SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of
The Securities Exchange Act of 1934
ADVANCED KNOWLEDGE, INC.
(Name of Small Business Issuer in Its Charter)
Delaware 95-4675095
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
17337 Ventura Boulevard, Suite 224, Encino, California 91316
(Address of Principal Executive Offices)
(Zip Code)
(818) 784-0040
(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None None
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.001
(Title of Class)
<PAGE>
<TABLE>
<CAPTION>
CONTENTS
<S> <C> <C>
PART I. PAGE
Item 1. Description of Business
Background........................................................1
Narrative Description of Business.................................1
Business of the Company...........................................1
Workforce Training Overview.......................................2
Products and Services.............................................4
Sales.............................................................6
Marketing.........................................................6
Distribution......................................................8
Competition.......................................................9
Company History...................................................10
Item 2. Management's Discussion and
Plan of Operations................................................12
Results of Operations.............................................13
Year 200 Issue....................................................13
Item 3. Description of Property...........................................14
Item 4. Security Ownership of Certain Beneficial
Owners and Management.............................................14
Item 5. Directors, Executive Officers,
Promoters and Control Persons.....................................15
Item 6. Executive Compensation............................................17
Item 7. Certain Relationships and Related Transactions....................17
Item 8. Description of Securities.........................................17
Common Stock......................................................17
Transfer Agent....................................................17
PART II.
Item 1. Market Price of and Dividends on the Registrant's
Common Equity and Other Related Shareholder Matters...............18
Item 2. Legal Proceedings.................................................19
Item 3. Changes in and Disagreements with Independent
Accountants ......................................................19
Item 4 Recent Sales of Unregistered Securities ..........................19
Item 5. Indemnification of Certain Directors and Officers.................19
PART F/S. Financial Statements..............................................20
DMA-Radtech, Inc..................................................22
Advanced Knowledge, Inc...........................................27
DMA-Radtech and Advanced Knowledge Pro Forma......................35
-i-
<PAGE>
PART III Exhibits
Item 1. Exhibit Index.............................................40
Item 2. Description of Exhibits...................................40
</TABLE>
-ii-
<PAGE>
FORWARD LOOKING STATEMENTS
Advanced Knowledge, Inc. ("Advanced Knowledge," "AK" or the "Company") cautions
readers that certain important factors may affect the Company's actual results
and could cause such results to differ materially from any forward-looking
statements that may be deemed to have been made in this Form 10-SB or that are
otherwise made by or on behalf of the Company. For this purpose, any statements
contained in the Form 10-SB that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the generality of the
foregoing, words such as "may," "expect," "believe," "anticipate," "intend,"
"could," "estimate," or "continue" or the negative or other variations thereof
or comparable terminology are intended to identify forward-looking statements.
Factors that may affect the Company's results include, but are not limited to,
the Company's limited operating history, its ability to produce additional
products and services, its dependence on a limited number of customers and key
personnel, its possible need for additional financing, its dependence on certain
industries, and competition from its competitors. The Company is also subject to
other risks detailed herein or set forth from time to time in the Company's
filings with the Securities and Exchange Commission.
PART I
Item 1. Description of Business
(a) Background
Advanced Knowledge, Inc. was originally incorporated under the laws of the State
of Delaware on January 2, 1987 under the name "EKS RN CON INC." For a discussion
of the Company's history and its recent reorganization, see "Company History."
(b) Narrative Description of Business
Business of the Company
The core business of Advanced Knowledge is the development, production, and
distribution of creatively unique management and general workforce training and
educational products and services for use by corporations throughout the world.
The Company's products and services, which include books, videos tapes, audio
cassettes, CD-ROMs, training packages, and job aids and tools are designed to
increase the effectiveness of individuals and organizations.
The Company initiated its first project in January 1998 when it entered into a
production agreement (the "Hathaway Agreement") with The Hathaway Group for the
production of a series of six corporate training videos based on either classic
Hollywood motion pictures or historical world events. The Hathaway Group is an
award-winning, leading supplier of corporate training videos for such clients as
IBM, Polaroid, 3M, Digital Equipment Corp., Du Pont, and ITT/Hartford Insurance,
and various divisions of Citicorp. Among the many videos produced by the
Hathaway Group is the best selling and critically acclaimed training video
entitled, "Workteams and The Wizard Of Oz."
Under the terms of the Hathaway Agreement, the Company will finance fifty
percent of the production cost of the six videos, and will provide a royalty to
The Hathaway Group based on a specified percentage of revenues derived from
their sale. Production was completed in April of this year on the first video in
the
<PAGE>
series entitled, "12 Angry Men: Teams That Don't Quit." The video, based on the
classic film starring Henry Fonda, utilizes 12 minutes of clips from the film,
licensed under an agreement with MGM/UA, and features Dr. Margaret J. Wheatley
as the on-camera personality. Dr. Wheatley, formerly an Associate Professor of
Management at the Marriott School of Management, Brigham Young University, is a
respected author whose work includes the best selling "Leadership and the New
Sciences." Dr. Wheatley also serves as a management consultant to major
corporations.
In conjunction with The Hathaway Group, the Company has started production of
the second training video in the series tentatively entitled, "Cuban Missile
Crisis: Critical Team Decision Making." This new video is based on the decision
making process of President Kennedy and his Cabinet during the Cuban missile
crisis. Production is expected to be completed in December 1998.
In addition to the Hathaway Agreement with The Hathaway Group, the Company
recently entered into an agreement (the "AIMS Agreement") with AIMS Multimedia
("AIMS"), a recognized leader in the production and distribution of educational
and training films. Under the terms of the AIMS Agreement, the Company has
acquired the non-exclusive distribution rights to their Business and Industry
library. The film library contains more than 200 titles, many of which have won
awards. The programs cover a broad spectrum of topics, ranging from management
training and development to safety in the workplace. The Company will pay AIMS a
45% royalty on all revenues derived from the sale of titles in the Business and
Industry library.
Workforce Training Industry Overview
General
According to a report published in the October 1998 issue of the most respected
industry publication, Lakewood Publication's Training Magazine:
58.6 billion dollars was budgeted for formal training in 1997 by U.S.
organizations with 100 or more employees.
56.6 million people received some formal training in 1997 from employers
employing 100 or more people.
70 percent of U.S. organizations employing 100 or more employees
offered some training to their employees in 1997.
During the past several years, large and small corporations throughout the world
have sought to remain competitive and to prosper in today's information age and
knowledge-orientated economy by allocating an increasing amount of resources to
the training of their employees. No longer is workplace training restricted to
senior managers. Among other categories of employees who now receive training
paid for by their employers, are middle managers, salespeople, first line
supervisors, production workers, administrative employees, customer service
representatives, and information technology personnel.
"Soft-Skill" training and Information Technology ("IT") training represent the
industry's two major, distinct sources of revenue. Soft-Skill training includes:
management skills/development, supervisory skills, communication skills, new
methods and procedures, customer relations/services, clerical/secretarial
skills,
-2-
<PAGE>
personal growth, employee/labor relations, and sales. Information Technology
training includes client/server systems, internet/intranet technologies,
computer networks, operating systems, databases, programming languages,
graphical user interfaces, object-oriented technology and IT management.
The Soft Skill Training Market
As reported in Lakewood Publication's October 1998 Training Magazine, Soft Skill
training represents 71 percent of the $58.6 billion spent by U.S. companies in
the training of their employees. Management believes that the Soft-Skill
training market is rapidly expanding mainly as a result of realization by
organizations throughout the world that in order to keep competitive and manage
for success, a continuous investment in the training of its employees is
required. Demand for quality training products and services is not only stemming
from organizations, but from millions of workers who are seeking advanced
training to keep up with the job skills required by today's more competitive
global economy.
As further reported by Training Magazine, there were over forty different
specific Soft-Skill training subjects utilized by organizations in 1997 to
increase employee productivity. The top ten subjects were: new employee
orientation, performance appraisals, personal computer use, team-building,
leadership, sexual harassment, hiring/selection process, train-the-trainer, new
equipment operation, and safety.
Although many organizations continue to maintain in-house training departments,
more and more of the Soft-Skill training function is being filled by outside
suppliers and contractors. Training Magazine reported in its October 1998 issue
that since 1995 expenditures for outside training products and services have
increased 32 percent. The trend for organizations to increasingly outsource the
training function is expected to continue as a result of the broad range of
subjects that must be part of an effective employee training program and the
cost of developing and maintaining internal training courses in the rapidly
changing workplace.
The Information Technology Market
Representing approximately 30 percent of the total dollars spent on training,
the market for Information Technology training is driven by technological
change. As the rate of this change accelerates, organizations find themselves
increasingly hampered in their ability to take advantage of the latest
information technologies because their IT professionals lack up-to-date
knowledge and skills. Industry experts believe that the increasing demand for
training IT professionals is a result of several key factors including: (i) the
proliferation of computers and networks throughout all levels of organizations;
(ii) the shift from mainframe systems to new client/server technologies; (iii)
the continuous introduction and evolution of new client/server hardware and
software technologies; (iv) the proliferation of internet and intranet
applications; and (v) corporate downsizing, resulting in increased training
requirements for employees who must perform new job functions or multiple job
tasks that require knowledge of varied software applications and technologies.
Furthermore, since many businesses use hardware and software products provided
by a variety of vendors, their IT professionals require training on an
increasing number of products and technologies which apply across vendors,
platforms and operating systems.
While approximately 55 percent of the training for IT professionals continues to
be provided by internal training departments, many organizations are expanding
their use of external training providers due to corporate downsizing, the lack
of internal trainers experienced in the latest technologies, and as in the
Soft-
-3-
<PAGE>
Skill sector, the cost of developing and maintaining internal training
courses in rapidly evolving technologies.
Products and Services
The Company believes that it must create a product that effectively combines
information and entertainment, and that it must sustain itself in the face of
existing and new technological delivery systems that are certain to develop over
the near future, including CD-ROM/DVD, new hardware, software, and permutations
of interactive media and computer-driven multimedia formats. Therefore, the
design of the Company's product must be such that it can adapt to these new
technologies. The Company's current and anticipated products and services are
set forth below.
Videos
During the first year of operation, the Company intends to focus on building its
video library. To that end, Advanced Knowledge entered into the production
agreement with The Hathaway Group to produce a series of training videos. The
Company has completed production of its first video entitled, "12 Angry Men:
Teams That Don't Quit" ("12 Angry Men"). Production started in February of this
year on the next video in the series tentatively entitled, "The Cuban Missile
Crisis: Critical Team Decision Making." This new video is based on the decision
making process of President Kennedy, and his Cabinet during the Cuban missile
crisis. Production is scheduled to be completed in November of this year. Other
videos scheduled for production are tentatively entitled, "Getting Things Done
When No One Else Wants To, Total Quality 2001," and "Turning Elephants On a
Dime: Change In Large Organizations."
Accompanying each of the videos produced by the Company is a workbook that is
designed to be given to all employees participating in the training program.
These workbooks are written for the Company by training professionals and serve
to reinforce and enhance the lasting effectiveness of the video. In addition to
the workbook, the Company plans to offer an audio cassette that gives the
trainee a general orientation to the training material and serves to reinforce
the video's salient points. The Company believes that the trainees will
significantly benefit by being able to use the audio cassette to strengthen and
review their comprehension of the information covered in the video during
periods when it would be impossible to view a video, i.e. drive-time.
Training videos typically have a running time of 20 to 35 minutes. The price
range for training videos is between $250 to over $895 per video. The reason for
the wide variance in the pricing structure is due to the inherent elements of
the particular video. Among the factors determining price are quality of
production, on-camera personality, source of material, sophistication of
graphics, and accompanying reference materials. The market continues to
demonstrate its willingness to purchase high-end videos. Therefore, the
Company's strategy is to concentrate on producing high caliber videos utilizing
elements and production values that will generate sales at the higher end of the
price range, where profit margins are greater.
The price differential between a corporate training video and a standard
consumer video is justified by the fact that an organization will purchase a
video and utilize it to train hundreds of employees over many years. A
successful video may generate revenues of as much as $1 million a year. There
are numerous examples of this, including: "Paradigm Shift" by Charthouse
Learning; "Remember Me and Abilene Paradox" by CRM Films; "More Than a Gut
Feeling" by American Media; "The Guest" by Media Partners; and "Subtle Sexual
-4-
<PAGE>
Harassment" by Quality Media.
Publications
In keeping with Advanced Knowledge's overall strategy, the Company anticipates
that during 1999 it will develop publications that will be written to be
informative and entertaining. The Company expects that such publications will
range in price from $6.95 to $30, will cover a wide range of topics and skill
levels, and will be authored by established industry authors. The Company
anticipates that such publications will vary in design, from books published and
distributed through a major outside publisher to small, creatively designed
pamphlets with key concepts on a certain topic.
Successful books such as "One Minute Manager," by Kenneth H. Blanchard and
Spencer Johnson, and "Leadership Challenge," by James M. Kouzes and Barry Z.
Posner, have generated millions of dollars in revenues for their publishers.
There can be no assurance that the Company's publications will produce
significant revenues.
Audio Cassettes
Capitalizing on the sales information gained as a result of the distribution of
the Company's videos, Advanced Knowledge anticipates producing and distributing
audio cassettes focusing on the subject matter and content that have proven to
be well received in the marketplace.
In line with the Company's strategy of designing its products to be more
effective by combining information and entertainment, the audio cassettes will
utilize such unique techniques as incorporating appropriate dialogue excerpts
from classic films, television and radio programs, famous speeches, and songs.
Training Packages
As a result of the continuing downsizing of organizations, many corporate
internal training departments no longer have the resources to design and print
in-house programs, and are increasingly looking more to outside firms for the
purchase of training packages and materials. According to Training Magazine's
October 1998 report, "outsourcing now accounts for 38% of training in
organizations with 100 or more employees, representing a 6% increase from 1997."
Prices for training packages range from between $250 and $1,000. In addition to
the initial sale, it is anticipated that additional revenue will be generated
for the Company by the follow-up orders for workbooks and other supplementary
materials required by the trainer as additional trainees participate in the
program.
Other Products and Services
The Company initially plans to utilize its resources and focus its efforts on
the development, production, and distribution of Soft-Skill training products as
outlined above. Following the launching of its initial product line, management
anticipates expanding its base within the training industry by pursuing
acquisitions of, and strategic alliances with, companies offering other
services, such as seminars, lectures, internet/intranet training programs, and
information technology training.
-5-
<PAGE>
Although the Company's intention is to design, develop, produce, and to offer
additional products and services as outlined above, there can be no assurance
that the Company will have sufficient financial and other resources to
accomplish these goals.
Sales
To date, the Company has released one video, "12 Angry Men." 12 Angry Men was
made available for sale on August 17, 1998. Through December 31, 1998
ninety-three units of this video have been sold, representing gross income of
approximately $45,000.
In most cases, the sale of management training products involve direct mail
solicitation, preview request fulfillment, and telemarketing. The Company begins
its sales effort by identifying prospective buyers, and soliciting them through
direct mail appeals that offer the recipient a free preview.
Preview request fulfillment represents a major part of the Company's sales plan.
Most professional trainers will not purchase a training video until they have
previewed it in its entirety, affording them an opportunity to evaluate the
video's applicability to their specific objective and to judge its effectiveness
as a training tool. When requests are received, a preview copy is immediately
sent to the prospective buyer. To enhance sales potential, the Company plans to
send preview copies in the form of video catalogues. Each video catalogue will
include several titles in the same general subject area, as the prospect may be
interested in acquiring other videos that deal with similar issues.
The Company anticipates that within a short period of time following the
shipment of the preview copy, a telemarketing representative will call the
prospective buyer to get their comments and to ascertain their level of
interest. As a result of having to send preview copies to potential customers,
the sales cycle may take as little as a week or as long as several months.
Marketing
Understanding that the principal competitive factors in the training industry
are quality, effectiveness, client service, and price, Advanced Knowledge has
developed a marketing campaign that emphasizes the Company's commitment to these
key points, and in addition, serves to establish a positive image and brand
value for the Company's products. Advanced Knowledge utilizes the following
marketing methods to reach and motivate buyers of training products and
services.
