: 8/12/98
------------------------ --------------------
Edson Ng
By:/s/ Eileen Keogh Date: 8/12/98
------------------------ --------------------
Eileen Keogh
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SUMMARY CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S
ANNUAL FINANCIAL STATEMENTS SET FORTH IN THIS FORM S-4 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 60000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 60000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 60000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 60000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 60000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
EXHIBIT 99.1 Merger Agreement
MERGER AGREEMENT
THIS AGREEMENT MADE THE 2nd DAY OF July, 1998.
BETWEEN:
AZTEK TECHNOLOGIES INC., a company incorporated under the laws of the
Province of British Columbia, and having its registered office at 505 - 700
West Pender Street, Vancouver, British Columbia, V6C 1G8 ("ATI")
OF THE FIRST PART
AND:
AZTEK, INC., a company incorporated under the laws of the State of Nevada,
and having its registered office at 1025 Ridgeview Drive, Suite 400 Reno,
Nevada, 89509 ("the Corporation")
OF THE SECOND PART
WHEREAS:
A. Aztek Technologies Inc. shareholders are legal and beneficial owners of
all the issued and outstanding shares in the capital stock of Aztek
Technologies Inc., a corporation incorporated under the laws of British
Columbia as follows:
<TABLE>
<CAPTION>
Description No. Of Registered Number of Shares
Shares Shareholders Outstanding
<S> <C>
<C>
Common 347 2,051,109
Escrow 1 354,000
Options 5 175,000
Total *347 2,051,109
</TABLE>
* The above shareholders are as of June 30, 1997. The current number of
shareholders is not available from the transfer agent at this time but will
be made available at a later date.
(the "ATI Shares").
B. Aztek, Inc. shareholders are legal and beneficial owners of all of the
issued and outstanding shares in the capital stock of Aztek, Inc., a
corporation incorporated under the laws of Nevada as follows:
<TABLE>
<CAPTION>
Description No. of Shareholders Number of Shares
Shares
Outstanding
<S> <C> <C>
Common 6 1,025,000
Escrow 5 1,000,000
Options 0 0
Total 6 2,025,000
</TABLE>
(the "Corporation Shares").
C. ATI has agreed to merge with the Corporation and the Corporation has
agreed to merge with ATI, through a pooling of Shares, all of the assets and
liabilities of the respective parties, on the terms and conditions as set out
in this Agreement.
BASED ON WHAT HAS BEEN SET OUT ABOVE THIS AGREEMENT WITNESSES that in
consideration of the premises and the mutual representations, warranties,
agreements and covenants contained in this Agreement (the receipt and
adequacy of such consideration is by this Agreement mutually admitted by each
party), the parties covenant and agree as follows:
1. INTERPRETATION
1.1 Definitions - In this Agreement the following words and phrases
shall have the meanings set out after each:
(a) "ATI" means Aztek Technologies Inc., a company incorporated under the
laws of the Province of British Columbia, and having its registered office at
505 - 700 West Pender Street, Vancouver, British Columbia, V6C 1G8;
(b) "ATI Shares" means all of the issued and outstanding shares in the
capital of ATI;
(c) "ATI's Certificates" means the stock certificates to be delivered at
Completion Date pursuant to paragraph 5.2(a).
(d) "ATI's Solicitor" means Stephen K. Winters Law Corporation, Barristers
and Solicitors, of #505 - 700 West Pender Street, Vancouver, British
Columbia, V6C 1G8;
(e) "Business" means the business carried on by ATI which primarily involves
the development, sale, and servicing of computer software;
(f) "Completion Date" means October 1, 1998, or will become effective the
date of the registration statement date, or such other date as may be agreed
upon in writing by the parties to this Agreement and accepted be the
regulatory authorities;
(g) "Corporation" means Aztek, Inc., a company incorporated under the laws
of the State of Nevada, and having its registered office at 1025 Ridgeview
Drive, Suite 400 Reno, Nevada, 89509
(h) "Corporation Shares" means all of the issued and outstanding shares in
the capital of the Corporation;
(i) "Corporation's Solicitor" means Michael J. Morrison 1025 Ridgeview
Drive, Suite # 400 Reno, Nevada 89509.
(j) "Financial Statements" means the Financial Statements of ATI for the
fiscal year of ATI ending on the 30th day of June, 1998 consisting of a
balance sheet, statement of retained earnings, an income statement and a
statement of changes in financial position of ATI including the notes to such
Financial Statements, a copy of which is attached to this Agreement as
Schedule "B";
(k) "Material Contracts" means those subsisting commitments, contracts,
agreements, instruments, leases or other documents entered into by ATI, by
which it is bound or to which it or its assets are subject which have total
payment obligations on the part of ATI in excess of $1,000;
(l) "Person" includes an individual, corporation, body corporate,
partnership, joint venture, association, trust or unincorporated organization
or any trustee, executor, administrator or other legal representative of such
entity;
(m) "Surviving Business" means the business to be carried on by the
Corporation.
1.2 Schedules - The following are the schedules to this Agreement:
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
<S> <C>
"A" Authorized Share Capital and Issued Shares
"B" Financial Statements
"C" Material Contracts
"D" Encumbrances
"E" Assets other than Real Property
"F" Equipment Leases
"G" Real Property
"H" Tax Elections
"I" Service Marks, Trade Marks, Trade
Names,
Intellectual Property, Codes, Designs
"J" Litigation
"K" License, Agency & Distribution Agreements
</TABLE>
2. COVENANTS, REPRESENTATIONS AND WARRANTIES OF ATI
2.1 Representations and Warranties - In order to induce the Corporation to
enter into and to consummate the transactions contemplated by this Agreement,
ATI by this Agreement represents and warrants to the Corporation as follows:
(a) Organization and Good Standing of ATI - ATI is duly incorporated and is
validly existing and in good standing with respect to the filing of annual
reports under the British Columbia Company Act and has all necessary
corporate power, authority and capacity to own its property and assets and to
carry on its business as presently conducted. Neither the nature of the
business of ATI nor the location or character of the property owned or leased
by it requires that ATI be registered or otherwise qualified or to be in good
standing in any other jurisdiction;
(b) Capitalization of ATI - The issued share capital of ATI together with the
names and the number, class and kind of shares held by each director,
officer, insider, or major shareholders (greater than 10%) of ATI is as set
out in Schedule "A" to this Agreement;
(c) Authority - ATI has due and sufficient right and authority to enter into
this Agreement on the terms and conditions set out in this Agreement;
(d) Agreement Valid - This Agreement constitutes a valid and binding
obligation of ATI. On the Completion Date, ATI shall not be a party to, bound
by or subject to any indenture, mortgage, lease, agreement, instrument,
statute, regulation, order, judgment, decree or law which would be violated,
contravened or breached by or under which any default would occur as a result
of the execution and delivery by ATI of this Agreement or the performance by
ATI of any of the terms of this Agreement;
(e) Absence of Options, etc. - The
Shares represent all of the issued and outstanding shares in the capital of
ATI and no Person has any agreement or option, present or future, contingent,
absolute or capable of becoming an agreement or option or which with the
passage of time or the occurrence of any event could become an agreement or
option:
(i) to require ATI to issue any further or other shares in its capital
or any other security convertible or exchangeable into shares in its capital
or to convert or exchange any securities into or for shares in the capital of
ATI;
(ii) for the issue and allotment of any of the authorized but unissued
shares in the capital of ATI;
(iii) to require ATI to purchase, redeem or otherwise acquire any of
the issued and outstanding shares in the capital of ATI; or
(iv) to acquire the Shares or any of them;
(f) Absence of Other Interest - ATI does not own any shares in or other
securities of, or have any interest in the assets or business of any other
Person;
(g) Financial Statements - The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with that of prior fiscal years. To the best of the knowledge of
ATI, such Financial Statements present fairly the financial position of ATI
as at the date of such Financial Statements and the results of ATI's operations
and the changes in ATI's financial position for the period then ending;
(h) Absence of Undisclosed Liabilities - Except to the extent reflected or
reserved against in the Financial Statements or the Schedules hereto or
incurred subsequent to the date of such Financial Statements in the ordinary
and usual course of the business of ATI, to the best of the knowledge of ATI,
ATI does not have any outstanding indebtedness or any liabilities or
obligations (whether accrued, absolute, contingent, or otherwise);
(i) Absence of Changes - To the best of the knowledge of ATI, prior to the
Completion Date, there has not been any damage, destruction or loss, labour
trouble or other event, development or condition, of any character (whether
or not covered by insurance) which is not generally known or which has not
been disclosed to the Corporation, which has or may materially and adversely
affect the business, assets, properties or future prospects of ATI;
(j) Accuracy of Records - To the best of the knowledge of ATI, all material
financial transactions of ATI have been accurately recorded in the books and
records of ATI and such books and records fairly present the financial
position and the corporate affairs of ATI;
(k) Absence of Unusual Transactions - Prior to the Completion Date, ATI has
not:
(i) transferred, assigned, sold or otherwise disposed of any of the
assets shown in the Financial Statements or canceled any debts or claims
except in each case in the ordinary and usual course of business;
(ii) incurred or assumed any obligation or liability (fixed or
contingent), except unsecured current obligations and liabilities incurred in
the ordinary and normal course of business;
(iii) issued or sold any shares in its capital stock or any warrants,
bonds, debentures or other corporate securities or issued, granted or
delivered any right, option or other commitment for the issuance of any such
or other securities;
(iv) discharged or satisfied any lien or encumbrance, or paid any
obligation or liability (fixed or contingent), other than current liabilities
in the ordinary and normal course of business;
(v) declared or made, or committed itself to make, any payment of any
dividend or other distribution in respect of any of its shares or purchased
or redeemed any of its shares or split, consolidated or reclassified any of
its shares;
(vi) entered into any material commitment or transaction not in the
ordinary and usual course of business;
(vii) waived or surrendered any right of substantial value;
(viii) made any gift of money or of any property or assets to any
Person;
(ix) purchased or sold any fixed assets;
(x) amended or changed or taken any action to amend or change its
memorandum or articles of incorporation;
(xi) increased or agreed to increase the pay of, or paid or agreed to
pay any pension, bonus, share of profits or other similar benefit of, any
director, employee or officer or former director, employee or officer of ATI;
(xii) made payments of any kind to or on behalf of ATI or any affiliate
or associate of ATI or under any management agreement with ATI save and
except business related expenses and salaries in the ordinary course of
business and at the regular rates payable to them;
(xiii) mortgaged, pledged, subjected to lien, granted a security
interest in or otherwise encumbered any of its assets or property, whether
tangible or intangible; or
(xiv) authorized or agreed or otherwise have become committed to do any
of the foregoing;
(l) Title to Properties - ATI has good and marketable title to all of its
properties, interests in properties and assets, real and personal including
those referred to in Schedules "E" and "G" hereto, including those reflected