Branding
The reason Advanced Knowledge has made brand development a key strategy of its
business plan is that a brand is the intentional declaration of "who we are,"
"what we believe" and "why you should put your faith in our products and
services." Above all, corporate branding is a promise a company can keep to its
customers, the trade and its own employees.
To be effective, a corporate brand should be understood by key audiences:
customers, vendors, analysts, the media, employees and all other groups that
determine the viability of a business. The Company believes that Advanced
Knowledge's corporate brand will grow to be our most valuable business asset.
Familiarity leads to favorability. People who know the Company are likely to
feel more positive toward it than a lesser-known company.
-6-
<PAGE>
In order to build brand name recognition, management will strive to ensure that
all corporate, brand, and trade advertising carrying the corporate name and
other company-wide communications have a demonstrably positive impact on
familiarity and favorability. In addition, the Company anticipates strengthening
its brand identity by expanding the scope of its products and services through
partnerships with highly regarded training institutions and professional
associations.
Direct Mail
The most cost efficient way of generating sales for the Company is through the
direct mailing of product catalogues to the purchaser of training products and
materials at organizations having 100 or more employees. This is the Company's
prime target. According to Dun & Bradstreet, there are over 135,000
organizations in the United States with at least 100 or more people. Management
believes that nearly all of these organizations have some sort of formal
training structure.
To reach the target buyer, the Company utilizes mailing lists purchased from,
among others, the industry's most prestigious trade association, the American
Society of Training and Development. Other sources of mailing lists include
various trade associations and companies that sell mailing lists, such as Hugo
Dunhill Mailing Lists, Inc.
In addition to being cost effective, direct mail represents the most accurate
way of measuring sales and marketing efforts. Each response received by the
Company is tracked through a database for the purpose of determining the highest
"pulling" list and to measure the effectiveness of a specific marketing
campaign. In addition, by evaluating response rates, management is also in a
position to determine what level of direct mail is needed to reach sales goals,
and to alter its product line in accordance with marketplace feedback.
Management's intention is to incorporate state-of-the-art design in the
production of Advanced Knowledge's catalogues that will not only serve to
generate sales for specific products, but will also help in building the
Company's brand value. This will be accomplished by highlighting the quality and
effectiveness of its product line through the showcasing of customer
endorsements. Management believes that brand values have a strong tangible
effect on the results of any direct mail effort, and therefore will utilize all
of its marketing materials to enhance the Company's image as a reliable and
competitive provider of quality training products and services.
Telemarketing
The Company anticipates launching its telemarketing efforts by the end of the
first quarter of 1999. The Company intends to manage its telemarketing efforts
by utilizing trained telephone representatives who will primarily focus on
following-up leads that have been generated through direct mail solicitation.
The Company's telemarketers will be provided with information on a customer's
buying history and past needs, which will be entered into the Company's
proprietary database.
Realizing that the buyers of training products and services are highly educated
executives who have multiple pressures and needs, the telemarketers that will be
employed by the Company will be trained in high-level, sophisticated selling
skills. Using a step-by-step telemarketing process, developed by Advanced
-7-
<PAGE>
Knowledge's management, the representative will attempt to establish a
consultive relationship with potential customers. He or she then will be able to
use that relationship in conjunction with information provided by the Company's
database to help generate additional sales or preview requests.
Distribution
As discussed above, the Company currently distributes its videos, publications
and audio tapes via direct mail and telemarketing efforts. For the past quarter
of a century the VHS cassette has represented the primary distribution channel
for workforce training products. Now the revolution in telecommunication
technology has created new opportunities within the industry. Today the
distribution of training products and services are managed through a number of
innovative channels. Among the newer distribution channels available to the
Company are: satellite, internet, intranet, and videoconferencing. A brief
outline of each channel is set forth below.
Satellite
In recent years, television cable channels devoted to specific topics such as
sports, finance, travel, health, and food have proliferated globally. Now Public
Broadcasting Service ("PBS") has established PBS The Business Channel, a cable
channel devoted to workplace training and professional development needs. In
contrast to traditional cable television channels that are broadcast into homes,
PBS The Business Channel will broadcast via satellite to member organizations
that subscribe to the service.
In addition to live events featuring such personalities as General Colin Powell,
former President George Bush, and respected author Tom Peters, PBS The Business
Channel broadcasts seminars and training videos to cover a wide range of topics
and skill levels.
PBS has been educating, informing ,and entertaining for over a half-century, and
therefore has immediate credibility in the marketplace. The Company intends to
sell its videos to PBS The Business Channel. If the Company is successful in
such efforts, management believes that this credibility should help the Company,
and may provide the Company a potential opportunity to generate increased
revenue from the sale of its products to this new distribution channel. There
can be no assurance, however, that the Company will be successful in this
regard.
Internet
As a result of the internet being accessible to an increasingly growing number
of employees both at the office and at home, many organizations have started to
integrate internet training into their overall workforce training programs.
Among the benefits of internet training are that it is interactive, and can be
made available to employees throughout the world, 24 hours a day.
The Company believes that the internet represents the most cost effective way
for organizations to facilitate a distance training program. Distance training
has become a very popular training concept, and it has achieved widespread
acceptance as a result of rapid technological innovations and intensifying
corporate demand to reduce costs related to bringing employees to home office
training locations. According to forecasts published in the October 1998 issue
of Training Magazine, distance training will grow exponentially for three
reasons: the substantially reduced costs of technology, increased pressure to
-8-
<PAGE>
lessen training costs, and greater need to expedite and improve the quality of
information distribution.
For the above mentioned reasons, internet training serves the needs of
organizations while providing many employees the benefits of participating
interactively in training programs at their convenience, even without ever
having to leave their home.
Advanced Knowledge intends to provide its training programs via the internet.
Advanced Knowledge also intends to preview its products over the internet. This
will reduce the time and cost of mailing an evaluation copy, accelerate the
sales cycle, and provide a unique service to the client. Management believes
that currently few other producers and publishers provide this service. The
Company has reserved the domain name, Advancedknowledge.com, but as yet does not
have an operating web site.
Intranet
Intranet technology holds a great deal of promise for employee training.
Intranet is the internet-like internal communication network of an organization.
Unlike the internet, however, access to an intranet is limited to an internal,
smaller group of users. There is growing interest in this new technology because
it offers ease of use and greater access to information. Intranets provide a
powerful tool for training employees, particularly where the specific training
program only involves the dissemination of information.
Because the tools required for delivering real-time skills training have yet to
be developed, intranet training technology is not yet ready for use in training
programs that entail a skill-building process. Management anticipates that these
tools will soon become available, and that over the next few years intranet
training will achieve rapid growth.
Videoconferencing
Organizations can now utilize the "electronic highway" to maximize time and
resource efficiency through the use of videoconferencing for training. This
advanced technology provides a way to simultaneously allow both expert trainers
and quality training videos available to employees throughout the world. In
addition to enabling trainers to have face-to-face training sessions with
employees located in distant branch offices, videoconferencing also permits
employees to participate and interact with distant colleagues in real-time, and
therefore dramatically adds to the effectiveness of the training program.
The Company believes that as videoconferencing technology improves and its costs
continue to decrease, more and more organizations will utilize this distribution
channel to enhance their overall training procedures. Advanced Knowledge intends
to develop specific products for this distribution channel.
Competition
Both the Soft-Skills and Information Technology sectors of the training market
are highly fragmented, with low barriers to entry and no single competitor
accounting for a dominant market share. The Company's competitors are primarily
the internal training departments of companies, and independent education and
training companies. Ranging in size, the independent training companies include
publishers of texts, training manuals, newsletters, as well as providers of
videos, software packages, training programs, and seminars. Many of these
companies have greater financial and managerial resources than the Company.
-9-
<PAGE>
Internal Training Departments
Internal training departments generally provide companies with the most control
over the method and content of training, enabling them to tailor the training to
their specific needs. However, the Company believes that industry trends toward
downsizing and outsourcing continue to reduce the size of internal training
departments and increase the percentage of training delivered by external
providers. Because internal trainers find it increasingly difficult to keep pace
with new training concepts and technologies, and lack the capacity to meet
demand, organizations increasingly supplement their internal training resources
with externally supplied training in order to meet their requirements.
Independent Training Providers
Independent training providers are the main beneficiaries of the organizational
outsourcing trend. As a result of the increased demand for external training
products and services, many large corporations have entered the field by
establishing corporate training divisions. Among the larger competitors are:
Times Mirror Corporation, Sylvan Learning Systems, Inc, Berkshire Hathaway, and
Harcourt General. Additional competitors currently producing training products
include: Blanchard Training & Development, CareerTrack, American Media, Pfeiffer
& Company, CRM Films, and AIMS Multimedia.
In all cases the companies listed above have established credibility within the
training industry, and compared to the Company, have substantially greater
financial resources.
Company History
Pre-Reorganization
The Company was incorporated under the laws of the State of Delaware on January
2, 1987 under the name of EKS RN CON Inc., as a wholly owned subsidiary of
Electro-Kinetic Systems Inc., a Pennsylvania corporation ("EKSI"). In March of
1987 the Corporation's name was changed to EKS RADTECH, INC. In 1990 EKSI
acquired a 72% interest in Douglas Martin & Associates, and changed the name of
its subsidiary to DMA-Radtech ("DMAR"). In 1992 EKSI acquired the remaining
minority interest in Douglas Martin Associates for 140,000 shares of its common
stock. On July 22, 1998 DMAR's Board of Directors declared a stock split of
300:1.
From its inception through March 1995, DMAR operated as a producer and
distributor of radon testing devices. In addition, DMAR served as a consultant
and maintained a testing facility for matters relating to radon. In March of
1995, DMAR ceased its operations, and sold its radon testing facility, following
the bankruptcy of its major distributor.
Upon suspending its operations in 1995, EKSI's management aggressively commenced
a search for other business opportunities for its subsidiary. In December of
1997, EKSI entered into negotiations for DMAR to acquire all the outstanding
shares and assets of Advanced Knowledge, Inc., a privately held Delaware
Corporation ("AKIP").
-10-
<PAGE>
Reorganization
On August 26, 1998 (the "Closing Date"), pursuant to a Plan of Merger and
Reorganization Agreement, dated as of June 30, 1998, between EKSI and AKIP (the
"Reorganization Agreement") DMAR acquired all the outstanding shares and assets
of AKIP in exchange for 2,700,000 shares of DMAR's common stock ("the
Reorganization"). Concurrent with the Closing, DMAR's shareholders voted to
change the name of the corporation to Advanced Knowledge, Inc. The assets
acquired from AKIP in the transaction include: workforce training video
inventory of $29,000, cash of $2,000 and other assets of $6,000, for a total of
approximately $37,000. In addition, pursuant to the Reorganization, liabilities
of $35,000 were assumed by the Company. These liabilities represent loans
payable to the Company's President and CEO, and principal shareholder.
In addition, pursuant to the Reorganization Agreement, AKIP paid $25,000 to EKSI
for certain proprietary know-how and work products, and EKSI contributed to
capital all the liabilities of DMAR, totaling $311,000, relating to its business
prior to the Closing Date.
The Reorganization Agreement provides for EKSI to indemnify the Company for any
liabilities resulting out of or relating to the operations of its business prior
to the Closing Date, and for the Company to indemnify EKSI for any liabilities
resulting out of or relating to the operations of AKIP's business prior to the
Closing Date.
Divestiture
Pursuant to the Reorganization Agreement, and following all applicable
regulatory approval, the common stock, par value $.001, of Advanced Knowledge
(the "Advanced Knowledge Stock") owned by EKSI will be distributed to the
stockholders of record of EKSI (the "EKSI Stockholders") as of October 1, 1998
(the "Record Date") (the "Divestiture").
A principal purpose of the Divestiture is to position the separate entities so
that they will be able to pursue the strategies best suited to their individual
markets, goals and needs. In addition, Advanced Knowledge will become an
independent, publicly-traded company by means of the Divestiture, and the
Divestiture will enable the Company to attempt to raise capital for its own
activities.
EKSI will distribute to the EKSI Stockholders, one (1) share of Advanced
Knowledge Stock for each one hundred (100) shares of EKSI's Common Stock held by
each EKSI Stockholder on the Record Date (the "Divestiture Record Date"). No
certificates or scrip representing fractional shares of Advanced Knowledge Stock
will be issued to the EKSI Stockholders. In lieu of receiving fractional shares,
each EKSI Stockholder that would otherwise be entitled to receive a fractional
share of Advanced Knowledge Stock will receive one whole share if the fraction
is equal to or greater than one-half. If such fraction is less than one-half,
the fractional shares shall be canceled. Any shares of Advanced Knowledge Stock
held by EKSI which are not distributed shall be canceled.
EKSI Stockholders receiving shares of Advanced Knowledge Stock will not be
required to pay any cash or consideration for the shares of Advanced Knowledge
Stock received in the Divestiture or to surrender or exchange any shares of
capital stock of EKSI ("EKSI Shares") in order to receive shares of Advanced
-11-
<PAGE>
Knowledge Stock. The Divestiture will not affect the number of outstanding EKSI
Shares.
Listing and Trading of Advanced Knowledge Stock
There currently is no public market for Advanced Knowledge Stock. A
"when-issued" trading market may develop prior to the Divestiture Date and
continue until the certificates have been mailed by the Divestiture Agent. The
term "when-issued" means that shares can be traded prior to the time
certificates actually are available or issued. Prices at which Advanced
Knowledge Stock may trade cannot be predicted. Until Advanced Knowledge Stock is
fully distributed and an orderly market develops, the prices at which such Stock
trades may fluctuate significantly. The prices at which Advanced Knowledge Stock
trades will be determined by the marketplace and may be influenced by a number
of factors, including, among others, the depth and liquidity of the market for
Advanced Knowledge Stock, investor perceptions of Advanced Knowledge, Advanced
Knowledge's dividend policy and general economic and market conditions.
Following the effectiveness of this Registration Statement, Advanced Knowledge
will be required to file annual, quarterly and other reports under the Exchange
Act (which will include audited financial statements, as required) and comply
with the SEC's proxy rules thereunder. Assuming it can fulfill and complete any
prerequisites, Advanced Knowledge intends to apply to the NASD to have its stock
listed on the Electronic Bulletin Board under the symbol "ADKI". However, no
assurance can be given that Advanced Knowledge Stock will ever meet the
requirements for inclusion on the Electronic Bulletin Board.
Based on the number of EKSI Stockholders as of the Divestiture Record Date,
Advanced Knowledge initially will have approximately 963 holders of record of
its Common Stock.
Subject to the foregoing, shares of Advanced Knowledge Stock distributed to the
EKSI Stockholders in the Divestiture will be freely transferable, except for
shares received by persons who may be deemed to be "affiliates" of Advanced
Knowledge under the 1933 Securities Act, as amended (the "Securities Act").
Persons who may be deemed to be affiliates of Advanced Knowledge after the
Divestiture generally include individuals or entities that control, are
controlled by, or are under common control with, Advanced Knowledge and may
include certain officers and directors of Advanced Knowledge as well as
principal stockholders of Advanced Knowledge. Persons who are affiliates of
Advanced Knowledge will be permitted to sell their shares of Advanced Knowledge
Stock only pursuant to an effective registration statement under the Securities
Act or an exemption from registration thereunder, such as the exemption afforded
by Section 4(1) of the Securities Act and Rule 144 thereunder.
Transaction Costs
Pursuant to the Reorganization Agreement, Advanced Knowledge paid $25,000 to
EKSI to cover the cost of printing, legal, accounting, Divestiture Agent and
other fees and expenses incurred in connection with the transaction.
Item 2. Management's Discussion and Analysis or Plan of Operation
Plan of Operation
The Company will continue to devote its resources to marketing its workforce
-12-
<PAGE>
training video and related training materials, "12 Angry Men: Teams That Don't
Quit" ("12 Angry Men"). In addition, its second video, "Cuban Missile Crisis:
Critical Team Decision Making", is expected to be completed and ready for
shipment in December.
Marketing expenses and production costs over the next year are estimated to
approximate $500,000. Management expects that sales of its videos and training
materials, along with available funds under an agreement with its President and
majority shareholder, should satisfy its cash requirements over the next year.
See "Item 7. Certain Relationships and Related Transactions." However, there can
be no assurance that its President will continue to supply funds pursuant to
such agreement. If its President does not continue to supply funds, the Company
will require additional funding from outside sources.
The Company currently has 2 employees which received no compensation through
August 31, 1998. The Company plans to increase its employees to 6 during 1999 (4
administrative, 2 sales).
Results of Operations
During the period January 1, 1998 through August 31, 1998, the Company expended
approximately $42,000 in the production and development of its workforce
training video and materials and in general and administrative expenses in
establishing its corporate business. In addition, in connection with the
acquisition of AKIP by DMAR, AKIP paid a total of $50,000 to EKSI (parent of
DMAR) for certain proprietary know-how and work products and to cover certain
administrative and professional fees associated with the transaction.
The Company has an agreement with its President and majority shareholder to
provide, at the President's discretion, up to $300,000 at 8% interest. Repayment
is to be made when funds are available with the balance of principal and
interest due December 31, 1999. The Company has borrowed $96,000 through October
31, 1998. See "Item 7. Certain Relationships and Related Transactions."
The Company has no material commitments for capital expenditures nor does it
foresee the need for such expenditures over the next year. In connection with
the production of its video and training materials, the Company has an agreement
with the co-producer of the video, 12 Angry Men, to pay a royalty based on a
specified formula, which has averaged to approximately 35% of gross sales.
The Company was effectively dormant during the year ended December 31, 1997,
expending only $758 in order to maintain its corporate status.
Year 2000 Issue
The Company's business does not currently utilize any electronic processing
systems and therefore is not directly at risk for having systems that will not
recognize the Year 2000 ("Y2K") or treat any date after December 31, 1999 as a
date during the twentieth century. However, no assurances can be given that the
Company will be able to avoid all Y2K problems, especially those that might
originate with third parties with whom the Company transacts business, such as
financial institutions, and the Company has not undertaken any investigation to
determine the Y2K readiness of such parties. If the Company, or any third party
with whom the Company does business were to have a Y2K problem, the business of
-13-
<PAGE>
the Company could be disrupted and the Company's financial condition and results
of operations could be materially adversely affected.
Item 3. Description of Property
During part of 1998, AKIP occupied leased office space at no cost. Since
September 1998, the Company has leased office space from an unaffiliated
third-party under a three year lease, for $1,605 per month, located at 17337
Ventura Boulevard, Suite 224, Encino, CA 91316. The Company anticipates that
this space, consisting of approximately 1,100 square feet, will be adequate for
its operations through the end of fiscal 1999. Such lease terminates February
28, 2000.
Item 4. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information concerning the beneficial
ownership of Advanced Knowledge's outstanding Common Stock as of August 31,
1998, by each person known by Advanced Knowledge to own beneficially more than
5% of the outstanding Common Stock, by each of Advanced Knowledge's directors
and by all directors and officers of Advanced Knowledge as a group. The table
assumes the completion of the Divestiture and is based upon a distribution of
300,000 shares in the Divestiture. The actual number of shares of Advanced
Knowledge Stock distributed could be greater due to rounding of fractional
shares. Unless otherwise indicated below, to the knowledge of Advanced Knowledge
all persons listed below have sole voting and investment power with respect to
their shares of Common Stock except to the extent that authority is shared by
spouses under applicable law.
<TABLE>
<S> <C> <C>
Name and Address Number of Shares Percentage of Class
Buddy Young and
Rebecca Young as Trustees
of the Young Family Trust
17337 Ventura Blvd.,
Suite 224, Encino,
California 91316 1,950,000 65%
Mr. Steve Albright
Wasserman, Comden & Cassleman
5567 Reseda Blvd.
Tarzana, CA 9135 10,000 0.34%
Mr. Dennis Spiegelman
13614 Addison Street
Sherman Oaks, CA 91423 10,000 0.34%
Howard Young
17337 Ventura Blvd.
Suite 224
Encino, California 91316 250,000 8.34%
All Officers and Directors
as a Group (4 persons) 2,220,000 74.00%
</TABLE>
-14-
<PAGE>
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The following table sets forth the Directors and Officers of the
Company:
<TABLE>
<S> <C> <C>
Name Age Position
Buddy Young 63 President, Chief Executive Officer,
Chief Financial Officer, and Director
L. Stephen Albright 45 Secretary, and Director
Dennis Spiegelman 52 Director
Howard Young 40 Vice President
</TABLE>
Buddy Young has served as President, Chief Executive Officer, Chief Financial
Officer and a Director of the Company since August 26, 1998. Immediately prior
thereto, Mr. Young served as President of AKIP, the privately held company he
founded in 1997. During Mr. Young's career he has served in various executive
capacities in the entertainment industry. From 1992 until July 1996, Mr. Young
served as President and Chief Executive Officer of Bexy Communications, Inc.
("Bexy"), a publicly held company whose stock traded on the over-the-counter
Bulletin Board system. Bexy's core business was the production, financing and
distribution of television programming. During his tenure at Bexy, Bexy produced
and distributed a number of television programs including a two-hour special
"Heartstoppers . . . Horror at the Movies," hosted by George Hamilton, and a 26
episode half-hour television series entitled, "Feelin' Great," hosted by
Dynasty's John James. From June 1983 until December 1991, Mr. Young was
President, Chief Executive Officer and a Director of Color Systems Technology,
Inc., a publicly held company whose stock traded on The American Stock Exchange.
Color Systems' major line of business is the use of its patented computer
process for the conversion of black and white motion pictures to color. Prior to
joining Color Systems, Mr. Young served from 1965 to 1975 as Director of West
Coast Advertising and Publicity for United Artists Corporation, from 1975 to
1976 as Director of Worldwide Advertising and Publicity for Columbia Pictures
Corp., from 1976 to 1979 as Vice President of Worldwide Advertising and
Publicity for MCA/Universal Pictures, Inc., and from 1981 to 1982 as a principal
in the motion picture consulting firm of Powell & Young, which represented some
of the industry's leading film makers. In addition to his duties at the Company,
Mr. Young currently serves as an officer and director of MGPX Ventures, Inc., a
publicly held company whose stock trades on the over-the-counter Bulletin Board
system. For the past twenty-five years Mr. Young has been an active member of
The Academy of Motion Picture Arts and Sciences, and has served on a number of
industry-wide committees.
-15-
<PAGE>
L. Stephen Albright has served as a Director of the Company since September 15,
1998. Mr. Albright received his undergraduate degree in Business Administration,
and Marketing, from West Virginia University in 1975. Following careers in sales
and new home construction, Mr. Albright entered Whittier College School of Law
in 1980. Mr. Albright was admitted to practice law in the State of California in
1983. Mr. Albright spent approximately half of his legal career in private
practice where he has been primarily engaged in transactional work, business
litigation, and providing general legal business advice to clients. Mr. Albright
also spent seven years as in-house-counsel, Vice President, General Counsel and
Secretary to CST Entertainment Imaging, Inc., a publicly-held company. While
with CST, Mr. Albright was responsible for all aspects of the company's annual
shareholder's meetings, preparation and filing of the company's proxy materials;
10-K's and 10-Q's, as well as drafting and negotiating lease agreements,
distribution and licensing agreements and debt and equity funding arrangements.
Dennis Spiegelman has served as a Director of the Company since September 15,
1998. Mr. Spiegelman is an experienced sales and marketing executive with a
successful track record in many aspects of the entertainment industry. He is
currently Senior vice President, Sales and Marketing at Axium entertainment, a
company specializing in providing payroll services to the entertainment
industry. Prior to joining Axium, he held similar positions with AP Services,
Inc., and IDC Entertainment Services. During his career of more than 25 years,
Mr. Spiegelman has held various other senior positions including Director of
Operations at Heritage Entertainment, and President and member of the Board of
Directors of All American Group, Inc. While at these companies Mr. Spiegelman
was mainly responsible for the sale of feature films to foreign theatrical,
video, and television markets. In addition, Mr. Spiegelman has served as
Executive Producer of the theatrical motion picture entitled, "Nobody's
Perfect," and is a past president of Financial, Administrative, and Management
Executives in Entertainment, a 50 year old networking organization for
entertainment industry executives.
Howard Young has served as a Vice President of the Company since September 14,
1998. Prior thereto, Mr. Young served as the Director of Marketing for AKIP. Mr.
Young started his business career at Columbia Pictures in 1983 as a motion
picture sales trainee. Shortly thereafter he was promoted to salesman, and was
responsible for sales and exhibitor relations in the Seattle- Portland
territory. In 1985 Mr. Young joined one of Hollywood's leading advertising
agencies, JP Advertising. While there he served in a number of positions
relating to the marketing of motion pictures. In 1992 he was named a Senior Vice
President of the agency, and was responsible for supervising client accounts.
Among others, the agency's accounts included: The Walt Disney Company, 20th
Century Fox, Columbia Pictures, and Paramount Pictures. Along with his client
responsibilities Mr. Young supervised the administrative operations of the
agency. During his tenure at JP Advertising, Mr. Young worked on the marketing
campaigns of such films as Titanic, Speed, 101 Dalmatians, Men in Black, and
True Lies. A graduate of Redlands University, Mr. Young joined AKIP in June of
this year. In addition to his responsibilities at the Company, he serves as a
consultant to a number of companies in the marketing of their products and
service, and is active as a graduate assistant in the Dale Carnegie Course
Program. Mr. Young is the son of the Company's President and principle
shareholder.
Directors are elected in accordance with the Company's bylaws to serve until the
next annual shareholders meeting. The Company does not currently pay
compensation to directors for services in that capacity.
-16-
<PAGE>
Item 6. Executive Compensation.
As a result of the Company's current limited available cash, no Officer received
compensation through the period ending August 31, 1998. The Company will pay
salaries when cash flow permits.
Item 7. Certain Relationships and Related Transactions
Through August 31, 1998 Buddy Young, an officer, director and principal
shareholder of the Company, advanced funds to the Company for operating expenses
and production of training videos. The advanced funds accrued interest at a rate
of 8% per annum and as of such date principal and interest due to Mr. Young on
account of such funds totaled $72,712. Such amount is represented by the
promissory note assumed by the Company in the Reorganization, and a security
interest in all the training videos produced by the Company. To date, these
include 12 Angry Men: Teams That Don't Quit, and Cuban Missile Crisis: Critical
Team Decision Making.
Item 8. Description of Securities.
Common Stock
The Company's certificate of incorporation has been amended to provide for the
authorization of 25,000,000 shares of common stock, $ .001 par value per share.
As of August 31, 1998, 3,000,000 shares of Advanced Knowledge were outstanding.
The holders of common stock are entitled to one vote for each share held of
record on all matters to be voted on by stockholders.
Transfer Agent
The Company's transfer agent is U.S. Stock Transfer Company, 1745 Gardena Ave,
Glendale, CA, Telephone (818) 502-1404.
-17-
<PAGE>
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters.
(a) Market Information
This Registration Statement has been prepared in connection with the
distribution (the "Divestiture") by EKSI to its stockholders of 300,000 shares
of Common Stock, $.001 par value, of the Company owned by EKSI. Prior to the
Reorganization, the Company was a wholly-owned subsidiary of EKSI. Accordingly,
no public market for the Registrant's Common Stock has existed. Although the
Registrant intends to apply for listing on the over-the-counter Electronic
Bulletin Board system under the symbol "ADKI," no assurance can be given that
the Registrant's Common Stock will be listed and traded on the Electronic
Bulletin Board.
Shares of the Company's Common Stock distributed to EKSI stockholders in the
Divestiture, generally, will be freely transferable, except for shares received
by persons who may be deemed to be "affiliates" of the Company under the
Securities Act of 1933 (the "Securities Act"). Persons who may be deemed to be
affiliates of the Company after the Divestiture generally include individuals or
entities that control, are controlled by, or are under common control with, the
Company and may include certain officers and directors of the Company as well as
principal stockholders of the Company. Persons who are affiliates of the Company
will be permitted to sell their shares of the Company Common Stock only pursuant
to an effective registration statement under the Securities Act or an exemption
from registration thereunder, such as the exemption afforded by Section 4(1) of
the Securities Act and Rule 144 thereunder. As of August 31, 1998 all the
3,000,000 outstanding shares of Common Stock are subject to restrictions on
transferability pursuant to Rule 144.
(b) Holders
Based on the stockholders of record of EKSI, as of the Divestiture Record Date,
the Company initially will have approximately 963 holders of record of its
Common Stock as of the Divestiture Date.
(c) Dividends
The Company had not paid cash dividends on its Common Stock and does not intend
to pay cash dividends on its Common Stock in the foreseeable future.
-18-
<PAGE>
Item 2. Legal Proceedings.
None.
Item 3. Changes in and Disagreements with Accountants
None.
Item 4. Recent Sales of Unregistered Securities
Pursuant to the Merger and Reorganization Agreement, the Registrant issued
2,700,000 shares of its Common Stock to the sole shareholder of AKIP, in
exchange for all the outstanding shares of AKIP.
This transaction is exempt from the registration requirement of the Securities
Act of 1933, as amended, by virtue of Section 4(2) thereof covering transactions
not involving any public offering.
Item 5. Indemnification of Directors and Officers
The Company's Bylaws and the Delaware General Corporation Law provide for
indemnification of directors and officers against certain liabilities. Officers
and directors of the Company are indemnified generally against expenses,
actually and reasonably, incurred in connection with proceedings, whether civil
or criminal, provided that it is determined that they acted in good faith, were
not found guilty and, in any criminal matter, had reasonable cause to believe
that their conduct was not unlawful.
-19-
<PAGE>
PART F/S
DMA-RADTECH, INC.
Financial Statements
For the Years Ended
December 31, 1997 and 1996
and Accountants' Report
-20-
<PAGE>
DMA-RADTECH, INC.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Page
ACCOUNTANTS' REPORT .............................................. 22
FINANCIAL STATEMENTS - Unaudited:
Balance Sheets, December 31, 1997 and 1996 ....................... 23
Statements of Operations and Accumulated Deficit
for the Years Ended December 31, 1997 and 1996 ................ 24
Statements of Cash Flows
for the Years Ended December 31, 1997 and 1996 ............... 25
Notes to Financial Statements .................................... 26
</TABLE>
- -------------------------------------------------------------------------------
-21-
<PAGE>
ACCOUNTANTS' REPORT
To DMA-Radtech, Inc.:
The accompanying balance sheets of DMA-Radtech, Inc. (the "Company") as of
December 31, 1997 and 1996, and the related statements of operations and
accumulated deficit and of cash flows for the years then ended were not audited
by us and, accordingly, we do not express an opinion on them.
/s/Farber & Hass LLP
Oxnard, California
September 29, 1998
-22-
<PAGE>
DMA-RADTECH, INC.
BALANCE SHEETS - Unaudited
DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
1997 1996
ASSETS
EQUIPMENT HELD FOR SALE $ -0- $ 9,000
--------- ---------
TOTAL ASSETS $ -0- $ 9,000
========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Amounts due to parent company $ 310,708 $ 302,140
Accounts payable 12,163
Accrued expenses 4,647
--------- ---------
Total current liabilities 310,708 318,950
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT:
Common stock, $.001 par value, 25,000,000
shares authorized, 300,000 shares issued
and outstanding 300 300
Additional paid-in capital 700 700
Accumulated deficit (311,708) (310,950)
--------- ---------
Total shareholders' deficit (310,708) (309,950)
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ -0- $ 9,000
========= ==========
See accountants' report and notes to financial statements.
- -------------------------------------------------------------------------------
-23-
<PAGE>
DMA-RADTECH, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT - Unaudited
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
1997 1996
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES $ 758 $ 12,960
--------- ---------
LOSS FROM OPERATIONS (758) (12,960)
OTHER INCOME 2,119
--------- ----------
NET LOSS (758) (10,841)
ACCUMULATED DEFICIT, BEGINNING OF YEAR (310,950) (300,109)
--------- ----------
ACCUMULATED DEFICIT, END OF YEAR $(311,708) $(310,950)
========= ==========
See accountants' report and notes to financial statements.
- --------------------------------------------------------------------------------
-24-
<PAGE>
DMA-RADTECH, INC.