in the Financial Statements or acquired since the date of the Financial
Statements (except as since transferred, sold or otherwise disposed of in the
ordinary and usual course of business), free and clear of all mortgages,
pledges, liens, title retention agreements, encumbrances or charges of any
kind or character whatsoever except as shown in Schedule "D" to this
Agreement, and none of ATI's assets or properties are in the possession of or
under the control of any other Person;
(m) Leased Equipment - Schedule "F" sets out a true and complete list of
all equipment, other personal property and fixtures in the possession or
custody of ATI which, as of the date of this Agreement, are leased or are held
under license or similar arrangement and accurately describes the leases,
licenses, agreements or other documentation relating to such personal
property. Except as set out in Schedule "B", all rental or other payments
required to be paid by ATI pursuant to such leases or licenses have been duly
paid and ATI is not otherwise in default in meeting its obligations under any
such leases or licenses;
(n) Collectability of Accounts Receivable - The accounts receivable shown in
the Financial Statements of ATI have been recorded by ATI in accordance with
its usual accounting practices. The reserves taken for doubtful or bad
accounts is adequate based on the past experience of ATI and is consistent
with the accounting procedures used by ATI in previous fiscal periods. There
is nothing which would indicate that such reserve is not adequate or that a
higher reserve should be taken;
(o) Real Property - Schedule "G" contains accurate descriptions of all real
property in respect of which ATI holds an interest, whether freehold,
leasehold or otherwise. ATI is not party to or bound by any leases of real
property other than those referred to in Schedule "G" to this Agreement and
all interests held by ATI whether as owner or as lessee are free and clear of
any and all liens, charges and encumbrances of any nature and kind whatsoever
except as set out in Schedule "D". All rental and other payments required to
be paid by ATI pursuant to such leases have been duly paid and ATI is not
otherwise in default in meeting its obligations under any such lease;
(p) Material Contracts - Except for the liens, charges and encumbrances
listed in Schedule "D", the equipment and other personal property leases and
agreements listed in Schedule "F", the real property leases listed in
Schedule "G", and the contracts and agreements listed in Schedule "C", ATI is
not party to or bound by any Material Contract, whether oral or written, and
the contracts and agreements listed in Schedule "C" are all in full force and
effect and unamended, no material default exists in respect of such
agreements on the part of any of the other parties to such agreements, ATI is
not aware of any intention on the part of any of the other parties to such
agreements to terminate or materially alter any such contracts or agreements,
and Schedule "C" lists all the present outstanding Material Contracts entered
into by ATI in the course of carrying on its business;
(q) Absence of Guarantees - ATI has no guarantees with respect to the
obligations of any other Person. ATI has no indemnities or contingent or
indirect obligations with respect to the obligation of any other Person
(including any obligation to service the debt of or otherwise acquire an
obligation of another Person or to supply funds to, or otherwise maintain any
working capital or other balance sheet condition of any other Person);
(r) Absence of Conflicting Agreements - ATI is not party to, bound by or
subject to any indenture, mortgage, lease, agreement, instrument, judgment or
decree which would be violated or breached by, or under which default would
occur or which could be terminated, cancelled or accelerated, in whole or in
part, as a result of the execution and delivery of this Agreement or the
consummation of any of the transactions provided for in this Agreement;
(s) Litigation - Other than as set out in Schedule "J", to the best of the
knowledge of ATI there is not any suit, action, litigation, arbitration
proceeding or governmental proceeding, including appeals and applications for
review, in progress, pending or threatened against, or relating to ATI or
affecting its assets, properties or business which might materially and
adversely affect the assets, properties, business, future prospects or
financial condition of ATI; and there is not presently outstanding against
any of ATI any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or arbitrator;
(t) Copies of Agreements, etc. - True, correct and complete copies of all
mortgages, leases, agreements, instruments and other documents listed in
Schedules "B", "C", "D", "F", "G", and "I" have been delivered to the
Corporation;
(u) Corporate Records - To the best of the knowledge of ATI, ATI has kept
the records required to be kept by ATI and any other applicable corporate
legislation and such records are complete and accurate and contain all
minutes of all meetings of directors and members of ATI;
(v) Absence of Approvals Required - Relying upon the Corporation's
representations and warranties with respect to the Investment Canada Act and
the Competition Act as set out in subsection 3.1(b) of this Agreement, no
authorization, approval, order, license, permit or consent of any
governmental authority, regulatory body or court, and no registration,
declaration or filing by ATI with any such governmental authority, regulatory
body or court is required in order for ATI:
(i) to incur the obligations expressed to be incurred by ATI pursuant
to
this Agreement;
(ii) to execute and deliver all of the documents and instruments to be
delivered by ATI pursuant to this Agreement;
(iii) to duly perform and observe the terms and provisions of this
Agreement; and
(iv) to render this Agreement legal, valid, binding and enforceable in
accordance with its terms;
(w) Permits and Licenses - ATI holds all permits, licenses, consents and
authorities issued by any governmental authority of Canada or any Province of
Canada, or any municipal, regional or other authority, or any subdivision of
the same, including without limitation, any governmental department,
commission, bureau, board or administrative agency, which are necessary or
desirable in connection with the conduct and operation of ATI's business and
the ownership or leasing of its assets and the conduct and operation of ATI's
business as the same are now owned, leased, conducted or operated is not in
breach of or in default under any term or condition of any such permits,
licenses, consents and authorities:
(x) Filings - ATI:
(i) has duly filed in a timely manner all federal and provincial income
tax returns and election forms and the tax returns of any other jurisdiction
required to be filed and to the best of the knowledge of ATI all such returns
and forms have been completed accurately and correctly in all respects;
(y) Additional Tax Matters - Except as specified in Schedule "H", ATI has
not:
(i) made any election under Section 85 of the Income Tax Act with
respect to the acquisition or disposition of any property;
(ii) made any election under Section 83 of the Income Tax Act with
respect to the payment out of the capital dividend account of ATI;
(iii) acquired or had the use of any property from a person with whom
it
was not dealing at arm's length other than at fair market value;
(iv) disposed of anything to a person with whom it was not dealing at
arm's length for proceeds less than fair market value of such thing; or
(v) discontinued carrying on any business in respect of which
non-capital losses were incurred, and any non-capital losses which ATI has are
not losses from property or business investment losses;
(z) Tax Elections - ATI has made all elections required to be made pursuant
to Part III of the Income Tax Act in connection with any distributions by ATI
and all such elections were true and correct and in the prescribed form and
were made within the prescribed time periods;
(aa) Statements Attached to Tax Returns - To the best of the knowledge of
ATI, the financial statements and schedules attached to the corporate income
tax returns as filed by ATI for each of its taxation years reflect and
disclose all transactions to which ATI was party as required by the Income
Tax Act or other applicable revenue laws and all of the transactions to which
ATI was or is a party are reflected or disclosed in such financial statements
and schedules and the corporate income tax returns and schedules have been
duly and accurately completed as required by such Act;
(bb) Intellectual Property -
(i) Schedule "I" attached hereto lists and contains a description of:
(1) all patents, patent applications and registrations, trade marks, trade
mark applications and registrations, copyrights, copyright applications and
registrations, trade names and industrial designs, domestic or foreign, owned
or used by ATI or relating to the operation of the Business,
(2) all trade secrets, know-how, inventions and other intellectual property
owned or used by ATI or relating to the Business, and
(3) all computer systems and application software, including without
limitation all documentation relating thereto and the latest revisions of all
related object and source codes therefor, owned or used by ATI or relating to
the Business,
(all of the foregoing being collectively called the "Intellectual Property");
(ii) ATI has good and valid title to all of the Intellectual Property, free
and clear of any and all encumbrances. Complete and correct copies of all
agreements whereby any rights in any of the Intellectual Property have been
granted or licensed to ATI have been provided to the Corporation. No royalty
or other fee is required to be paid by ATI to any other person in respect of
the use of any of the Intellectual Property except as provided in such
agreements delivered to the Corporation.
(iii) Except as disclosed in Schedule "I" or "K", there are no restrictions
on the ability of ATI or any successor to or assignee from ATI to use and
exploit all rights in the Intellectual Property. All statements contained in
all applications for registration of the Intellectual Property were true and
correct as of the date of such applications. Each of the trade marks and
trade names included in the Intellectual Property is in use. None of the
rights of ATI in the Intellectual Property will be impaired or affected in any
way by the transactions contemplated by this Agreement;
(iv) To the best of the knowledge of ATI, the conduct of the Business and
the use of the Intellectual Property does not infringe, and ATI has not
received any notice, complaint, threat or claim alleging infringement of, any
patent, trade mark, trade name, copyright, industrial design, trade secret or
other Intellectual Property or proprietary right of any other person, and the
conduct of the Business does not include any activity which may constitute
passing-off;
(v) Partnerships or Joint Ventures - Except as disclosed in the Schedules
hereto, ATI is not a partner or participant in any partnership, joint
venture, profit-sharing arrangement or other association of any kind and is
not party to any agreement under which ATI agrees to carry on any part of the
Business or any other activity in such manner or by which ATI agrees to share
any revenue or profit with any other person;
(vi) Customers - ATI has previously delivered to the Corporation a true and
complete list of all customers of the Business as of the date hereof. ATI is
the sole and exclusive owner of, and has the unrestricted right to use, such
customer list. Neither the customer list nor any information relating to the
customers of the Business have, within three years prior to the date of this
Agreement, been made available to any person other than the Corporation and
ATI's User Group. ATI has no knowledge of any facts which could reasonably be
expected to result in the loss of any customers or sources of revenue of the
Business which, in the aggregate, would be material to the Business or the
condition of ATI;
(vii) Restrictions on Doing Business - Except as disclosed in the Schedules
hereto, ATI is not a party to or bound by any agreement which would restrict
or limit its right to carry on any business or activity or to solicit
business from any person or in any geographical area or otherwise to conduct
the Business as ATI may determine.