STATEMENTS OF CASH FLOWS - Unaudited
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(758) $(10,841)
Adjustment to reconcile net loss to net
cash used by operating activities:
Write-down of fixed assets 8,000
Changes in operating assets and
liabilities:
Accounts receivable 3,321
Accounts payable and accrued expenses (4,188)
Amounts due to parent company 758 (1,374)
----- ---------
Net cash used by operating activities -0- (5,082)
----- ---------
NET DECREASE IN CASH (5,082)
CASH, BEGINNING OF YEAR -0- 5,082
CASH, END OF YEAR $-0- $ -0-
====== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $-0- $ -0-
Income taxes $-0- $ -0-
During 1997, the Company transferred all accounts payable, accrued expenses and
equipment held for sale, to its parent company. The net liabilities transferred
totaled $7,810.
See accountants' report and notes to financial statements.
-25-
<PAGE>
DMA-RADTECH, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business - DMA-Radtech, Inc. (the "Company") was engaged in the
design of radon detection. Since 1995, the Company has experienced minimal
operating activity. The Company is a wholly-owned subsidiary of Electro-Kenetic
Systems, Inc. ("EKSI").
Common Stock - In July 1998, the Board of Directors of the Company
declared a 300:1 stock split. The stock split has been retroactively
reflected in the 1997 and 1996 financial statements.
Income Taxes - Income taxes are provided based on earnings reported for
financial statement purposes. In accordance with FASB Statement No.
109, the asset and liability method requires the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between tax basis and financial
reporting basis of assets and liabilities. Deferred income taxes
consist primarily of a net operating loss carryforward of approximately
$475,000 which will expire in various periods through 2012. Due to the
uncertainty as to the realization of this asset, a valuation allowance
has been provided on the total amount.
Pervasiveness of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. BUSINESS COMBINATION
In August 1998, EKSI entered into an agreement with Advanced Knowledge,
Inc. ("AKIP"), whereby the Company would acquire all of the outstanding
shares of AKIP in exchange for 2,700,000 shares of its common stock.
Concurrent with the agreement, the Company changed its name to Advanced
Knowledge, Inc. The fair value of net assets acquired was valued at the
par value of shares issued.
In connection with the agreement, AKIP paid $25,000 to EKSI for certain
proprietary technology and work-products related to the Company's core
business and EKSI agreed to contribute to capital all liabilities of
the Company as of the date of the agreement. Such liabilities totaled
approximately $311,000. In addition, AKIP paid $25,000 to EKSI for
professional fees and other expenses related to the transaction.
-26-
<PAGE>
ADVANCED KNOWLEDGE, INC.
Financial Statements
For the Period January 1, 1998
to August 31, 1998
and Independent Auditors' Report
-27-
<PAGE>
ADVANCED KNOWLEDGE, INC.
TABLE OF CONTENTS
<TABLE>
<S> <C>
PAGE
INDEPENDENT AUDITORS' REPORT ...................................... 29
FINANCIAL STATEMENTS:
Balance Sheet,
August 31, 1998 ............................................... 30
Statement of Operations and Accumulated Deficit
for the Period January 1, 1998
to August 31, 1998 ............................................ 31
Statement of Cash Flows
for the Period January 1, 1998
to August 31, 1998 ............................................ 32
Notes to Financial Statements ..................................... 33-38
</TABLE>
- --------------------------------------------------------------------------------
-28-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Advanced Knowledge, Inc.:
We have audited the accompanying balance sheet of Advanced Knowledge, Inc. (the
"Company") as of August 31, 1998 and the related statements of operations and
accumulated deficit and of cash flows for the period January 1, 1998 to August
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at August 31, 1998, and the
results of its operations and its cash flows for the period ended August 31,
1998 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered significant losses from
operations that raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans in regard to these matters are also
described in Note 4. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/Farber & Hass LLP
Oxnard, California
October 14, 1998
-29-
<PAGE>
ADVANCED KNOWLEDGE, INC.
BALANCE SHEET
AUGUST 31, 1998
- --------------------------------------------------------------------------------
ASSETS
CASH $ 10,918
ACCOUNTS RECEIVABLE 6,836
VIDEO INVENTORY AND PRODUCTION COSTS 33,285
PREPAID EXPENSES 2,000
OTHER ASSET 197
TOTAL ASSETS $ 53,236
========
LIABILITIES AND SHAREHOLDERS' DEFICIT
LIABILITIES:
Accounts payable $ 64,472
Note payable to shareholder 72,712
--------
Total liabilities 137,184
--------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT:
Common stock, par value - $.001, 25,000,000 shares
authorized, 3,000,000 issued and outstanding 3,000
Additional paid-in capital 311,408
Accumulated deficit (398,356)
---------
Total shareholders' deficit (83,948)
---------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 53,236
=========
See accompanying notes to financial statements.
-30-
<PAGE>
ADVANCED KNOWLEDGE, INC.
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE PERIOD JANUARY 1, 1998 TO AUGUST 31, 1998
- --------------------------------------------------------------------------------
REVENUES $ 6,836
COST OF SALES 7,825
---------
GROSS LOSS (989)
---------
EXPENSES:
Advertising 2,555
Research and development 25,000
General and administrative 11,572
Consulting fees 10,000
Professional fees 9,994
Organization costs 25,738
---------
Total expenses 84,859
---------
BEFORE INCOME TAXES (85,848)
INCOME TAXES 800
---------
NET LOSS (86,648)
ACCUMULATED DEFICIT AT JANUARY 1, 1998 (311,708)
----------
ACCUMULATED DEFICIT AT AUGUST 31, 1998 $(398,356)
==========
BASIC LOSS PER SHARE $ (.029)
==========
COMMON SHARES OUTSTANDING 3,000,000
==========
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
-31-
<PAGE>
ADVANCED KNOWLEDGE, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 1998 TO AUGUST 31, 1998
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (86,648)
Adjustments to reconcile net loss to
net cash used by operating activities:
Amortization 420
Changes in operating assets and liabilities:
Accounts receivable (6,836)
Inventory (33,702)
Prepaid expenses (2,000)
Accounts payable 64,472
---------
Net cash used by operating activities (64,294)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributed capital 2,500
Borrowings from shareholder 72,712
---------
Net cash provided by financing activities 75,212
---------
NET INCREASE IN CASH 10,918
CASH, BEGINNING OF PERIOD -0-
CASH, END OF PERIOD $ 10,918
=========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ -0-
Cash paid for income taxes $ 800
Effective June 30, 1998, DMA-Radtech, Inc. issued 2,700,000 shares of its common
stock in exchange for all outstanding shares of Advanced Knowledge, Inc.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
-32-
<PAGE>
ADVANCED KNOWLEDGE, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General Information -At a special meeting held on June 30, 1998, the
shareholders of DMA-Radtech, Inc. ("DMA"), a wholly-owned subsidiary of
Electro-Kinetic Systems, Inc. ("EKSI"), approved a plan of merger and
reorganization, as set forth in an Agreement and Plan of Merger and
Reorganization dated as of June 30, 1998, with Advanced Knowledge, Inc.
("AKIP"). DMA issued 2,700,000 shares of its common stock in exchange
for all outstanding shares of AKIP. Concurrent with the agreement, DMA
changed its name to Advanced Knowledge, Inc. ("AK" or the "Company").
AK, a Delaware corporation, was incorporated under the laws of the
State of Delaware in January 1987.
The Company has changed its fiscal year-end from December 31 to August
31. The audited financial statements for the period January 1 through
August 31, 1998 reflect primarily the operations of the predecessor
company (AKIP) since DMA was effectively dormant during the period
January 1 through June 30, 1998.
In connection with the agreement, AKIP paid $25,000 to EKSI for certain
proprietary technology and work-products related to the Company's core
business and EKSI agreed to contribute to capital all liabilities of
the Company as of the date of the agreement. Such liabilities totaled
approximately $311,000. Management has elected not to pursue the
technology acquired in the transaction and thus, the amount has been
expensed as Research and Development costs. In addition, AKIP paid
$25,000 to EKSI for professional fees and other expenses related to the
transaction. The amount paid by AKIP has been expensed and is included
in Organization Costs in the Statement of Operations.
The current core business of the Company is the production and
marketing of business training videos.
Going Concern - The Company experienced significant operating losses
for the period ended August 31, 1998. The financial statements have
been prepared assuming the Company will continue to operate as a going
concern which contemplates the realization of assets and the settlement
of liabilities in the normal course of business. No adjustment has been
made to the recorded amount of assets or the recorded amount or
classification of liabilities which would be required if the Company
were unable to continue its operations. As discussed in Note 4,
management has developed an operating plan which they believe will
generate sufficient cash to meet its obligations in the normal course
of business. In addition, the Company has an agreement with its
President and majority shareholder which provides for borrowings up to
$300,000 (see Note 2).
-33-
<PAGE>
Unclassified Balance Sheet - In accordance with the provisions of SFAS
No. 53, the Company has elected to present an unclassified balance
sheet.
Video Inventory - Video inventory consists of video tapes, demos,
training manuals and film production costs. Inventory is stated at the
lower of cost or estimated net realizable value and is amortized in the
ratio of the current year's gross revenues to management's estimate of
remaining gross revenues. Accumulated amortization at August 31, 1998
totaled $417.
Pervasiveness of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Income Taxes - The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes".
Income taxes are provided based on earnings reported for financial
statement purposes. Deferred taxes are provided on the temporary
differences between income for financial statement and tax purposes.
At August 31, 1998, the Company has available net operating loss
carryovers of approximately $560,000 that will expire in various
periods through 2013. The Company has established a valuation allowance
for the full tax benefit of the operating loss carryovers due to the
uncertainty regarding realization of the asset.
Fair Value of Financial Instruments - The carrying value of all
financial instruments potentially subject to valuation risk
(principally consisting of accounts receivable, accounts payable and
note payable) approximates fair value due to the short term maturities
of such instruments.
Loss Per Share - The Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share"
that established standards for the computation, presentation and
disclosure of earnings per share ("EPS"), replacing the presentation of
Primary EPS with a presentation of Basic EPS. It also requires dual
presentation of Basic EPS and Diluted EPS on the face of the income
statement for entities with complex capital structures. In accordance
with Staff Accounting Bulletin Topic 4, basic EPS is based on the
number of common shares outstanding as if such shares were outstanding
at the beginning of the period, which totaled 3,000,000. The Company
did not present Diluted EPS since the result was anti-dilutive.
New Accounting Pronouncements - SFAS No. 130, "Reporting Comprehensive
-34-
<PAGE>
Income", establishes standards for reporting and displaying
comprehensive income and its components in financial statements. For
the period ended August 31, 1998, SFAS No. 130 was not considered
applicable to the Company's operations. The Company does not expect its
impact on the financial statements to be significant in 1999.
2. NOTE PAYABLE TO SHAREHOLDER
The Company entered into an agreement with its President and majority
shareholder to borrow to $300,000 (at the discretion of the President)
with interest at 8.0%. Repayment shall be made when funds are available
and the balance of principal and accrued interest is due December 31,
1999.
3. COMMITMENTS AND CONTINGENCIES
The Company has agreements with companies to pay a royalty on sales of
certain videos. The royalty is based on a specified formula which
averages to approximately 35% of gross sales.
4. MANAGEMENT PLANS
During the period ended August 31, 1998, the Company commenced
marketing and sales of its new training videos. Management expects that
the forecasted higher sales and cash flow from operations will be
adequate to finance the 1999 cash flow requirements. Management has
developed plans which include but are not limited to, merging with
another company and obtaining additional financing sources.
- --------------------------------------------------------------------------------
-35-
<PAGE>
DMA-RADTECH, INC. AND ADVANCED KNOWLEDGE, INC.
PRO FORMA FINANCIAL INFORMATION
(UNAUDITED)
The following unaudited pro forma condensed consolidated balance sheet and the
unaudited pro forma condensed consolidated statement of operations have been
prepared by Advanced Knowledge, Inc. ("AKIP") management and give effect to the
acquisition of certain AKIP assets and assumption of liabilities by DMA-Radtech,
Inc. ("DMA") in June 1998. The pro forma information is based on the historical
financial statements of AKIP and DMA giving effect to the transaction under the
purchase method of accounting and the assumptions and adjustments in the
accompanying notes to the pro forma consolidated financial statements.
These pro forma consolidated statements may not be indicative of the results
that actually would have occurred if the combination had been in effect on the
dates indicated or which may be obtained in the future. The pro forma
consolidated financial statements should be read in conjunction with the
historical financial statements of AKIP and DMA.
- --------------------------------------------------------------------------------
-36-
<PAGE>
DMA-RADTECH, INC. AND ADVANCED KNOWLEDGE, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AUGUST 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
Balance Sheet Pro Forma
------------------------ ------------------------------
DMA AKIP Adjust Consolidated
--------- --------- ------------ -------------
ASSETS
CASH $ 10,918 $ 10,918
ACCOUNTS RECEIVABLE 6,836 6,836
INVENTORIES 33,285 33,285
PREPAID EXPENSES
AND OTHER ASSETS _________ 2,000 $ 160 a,b 2,160
-------- --------
TOTAL ASSETS $ -0- $ 53,039 $ 53,199
========= ========= ==========
LIABILITIES AND
STOCKHOLDERS'
DEFICIT
LIABILITIES:
Accounts payable $ 64,472 $ 64,472
Amounts due to
officer 72,712 72,712
Amounts due to
parent company $310,708 _________ $ 310,708 c __________
--------- -----------
Total liabilities 310,708 137,184 137,184
--------- --------- ----------
STOCKHOLDERS'
DEFICIT:
Common stock 1,000 2,500 $(310,908)a,c 314,408
Accumulated deficit (311,708) (86,645) $ (40) b (398,393)
--------- -------- ----------
Total stockholders'
deficit (310,708) (84,145) (83,985)
--------- -------- ----------
TOTAL LIABILITIES
AND STOCKHOLDERS'
DEFICIT $ -0- $ 53,039 $ 53,199
========= ============ ==========
- --------------------------------------------------------------------------------
-37-
<PAGE>
DMA-RADTECH, INC. AND ADVANCED KNOWLEDGE, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED AUGUST 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
Statement
of Operations Pro Forma
------------------------- -------------------------
DMA AKIP Adjust Consolidated
--------- --------- ---------- ------------
SALES $ -0- $ 6,836 $ 6,836
--------- --------- ---------
COST AND EXPENSES:
Cost of sales 7,825 7,825
Selling, general and
administrative 758 84,856 $ 40 b 85,654
--------- --------- ---------
Total costs and
expenses 758 92,681 93,479
--------- --------- ---------
LOSS BEFORE INCOME
TAXES (758) (85,845) (86,643)
INCOME TAXES _________ 800 800
--------- ---------
NET LOSS $ (758) $ (86,645) $(87,443)
========== =========== =========
BASIC LOSS
PER SHARE $ (.0003) $(0.029)
========== =========
COMMON SHARES
OUTSTANDING 3,000,000 3,000,000
========== =========
- --------------------------------------------------------------------------------
-38-
<PAGE>
DMA-RADTECH, INC. AND ADVANCED KNOWLEDGE, INC.
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
a. Under purchase accounting, AKIP's assets and liabilities are required
to be adjusted to their estimated fair values. The estimated fair value
adjustments have been determined based upon available information,
although there cannot be assurance that such estimated fair values
represent fair values that would ultimately be determined at the
acquisition date. The following are the pro forma adjustments made to
reflect AKIP's fair values as of June 30, 1998:
Net Assets
Increase (Decrease)
---------------------
AMOUNTS AS REPORTED BY AKIP:
Net assets $2,500
Fair value adjustment - goodwill 200
------
Total $2,700
======
b. For purposes of determining the pro forma effect of the AKIP
acquisition on the consolidated statement of operations, the following
pro forma adjustment has been made for the year ended August 31, 1998:
Increase in amortization expense
due to step-up in basis $ 40
======
c. Reduction of amounts due to parent company (Electro-Kinetic Systems,
Inc.) and increase of capital of DMA based on agreement by parent
company to contribute to capital all liabilities of DMA in connection
with acquisition of AKIP.
- --------------------------------------------------------------------------------
-39-
<PAGE>
PART III
Item 1 and Item 2, Index to Exhibits and Description of Exhibits
The following exhibits required by Item 601 of Regulation S-B are filed
herewith:
Sequential
Exhibit No. Document Description
3.
3.1. Certificate of Incorporation
3.2. Certificate of Amendment
3.3. Certificate of Merger
3.4. By-laws
10. Material Contracts
10.1. Agreement and Plan of Merger and
Reorganization dated June 30, 1998 by
and between Advanced Knowledge , Inc
and DMA Radtech, Inc.
10.2 Production Agreement dated January 5,
1998 by and between Advanced Knowledge, Inc.
and The Hathaway Group.
10.3 Distribution Agreement dated February 1, 1998
By and between Advanced Knowledge, Inc. and
Aims Multimedia.
-40-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration Statement to be signed on
its behalf by the undersigned duly authorized.
Date: January 6, 1999 ADVANCED KNOWLEDGE, INC.
By: /s/Buddy Young
---------------------------
Buddy Young
President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
date indicated.
Dated January 6, 1999 /s/ Buddy Young
----------------------------------
Buddy Young, Director
Dated January 6, 1999 /s/ L. Stephen Albright
-----------------------------------
L. Stephan Albright, Director
Dated January 6, 1999 /s/ Dennis Spiegelman
-----------------------------------
Dennis Spiegelman, Director
-41-
<PAGE>
Certificate Of Incorporation
of
EKS RN CON INC.
FIRST. The name of this corporation is EKS RN CON INC
SECOND. Its registered office in the State of Delaware is to be
located at 725 Market Street in the City of Wilmington, County of New
Castle. The registered agent in charge thereof is The Company
Corporation at same as above.
THIRD. The nature of the business and, the objects and purposes
proposed to be transacted, promoted and carried on, are to do any or
all the things herein mentioned, as fully and to the same extent as
natural persons might or could do, and in any part of the world, via:
"The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of Delaware."
FOURTH. The amount of the total authorize capital stock of this
corporation is 1000 shares of No Par Value.
FIFTH. The name and mailing address of the Incorporator is as follows:
NAME: ADDRESS: MARSHA MILLS 725 MARKET ST., WILMINGTON, DE 19801
SIXTH. The powers of the Incorporator are to terminate upon filing of
the Certificate of Incorporation, and the names(s) and mailing
address(es) of persons who are to serve as director(s) until the first
annual meeting of stockholders or until their successors are elected
and qualify are as follows:
WILLIAM N. HAMRE, 1337 PARKLANE RD., SWARTHMORE, PA 19081
SEVENTH: The Directors shall have power to make and to alter or amend
the By-Laws; to fix the amount to be reserved as working capital, and
to authorize and cause to be executed, mortgages and liens without
limit as to the amount, upon the property and franchise of the
Corporation.
With the consent in writing, and pursuant to a vote of the holders of
a majority of the capital stock issued and outstanding, the Directors
shall have the authority to dispose, in any manner, of the whole
property of this corporation.
The By-Laws shall determine whether and to what extent the accounts
and books of this corporation, or any of them shall be open to the
inspection of the stockholders; and no stockholder shall have any
right of inspecting any account, or book or document of this
Corporation, except as conferred by the law or the By-Laws, or by
resolution of the stockholders.
The stockholders and directors shall have power to hold their meetings
and keep the books, documents and papers of the Corporation outside of
the State of Delaware, at such places as may be from time to time
designated by the By-Laws or by resolution of the stockholders or
directors, except as otherwise required by the laws of Delaware.
It is the intention that the objects, purposes and powers specified in
the Third paragraph hereof shall, except where otherwise specified in
said paragraph, be nowise limited or restricted by reference to or
inference from the terms of any other clause or paragraph in this
certificate of incorporation, but that the objects, purposes and
powers specified in the Third paragraph and in each of the clauses or
paragraphs of this charter shall be regarded as independent objects,
purposes and powers.
<PAGE>
I, THE UNDERSIGNED, for the purpose of forming a Corporation under the
laws of the State of Delaware, do make, file and record this
Certificate and do certify that the facts herein are true; and I have
accordingly hereunto set my hand.
DATED : 1/2/87
State of Delaware
County of New Castle
/s/Marsha Mills
------------------------
-2-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
DMA-RADTECH, INC.
It is hereby certified that:
1. The present name of the corporation (the "Corporation") is
DMA-Radtech, Inc.
2. The Certificate of Incorporation of the Corporation is hereby
amended by deleting Article Fourth in its entirety and replacing it
with the following: "Fourth (A) The total number of shares of stock
which the Corporation is authorized to issue is 25,000,000 shares of
Common Stock, $.001 par value.
(B) At the effective time of this amendment, each security of the
Corporation outstanding on the record date set by the Board of
Directors shall be split and changed into 300 times such security."
3. The Certificate of Incorporation of the Corporation is hereby
amended by adding Article Eighth as follows:
"Eighth. The Corporation shall, to the full extent permitted by
Section 145 of the Delaware Corporation Law, as the same may be
amended and supplemented from time to time, indemnify all persons whom
it may indemnify pursuant thereto. The personal liability of directors
of the Corporation is hereby eliminated to the fullest extent
permitted by Section 102(b)(7)of the Delaware General Law, as the same
may be amended and supplemented from time to time."
<PAGE>
4. The foregoing Amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, DAM-RADTECH, INC. has caused this Certificate of
Amendment to be signed by a duly authorized Officer, under penalty of
perjury, this 31st day of July, 1998.
/s/ RICHARD J.L. HERSON
-------------------------
Name: Richard J.L. Herson
Title: Authorized Officer
-2-
<PAGE>
CERTIFICATE OF MERGER
OF
ADVANCED KNOWLEDGE, INC.
INTO
DMA-RADTECH, INC.
The undersigned corporation, DMA-Radtech, Inc., organized and existing
under and by virtue of the General Corporation Law of the State of
Delaware,
does hereby certify:
First: That the name and state of incorporation of each of the
constituent corporations of the merger is a follows:
Name State of Incorporation
DMA Radtech, Inc. Delaware
Advanced Knowledge, Inc. Delaware
Second: That an Agreement and Plan of Merger between the parties to
the merger has been approved, adopted, certified, executed and
acknowledged by each of the constituent corporations in accordance
with the requirements of Section 251 of the General Corporation Law of
the State of Delaware. The approval on behalf of both constituent
corporations was adopted by written consent of their stockholders,
each in accordance with Section 228 of the General Corporation Law of
the State of Delaware.
Third: That the name of the surviving corporation of the merger
is DMA-Radtech, Inc.
Fourth: That the Certificate of Incorporation of the surviving
corporation shall be amended to change the name to Advanced
Knowledge, Inc.
Fifth: That the executed Agreement and Plan of Merger is on file
at the principal place of business of the surviving corporation.
The address of the principal place of business of the surviving
corporation is 17337 Ventura Blvd., Suite 24, Encino, CA 91316.
<PAGE>
Sixth: That a copy of the Agreement and Plan of Merger will be
furnished by the surviving corporation, on request and without
cost, to any stockholder of any constituent corporation.
Seventh: That this Certificate of Merger and the Merger provided
for herein shall be effective at, and not until, the time that
this Certificate of Merger is filed in the Office of the
Secretary of the State of Delaware.
in witness whereof, the surviving corporation has caused this
certificate to be signed by its president, this 10th day of
August, 1998.
DMA-Radtech, Inc.
By: /s/ Richard J.L. Herson
------------------------
Richard J.L. Herson
Authorized Officer
-2-
<PAGE>
BY-LAWS
OF
ADVANCED KNOWLEDGE, INC.
(a Delaware corporation)
ARTICLE I
OFFICES
1. Registered Office: The registered office shall be established
and maintained at and shall be the registered agent of the
Corporation in charge hereof.
2. Other Offices: The Corporation may have other offices, either
within or without the State of Delaware, at such place or places
as the Board of Directors may from time to time appoint or the
business of the Corporation may require, provided, however, that
the corporation's books and records shall be maintained at such
place within the continental United States as the Board of
Directors shall from time to time designate.
ARTICLE II
STOCKHOLDERS
2.1 Place of Stockholders' Meetings: All meetings of the
stockholders of the Corporation shall be held at such place or
places, within or outside the State of Delaware as may be fixed
by the Board of Directors from time to time or as shall be
specified in the respective notices thereof.
2.2 Date and Hour of Annual Meetings of Stockholders: An annual
meeting of the stockholders shall be held each year within
thirteen (13) months after the close of the fiscal year of the
Corporation.
2.3 Purpose of Annual Meetings: At each annual meeting, the
stockholder shall elect the members of the Board of Directors for
the succeeding year. At any such annual meeting any further
proper business may be transacted.
2.4 Special Meetings of Stockholders: Special meetings of the
stockholders or of any class or series thereof entitled to vote
may be called by the President or by the Chairman of the Board of
Directors, or at the request in writing by stockholders of record
owning at least fifty percent (50%) of the issued and outstanding
voting shares of common stock of the Corporation.
2.5 Notice of Meetings of Stockholders: Except as otherwise
expressly required or permitted by law, not less than ten days
<PAGE>
nor more than sixty days before the date of every stockholders'
meeting the Secretary shall give to each stockholder of record
entitled to vote at such meeting, written notice, served
personally by mail or by telegram, stating the place, date and
hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called. Such notice,
if mailed shall be deemed to be given when deposited in the
United States mail, postage prepaid, directed to the stockholder
at his address for notices to such stockholder as it appears on
the records of the Corporation.
2.6 Quorum of Stockholders:
(1) Unless otherwise provided by the Certificate of Incorporation
or by law, at any meeting of the stockholders, the presence in
person or by proxy of stockholders entitled to cast a majority of
the votes thereat shall constitute a quorum. The withdrawal of
any shareholder after the commencement of a meeting shall have no
effect on the existence of a quorum, after a quorum has been
established at such meeting.
(2) At any meeting of the stockholders at which a quorum shall be
present, a majority of voting stockholders, present in person or
by proxy, may adjourn the meeting from time to time without
notice other than announcement at the meeting. In the absence of
a quorum, the officer presiding thereat shall have power to
adjourn the meeting from time to time until a quorum shall be
present. Notice of any adjourned meeting, other than announcement
at the meeting, shall not be required to be given except as
provided in paragraph (d) below and except where expressly
required by law.
(3) At any adjourned session at which a quorum shall be present,
any business may be transacted which might have been transacted
at the meeting originally called but only those stockholders
entitled to vote at the meeting as originally noticed shall be
entitled to vote at any adjournment or adjournments thereof.,
unless a new record date is fixed by the Board of Directors.
(4) If an adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
2.7 Chairman and Secretary of Meeting: The President, shall
preside at meetings of the stockholders. The Secretary shall act
as secretary of the meeting or if he is not present, then the
presiding officer may appoint a person to act as secretary of the
meeting.
2.8 Voting by Stockholders: Except as may be otherwise provided
by the Certificate of Incorporation or these by-laws, at every
meeting of the stockholders each stockholder shall be entitled to
one vote for each share of voting stock standing in his name on
the books of the Corporation on the record date for the meeting.
Except as otherwise provided by these by-laws, all elections and
-2-
<PAGE>
questions shall be decided by the vote of a majority in interest
of the stockholders present in person or represented by proxy and
entitled to vote at the meeting.
2.9 Proxies: Any stockholder entitled to vote at any meeting of
stockholders may vote either in person or by proxy. Every proxy
shall be in writing, subscribed by the stockholder or his duly
authorized attorney-in-fact, but need not be dated, sealed,
witnessed or acknowledged.
2.10 Inspections: The election of directors and any other vote by
ballot at any meeting of the stockholders shall be supervised by
at least two inspectors. Such inspectors may be appointed by the
presiding officer before or at the meeting; or if one or both
inspectors so appointed shall refuse to serve or shall not be
present, such appointment shall be made by the officer presiding
at the meeting.
2.11 List of Stockholders:
(1) At least ten days before every meeting of stockholders, the
Secretary shall prepare and make a complete list of the
stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder
and the number of shares registered in the name of each
stockholder.
(2) During ordinary business hours, for a period of at least ten
days prior to the meeting, such list shall be open to examination
by any stockholder for any purpose germane to the meeting, either
at a place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or if not
so specified, at the place where the meeting is to be held.
(3) The list shall also be produced and kept at the time and
place of the meeting during the whole time of the meeting, and it
may be inspected by any stockholder who is present.
(4) The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list
required by this Section 2.11 or the books of the Corporation, or
to vote in person or by proxy at any meeting of stockholders.
2.12 Procedure at Stockholders' Meetings: Except as otherwise
provided by these by-laws or any resolutions adopted by the
stockholders or Board of Directors, the order of business and all
other matters of procedure at every meeting of stockholders shall
be determined by the presiding officer.
2.13 Action by Consent Without Meeting: Unless otherwise by the
Certificate of Incorporation, any action required to be taken at
-3-
<PAGE>
any annual or special meeting of stockholders, or any action
which may be taken at any annual or special meeting, may be taken
without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking
of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not
consented in writing.
ARTICLE III
DIRECTORS
3.1 Powers of Directors: The property, business and affairs of
the Corporation shall be managed by its Board of Directors which
may exercise all the powers of the Corporation except such as are
by the law of the State of Delaware of the Certificate of
Incorporation or these by-laws required to be exercised or done
by the stockholders.
3.2 Number, Method of Election, Terms of Office of Directors: The
number of directors which shall constitute the Board of Directors
shall be five (5) unless and until otherwise determined by a vote
of a majority of the entire Board of Directors. Each Director
shall hold office until the next annual meeting of stockholders
and until his successor is elected and qualified, provided,
however, that a director may resign at any time. Directors need
not be stockholders.
3.3 Vacancies on Board of Directors; Removal:
(1) Any director may resign his office at any time by delivering
his resignation in writing to the Chairman of the Board or to the
President. It will take effect at the time specified therein or,
if no time is specified, it will be effective at the time of its
receipt by the Corporation. The acceptance of a resignation shall
not be necessary to make it effective, unless expressly so
provided in the resignation.
(2) Any vacancy in the authorized number of directors may be
filled by majority vote of the stockholders and any director so
chosen shall hold office until the next annual election of
directors by the stockholders and until his successor is duly
elected and qualified or until his earlier resignation or
removal.
(3) Any director may be removed with or without cause at any time
by the majority vote of the stockholders given at a special
meeting of the stockholders called for that purpose.
-4-
<PAGE>
3.4 Meetings of the Board of Directors:
(1) The Board of Directors may hold their meetings, both regular
and special, either within or outside the State of Delaware.
(2) Regular meetings of the Board of Directors may be held at
such time and place as shall from time to time be determined by
resolution of the Board of Directors. No notice of such regular
meetings shall be required. If the date designated for any
regular meeting be a legal holiday, then the meeting shall be
held on the next day which is not a legal holiday.
(3) The first meeting of each newly elected Board of Directors
shall be held immediately following the annual meeting of the
stockholders for the election of officers and the transaction of
such other business as may come before it. If such meeting is
held at the place of the stockholders' meeting, no notice thereof
shall be required.
(4) Special meetings of the Board of Directors shall be held
whenever called by direction of the Chairman of the Board or the
President or at the written request of any one director.
(5) The Secretary shall give notice to each director of any
special meeting of the Board of Directors by mailing the same at
least three days before the meeting or by telegraphing, telexing,
or delivering the same not late than the date before the meeting.
Unless required by law, such notice need not include a statement
of the business to be transacted at, or the purpose of, any such
meeting. Any and all business may be transacted at any meeting of
the Board of Directors. No notice of any adjourned meeting need
be given. No notice to or waiver by any director shall be
required with respect to any meeting at which the director is
present.
3.5 Quorum and Action: Unless provided otherwise by law or by the
Certificate of Incorporation or these by-laws, a majority of the
Directors shall constitute a quorum for the transaction of
business; but if there shall be less than a quorum at any meeting
of the Board, a majority of those present may adjourn the meeting
from time to time. The vote of a majority of the Directors
present at any meeting at which a quorum is present shall be
necessary to constitute the act of the Board of Directors.
3.6 Presiding Officer and Secretary of the Meeting: The President
or, in his absence a member of the Board of Directors selected by
the members present, shall preside at meetings of the Board. The
Secretary shall act as secretary of the meeting, but in his
absence the presiding officer may appoint a secretary of the
meeting.