(viii) No Breach of Material Contracts - All Material Contracts are valid
and subsisting and no material default exists under the Material Contracts
except as disclosed in Schedule "B";
(ix) Indebtedness to ATI - The Business shall not at Completion be indebted
to ATI or any directors, officers, or employees of ATI or any affiliate or
associate of any of them, on any account whatsoever;
(x) Condition of Assets - All assets and all other plant, machinery,
facilities and equipment used by ATI in connection with its business is in
good operating condition and in a good state of maintenance and repair for
equipment of similar age relative to the standards of maintenance and repair
maintained by other companies carrying on similar Business in Canada;
(xi) Undisclosed Information - ATI has no specific information relating to
ATI which is not generally known or which has not been disclosed to the
Corporation and which if known could reasonably be expected to have a
materially adverse effect on the value of the Shares;
(xii) Conduct of Business - The conduct of business by ATI on any lands
from which they operate their business is not subject to any restriction or
limitation other than those registered against title to the lands, contained
in applicable zoning regulations or that are of general application and the
conduct of any such business is not in contravention of any law, regulation
or order or any court or other body having jurisdiction including zoning
requirements;
(xiii) Licenses, Agency and Distribution Agreements - Schedule "K" attached
hereto lists all agreements to which ATI is a party or by which it is bound
under which the right to manufacture, use or market any product, service,
technology, information, data, computer hardware or software or other
property has been granted, licensed or otherwise provided to ATI or by ATI to
any other person, or under which ATI has been appointed or any person has
been
appointed by ATI as an agent, distributor, licensee or franchisee for any of
the foregoing. Complete and correct copies of all of the agreements listed in
Schedule "K" have been provided to the Corporation. None of the agreements
listed in Schedule "K" grant to any person any authority to incur any
liability or obligation or to enter into any agreement on behalf of ATI;
(xiv) Outstanding Agreements - ATI is not a party to or bound by any
outstanding or executory agreement, contract or commitment, whether written
or oral, except for:
(1) any contract, lease or agreement described or referred to in this
Agreement or in the Schedules hereto,
(2) any contract, lease or agreement made in the ordinary course of the
routine daily affairs of the Business under which ATI has a financial
obligation of less than One Thousand Dollars ($1,000) per annum and which can
be terminated by ATI without payment of any damages, penalty or other amount
by giving not more than thirty (30) days' notice, and
(3) the contracts, leases and agreements described in Schedule "K" attached
hereto. Complete and correct copies of each of the contracts, leases and
agreements described in Schedule "K" have been provided to the Corporation;
and ATI covenants, represents and warrants to the Corporation that all
of the representations and warranties set forth in this paragraph shall be
true and correct at the Completion Time as if made on that date.
(cc) Guarantees, Warranties and Discounts
(i) ATI is not a party to or bound by any agreement of guarantee,
indemnification, assumption or endorsement or any other like commitment of
the obligations, liabilities (contingent or otherwise) or indebtedness of any
person;
(ii) ATI has not given any guarantee or warranty in respect of any of the
products sold or the services provided by it, except warranties made in the
ordinary course of the Business and in the form of ATI's standard written
warranty, a copy of which has been provided to the Corporation, and except
for warranties implied by law;
(iii) during each of the three fiscal years of ATI ended immediately
preceding the date hereof, no claims have been made against ATI for breach of
warranty or contract requirement or negligence or for a price adjustment or
other concession in respect of any defect in or failure to perform or deliver
any products, services or work which had, in any such year, an aggregate cost
exceeding $25,000;
(iv) there are no repair contracts or maintenance obligations of ATI in
favor of the customers or users of products of the Business, except
obligations incurred in the ordinary course of the Business and in accordance
with ATI's standard terms, a copy of which has been provided to the
Corporation;
(v) ATI is not now subject to any agreement or commitment, and ATI has not,
within three years prior to the date hereof, entered into any agreement with
or made any commitment to any customer of the Business which would require
ATI to repurchase any products sold to such customers or to adjust any price
or grant any refund, discount or other concession to such customer;
(vi) ATI is not required to provide any letters of credit, bonds or other
financial security arrangements in connection with any transactions with its
suppliers or customers; and
2.2 Other Representations - All statements contained in any
certificate or other instrument delivered by or on behalf of ATI pursuant to
this Agreement or in connection with the transactions contemplated by this
Agreement shall be deemed to be representations and warranties by ATI under
this Agreement.
2.3 Survival - The representations and warranties of ATI contained
in this Agreement shall survive the Completion and the Share exchange and,
notwithstanding the Completion and the Share exchange, notwithstanding any
investigations or inquiries made by the Corporation prior to the Completion
and notwithstanding the waiver of any condition by the Corporation, the
representations, warranties, covenants and agreements of ATI shall (except
where otherwise specifically provided in this Agreement) survive the
Completion and shall continue in full force and effect for a period of two
(2) years from the Completion Date for all matters except income tax liability
or other tax matters. With respect to income tax liability of ATI or other
tax
matters, the representations, warranties, covenants and agreements of ATI
shall survive the Completion and continue in full force and effect for six
(6) years from the later of the date of mailing of a notice of original
assessment by the Minister of National Revenue and the date of mailing of a
notification from the Minister of National Revenue that no tax is payable by
ATI for the fiscal year of ATI ending on the Completion Date.
2.4 Reliance - ATI acknowledges and agrees that the Corporation has
entered into this Agreement relying on the warranties and representations and
other terms and conditions of this Agreement notwithstanding any independent
searches or investigations that may be undertaken by or on behalf of the
Corporation and that no information which is now known or should be known or
which may from the date of this Agreement become known to the Corporation or
its agents or professional advisers shall limit or extinguish the right to
indemnification under this Agreement.
3. COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
3.1 Representations and Warranties - In order to induce ATI to enter into
and to consummate the transactions contemplated by this Agreement, the
Corporation represents and warrants to ATI that:
(a) Organization and Good Standing - The Corporation is a company duly
organized, validly existing and in good standing under the laws of Nevada
with respect to the filing of annual reports;
(b) Authority Relative to this Agreement - The Corporation has all
necessary corporate power, authority and capacity to acquire the Shares and to
perform its obligations under this Agreement. The execution and delivery of
this Agreement has been duly authorized by all necessary corporate action on
the part of the Corporation and this Agreement constitutes a valid and
binding
obligation of the Corporation. The Corporation is not a party to, bound by or
subject to any indenture, mortgage, lease, agreement, instrument, statute,
regulation, order, judgment, decree or law which would be violated,
contravened or breached by or under which any default would occur as a result
of the execution and delivery by the Corporation of this Agreement or the
performance by the Corporation of any of the terms of this Agreement; and the
Corporation covenants, represents and warrants to ATI that all of the
representations and warranties set forth in this paragraph 3.1 shall be true
and correct at the Completion Time as if made on that date;
3.2 Survival - The representations and warranties of the Corporation
contained in this Agreement shall survive the Completion and the exchange of
the Shares and notwithstanding the Completion and the exchange of the Shares,
the representations and warranties of the Corporation shall continue in full
force and effect for the benefit of ATI for a period of three (3) years from
the Completion Date;
3.3 Reliance - The Corporation acknowledges and agrees that ATI has entered
into this Agreement relying on the warranties and representations and other
terms and conditions of this Agreement notwithstanding any independent
searches or investigations that may be undertaken by or on behalf of ATI, and
that no information which is now known or which should be known or which may
after the date of this Agreement become known to ATI or its agents or
professional advisers shall limit or extinguish the right to indemnification
under this Agreement.
5. POOLING OF SHARES
4.1 Shares - Based and relying on the representations and warranties set
forth in paragraphs 2 and 3, the Corporation agrees to exchange the Shares of
ATI and ATI agrees to accept the exchange of Shares from the Corporation,
free and clear of all liens, claims, charges, options and encumbrances
whatsoever and the Corporation agrees to exchange ATI Shares on the terms and
conditions set out in this Agreement.
5. COMPLETION
5.1 Completion Date - The transactions contemplated in this Agreement shall
be completed effective as of the Completion Date. The Completion Date is
October 1st, 1998 subject to shareholder and regulatory approval of ATI and
the Corporation. In the event that the Vancouver Stock Exchange does not
approve the merger in an ordinary fashion, ATI may request the Vancouver
Stock Exchange to de-list ATI from the Exchange in order to complete the
merger transaction.
5.2 Completion Deliveries - On or before the Completion Date:
(a) ATI will deliver to the Corporation:
(i) resignations in writing, dated as of the Completion Date, of the
officers and directors of ATI with the exception of ATI President, Mike
Sintichakis, which will be delivered when all or any outstanding matters have
been resolved and the merger has been totally completed;
(ii) certified copies of directors and members resolutions of ATI approving
this Agreement; (b) Corporation will deliver to ATI:
(i) certified copy of directors resolutions of the Corporation approving
this Agreement and the completion of the transaction contemplated hereby;
5.3 Share Exchange and Pooling of Assets and Liabilities - Upon Completion
Date, the Corporation will;
(a) Exchange the Shares of ATI for Shares of the Corporation as
follows:
(i) One (1) Common share of the Corporation will be issued in exchange for
each Common share of ATI;
(ii) One (1) Common share option of the Corporation will be issued in
exchange for each Common share option of ATI under existing restrictions;
(iii) One (1) Escrow share of the Corporation will be issued in exchange for
each Escrow share of ATI under existing restrictions.
(b) Transfer all assets and liabilities of ATI to the
Corporation;
6. CONDITIONS PRECEDENT TO THE PERFORMANCE BY CORPORATION OF ITS
OBLIGATIONS UNDER THIS AGREEMENT
6.1 Corporation's Conditions - The obligations of the Corporation to
complete the exchange of the Shares shall be subject to the satisfaction of,
or compliance with, on or before the Completion Date, each of the following
conditions precedent:
(a) Truth and Accuracy of Representations of ATI at Completion - The
representations and warranties of ATI made in paragraph 2.1 shall be true and
correct in all material respects as at the Completion Date and with the same
effect as if made at and as of the Completion Date and ATI shall have
complied
in all material respects with its obligations and covenants under this
Agreement;
(b) Performance of Obligations - ATI shall have caused the Corporation to
have performed and complied with all the obligations to be performed and
complied with by ATI under this Agreement;
(c) Absence of Injunctions, etc. - No injunction or restraining order of
any Court or administrative tribunal of competent jurisdiction shall be in
effect prohibiting the transactions contemplated by this Agreement and no
action or proceeding shall have been instituted or be pending before any Court
or administrative tribunal to restrain or prohibit the transactions between
the parties contemplated by this Agreement;
(d) Absence of Change of Conditions - No event shall have occurred or
condition or state of facts of any character shall have arisen or legislation
(whether by statute, rule, regulation, by-law or otherwise) shall have been
introduced which might reasonably be expected to have a materially adverse
effect upon the financial condition, results of operations or business
prospects of ATI.
6.2 The conditions set out in this paragraph 6 are for the exclusive
benefit of the Corporation and may be waived by the Corporation in writing in
whole or in part on or before the Completion Date. Notwithstanding any such
waiver, the completion of merger contemplated by this Agreement by the
Corporation shall not prejudice or affect in any way the rights of the
Corporation in respect of the warranties and representations of ATI set out
in paragraph 2.1 of this Agreement, and the representations and warranties of
ATI set out in paragraph 2.1 of this Agreement shall survive the completion
of
the merger.
7. CONDITIONS PRECEDENT TO THE PERFORMANCE OF ATI OF ITS OBLIGATIONS
UNDER THIS AGREEMENT
7.1 The obligations of ATI to complete the exchange of Shares under
this Agreement shall be subject to the satisfaction of or compliance with, at
or before the Completion Time, of each of the following conditions precedent:
(a) Truth and Accuracy of Representations of the Corporation at Completion -
All of the representations and warranties of the Corporation set out in
paragraph 3.1 of this Agreement shall be true and correct in all material
respects as at the Completion Date and with the same effect as if made at and
as of the Completion Date;
(b) Performance of Agreements - The Corporation shall have complied with
and/or performed all its obligations, covenants and agreements contained in
this Agreement.
7.2 The conditions set out in this paragraph 7 are for the exclusive
benefit of ATI and may be waived by ATI in writing in whole or in part on or
before the Completion Date. Notwithstanding any such waiver, completion of
the merger contemplated by this Agreement by ATI shall not prejudice or affect
in any way the rights of ATI in respect of the warranties and representations
of the Corporation set out in paragraph 3.1 of this Agreement, and the
representations and warranties of the Corporation set out in paragraph 3.1 of
this Agreement shall survive for a period of two (2) years from the date of
this Agreement.
8. CONDUCT OF BUSINESS PRIOR TO COMPLETION
8.1 Conduct - Except as otherwise contemplated or permitted by this
Agreement, during the period from the date of this Agreement to the
Completion Date, the Corporation shall cause ATI to do the following:
(a) Conduct Business in Ordinary Course - Conduct ATI's business in the
ordinary and normal course of such business and not, without the prior
written consent of the Corporation, enter into any transaction which would
constitute a breach of the representations, warranties or agreements contained
in this Agreement;
(b) Continue Insurance - Continue in force all existing policies of
insurance presently maintained by ATI;
(c) Perform Obligations - Comply with all laws affecting the operation of
ATI's businesses and pay all required taxes;
(d) Prevent Certain Changes - Not, without the prior written consent of the
Corporation, take any of the actions, do any of the things or perform any of
the acts described in sub-paragraph 2.1(k) except as specifically permitted
under such sub-paragraph; and
(e) Compliance with Paragraph 9 - Comply with the provisions of paragraph 9
of this Agreement.
9. EXAMINATIONS AND WAIVERS
9.1 Access for Investigation - ATI shall permit the Corporation and
its agent, legal counsel, accountants and other representatives, between the
date of this Agreement and the Completion Date, to have access during normal
business hours to the premises and to all the key employees, books, accounts,
records and other data of ATI computer designs and codes, (including without
limitation, all corporate, accounting and tax records and any electronic or
computer accessed data) and to the properties and assets of ATI and ATI will
furnish, and require that ATI's principal bankers, appraisers and independent
auditors and other advisors furnish, to the Corporation such financial and
operating data and other information with respect to the business, properties
and assets of ATI as the Corporation shall from time to time reasonably
request to enable confirmation of the matters warranted in paragraph 2 of
this Agreement. It is also the intention of the parties that the Corporation
shall be entitled to meet with ATI's major clients, customers and suppliers
prior to Completion.
9.2 Disclosure of Information - Until the Completion Date and, in the event
of the termination of this Agreement without consummation of the transactions
contemplated by this Agreement, the Corporation shall use its best efforts to
keep confidential any information (unless otherwise required by law or such
information is readily available or becomes readily available, from public or
published information or sources) obtained from ATI. If this Agreement is so
terminated, promptly after such termination all documents, work papers and
other written material obtained from a party in connection with this
Agreement and not previously made public (including all copies and
photocopies
thereof), shall be returned to the party which provided such material.
10. INDEMNITIES
10.1 Indemnification of the Corporation - Subject to the limitations
set out in this Agreement, ATI agrees with the Corporation to indemnify the
Corporation against all liabilities, claims, demands, actions, causes of
action, damages, losses, costs or expenses (including legal fees on a
solicitor and its own client basis) suffered or incurred by the Corporation,
directly or indirectly, by reason of or arising out of:
(a) any warranties or representations on the part of ATI set out in this
Agreement being materially untrue;
(b) a material breach of any agreement, term or covenant on the part of ATI
made or to be observed or performed pursuant to this Agreement;
which liabilities, claims, demands, actions, causes of action, damages,
losses, costs and expenses are collectively referred to as the "Corporation's
Losses";
10.2 Indemnification of ATI - Subject to the limitations set out in
this Agreement, the Corporation covenants and agrees with ATI to indemnify
ATI against all liabilities, claims, demands, actions, causes of action,
damages, losses, costs or expenses (including legal fees on a solicitor and
its own client basis) suffered or incurred by ATI, directly or indirectly, by
reason of or arising out of:
(a) any warranties or representations on the part of the
Corporation set out in this Agreement being materially untrue;
(b) a material breach of any agreement, term or covenant on the
part of the Corporation made or to be observed or performed pursuant to this
Agreement;
which liabilities, claims, demands, actions, causes of action, damages,
losses, costs and expenses are collectively referred to as "ATI's Losses".
10.3 Claims under ATI's Indemnity - If any claim is made by any
Person against the Corporation in respect of which the Corporation may incur
or suffer damages, losses, costs or expenses that might reasonably be
considered to be subject to the indemnity obligation of ATI as provided in
paragraph 10.1, the Corporation shall notify ATI as soon as reasonably
practicable of the nature of such claim and ATI shall be entitled (but not
required) to assume the defense of any suit brought to enforce such claim.
The defense of any such claim (whether assumed by ATI or not) shall be
through
legal counsel and shall be conducted in a manner acceptable to the
Corporation and ATI, acting reasonably, and no settlement may be made by ATI
or the Corporation without the prior written consent of the other. If ATI
assumes the defense of any claim then the Corporation and the Corporation's
counsel shall cooperate with ATI and its counsel in the course of the defense,
such cooperation to include using reasonable best efforts to provide or make
available to ATI and its counsel documents and information and witnesses for
attendance at examinations for discovery and trials. The reasonable legal
fees and disbursements and other costs of such defense shall, from and after
such assumption, be borne by ATI. If ATI assumes the defense of any claim and
the Corporation retains additional counsel to act on its behalf, ATI and his
counsel shall cooperate with the Corporation and its counsel, such
cooperation to include using reasonable best efforts to provide or make
available to the Corporation and its counsel documents and information and
witnesses for attendance at examinations for discovery and trials. All fees
and disbursements of such additional counsel shall be paid by the Corporation.
If ATI and the Corporation are or become parties to the same action, and the
representation of all parties by the same counsel would be inappropriate due
to a conflict of interest, then the Corporation and ATI shall be represented
by separate counsel and, subject to the indemnity obligations of ATI as set
out in paragraph 10.1, the costs associated with the action shall be borne by
the parties incurring such costs.
10.4 Claims under the Corporation's Indemnity - If any claim is made
by any Person against ATI in respect of which ATI may incur or suffer
damages, losses, costs or expenses that might reasonably be considered to be
subject to the indemnity obligation of the Corporation as provided in
paragraph 10.2, ATI shall notify the Corporation as soon as reasonably
practicable of the nature of such claim and the Corporation shall be entitled
(but not required) to assume the defense of any suit brought to enforce such
claim. The defense of any such claim (whether assumed by the Corporation or
not) shall be through legal counsel and shall be conducted in a manner
acceptable to ATI and the Corporation, acting reasonably, and no settlement
may be made by the Corporation or ATI without the prior written consent of the
other. If the Corporation assumes the defense of any claim, ATI and ATI's
counsel shall cooperate with the Corporation and his counsel in the course of
the defense, such cooperation to include using reasonable best efforts to
provide or make available to the Corporation and its counsel documents and
information and witnesses for attendance at examinations for discovery and
trials. The reasonable legal fees and disbursements and other costs of such
defense shall be borne by the Corporation. If the Corporation assumes the
defense of any claim and ATI retains additional counsel to act on its behalf,
then the Corporation and its counsel shall cooperate with ATI and its counsel,
such cooperation to include using reasonable best efforts to provide or make
available to ATI and its counsel documents and information and witnesses for
attendance at examinations for discovery and trials. All fees and
disbursements of such additional counsel shall be paid by ATI. If the
Corporation and ATI are or become parties to the same action, and the
representation of all parties by the same counsel would be inappropriate due
to a conflict of interest, then ATI and the Corporation shall be represented
by separate counsel and, subject to the indemnity obligations of the
Corporation as set out in paragraph 10.2, the costs associated with the
action shall be borne by the parties incurring such costs.
11. GENERAL
11.1 Public Notices - The parties agree that all notices to third
parties and all other publicity concerning the transactions contemplated by
this Agreement shall be jointly planned and coordinated and no party shall
act unilaterally in this regard without the prior approval of the others,
such
approval not to be unreasonably withheld.