-5-
<PAGE>
3.7 Action by Consent Without Meeting: Any action required or
permitted to be taken at any meeting of the Board of Directors or
of any committee thereof may be taken without a meeting if all
members of the Board of Directors or committee, as the case may
be, consent thereto in writing, and the writing or writings are
filed with the minutes or proceedings of the Board or committee.
3.8 Action by Telephonic Conference: Members of the Board of
Directors, or any committee designated by such board, may
participate in a meeting of such board or committee by manes of
conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each
other, and participation in such a meeting shall constitute
presence in person at such meeting.
3.9 Committees: The Board of Directors shall, by resolution or
resolutions passed by a majority of the Directors designate one
or more committees, each of such committees to consist of one or
more Directors of the Corporation, for such purposes as the Board
shall determine. The Board may designate one or more Directors as
alternate members of any committee, who may replace any absent or
disqualified member at any meeting of such committee.
3.10 Compensation of Directors: Directors shall receive such
reasonable compensation for their service on the Board of
Directors or any committees thereof, whether in the form of
salary or a fixed fee for attendance at meetings, or both, with
expenses, if any, as the Board of Directors may from time to time
determine. Nothing herein contained shall be construed to
preclude any Director from serving in any other capacity and
receiving compensation therefor.
ARTICLE IV
OFFICERS
4.1 Officers, Title, Elections, Terms:
(1) The elected officers of the Corporation shall be a President,
a Treasurer and a Secretary, and such other officers as the Board
of Directors shall deem advisable. The officers shall be elected
by the Board of Directors at its annual meeting following the
annual meeting of the stockholders, to serve at the pleasure of
the Board or otherwise as shall be specified by the Board at the
time of such election and until their successors are elected and
qualified.
-6-
<PAGE>
(2) The Board of Directors may elect or appoint at any time, and
from time to time, additional officers or agents with such duties
as it may deem necessary or desirable. Such additional officers
shall serve at the pleasure of the Board or otherwise as shall be
specified by the Board at the time of such election or
appointment. Two or more offices may be held by the same person.
(3) Any vacancy in any office may be filled for the unexpired
portion of the term by the Board of Directors.
(4) Any officer may resign his office at any time. Such
resignation shall be made in writing and shall take effect at the
time specified therein or, if no time has been specified, at the
time of its receipt by the Corporation. The acceptance of a
resignation shall not be necessary to make it effective, unless
expressly so provided in the resignation.
(5) The salaries of all officers of the Corporation shall be
fixed by the Board of Directors.
4.2 Removal of Elected Officers: Any elected officer may be
removed at any time, either with or without cause, by resolution
adopted at any regular or special meeting of the Board of
Directors by a majority of the Directors then in office.
4.3 Duties:
(1) President: The President shall be the principal executive
officer of the Corporation and, subject to the control of the
Board of Directors, shall supervise and control all of the
business and affairs of the Corporation. He shall, when present,
preside at all meetings of the stockholders and of the Board of
Directors. He shall see that all orders and resolutions of the
Board of Directors are carried into effect (unless any such order
or resolution shall provide otherwise), and in general shall
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.
(2) Treasurer: The Treasurer shall (1) have charge and custody of
and be responsible for all funds and securities of the
Corporation; (2) receive and give receipts for monies due and
payable to the Corporation from any source whatsoever; (3)
deposit all such monies in the name of the Corporation in such
banks, trust companies, or other depositories as shall be
selected by resolution of the Board of Directors; and (4) in
general perform all 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. He shall, if
required by the Board of Directors, 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.
-7-
<PAGE>
(3) Secretary: The Secretary shall (1) keep the minutes of the
meetings of the stockholders, the Board of Directors, and all
committees, if any, of which a secretary shall not have been
appointed, in one or more books provided for that purpose; (2)
see that all notices are duly given in accordance with the
provisions of these by-laws and a required by law; (3) be
custodian of the corporate records and of the seal of the
Corporation and see that the seal of the Corporation is affixed
to all documents, the execution of which on behalf of the
Corporation under its seal, is duly authorized; (4) keep a
register of the post office address of each stockholder which
shall be furnished to the Secretary by such stockholder; (5) have
general charge of stock transfer books of the Corporation; and
(6) in general 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.
ARTICLE V
CAPITAL STOCK
5.1 Stock Certificates:
(1) Every holder of stock in the Corporation shall be entitled to
have a certificate signed by, or in the name of, the Corporation
by the President and by the Treasurer or the Secretary,
certifying the number of shares owned by him.
(2) If such certificate is countersigned by a transfer agent
other than the Corporation or its employee, or by a registrar
other than the Corporation of its employee, the signatures of the
officers of the Corporation may be facsimiles, and, if permitted
by law, any other signature may be a facsimile.
(3) In case any officer who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to
be such officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such
officer at the date of issue.
(4) Certificates of stock shall be issued in such form not
inconsistent with the Certificate of Incorporation as shall be
approved by the Board of Directors, and shall be numbered and
registered in the order in which they were issued.
(5) All certificates surrendered to the Corporation shall be
canceled with the date of cancellation, and shall be retained by
the Secretary, together with the powers of attorney to transfer
and the assignments of the shares represented by such
certificates, for such period of time as shall be prescribed from
time to time by resolution of the Board of Directors.
-8-
<PAGE>
5.2 Record Ownership: A record of the name and address of the
holder of such certificate, the number of shares represented
thereby and the date of issue thereof shall be made on the
Corporation's books. The Corporation shall be entitled to treat
the holder of any share of stock as the holder in fact thereof,
and accordingly shall not be bound to recognize any equitable or
other claim to or interest in any share on the part of any other
person, whether or not it shall have express or other notice
thereof, except as required by law.
5.3 Transfer of Record Ownership: Transfer of stock shall be made
on the books of the Corporation only by direction of the person
named in the certificate or his attorney, lawfully constituted in
writing, and only upon the surrender of the certificate therefor
and a written assignment of the shares evidenced thereby.
Whenever any transfer of stock shall be made for collateral
security, and not absolutely, it shall be so expressed in the
entry of the transfer if, when the certificates are presented to
the Corporation for transfer, both the transferor and the
transferee request the Corporation to do so.
5.4 Lost, Stolen or Destroyed Certificates: Certificates
representing share of the stock of the Corporation shall be
issued in place of any certificate alleged to have been lost,
stolen or destroyed in such manner and on such terms and
conditions as the Board of Directors from time to time may
authorize.
5.5 Transfer Agent; Registrar; Rules Respecting Certificates: The
Corporation may maintain one or more transfer officers or
agencies where stock of the Corporation shall be transferable.
The Corporation may also maintain one or more registry offices
where such stock shall be registered. The Board of Directors may
make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of stock
certificates.
5.6 Fixing Record Date for Determination of Stockholders of
Record: The Board of Directors may fix, in advance, a date as the
record date for the purpose of determining stockholders entitled
to notice of, or to vote at, any meeting of the stockholders or
any adjournment thereof, or the stockholders entitled to receive
payment of any dividend or other distribution or the allotment of
any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or to express consent to
corporate action in writing without a meeting, or in order to
make a determination of the stockholders for the purpose of any
other lawful action. Such record date in any case shall be not
more than sixty days nor less than ten days before the date of a
meeting of the stockholders, nor more than sixty days prior to
any other action requiring such determination of the
stockholders. A determination of the stockholders of record
entitled to notice or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that
the Board of Directors may fix a new record date for the
adjourned meeting.
-9-
<PAGE>
5.7 Dividends: Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may, out of funds legally
available therefor at any regular or special meeting, declare
dividends upon the capital stock of the Corporation as and when
they deem expedient. Before declaring any dividend there may be
set apart out of any funds of the Corporation available for
dividends, such sum or sums as the Board of Directors from time
to time in their discretion deem proper for working capital or as
a reserve fund to meet contingencies or for equalizing dividends
or for such other purposes as the Board of Directors shall deem
conducive to the interests of the Corporation.
ARTICLE VI
SECURITIES HELD BY THE CORPORATION
6.1 Voting: Unless the Board of Directors shall otherwise order,
the President, the Secretary or the Treasurer shall have full
power and authority, on behalf of the Corporation, to attend, act
and vote at any meeting of the stockholders of any corporation in
which the Corporation may hold stock, and at such meeting to
exercise any or all rights and powers incident to the ownership
of such stock, and to execute on behalf of the Corporation a
proxy or proxies empowering another or others to act as
aforesaid. The Board of Directors from time to time may confer
like powers upon any other person or persons.
6.2 General Authorization to Transfer Securities Held by the
Corporation:
(1) Any of the following officers, to wit: the President and the
Treasurer shall be, and they hereby are, authorized and empowered
to transfer, convert, endorse, sell, assign, set over and deliver
any and all shares of stock, bonds, debentures, notes,
subscription warrants, stock purchase warrants, evidence or
indebtedness, or other securities now or hereafter standing in
the name of or owned by the Corporation, and to make, execute and
deliver, under the seal of the Corporation, any and all written
instructions of assignment and transfer necessary or proper to
effectuate the authority hereby conferred.
(2) Whenever there shall be annexed to any instrument of
assignment and transfer executed pursuant to and in accordance
with the foregoing paragraph (a), a certificate of the Secretary
of the Corporation in office at the date of such certificate
setting forth the provisions of this Section 6.2 and stating that
they are in full force and effect and setting forth the names of
persons who are then officers of the Corporation, then all
persons to whom such instrument and annexed certificate shall
thereafter come, shall be entitled, without further inquiry or
investigation and regardless of the date of such certificate, to
assume and to act in reliance upon the assumption that the shares
of stock or other securities named in such instrument were
theretofore duly and properly transferred, endorsed, sold,
assigned, set over and delivered by the Corporation, and that
-10-
<PAGE>
with respect to such securities the authority of these provisions
of the by-laws and of such officers is still in full force and
effect.
ARTICLE VII
MISCELLANEOUS
7.1 Signatories: All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued
in the name of the Corporation shall be signed by such officer or
officers or such other person or persons as the Board of
Directors may from time to time designate.
7.2 Seal: The seal of the Corporation shall be in such form and
shall have such content as the Board of Directors shall from time
to time determine.
7.3 Notice and Waiver of Notice: Whenever any notice of the time,
place or purpose of any meeting of the stockholders, directors or
a committee is required to be given under the law of the State of
Delaware, the Certificate of Incorporation or these by-laws, a
waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the holding
thereof, or actual attendance at the meeting in person or, in the
case of any stockholder, by his attorney-in-fact, shall be deemed
equivalent to the giving of such notice to such persons.
7.4 Indemnity: The Corporation shall indemnify its directors,
officers and employees to the fullest extent allowed by law,
provided, however, that it shall be within the discretion of the
Board of Directors whether to advance any funds in advance of
disposition of any action, suit or proceeding, and provided
further that nothing in this Section 7.4 shall be deemed to
obviate the necessity of the Board of Directors to make any
determination that indemnification of the director, officer or
employee is proper under the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and
(b) of Section 145 of the Delaware General Corporation Law.
7.5 Fiscal Year: Except as from time to time otherwise determined
by the Board of Directors, the fiscal year of the Corporation
shall end on December 31st.
-11-
<PAGE>
CERTIFICATE OF SECRETARY
KNOW ALL PERSONS BY THESE PRESENTS:
The undersigned , Secretary of Advanced Knowledge, Inc., a
Delaware corporation (the "Corporation"), does hereby certify
that the above and foregoing By-laws were duly adopted as the
By-laws of the Corporation at a meeting of the Board of Directors
duly held on January 12, 1998.
IN WITNESS WHEREOF, the undersigned has subscribed his name and
affixed the seal of the Corporation on the date set forth below.
DATE: January 12, 1998
/s/ Buddy Young
----------------------------
Secretary of the Corporation
-12-
<PAGE>
AGREEMENT
AND
PLAN OF MERGER
AND
REORGANIZATION
BETWEEN
DMA RADTECH., Inc.
AND
ADVANCED KNOWLEDGE, INC.
Dated: As of June 30, 1998
<PAGE>
AGREEMENT made as of this 30th day of June, 1998, between
ADVANCED KNOWLEDGE, INC. ("AKI"), a Delaware corporation with an
address at 17337 Ventura Blvd, Suite 224, Encino, CA 91316, DMA
RADTECH., INC., a Delaware corporation with an address at c/o
Richard J.L. Herson, 270 Rocky Run Road, Glen Gardner, NJ 08826
("DMA"), and ELECTRO-KINETIC SYSTEMS, INC., a Pennsylvania
corporation with an address at c/o Richard J.L. Herson, 270 Rocky
Run Road, Glen Gardner, NJ 08826 ("EKSI"), DMA's sole
stockholder.
WITNESSETH:
WHEREAS, DMA is currently inactive with no operations; and
WHEREAS, EKSI owns certain proprietary know-how and work product
in an area of interest to AKI; and
WHEREAS, the Boards of Directors of each of AKI and DMA have
determined that it is in the best interest of each corporation
and its respective stockholder to consummate a tax-free
reorganization under Section 368(a) of the Internal Revenue Code
of 1986, as amended, in the form of a merger in the manner set
forth herein.
NOW, THEREFORE, in consideration of the mutual agreements,
covenants and representations and warranties hereinafter set
forth, the aforementioned parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
NOW, THEREFORE, it is agreed as follows:
1.1 The Merger. AKI as of the Effective Date (as defined below)
shall be and hereby is merged pursuant to Section 251 of the
Delaware General Corporation Laws ("DGCL") into DMA (the
"Merger"). DMA shall be the surviving corporation and it shall
continue and shall be deemed to continue for all purposes
whatsoever after the Merger with and into itself of AKI. DMA, as
it shall exist as the surviving corporation after the Merger, is
hereinafter sometimes referred to as the "Surviving Corporation."
1.2 The Effective Date. The Merger shall become effective when
this Agreement has been adopted by DMA, AKI and their respective
shareholders and appropriate documentation has been prepared and
filed in accordance with the laws of the State Delaware. For
operational, accounting and bookkeeping purposes, the time when
the Merger shall become effective is referred to herein as the
"Effective Date" which shall be the date fixed in accordance with
the laws of, and the documentation filed with, the State of
Delaware.
1.3 Corporate Governance of Surviving Corporation. After the
Effective Date, the Surviving Corporation's name shall be changed
<PAGE>
to "Advanced Knowledge, Inc." The present Certificate of
Incorporation of DMA shall continue to be the Certificate of
Incorporation of the Surviving Corporation. The present By-Laws
of AKI shall become the By-Laws of the Surviving Corporation and
the existing By-Laws of DMA shall no longer be in effect. The
directors and officers of DMA immediately prior to the Effective
Date shall resign and the sole officer and director of AKI shall
be the sole director and officer of the Surviving Corporation
upon the Effective Date.
1.4 Issuance of Stock. All shares of stock of AKI which are
outstanding immediately prior to the Effective Date shall be
exchanged for 2,700,000 newly issued DMA shares of Common Stock
(the "Shares").
1.5 Further Documentation. From time to time as and when
requested by the Surviving Corporation or their successors or
assigns, EKSI, AKI, DMA and their proper (or former in the case
of AKI and DMA) officers and directors, shall execute and
deliver, or cause to be executed and delivered, all deeds and
other instruments and shall take or cause to be taken all such
other and further actions as the Surviving Corporation may deem
necessary or appropriate in order to more fully vest in the
Surviving Corporation title to and possession of all of the
rights, privileges, powers, immunities, purposes and franchises
of AKI and to carry-out the intent and purposes of this
Agreement.
1.6 Closing. Concurrently with the filing of the Certificate of
Merger the parties shall execute and deliver to and among
themselves the Closing Documents (as hereinafter defined) at a
closing (the "Closing") to occur July 15, 1998 the Closing Date.
The term "Closing Documents" means the agreements, instruments
and documents which are contemplated by this Agreement to be
executed and delivered by the parties on the Closing Date.
1.7 Payments by AKI. AKI agrees that upon execution of this
Agreement it will pay EKSI $25,000 as payment for the proprietary
know-how and work product of DMA.