11.2 Expenses - All costs and expenses incurred in connection with
this Agreement and the transactions contemplated by this Agreement shall be
paid by the party incurring such expenses.
11.3 Time - Time shall be of the essence of this Agreement.
11.4 Notices - Any notice or other writing required or permitted to
be given under this Agreement or for the purposes of this Agreement shall be
sufficiently given if delivered or telecopied to the party to whom it is
given or if mailed, by prepaid registered mail, addressed to such party at:
(a) If to Aztek, Inc. at:
Meadow Wood Crown Plaza
1575 Delucchi Lane, Suite # 40
Reno, Nevada 89502
with a copy to the Corporation's Solicitors at:
Michael J. Morrison Attorney and Counselor at Law
1025 Ridgeview Drive Suite 400,
Reno Nevada 89509
(b) If to Aztek Technologies Inc. at:
#5 -246 Lawrence Avenue
Kelowna, British Columbia, V1Y 6L3
with a copy to ATI's Solicitors at:
Stephen K. Winters Law Corporation
#505 - 700 West Pender Street
Vancouver, British Columbia, V6C 1G8
or at such other address as the party to whom such writing is to be given
shall have last notified to the party giving the same in the manner provided
in this paragraph. Any notice mailed as set out above shall be deemed to have
been given and received on the fifth (5th) business day next following the
date of its mailing unless at the time of mailing or within five (5) business
days after the date of such mailing there occurs a postal interruption which
could have the effect of delaying the mail in the ordinary course, in which
case any notice shall only be effectively given if actually delivered or sent
by telecopy. Any notice delivered or telecopied to the party to whom it is
addressed shall be deemed to have been given and received on the day it was
delivered, provided that if such day is not a business day then the notice
shall be deemed to have been given and received on the business day next
following such day.
11.5 Governing Law - This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada and the parties
submit and attorn to the jurisdiction of the Courts of the State of Nevada.
11.6 Severability - If any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in any respect
in any jurisdiction, the validity, legality and enforceability of such
provision or provisions shall not in any way be affected or impaired as a
result of such event in any other jurisdiction and the validity, legality and
enforceability of the remaining provisions contained in this Agreement shall
not in any way be affected or impaired as a result of such event, unless in
either case as a result of such determination this Agreement would fail in its
essential purpose.
11.7 Entire Agreement - This Agreement constitutes the entire
agreement between the parties and supersedes all prior agreements and
understandings, oral or written, by and between any of the parties with
respect to the subject matter of this Agreement.
11.8 Further Assurances - The parties shall with reasonable
diligence do all such things and provide all such reasonable assurances as may
be required to consummate the transactions contemplated by this Agreement,
and
each party shall provide such further documents or instruments required by
the other party as may be reasonably necessary or desirable to effect the
purpose of this Agreement and carry out its provisions whether before or after
the Completion Date.
11.9 Enurement - This Agreement and each of its terms and provisions
shall enure to the benefit of and be binding upon the parties and their
respective heirs, executors, administrators, personal representatives,
successors and assigns.
11.10 Counterparts - This Agreement may be executed in as many
counterparts as may be necessary or by facsimile and each such agreement or
facsimile so executed shall be deemed to be an original and such counterparts
together shall constitute one and the same instrument.
IN WITNESS TO THIS AGREEMENT the parties have duly executed this Agreement as
of the day and year first above written.
SIGNED, SEALED AND DELIVERED )
BY AZTEK TECHNOLOGIES INC. )
in the presence of: )
)
) /s/ Edson Ng
______________________________) -------------------------
Name of Witness ) EDSON NG
)
______________________________)
Address of Witness )
)
______________________________ )
SIGNED, SEALED AND DELIVERED )
BY AZTEK, INC. )
in the presence of: )
)
) /s/ Mike Sintichakis
______________________________ )
- ----------------------------------- Name of Witness )
) MIKE E. SINTICHAKIS
)
______________________________ )
Address of Witness )
)
______________________________ )
EXHIBIT 99.2 Letter Of Intent For ATI To Acquire Harrison Muirhead Systems
Inc. And Q-Smart Investments Inc.
[ATI's Letterhead]
Letter of Intent
August 20, 1997
Blaine Harrison, President
Harrison Muirhead Systems Inc.
101, 15023 - 123 Avenue
Edmonton, Alberta
T5V 1J7
Dear Blaine,
This Letter of Intent formalizes the sale of assets and business operations
of Harrison Muirhead Systems Inc. and Q-Smart Investments Inc. to Aztek
Technologies Inc. The close date for the acquisisiiotn is Feb. 28, 1998 and
subject to the following conditions:
Completion of Aztek Technologies Inc. financing.
Aztek completing due diligence review on Harrison Muirhead Systems
Inc.
Harrison Muirhead completing due diligence review on Aztek products.
Finalizing terms and conditions for future purchase agreement.
Approval by the Vancouver Stock Exchange.
By signing below, the parties agree to the terms and conditions set forth in
this agreement.
Aztek Technologies Inc. Harrison Muirhead Systems Inc. and
Q-Smart Investments Inc.
/s/ Mike Sintichakis /s/ Blaine Harrison
- -------------------- -----------------------
Mike Sintichakis, President Blaine Harrison, President
Aug. 26/1997 Aug. 25\1997
EXHIBIT 99.3 Letter of Intent for ATI to acquire Concord Consultants.
[ATI's Letterhead]
Letter of Intent
September 3, 1997
Gerry Schaup, President
Concord Consultants Limited 228 - 11121 Horseshoe Way
Richmond, British Columbia
V7A 4Y1
Dear Gerry,
This Letter of Intent formalizes the sale of assets and business operations
of Concord Consultants Limited to Aztek Technologies Inc. The close date for
the acquisition is November 1, 1997 and subject to the following conditions:
Completion of Aztek equity financing
Aztek completing due diligence review on Concord Consultants Limited
Concord Consultants Limited completing due diligence review on
Aztek and Aztek products.
Finalizing terms and conditions for purchase agreement.
Approval by the Vancouver Stock Exchange and B.C. Securities
Commission.
By signing below, the parties agree to the terms and conditions set forth in
this agreement.
Aztek Technologies Inc. Concord Consultants Limited
/s/ Mike Sintichakis /s/ Gerry Schaap, President
- ------------------------- ----------------------------
Mike Sintichakis, President Gerry Schaap, President
Sept. 5/97 Sept. 3/97
EXHIBIT 99.4 Minutes Of Shareholders Of Aztek Inc. To Approve Merger
MINUTES OF THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
OF
AZTEK, INC.
(the "Company")
The Annual and Special Meeting of the Shareholders of AZTEK, INC., a
Nevada corporation, was held at the Company's offices, on the 30th day of
June, 1998, at the hour of 10:00 o'clock a.m., for the purposes of:
(a) electing Directors for the ensuing year;
(b) approving a merger and share exchange with Aztek Technologies Inc.;
(c) approving directors, officers and employees options;
(d) authorizing Mike Sintichakis to arrange financing of a maximum $10
million for the purpose of acquiring and developing two properties, one
located in the U.S. and one located in Canada for sales and support of the
Company's customers. The Directors do not anticipate that the maximum
development costs of the properties will not exceed $6.0 million. The balance
of $4.0 million will be used as follows: $1.5 million for new acquisitions;
$1.0 million for completion of products under development; and $1.5 million
to be used for financing expenses, marketing and working capital.
Mike Sintichakis, President and Chairman of the Company, called the
meeting to order, and Nick Sintichakis, Secretary, recorded the minutes.
On motion duly made and unanimously carried, the reading, correcting and
approval of the minutes of the last meeting was waived.
Upon motion duly made, Mike Sintichakis, Nick Sintichakis, Edson Ng and
Eileen Keogh were elected as Directors of the Company to serve for the
ensuing year.
On motion duly made and unanimously carried, it was resolved that the
Company enter into an agreement with Aztek Technologies Inc., on terms and
conditions acceptable to the Board of Directors of the Company in their
discretion, whereby each one outstanding share of common stock of Aztek
Technologies Inc. would be exchanged for one common share par value $0.001 of
the Company resulting in all shareholders of Aztek Technologies Inc. becoming
shareholders of the Company. Aztek Technologies Inc. is a British Columbia
public company listed on the Vancouver Stock Exchange and the Electronic
Bulletin Board of NASD. The transaction is subject to regulatory acceptance
and the approval of the shareholders of Aztek Technologies Inc. The
transaction is also subject to the approval of all regulatory bodies having
jurisdiction over the Company.
On motion duly made and unanimously carried, it was resolved the Board
of Directors of the Company be and are hereby authorized to grant directors,
officers and employees stock options at prices and on terms and conditions
acceptable to the Board of Directors in their sole discretion and to amend
such options as from time to time may be required. The granting, alteration
and pricing of such options shall be in accordance with, and subject to the
approval of, the prevailing policies of all regulatory bodies and stock
exchanges having jurisdiction over the Company and no further resolution or
approval by the shareholders of the Company shall be required for the
granting of the options or the exercise of such options granted.
On motion duly made and unanimously carried, it was resolved that Mike
Sintichakis, President of the Company, be and is hereby authorized on behalf
of the Company to enter into agreements to arrange equity or debt
financings.
Be it further resolved that the maximum number of shares to be issued to any
new investor or group of investors shall not exceed 5% of all outstanding
shares of the Company.
On motion duly made and unanimously carried, it was resolved that Mike
Sintichakis be and is hereby authorized on behalf of the Company to enter
into agreements for the acquisition and/or development of any property on
terms and conditions deemed appropriate and in the best interests of the
Company. Be it further resolved that Mike Sintichakis be authorized and
empowered on behalf of the Company to do all such acts and deeds and execute
and deliver all such documents and instruments as he in his discretion may
deem necessary or desirable in order to effect the purchase and development of
any property.
There being no further business to come before the meeting at this time,
the meeting was, upon motion duly made, adjourned at 10:30 a.m.
Dated this 30th day of June, 1998.
/s/ Mike Sintichakis
---------------------------
Mike Sintichakis, President
/s/ Nick Sintichakis
---------------------------
Nick Sintichakis, Secretary
EXHIBIT 99.5
AZTEK TECHNOLOGIES INC.
Consolidated Financial Statements
For the years ended June 30, 1998 and 1997
Contents
- ---------------------------------------------------------------------
Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Financial Statements
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations and Deficit . . . . . . 4
Consolidated Statements of Changes in Financial Position . . 5
Summary of Significant Accounting Policies. . . . . . . . 6 - 7
Notes to Consolidated Financial Statements. . . . . . . 8 - 14
<PAGE>
<AUDIT-REPORT>
[Letterhead of BDO Dunwoody Chartered Accountants]
- ------------------------------------------------------------------------------
Auditor's Report
- ------------------------------------------------------------------------------
To the Shareholders of
Aztek Technologies Inc.
We have audited the consolidated balance sheets of Aztek Technologies Inc. as
at June 30, 1998 and 1997 and the consolidated statements of operations and
deficit and changes in financial position for the years then ended. 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 an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at June 30, 1998 and 1997
and the results of its operations and the changes in its financial position
for the years then ended in accordance with generally accepted accounting
principles. As required by the British Columbia Companies Act we report that,
in our opinion, these principles have been applied on a consistent basis.
"BDO Dunwoody "
Chartered Accountants
Penticton, British Columbia
July 10, 1998
</AUDIT-REPORT>
______________________________________________________________________________
Canada - United States Reporting Differences
______________________________________________________________________________
In the United States, reporting standards for auditors require the addition
of an explanatory paragraph (following the opinion paragraph) when the
financial statements are affected by conditions and events that cast
substantial doubt on the company's ability to continue as a going concern,
such as those described in Note 1 to the financial statements. Our report to
the shareholders dated July 10, 1998 is expressed in accordance with Canadian
reporting standards which do not permit a reference to such events and
conditions in the auditor's report when these are adequately disclosed in the
financial statements.
"BDO Dunwoody "
Chartered Accountants
Penticton, British Columbia
July 10, 1998
2
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Aztek Technologies Inc.
Consolidated Balance Sheets
June 30 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current
Cash $ 2,957 $ 20,232
Accounts receivable 67,693 56,642
Prepaid expenses 1,904 1,536
---------- ----------
72,554 78,410
Capital Assets (Note 2) 105,860 151,292
Goodwill (Note 3) - 417
---------- ----------
$ 178,414 $ 230,119
========== ==========
Liabilities and Shareholders' Deficiency
Current
Accounts payable and
accrued liabilities - trade $ 222,326 $ 122,971
Accounts payable and accrued
liabilities - officers and directors 64,840 5,693
Deferred revenue 103,991 138,781
Current portion of amounts
due to related parties - 166,241
Current portion of royalties payable 100,000 70,000
Current portion of obligation under
capital lease 33,095 43,553
---------- ----------
524,252 547,239
Due to related parties (Note 4) 132,707 3,689
Royalties payable (Note 5) - 30,000
Obligation under capital lease (Note 6) 800 33,632
---------- ----------
657,759 614,560
Shareholders' deficiency
Share capital (Note 7)
Authorized
100,000,000 common shares
without par value
Issued
2,051,109 common shares
(1997 - 1,904,244) 4,179,522 3,909,000
Deficit (4,658,867) (4,293,441)
----------
- ----------
(479,345) (384,441)
----------- ----------
$ 178,414 $ 230,119
=========== ==========
</TABLE>
Approved on behalf of the Board:
"Mike Sintichakis" Director
" Director
3
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Aztek Technologies Inc.
Consolidated Statements of Operations and Deficit
For the years ended June 30 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C>
Revenue
Maintenance and customization services $ 340,081 $ 442,656
Product Sales - $ 22,910
---------- ----------
340,081 465,566
----------- ----------
Cost of Revenue
Contractor fees 13,935 49,407
Product - 20,867
Telephone 4,673 10,133
Travel - 4,618
Wages, salaries and benefits 80,176 99,301
---------- ----------
98,784 184,326
---------- ----------
Gross it 241,297 281,240
---------- ----------
Selling and administration expenses
Advertising and promotion 4,382 27,770
Amortization 40,310 81,160
Contractors fees 43,485 102,145
Equipment leases 12,213 11,609
Filing and transfer fees 7,356 41,641
Interest on long-term debt 28,307 34,493
Investor relations 32,309 6,000
Management fees 199,589 91,122
Office and administration 23,606 42,823
Professional fees 48,004 60,835
Rent and property taxes 53,055 52,277
Selling and marketing 1,041 41,047
Telephone 19,031 23,928
Travel 5,227 3,541
Utilities 23,049 20,975
Wages, salaries and benefits 65,759 198,781
---------- ----------
606,723 840,147
Loss from operations (365,426) (558,907)
Deferred income taxes (recovery) - (1,000)
---------- ----------
Net loss for the year (365,426) (557,907)
Deficit, beginning of year (4,293,441) (3,735,534)
---------- ----------
Deficit, end of year $ (4,658,867)$ (4,293,441)
========== ==========
Weighted average number of shares outstanding 1,534,974 1,468,176
========== ==========
Loss per share, basic $ (0.18)$ (0.38)
========== ==========
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Aztek Technologies Inc.
Consolidated Statements of Changes in Financial Position
For the years ended June 30 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C>
Cash provided by (used in)
Operating activities
Net loss for the year $ (365,426)$ (557,907)
Items not involving cash
Amortization 40,310 81,160
Deferred income taxes (recovery) - (1,000)
---------- ----------
(325,116) (477,747)
Decrease in deferred revenue - non-current - (19,272)
Changes in non-cash working capital balances
Accounts receivable (11,051) (2,130)
Prepaid expenses (368) (96)
Accounts payable 99,355 (8,733)
Due to officer 59,147 5,332
Deferred revenue (34,790) 16,129
---------- ----------
(212,823) (491,853)
Financing activities
Advances from related parties 222,098 -
Repayments to related parties (259,321) (184,539)
Capital lease repayments (43,290) (34,290)
Increase in capital lease obligation - 20,682
Issuance of share capital 270,522 754,870
---------- ----------
190,009 556,723
---------- ----------
Investing activities
Acquisition of capital assets (866) (57,271)
Proceeds on disposal of capital assets 6,405 -
---------- ----------
5,539 (57,271)
Increase (decrease) in cash (17,275) 7,599
Cash, beginning of year 20,232 12,633
---------- ----------
Cash, end of year $ 2,957 $ 20,232
========== ==========
</TABLE>
5
<PAGE>
- ------------------------------------------------------------------------------
Aztek Technologies Inc.
Summary of Significant Accounting Policies
June 30, 1998 and 1997
- ------------------------------------------------------------------------------
Basis of Consolidation These consolidated financial statements include
the accounts of the Company and its wholly-owned
subsidiaries, S.T.A. North America Technologies
Inc. and Responseware Corp.
Use of Estimates The consolidated financial statements of the
corporation have been prepared by management in
accordance with generally accepted accounting
principals in Canada. The preparation of financial
statements in conformity with generally accepted
accounting principals requires management to make
estimates and assumptions that affect the amounts
reported in the financial statements and
accompanying notes. Actual results could differ
from those estimates. The financial statements
have, in management's opinion, been properly
prepared using careful judgment within reasonable
limits of materiality and within the framework of
the accounting policies summarized below.
Capital Assets and Capital assets are recorded at cost. Amortization
amortization based on their estimated useful lives is as
follows:
Computer hardware - 30% diminishing balance basis
Purchased Computer
software - 30% diminishing balance basis
Furniture and
equipment - 20% diminishing balance basis
Software license - 33% straight-line basis
Leasehold improvements are recorded at cost and
are amortized using the straight-line method over
a period of five years.
Assets under Capital Assets under capital lease are recorded at cost.
Lease Amortization based on the estimated useful life of
the asset is as follows:
Computer hardware - 20% straight-line basis
Goodwill Goodwill is recorded at cost. Amortization is
provided as follows:
Goodwill - 50% straight-line basis
Financial Instruments The Company's financial instruments consist of cash,
accounts receivable, accounts payable and accrued
liabilities, amounts due to related parties,
royalties payable, and obligation under capital
leases. Unless otherwise noted, it is management's
opinion that the Company is not exposed to
significant interest, currency or credit risks
arising from these financial instruments. The fair
value of these financial instruments approximate
their carrying values, unless otherwise noted.
6
<PAGE>
- ------------------------------------------------------------------------------
Aztek Technologies Inc.
Summary of Significant Accounting Policies
June 30, 1998
- ------------------------------------------------------------------------------
Capitalized Software Costs for developing computer software are Costs
Costs capitalized when technological feasibility has been
established for the computer software product.
Capitalization of computer software costs is
discontinued when the products is available for
general release to customers and such costs are
amortized on a product-by-product basis over the
estimated lives of the products. There are no
capitalized costs in the accompanying financial
statements.
Purchased computer software, which includes
programs used for company management and software
development are capitalized and amortized as
disclosed in the capital assets and amortization
significant accounting policy note.
Revenue Recognition The Company licenses software under noncancellable
license agreements and provides maintenance
services, consisting of product support services
and periodic updates. License fee revenues are
generally recognized when a noncancellable license
agreement has been signed, the software product has
been shipped, there are no uncertainties
surrounding product acceptance, there are no
significant vendor obligations, the fees are fixed
and determinable, and collection is considered
probable. Revenues from maintenance agreements
are recognized ratably over the maintenance period,
which in most instances is one year. Revenues for
training or consulting services are recognized as
services are performed.
Deferred Revenue Deferred revenue is comprised of deferrals for
license fees, maintenance and other services.
Deferred Income Taxes Deferred income taxes arise from the difference
between amortization for accounting purposes and
capital cost allowance for income tax purposes.
Per Share Data Share amounts for all periods presented reflect
restatement for the five-for-one stock split in
December 1996. Basic loss per share is computed
using the weighted average number of common shares
outstanding during the respective years. Diluted
loss per share has not been calculated due to the
anti-dilutive effect.
7
<PAGE>
- ------------------------------------------------------------------------------
Aztek Technologies Inc.
Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------
June 30, 1998 and 1997
- ------------------------------------------------------------------------------
1. Operations
The Company has continued to incur operating losses and continues to have a
working capital deficiency as at June 30, 1998. The future ability of the
Company to realize its assets at the recorded amounts and discharge its
liabilities in the normal course of business will depend upon its ability to
obtain further financing and to attain profitable operations. It is not
possible at this time to predict with assurance the outcome of these matters.