1.8 Additional Payment and Escrow. At the Closing, an additional
$25,000 for the payment of expenses of EKSI's obligations as
contained in Article VI(k) and Article VIII will be delivered to
Seller's counsel, Heller, Horowitz & Feit, P.C. ("Escrow Agent"),
to be held in escrow pending the Securities and Exchange
Commission declaring effective a Form 10 for the Surviving
Corporation. In the event such Form is not declared effective
within six months after the date hereof, the current shareholder
of AKI shall have the option for six months to return the Shares
to EKSI and the Escrow Agent shall thereupon return the escrowed
funds to the current shareholder of AKI. In the event that after
twelve months of the date hereof the escrowed funds have not been
delivered pursuant hereto and the current shareholder of AKI has
not exercised his option to return the Shares, EKSI shall then
have the option, for 90 days, to repurchase the Shares for the
amount of the escrowed funds, whereupon the Escrow Agent shall
deliver the escrowed funds to the current shareholder of AKI.
-2-
<PAGE>
The Escrow Agent shall be entitled to rely upon the authenticity
of any signature and the genuineness and/or validity of any
writing received by it pursuant to or otherwise relating to this
Agreement.
If any dispute shall arise among the parties with respect to the
escrowed funds, the Escrow Agent may (a) commence an interpleader
or similar action permitted to stakeholders in the court of the
State of New York and deposit the escrowed funds in to the court
where such action has been commenced, or (b) whether or not such
dispute involved litigation, retain the escrowed funds pending
either a settlement of such dispute or final determination of the
rights of the respective parties thereto.
The Escrow Agent shall not be liable to anyone whatsoever by
reason of, and each party hereto agrees, jointly and severally,
to indemnify it for, and hold it harmless as to, any Loss (as
defined below), incurred by it in connection with any error of
judgment or for any act done or step taken or omitted by it in
good faith or for any mistake of fact or law or for anything
which it may do or refrain from doing in connection herewith
unless caused by or arising out of its own gross negligence or
willful misconduct.
The Escrow Agent's duties and obligations are purely ministerial
in nature and nothing herein shall be construed to give rise to
any fiduciary obligations on its part.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF EKSI
EKSI hereby represents, covenants and warrants to AKI that except
as contemplated by this Agreement or any agreement related or
disclosed to AKI in writing or in any schedule or exhibit hereto:
2.1 Corporate Organization, etc. EKSI is a corporation duly
organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania. DMA is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware and has full corporate power and
authority to conduct its business as and to the extent now
conducted, and is duly qualified, licensed or admitted to do
business and is in good standing in those jurisdictions in which
the conduct or nature of its business, makes such qualification,
licensing or admission necessary. The copies of the Certificate
of Incorporation and By-Laws heretofore delivered to AKI are
complete and correct copies of such instruments as currently in
effect.
2.2 Authorized and Outstanding Shares. DMA's authorized capital
stock consists of 1,000 shares of Common Stock, no par value, all
of which are issued and outstanding and owned by EKSI. All of
such shares are duly authorized, validly issued, fully paid and
non-assessable. The delivery of a certificate or certificates at
the Closing representing the Shares will transfer to AKI good and
valid title to the Shares. Except for DMA's shares owned by EKSI,
no other equity securities, or securities convertible into or
exchangeable for equity securities, of DMA, are authorized,
issued or outstanding, and there are no outstanding options,
warrants, agreements, restrictions, contracts, calls, demands,
understandings, obligations (contingent or otherwise) or
commitments of any character relating to any equity interest in
DMA other than this Agreement. DMA does not have, nor has it ever
had, any subsidiaries.
-3-
<PAGE>
2.3 Title to Shares. Upon issuance, AKI will own, beneficially
and of record, the Shares free and clear of all liens, charges,
claims, restrictions, pledges and encumbrances of any kind or
nature whatsoever,
2.4 Authorization, etc. The execution, delivery and performance
of this Agreement has been duly and validly authorized by all
necessary action on the part of each of EKSI and DMA and
constitutes a legal, valid and binding obligation of each of EKSI
and DMA, enforceable in accordance with its terms, except that:
(a) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter
in effect relating to creditors' rights, and
(b) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses
and to the discretion of the court before which any proceeding
therefore may be brought. Other than the need to comply with the
federal securities laws and California Blue Sky laws, the
execution, delivery and performance of this Agreement does not
violate or conflict with any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction
applicable to EKSI or DMA.
2.5 Good Standing Under Securities Laws. (a) Neither EKSI nor DMA
is in violation of the applicable provisions of the Securities
Exchange Act or the rules and regulations thereunder.
(b) There is no currently pending or threatened material,
complaint, inquiry, investigation, or disciplinary proceeding
undertaken by the SEC or any states concerning DMA or EKSI, or
any of its officers or directors, nor has DMA or EKSI operated
its business in a manner which would give rise to the foregoing.
(c) DMA is not an "investment company" or an "investment advisor"
as those terms are defined in the Investment Company Act of 1940
or the Investment Advisors Act of 1940 (collectively, the "1940
Acts"), respectively, nor is DMA registered as an "investment
company" or an "investment advisor" as those terms are defined in
the 1940 Acts.
2.6 Compliance with Law. DMA has operated in accordance with all
applicable laws, regulations and other requirements, of all
national governmental and quasi-governmental authorities, and of
-5-
<PAGE>
all states, jurisdictions, municipalities and other political
subdivisions and agencies thereof, having jurisdiction over it,
including, without limitation, all such laws, regulations and
requirements relating to antitrust, consumer protection, currency
exchange, equal opportunity, health, occupational safety, pension
and securities matters, except for violations which could not
reasonably be expected to have a material adverse effect on its
business, assets or properties. DMA has not received during the
last twelve (12) months any notification of any asserted present
or past failure to comply with such laws, rules, or regulations.
There are no orders of any governmental or regulatory authority
outstanding against DMA.
2.7 No Undisclosed Liabilities, etc. DMA has no liabilities or
obligations of any nature (absolute, accrued, contingent or
otherwise), except that the liabilities listed on Schedule 2.7
were transferred to, and assumed by, EKSI.
2.8 Consents and Approvals. Other than the need to comply with
federal securities laws, Delaware corporate law (which will be
satisfied by filing a Certificate of Merger in the form of
Exhibit A hereto) and California Blue Sky laws, no consent of any
person, governmental authority or agency (federal, state or
local) or any regulatory or membership organization is necessary
to the consummation of the transactions contemplated hereby. The
execution and delivery by EKSI and DMA of this Agreement does
not, and the performance by EKSI and DMA of their respective
obligations under this Agreement and the consummation of the
transactions contemplated hereby will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of their respective articles
of incorporation or by-laws (or other comparable corporate
charter documents); or
(b) conflict with or result in a violation or breach of any term
or provision of any law or order applicable to EKSI or DMA or any
of their respective assets or properties.
2.9 Litigation. There is no action, suit, proceedings or, to its
knowledge, investigation pending or, to the knowledge of either
EKSI or DMA, threatened against, relating to or affecting EKSI or
DMA or any of their respective assets and properties by or before
any court or governmental or other regulatory or administrative
agency, or commission or membership body nor is there any
arbitration proceeding pending or threatened against or involving
DMA, or which questions or challenges the validity of this
Agreement or any action taken or to be taken by EKSI, DMA or AKI
pursuant to this Agreement or in connection with the transactions
contemplated hereby; and DMA does not know or have any reason to
know of any valid basis for any such action, proceeding or
investigation.
2.10 Contracts. DMA is not a party to any other contracts or
agreements.
-6-
<PAGE>
2.11 Books and Records. The minute books and other similar
records of DMA as made available to AKI prior to the execution of
this Agreement contain a true and complete record, in all
material respects, of all available and recorded action taken at
all meetings and by written consents in lieu of meetings of the
stockholders, the boards of directors and committees of the board
of directors of DMA. The stock transfer ledgers and other similar
records of DMA as made available to AKI prior to the execution of
this Agreement accurately reflect all record transfers prior to
the execution of this Agreement in the capital stock of DMA.
Section 2.12 Financial Statements. Prior to the execution of this
Agreement, EKSI has delivered to AKI true and complete copies of
the following financial statements:
(a) the unaudited balance sheets of DMA as of December 31, 1995,
1996 and 1997, and the related unaudited consolidated statements
of operations, stockholders' equity and cash flows for each of
the fiscal years then ended; and
(b) the unaudited balance sheets of DMA as of March 31, 1998 and
the related unaudited consolidated statements of operations,
stockholders' equity and cash flows for the portion of the fiscal
year then ended.
All such financial statements (i) were prepared in accordance
with GAAP, (ii) fairly present the financial condition and
results of operations of DMA as of the respective dates thereof
and for the respective periods covered thereby, and (iii) were
compiled from the books and records of DMA regularly maintained
by management and used to prepare the financial statements of DMA
in accordance with the principles stated therein. DMA has
maintained its respective books and records in a manner
sufficient to permit the preparation of financial statements in
accordance with GAAP.
Section 2.13 Absence of Changes. Except for the execution and
delivery of this Agreement and the transactions to take place
pursuant hereto on or prior to the Closing, since March 31, 1998
there has not been any material adverse change, or any event or
development which, individually or together with other such
events, could reasonably be expected to result in a material
adverse change, in the business or condition of DMA.
Section 2.14 Licenses. Prior to the execution of this Agreement,
EKSI has delivered to AKI true and complete copies of all
licenses and pending licenses ("Licenses") held by DMA. DMA owns
or validly holds all Licenses that are material, individually or
in the aggregate, to its business or operations. Each License is
valid, binding and in full force and effect, and DMA is not, nor
has it received any notice that it is, in default (or with the
giving of notice or lapse of time or both, would be in default)
under any such License.
Section 2.15 Insurance. DMA has no insurance policies in place
nor is it covered by any policies owned by EKSI.
-7-
<PAGE>
Section 2.16 Affiliate Transactions. Except as disclosed in
writing to AKI, (i) there are no intercompany liabilities between
DMA, on the one hand, and EKSI, any officer, director or
affiliate of EKSI, on the other, (ii) neither EKSI nor any such
officer, director or affiliate provides or causes to be provided
any assets, services or facilities to DMA, (iii) DMA does not
provide or cause to be provided any assets, services or
facilities to EKSI or any such officer, director or affiliate and
(iv) DMA does not beneficially own, directly or indirectly, any
investment assets issued by EKSI or any such officer, director or
affiliate.
Section 2.17 Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by
EKSI directly with AKI without the intervention of any person on
behalf of EKSI in such manner as to give rise to any valid claim
by any person against AKI or, DMA for a finder's fee, brokerage
commission or similar payment.
Section 2.18 Taxes. DMA has filed all tax returns which are
required to have been filed in any jurisdiction, and has paid all
taxes shown to be due and payable on such returns and all other
taxes payable by DMA to the extent the same have become due and
payable and before they have become delinquent. EKSI knows of no
proposed material tax assessment against DMA and in the opinion
of the EKSI all tax liabilities are adequately provided for on
the books of DMA.
Section 2.19 Disclosure. All material facts relating to the
business or condition of DMA have been disclosed in writing to
AKI in or in connection with this Agreement. No representation or
warranty contained in this Agreement, and no statement contained
in any certificate, list or other writing furnished to AKI
pursuant to any provision of this Agreement (including without
limitation the Financial Statements), contains any untrue
statement of a material fact or omits to state a material fact
necessary in order to make the statements herein or therein, in
the light of the circumstances under which they were made, not
misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AKI
3.1 Corporate Organization, etc. AKI is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware and has full corporate power and
authority to conduct its business as and to the extent now
conducted, and is duly qualified, licensed or admitted to do
business and is in good standing in those jurisdictions in which
the conduct or nature of its business, makes such qualification,
licensing or admission necessary. The copies of the Certificate
of Incorporation and By-Laws heretofore delivered to DMA are
complete and correct copies of such instruments as currently in
effect.
3.2 Authorized and Outstanding Shares. AKI's authorized capital
stock consists of 25,000,000 shares of Common Stock, $.0001 par
value, of which 100 shares are issued and outstanding and owned
by a single stockholder. All of such shares are duly authorized,
validly issued, fully paid and non-assessable. Except for such
shares, no other equity securities, or securities convertible
-8-
<PAGE>
into or exchangeable for equity securities, of AKI, are
authorized, issued or outstanding, and there are no outstanding
options, warrants, agreements, restrictions, contracts, calls,
demands, understandings, obligations (contingent or otherwise) or
commitments of any character relating to any equity interest in
AKI other than this Agreement. AKI does not have, nor has it ever
had, any subsidiaries.
3.3 Authorization, etc. The execution, delivery and performance
of this Agreement has been duly and validly authorized by all
necessary action on the part of AKI and constitutes a legal,
valid and binding obligation of AKI, enforceable in accordance
with its terms, except that:
(a) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter
in effect relating to creditors' rights, and
(b) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses
and to the discretion of the court before which any proceeding
therefore may be brought. The execution, delivery and performance
of this Agreement does not violate or conflict with any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree
or injunction applicable to AKI.
3.4 Compliance with Law. AKI has operated in accordance with all
applicable laws, regulations and other requirements, of all
national governmental and quasi-governmental authorities, and of
all states, jurisdictions, municipalities and other political
subdivisions and agencies thereof, having jurisdiction over it,
including, without limitation, all such laws, regulations and
requirements relating to antitrust, consumer protection, currency
exchange, equal opportunity, health, occupational safety, pension
and securities matters, except for violations which could not
reasonably be expected to have a material adverse effect on its
business, assets or properties. AKI has not received any
notification of any asserted present or past failure to comply
with such laws, rules, or regulations. There are no orders of any
governmental or regulatory authority outstanding against AKI.
3.5 No Undisclosed Liabilities, etc. AKI has no liabilities or
obligations of any nature (absolute, accrued, contingent or
otherwise), except as noted in AKI's financial statements
delivered to DMA pursuant to section 3.10.
3.6 Consents and Approvals. Other than the need to comply with
Delaware corporate law (which will be satisfied by filing a
Certificate of Merger in the form of Exhibit A hereto) no consent
of any person, governmental authority or agency (federal, state
or local) or any regulatory or membership organization is
necessary to the consummation of the transactions contemplated
hereby. The execution and delivery by AKI of this Agreement does
-9-
<PAGE>
not, and the performance by AKI of its obligations under this
Agreement and the consummation of the transactions contemplated
hereby will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the articles of
incorporation or by-laws (or other comparable corporate charter
documents) of AKI; or
(b) conflict with or result in a violation or breach of any term
or provision of any law or order applicable to or any of its
assets or properties.
3.7 Litigation. There is no action, suit, proceedings or, to its
knowledge, investigation pending or, to its knowledge, threatened
against, relating to or affecting AKI or any of its assets and
properties by or before any court or governmental or other
regulatory or administrative agency, or commission or membership
body nor is there any arbitration proceeding pending or
threatened against or involving AKI, or which questions or
challenges the validity of this Agreement or any action taken or
to be taken by EKSI, DMA or AKI pursuant to this Agreement or in
connection with the transactions contemplated hereby; and AKI
does not know or have any reason to know of any valid basis for
any such action, proceeding or investigation.
3.8 Contracts. AKI is not a party to any material contracts or
agreements, except as listed on Schedule 3.8 hereto.
3.9 Books and Records. The minute books and other similar records
of AKI as made available to DMA prior to the execution of this
Agreement contain a true and complete record, in all material
respects, of all available and recorded action taken at all
meetings and by written consents in lieu of meetings of the
stockholders, the boards of directors and committees of the board
of directors of AKI. The stock transfer ledgers and other similar
records of AKI as made available to DMA prior to the execution of
this Agreement accurately reflect all record transfers prior to
the execution of this Agreement in the capital stock of AKI.
3.10 Financial Statements. Prior to the execution of this
Agreement, AKI has delivered to DMA true and complete copies of
the unaudited balance sheets of AKI for the period from inception
through June 30, 1998 and the related unaudited consolidated
statements of operations, stockholders' equity and cash. Such
financial statements (i) were prepared in accordance with GAAP,
(ii) fairly present the financial condition and results of
operations of AKI as of the specified date thereof and for the
period covered thereby, and (iii) were compiled from the books
and records of AKI regularly maintained by management and used to
prepare the financial statements of AKI in accordance with the
principles stated therein. AKI has maintained its respective
books and records in a manner sufficient to permit the
preparation of financial statements in accordance with GAAP.