Management intends to raise equity that would allow the Company to proceed
with its business plan.
The company's primary business is that of developing and selling computer
software and computer systems and providing support services for the
company's computer software.
- ------------------------------------------------------------------------------
2. Capital Assets
<TABLE>
<CAPTION>
1998 1997
--------------------------------------------------
Accumulated Accumulated
Cost Amortization Cost Amortization
<S> <C> <C> <C> <C>
Computer hardware $ 93,884 $ 78,845 $ 93,017 $ 72,771
Purchased Computer software 102,601 62,557 105,081 45,357
Leasehold improvements 19,972 17,242 23,898 14,028
Furniture and equipment 42,916 32,631 42,916 30,060
Software license 16,000 16,000 16,000 14,666
Equipment under capital lease
- Computer hardware 159,958 122,196 159,958 112,696
------- ------- ------- -------
$ 435,331 $ 329,471 $ 440,870 $ 289,578
------- ------- ------- -------
Net book value $ 105,860 $
151,292
======= =======
</TABLE>
- ------------------------------------------------------------------------------
3. Goodwill
<TABLE>
<CAPTION>
1998 1997
---------------------------------------------------------
Accumulated Accumulated
Cost Amortization Cost Amortization
<S> <C> <C> <C> <C>
Goodwill $ 191,660 $ 191,660 $ 191,660 $ 191,243
------- ------- -------
- -------
Net book value $ - $ 417
======= ======= ======= =======
</TABLE>
8
<PAGE>
- ------------------------------------------------------------------------------
Aztek Technologies Inc.
Notes to Consolidated Financial Statements
June 30, 1998 and 1997
- ------------------------------------------------------------------------------
4. Due to Related Parties
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Loans payable, without interest, and specific
repayment terms. Principal is not repayable
prior to July 1, 1999. It was not practical
to determine the fair value of this debt. $ 132,707 $ 3,689
Note payable, repayable $1,507 monthly
including interest at 9% per annum and
collateralized by a general security
agreement. During the year a shares for debt
settlement agreement was entered into and
submitted to regulatory authorities for their
approval. - 166,241
------- -------
132,707 169,930
Less current portion - 166,241
------- -------
$ 132,707 $ 3,689
======= =======
</TABLE>
- ------------------------------------------------------------------------------
5. Royalties Payable
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Royalties payable, royalties incurred in
a prior year's operations are repayable
$10,000 monthly, without interest, commencing
December 9, 1997. $ 100,000 $ 100,000
Less current portion 100,000 70,000
------- -------
$ - $ 30,000
------- -------
</TABLE>
As at June 30, 1998 the Company is in default on repayment and is negotiating
a revised payment schedule. It is anticipated that this will not have an
adverse effect on the Company's financial position or results of future
operations.
- ------------------------------------------------------------------------------
6. Obligation Under Capital Lease
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Total minimum lease payments $ 36,433 $ 89,694
Less imputed interest 2,538 12,509
------ ------
Lease obligation 33,895 77,185
Less current portion 33,095 43,553
------ ------
$ 800 $ 33,632
====== ======
</TABLE>
Minimum lease payments on the capital lease obligations are 1999 - $35,620,
2000 - $813.
During the year interest expense of $10,252 (1997 - $18,240) was incurred on
the obligation under capital lease.
9
<PAGE>
- ------------------------------------------------------------------------------
Aztek Technologies Inc.
Notes to Consolidated Financial Statements
June 30, 1998 and 1997
- ------------------------------------------------------------------------------
7. Share Capital
<TABLE>
Authorized
100,000,000 common shares without par value
<CAPTION>
1998 1997
Number of Number of
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Issued and fully paid
Balance, beginning of year 1,904,244 $ 3,909,000 1,001,932 $ 3,055,330
Issued for cash
Private placement - - 400,000 620,000
Exercise of warrants 47,400 104,280 28,600 65,560
For escrow shares - - 354,000 3,540
Issued for acquisition - - 30,000 30,000
Issued for debt settlement 120,465 166,242 89,712 134,570
Cancelled due to expiry
of escrow agreement (21,000) - - -
--------- --------- --------- ---------
Balance, end of year 2,051,109 $ 4,179,522 1,904,244 $ 3,909,000
========= ========= ========= =========
</TABLE>
a) Escrow Shares - The issued share capital includes 354,000 escrow shares
(1997 - 375,000). These shares will be released from escrow at the rate of 1
share for each $0.31 of cash flow from operations, as defined in the
agreement. Any shares not released prior to September 17, 2001 will be
cancelled and returned to treasury.
During the year ended June 30, 1998 21,000 shares, subject to a separate
escrow agreement that expired October 27, 1997, were cancelled and returned
to
treasury.
b) Share Purchase Options - See Note 11 for additional information
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Number of share purchase options, beginning of year 185,000 -
Number granted during the year 40,000 185,000
-------
- -------
Number of share purchase options, end of year 225,000 185,000
</TABLE>
Options outstanding at June 30, 1998 are exercisable:
185,000 at $1.82 per share, expiring March 20, 1999
40,000 at $0.85 per share, expiring September 22, 1998
10
<PAGE>
- ------------------------------------------------------------------------------
Aztek Technologies Inc.
Notes to Consolidated Financial Statements
June 30, 1998 and 1997
- ------------------------------------------------------------------------------
8. Related Party Transactions
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
a. Accounts payable and amounts due to related parties
include the following:
Due to officers and directors-accounts payable $ 64,040 $ 6,552
Due to officers and directors-
due to related parties 5,607 -
Due to a director's family members-
accounts payable 800
169,071 Due to a director's family members-
due to related parties 127,100 -
Amounts due to officers and directors, or their
family members that are recorded in accounts payable
arose as a result of those parties providing services
to the company. These transactions are in the normal
course of operations and are measured at the exchange
value which is the amount of consideration established
and agreed to by the related parties at amounts that
approximate the value of services purchased from
arms-length parties.
b. Selling and administration expenses
include the following:
Interest paid to the spouse of a director 1,099 12,313
Rent paid to a company controlled by the spouse
of a director 13,500 13,500
</TABLE>
These transactions are in the normal course of operations and are measured at
the exchange value which is the amount of consideration established and
agreed to by the related parties.
c. Issuance of shares to President's wife in settlement of debt.
During the year the company issued 120,465 common shares in settlement
of
a loan from the wife of the President of the company. The debt arose during
the fiscal year ended June 30, 1996. At that time the company was unable to
arrange debt financing from commercial lenders and therefore entered into a
loan agreement with the wife of the President. The loan was provided on
normal commercial terms. The loan was repayable $1,507 monthly, including
interest at 9%. From July 1997 to the date of settlement, the company was
unable to make payments for either interest or principal. The company and
the
President's wife agreed to settle the full amount of the debt in exchange for
issuance of common shares of the company. The shares were deemed issued at
$1.38 per share, the average of the trading price of the shares for the ten
days prior to the date of the agreement.
- ------------------------------------------------------------------------------
9. Income Taxes
The company has losses available for income tax purposes totaling
approximately $1,577,000. This amount can be used to reduce taxable income of
future years and has not been recognized in the financial statements. The
right to claim these losses expire as follows: 1999 - $89,000; 2000 -
$76,000; 2001 - $376,000; 2002 - $131,000; 2003 - $101,000; 2004 - $479,000;
2005 - $325,000.
11
<PAGE>
10. Lease Commitments
The company has lease commitments for its premises and certain equipment
which require minimum annual lease payments payable as follows:
Year Amount
1999 $ 45,442
2000 27,504
2001 10,158
-----------
$ 83,104
===========
- ------------------------------------------------------------------------------
11. Differences Between Canadian and United States Generally Accepted
Accounting Principles
Stock Based Compensation
As at June 30, 1998, the Company has a issued non-plan options which are
described below.
During the year one-year non-plan option to purchase 40,000 shares at $1.40
were granted to an employee. These options were fully vested at the date of
grant. In connection with this grant, there was no difference between the
market price of the stock and the exercise price of the options on the date
that the options were granted.
In preparing financial statements in accordance with United States Generally
Accepted Accounting principles the Company is required to apply the
disclosure requirements contained in U.S. Financial Accounting Standards
board
SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 requires
the Company to include in the financial statements compensation costs for the
fair value of stock options issued.
In calculating the benefit included in the following reconciliation, the
Company has estimated the fair value of each stock option at the grant date
by using the black-Scholes option-pricing model with the following
weighted-average assumptions for grants in the year ended June 30,1998: no
dividend yield percent; expected volatility of 142%; risk-free interest rate
of 5.8%; and expected life of 1 year. Under the accounting provisions of
SFAS No. 123, the Company's net loss and loss per share would have been
increased to the amounts indicated below.
12
<PAGE>
- ------------------------------------------------------------------------------
Aztek Technologies Inc.
Notes to Consolidated Financial Statements
June 30, 1998 and 1997
- ------------------------------------------------------------------------------
11. Differences Between Canadian and United States Generally Accepted
Accounting Principles-Continued.
Stock Based Compensation - Continued
<TABLE>
<CAPTION>
1998 1997
-------------------------------------
<S> <C> <C>
NET INCOME
Net loss for the year-based on
Canadian GAAP $ (366,426) $ (557,907)
Charge to operations representing
the difference between the market
price of the stock options and the
exercise price of the options (30,000) (40,700)
---------- --------
Net loss for the year-based on U.S. GAAP $ (395,426) $ (598,607)
========== ========
LOSS PER SHARE
Net loss per common share - based
on U.S. GAAP $ (0.19) $ (0.41)
========== ========
RETAINED EARNINGS The cumulative effect
of the application of U.S. GAAP on
the deficit of the company would be:
Deficit beginning of year - based
on Canadian GAAP $ (4,293,441) $ (3,735,534)
Charge to operations representing the
difference between the market price of
the stock options and the exercise price
of the stock options for previous years (40,700) -
Deficit beginning of year - based
on U.S. GAAP (4,334,141) (3,735,354)
Net loss for the year-based on US GAAP (395,426) (598,607)
---------- -----------
Deficit end of year-based on US GAAP $ (4,729,567) $ (4,334,141)
========== ==========
</TABLE>
SFAS No. 123 requires disclosure of a summary of the status of the Company's
options as of June 30, 1998, and changes during the year ended on that date.
That additional disclosure is presented below:
<TABLE>
<CAPTION>
Weighted-
Average
June 30, 1998 Shares Exercise Price
- ------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at beginning of year 185,000 $ 1.82
Granted during the year 40,000 1.40
Exercised - -
Cancelled - -
------- ----
Outstanding at end of year 225,000 $ 1.75
======= ====
Options exercisable at end of year 225,000 $ 1.75
</TABLE>
Weighted-average fair value of options granted
during the year:
Below market $ -
At market $ 1.40
Above market $ -
13
<PAGE>
- ------------------------------------------------------------------------------
Aztek Technologies Inc.
Notes to Consolidated Financial Statements
June 30, 1998 and 1997
- ------------------------------------------------------------------------------
11. Differences Between Canadian and United States Generally Accepted
Accounting Principles-Continued
Stock Based Compensation-Continued
The following table summarizes information about non-plan options
outstanding at June 30, 1998.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted
Number Average Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise at June 30, Contractual Exercise at June 30, Exercise
Prices 1998 Life Price 1998 Price
- ------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$ 1.82 185,000 0.70 years $ 1.82 185,000 $ 1.82
$ 1.40 40,000 0.20 years $ 1.40 40,000 $ 1.40
</TABLE>
14
Exhibit 99.6 Schedule II Valuation and Qualifying Accounts
Aztek Technologies Inc.
<TABLE>
<CAPTION>
Beginning of Costs and Charges to Balance at end
Description Period Expenses Other Accounts Deductions Of Period
<S> <C> <C> <C> <C> <C>
Allowance
for
Doubtful
Accounts 0 0 0 0 0
</TABLE>
99.7 Opinion Letter of Independent Accountants in Reference to Canadian
Tax Consequences
[Letterhead of BDO Dunwoody]
August 19, 1998
Aztek Technologies Inc.
#5 - 246 Lawrence Avenue
Kelowna, B.C.
V1Y 6L3
Attention: Mike Sintachakis
Dear Sirs:
RE: MERGER WITH U.S. COMPANY
This letter is further to your request that our firm offer an opinion as to
the Canadian tax implications to the shareholders of Aztek Technologies Inc.
("Canco") of a merger with Aztek Inc. ("Usco").
FACTS AND ASSUMPTIONS
Our opinion is based on our understanding of the following facts and
assumptions. Please review them to ensure that they are correct and, if not,
advise our office immediately so that our opinion can be revised accordingly.
1) Canco is a widely held, Canadian corporation with only one class of issued
shares. These shares are publicly traded on the Vancouver Stock Exchange.
2) Usco is a privately owned Nevada corporation.
3) Pursuant to U.S. corporate law:
a) Canco is to be merged into Usco. Usco will receive the assets of Canco,
and each shareholder of Canco will receive shares of Usco on a one-for-one
basis.
b) Canco will not be continued into Nevada prior to this merger, and at no
time in this process will Canco be a U.S. resident corporation.
c) Immediately upon the completion of the merger, Canco will cease to exist,
while Usco will be the surviving corporation.
4) The Canadian and U.S. corporate counsel for the companies agree that the
above merger is effected in the following manner for purposes of Canadian
corporate law:
a) The shareholders of Canco exchange their shares thereof for shares of Usco
on a one-for-one basis. Canco will then be a wholly-owned subsidiary of Usco.
b) Canco is wound up into Usco, which takes possession of Canco's assets and
liabilities.
5)
At no time in the last five years has
a) a non-resident shareholder,
b) a person related to a non-resident shareholder, or
c) a non-resident shareholder and a person related thereto
owned more than 25% of the issued shares of any class of Canco.
6) Usco has (and will have, after the above transaction) only one issued class
of shares.
QUESTION
What are the Canadian tax ramifications to the shareholders of Canco?
OPINION
Deemed Disposition
In our opinion the Canadian shareholders of Canco have, for Canadian tax
purposes, disposed of their shares of Canco on the date of the merger for
proceeds equal to the fair market value of the shares of Usco received in
exchange therefor. Any gain or loss will be reportable for Canadian tax
purposes. Whether the gain is on account of capital (75% of which is included
in taxable income) or income (100% of which is included in taxable income)
depends on the particular shareholder's circumstances.
The actual gain or loss to each shareholder is a function of:
1. the fair market value of Usco's shares as at the date of amalgamation, and
2. the adjusted cost base of the particular shareholder's shares of Canco.
Generally, there are no Canadian tax ramifications to the non-resident
shareholders of Canco. However, this may not be true for a non-resident
shareholder that was a Canadian resident at some time in the past or a
non-resident shareholder that carries on business in Canada. Any such persons
should seek professional advice in this regard.
Foreign Affiliate
Usco will be a "foreign affiliate" for Canadian tax purposes of a
Canadian-resident shareholder if:
1. the particular shareholder owns 1% or more of the issued shares of Usco,
and
2. the particular shareholder and all persons "related" (as defined for
Canadian tax purposes) thereto own (directly, or through other corporations)
10% or more of the issued shares of Usco.
Usco will be a "controlled foreign affiliate" for Canadian tax purposes of a
Canadian-resident shareholder if at that time it is a "foreign affiliate" of
the taxpayer that is controlled by:
1. the shareholder,
2. the particular shareholder and not more than four other persons resident in
Canada,
3. not more than 4 persons resident in Canada, other than the shareholder,
4. a person or persons with whom the shareholder does not deal at arm's
length, or
5. the shareholder and a person or persons with whom the shareholder does not
deal at arm's length.
If Usco pays dividends to a corporation resident in Canada, the Canadian
taxation of those dividends may be impacted if Usco is a "foreign affiliate"
of said corporation. Any Canadian corporation of which Usco is a "foreign
affiliate" should seek professional advice.
If Usco is a "controlled foreign affiliate" of a person resident in Canada,
certain types of income earned by Usco (broadly defined as passive investment
income and income from certain services) is taxed in Canada on a current
basis. Again, any such person should seek professional advice.
Canadian Information Reporting
If Usco is a "foreign affiliate" of a person or partnership resident in
Canada, the person or partnership is required to file an annual information
return with Revenue Canada in respect of Usco pursuant to S.233.4 of the
Income Tax Act (Canada). This return is due within 15 months after the end of
the taxation year or fiscal period for which the person or partnership is
required to report.
If Usco is a "controlled foreign affiliate" of a Canadian shareholder, that
shareholder may be required to file additional information returns under
S.233.2 of the Income Tax Act (Canada) in respect of loans or transfers to the
corporation by certain foreign Trusts or in respect of loans and transfers to
those Trusts by the corporation. The same reporting requirement will apply to
loans and transfers to Usco made by the Canadian shareholder if Usco is a
"controlled foreign affiliate" of a foreign Trust that the Canadian
shareholder is in any way connected with. This return if required is due by
the normal Canadian tax filing deadline for the filer.
Withholding Tax
Any dividends paid by Usco to a Canadian-resident shareholder will be subject
to U.S. withholding tax at the following rates:
(a) 5% of the gross amount of the dividends if the beneficial owner is a
company which owns at least 10% of the voting stock of Usco;
(b) 15% of the gross amount of the dividends in all other cases.
Foreign Property
The shares of Usco will be considered "foreign property" for pension funds and
certain other tax-exempt entities (i.e. registered retirement savings plans).
These funds and entities are limited in the amount of "foreign property" that
they can own without incurring a special tax under Part XI of the Income Tax
Act (Canada).
Any such fund, plan or entity that currently owns shares of Canco should seek
professional advice regarding the pending change to its investment.
CAVEAT
The opinions expressed above are our views as Chartered Accountants
experienced in Canadian income tax matters. They are restricted to the
specific facts as set out above and are based on our interpretation of the
Income Tax Act (Canada) and the Income Tax Regulations as they presently
exist. None of the opinions are or should be construed to be legal opinions.
We have not been asked to express an opinion in respect of the tax
ramifications to Canco or Usco of this merger, nor have we been asked to
express an opinion as to the non-Canadian tax implications to any party.
We trust that we have addressed the issues to your satisfaction. If you have
any questions in this regard, please contact Murray Swales @ (250) 492-6020.
Sincerely,
BDO DUNWOODY
/s/ BDO Dunwoody
- -----------------
BDO/mmb
EXHIBIT 99.8 Proxy
REVOCABLE PROXY
AZTEK TECHNOLOGIES INC.
ANNUAL AND EXTRAORDINGARY MEETING, _________, 1998
PROXY SOLICITED BY BOARD OF DIRECTORS
The undersigned stockholder of the Company Technologies Inc. ("ATI") hereby
appoints Mike Sintichakis, the lawful attorney and proxy of the undersigned,
with several powers of substitution, to vote all shares of Common Stock of
ATI which the undersigned is entitled to vote at the Annual and Extraordinary
Meeting of Stockholders to be held on ___________, 1998, and at any
adjournments thereof:
1. Approval of the Merger Agreement and the Plan of Merger providing for a
merger pursuant to which ATI will be merged into the Company Inc. (the
"Company") and each outstanding share of ATI Common Stock will be converted
into one share of the Company Common Stock.
2. Approval of the acquisition of Qdata Software Inc.
3. IN THEIR DISCRETION ON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE
MEETING.
Shares represented by all properly executed proxies will be voted in
accordance with instructions appearing on the proxy. IN THE ABSENCE OF
SPECIFIC INSTRUCTIONS, PROXIES WILL BE VOTED FOR APPROVAL OF THE
MERGER
AGREEMENT AND PLAN OF REORGANIZATION AND THE PLAN OF MERGER AND
IN THE
DISCRETION OF THE PROXY HOLDER AS TO ANY OTHER MATTERS.
[X] Please mark votes as in this example.
FOR AGAINST ABSTAIN
[_] [_] [_]
Please date and sign as name appears on the stock certificate, including
designation as executor, etc., if applicable. A corporation must sign in its
name by the president or other authorized officers. All co-owners must sign.
A majority of the proxies or substitutes present at the meeting may exercise
all powers granted hereby.
MARK HERE FOR ADDRESS
CHANGE AND NOTE AT LEFT [_]
Signature Date
----------------------------- -------------
Signature Date
----------------------------- -------------