-10-
<PAGE>
3.11 Absence of Changes. Except for the execution and delivery of
this Agreement and the transactions to take place pursuant hereto
on or prior to the Closing, since the date of its financial
statements described above, there has not been any material
adverse change, or any event or development which, individually
or together with other such events, could reasonably be expected
to result in a material adverse change, in the business or
condition of AKI.
3.12 Licenses. Prior to the execution of this Agreement, AKI has
delivered to DMA true and complete copies of all licenses and
pending licenses ("Licenses") held by AKI. AKI owns or validly
holds all Licenses that are material, individually or in the
aggregate, to its business or operations. Each License is valid,
binding and in full force and effect, and AKI is not, nor has it
received any notice that it is, in default (or with the giving of
notice or lapse of time or both, would be in default) under any
such License.
3.13 Insurance. AKI has no insurance policies in place except as
listed on Schedule 3.13 hereto.
3.14 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by AKI
directly with EKSI without the intervention of any person on
behalf of AKI in such manner as to give rise to any valid claim
by any person against EKSI or DMA for a finder's fee, brokerage
commission or similar payment.
3.15 Taxes. AKI has filed all tax returns which are required to
have been filed in any jurisdiction, and has paid all taxes shown
to be due and payable on such returns and all other taxes payable
by AKI to the extent the same have become due and payable and
before they have become delinquent. The AKI knows of no proposed
material tax assessment against AKI and in the opinion of the AKI
all tax liabilities are adequately provided for on the books of
AKI.
3.16 Disclosure. All material facts relating to the business or
condition of AKI have been disclosed in writing to DMA in or in
connection with this Agreement. No representation or warranty
contained in this Agreement, and no statement contained in any
certificate, list or other writing furnished to DMA pursuant to
any provision of this Agreement (including without limitation the
Financial Statements), contains any untrue statement of a
material fact or omits to state a material fact necessary in
order to make the statements herein or therein, in the light of
the circumstances under which they were made, not misleading.
3.17 The Shares.
(a) AKI is acquiring the Shares for investment for its own
account and not with a view to distribution or resale, and is not
holding all or any portion of the Shares for any other person.
-11-
<PAGE>
(b) AKI has evaluated and understands the high risks and terms of
this transaction and has available to it persons that possess
experience and sophistication which are adequate for the
evaluation of the merits and risks associated with the Shares.
(c) Prior to executing this Agreement, AKI has made an
independent investigation of DMA and has had available to it all
information with respect thereto which it deemed it needed to
make an informed decision. EKSI has made available all documents
that were requested relating to this investment and has provided
written answers to any questions concerning the offering. AKI has
not been furnished with or relied upon any representations or
other information (whether oral or written) other than as
contained in any documents or written answers to questions
furnished by EKSI.
(d) AKI has its principal place of business in the state set
forth in its address above.
(e) AKI understands that, unless the Shares are registered
pursuant to an effective Registration Statement, or an exemption
from such registration is available, the Shares cannot be sold,
transferred, pledged, offered for sale or otherwise transferred
during at least the twelve months following the date hereof and
that AKI must bear the economic risk of this investment for such
period of time. AKI agrees that the Shares subscribed for are
subject to the restrictions on transfer described and/or referred
to herein and AKI understands that the Surviving Corporation may
issue stop transfer orders with its transfer agent to enforce
such restrictions.
(f) AKI is aware that there is presently no market for the resale
of the Shares and that no market may exist in the future for such
resale. AKI understands that DMA has no operations and has
essentially been inactive for at least the last 12 months.
(g) AKI is neither a member of, affiliated with or employed by a
member of the National Association of Securities Dealers, nor is
it employed by or affiliated with a broker-dealer registered with
the Securities and Exchange Commission or with any state
regulatory authority.
-12-
<PAGE>
ARTICLE IV
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
(a) The representations and warranties contained herein shall not
be deemed waived or otherwise affected by any investigations made
by the parties hereto except for facts actually known to them on
the date hereof. All representations, warranties, covenants and
agreements shall survive the execution and delivery hereof and
the Closing hereunder. The provisions of this Article IV shall
have no effect upon any other obligation of the parties hereto,
whether to be performed before or after the Closing.
(b) EKSI shall indemnify AKI in respect of, and hold it harmless
from and against, any and all Losses (as defined below) suffered,
incurred, or sustained by it or to which it becomes subject,
resulting from, arising out of or relating to any breach of
representation or warranty or nonfulfillment of or failure to
perform any covenant or agreement on the part of EKSI contained
in this Agreement or arising from or relating to any false or
misleading statement made or any statement not made contained in
any document prepared by it and filed with the Securities and
Exchange Commission ("SEC") or any state securities agency or
distributed to the stockholders of EKSI.
(c) AKI shall indemnify the EKSI in respect of, and hold it
harmless from and against, any and all Losses suffered, incurred
or sustained by it or to which it becomes subject, resulting
from, arising out of or relating to any breach of representation
or warranty or nonfulfillment of or failure to perform any
covenant or agreement on the part of AKI contained in this
Agreement or arising from or relating to any false or misleading
statement made or any statement not made contained in any
document prepared by it and filed with the SEC or any state
securities agency or distributed to the stockholders of EKSI.
(d) "Loss" means any and all damages, fines, fees, penalties,
deficiencies, losses and expenses including without limitation,
fees for attorneys, accountants and other experts or other
expenses of litigation or other proceedings or of any and all
expenses (including without limitation interest, court costs,
fees of attorneys, claim, default or assessment).
-13-
<PAGE>
ARTICLE V
COVENANTS
5.1 EKSI covenants and agrees with AKI that, at all times from
and after the date hereof until the Closing and, with respect to
any covenant or agreement by its terms to be performed in whole
or in part after the Closing, EKSI will comply with all covenants
and provisions of this Article V, except to the extent AKI may
otherwise consent in writing or as otherwise specifically
required hereto:
(i) Investigation by AKI. EKSI will, and will cause DMA to, (a)
provide AKI and its officers, directors, employees, agents,
counsel, accountants, financial advisors, consultants and other
representatives (together "Representatives") with full access,
upon reasonable prior notice and during normal business hours, to
all officers, employees, agents and accountants to DMA and its
assets and properties and books and records, and (b) furnish AKI
and such Representatives with all such information and data
(including without limitation copies of any contracts, benefit
plans and other books and records) concerning the business and
operations of DMA as AKI or any of such Representatives
reasonably may request in connection with such investigation.
(ii) Conduct of Business. EKSI will cause DMA to conduct business
only in the ordinary course consistent with past practice.
(iii) Certain Restrictions. Except as required by the terms of
this Agreement, EKSI will cause DMA to refrain from:
(a) amending its articles of incorporation or by-laws (or other
comparable corporate charter documents) or taking any action with
respect to any such amendment or any recapitalization,
reorganization, liquidation or dissolution of any such
corporation;
(b) authorizing, issuing, selling or otherwise disposing of any
shares of capital stock of or any option with respect to DMA, or
modifying or amending any right of any holder of outstanding
shares of capital stock of or option with respect to DMA;
(c) declaring, setting aside or paying any dividend or other
distribution in respect of the capital stock of DMA, or directly
or indirectly redeeming, purchasing or otherwise acquiring any
capital stock of or any option with respect to DMA;
-14-
<PAGE>
(d) acquiring or disposing of, or incurring any lien on, any
assets and properties, other than in the ordinary course of
business consistent with past practices;
(e) (i) entering into, amending, modifying, terminating
(partially or completely), granting any waiver under or giving
any consent with respect to (A) any contract or (B) any material
license or (ii) granting any irrevocable powers or attorney;
(f) violating, breaching or defaulting under in any material
respect, or taking or failing to take any action that (with or
without notice or lapse of time or both) would constitute a
material violation or breach of, or default under, any term or
provision of any license held or used by DMA.
(g) incurring any indebtedness;
(h) engaging with any person in any merger or other business
combination;
(i) making capital expenditures;
(j) writing off or writing down any of DMA's assets or
properties; or
(k) entering into any contract to do or engage in any of the
foregoing.
(iv) Affiliate Transactions. Immediately prior to the Closing,
all indebtedness and any other amounts owing under contracts
between EKSI, any officer, director or affiliate (other than DMA)
of EKSI, on the one hand, and DMA, on the other, will be paid in
full or assumed by EKSI and EKSI will terminate and will cause
any such officer, director or affiliate to terminate each
contract with DMA. Prior to the Closing, DMA will not enter into
any contract, and will not engage in any transaction with EKSI or
any such officer, director or affiliate.
(v) Books and Records. On the Closing Date, EKSI will deliver or
make available to DMA all of DMA's books and records in its
possession and/or control, and if at any time after the Closing
EKSI discovers in its possession or under its control any other
books and records, it will forthwith deliver such books and
records to DMA.
(vi) Taxes. EKSI will pay all taxes (including interest and
penalties), other than taxes imposed on the income of AKI, which
may be payable in respect of the execution and delivery of this
Agreement or of the sale and delivery of any of the Shares or of
any amendment of, or waiver or consent under or with respect to,
this Agreement and will hold AKI and all subsequent holders of
the Shares harmless against any loss or liability resulting from
nonpayment or delay in payment of any such taxes.
(vii) Recapitalization. Prior to the Effective Date, EKSI shall
(a) cause DMA's Certificate of Incorporation to be amended to
increase its authorized common stock to 25,000,000 shares and (b)
declare a 300:1 stock split or dividend.
5.2 AKI covenants and agrees with DMA that, at all times from and
after the date hereof until the Closing and, with respect to any
covenant or agreement by its terms to be performed in whole or in
part after the Closing, AKI will comply with all covenants and
provisions of this Article V, except to the extent DMA may
-16-
<PAGE>
otherwise consent in writing or as otherwise specifically
required hereto:
(i) Investigation by EKSI and/or DMA. AKI will(a) provide EKSI
and/or DMA and their officers, directors, employees, agents,
counsel, accountants, financial advisors, consultants and other
representatives (together "Representatives") with full access,
upon reasonable prior notice and during normal business hours, to
all officers, employees, agents and accountants to AKI and its
assets and properties and books and records, and (b) furnish EKSI
and/or DMA and such Representatives with all such information and
data (including without limitation copies of any contracts,
benefit plans and other books and records) concerning the
business and operations of AKI as EKSI and/or DMA or any of such
Representatives reasonably may request in connection with such
investigation.
(ii) Conduct of Business. AKI will conduct business only in the
ordinary course consistent with past practice.
(iii) Certain Restrictions. AKI will refrain from:
(a) amending its articles of incorporation or by-laws (or other
comparable corporate charter documents) or taking any action with
respect to any such amendment or any recapitalization,
reorganization, liquidation or dissolution of any such
corporation;
(b) authorizing, issuing, selling or otherwise disposing of any
shares of its capital stock or any option or modifying or
amending any right of any holder of its outstanding shares of
capital stock or option;
(c) declaring, setting aside or paying any dividend or other
distribution in respect of its capital stock, or directly or
indirectly redeeming, purchasing or otherwise acquiring any of
its capital stock or any of its options;
(d) acquiring or disposing of, or incurring any lien on, any
assets and properties, other than in the ordinary course of
business consistent with past practices;
(e) (i) entering into, amending, modifying, terminating
(partially or completely), granting any waiver under or giving
any consent with respect to (A) any contract or (B) any material
license or (ii) granting any irrevocable powers or attorney;
(f) violating, breaching or defaulting under in any material
respect, or taking or failing to take any action that (with or
without notice or lapse of time or both) would constitute a
material violation or breach of, or default under, any term or
provision of any license held or used by it.
-17-
<PAGE>
(g) incurring any indebtedness;
(h) engaging with any person in any merger or other business
combination;
(i) making capital expenditures;
(j) writing off or writing down any of its assets or properties;
or
(k) entering into any contract to do or engage in any of the
foregoing.
(iv) Books and Records. On the Closing Date, AKI will deliver or
make available to EKSI all of its books and records in its
possession and/or control, and if at any time after the Closing
AKI discovers in its possession or under its control any other
books and records, it will forthwith deliver such books and
records to the Surviving Corporation.
ARTICLE VI
CONDITIONS TO CLOSING
The obligations of the parties hereto to be performed under this
Agreement at the Closing are subject to the satisfaction of each
of the following conditions on or before the Closing unless
waived in writing by the party having the benefit of such
provision:
(a) Each of AKI's and EKSI's representations and warranties made
herein shall be true and correct in all material respects on the
date hereof and at the Closing.
(b) The current officers and directors of DMA shall resign and
appoint Mr. Buddy Young as the sole officer and director.
(c) EKSI shall have performed and complied with, in all material
respects, each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by EKSI at or
before the Closing.
(d) There shall not be in effect on the Closing Date any order or
law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated
by this Agreement or which could reasonably be expected to
otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement to either party, and
there shall not be pending on the Closing Date any action or
proceeding in, before or by any governmental or regulatory
authority which could reasonably be expected to result in the
issuance of any such order or the enactment, promulgation or
deemed applicability to AKI, DMA or EKSI of any such law.
-18-
<PAGE>
(e) All consents, approvals and actions of, filings with and
notices to any governmental or regulatory authority necessary to
permit AKI, DMA and EKSI to perform their obligations under this
Agreement and to consummate the transactions contemplated hereby
(i) shall have been duly obtained, made or given, (ii) shall be
in form and substance reasonably satisfactory to AKI, (iii) shall
not be subject to the satisfaction of any condition that has not
been satisfied or waived and (iv) shall be in full force and
effect, and all terminations or expirations of waiting periods
imposed by any governmental or regulatory authority necessary for
the consummation of the transaction contemplated by this
Agreement shall have occurred.
(f) All consents (or in lieu thereof waivers) to the performance
by AKI and EKSI of their obligations under this Agreement or to
the consummation of the transactions contemplated hereby (a)
shall have been obtained, (b) shall be in form and substance
reasonably satisfactory to AKI, (c) shall not be subject to the
satisfaction of any condition that has not been satisfied or
waived and (d) shall be in full force and effect.
(g) AKI shall have received the opinion of Heller, Horowitz &
Feit, P.C., counsel to EKSI and DMA, dated the Closing Date,
substantially in the form and to the effect of Exhibit A hereto
and EKSI shall have received the opinion of Nida & Maloney,
counsel to AKI, dated the Closing Date, substantially in the form
and to the effect of Exhibit B hereto.
(h) All proceedings to be taken on the part of EKSI in connection
with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in
form and substance to AKI, and AKI shall have received copies of
all such documents and other evidences as AKI may reasonably
request in order to establish the consummation of such
transactions and the taking of all proceedings in connection
therewith.
(i) All proceedings to be taken on the part of AKI in connection
with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in
form and substance to EKSI, and EKSI shall have received copies
of all such documents and other evidences as EKSI may reasonably
request in order to establish the consummation of such
transactions and the taking of all proceedings in connection
therewith.
(j) Notwithstanding anything in this Article VI to the contrary,
AKI understands and acknowledges that court decisions and Sec
no-action letters indicate that transactions of this nature
should have a Form 10 (or Form 10SB) (the "Form")filed with the
SEC and an Information Statement containing, in large part, the
information required by Regulation 14C under the Securities
Exchange Act of 1934 (the "Statement") shall be delivered to the
Shareholders, and that all references in this Article to
consents, approvals, laws, actions, filings, notices or similar
concepts shall not mean any references to the requirements of
such Form or Statement.
-19-
<PAGE>
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 Expenses; etc. AKI agrees that all fees and expenses incurred
by it in connection with this Agreement shall be borne by it and
EKSI agrees that all fees and expenses incurred by it in
connection with this Agreement shall be borne by it.
Notwithstanding the foregoing, AKI shall pay all transfer taxes
and other taxes and fees associated with or arising out of this
Agreement.
7.2 Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly given and received
if delivered by hand four (4) days after having been mailed,
certified or registered mail, return receipt requested, with
postage prepaid:
(a) If to AKI:
Mr. Buddy Young
Advanced Knowledge, Inc.
17337 Ventura Blvd.
Suite 224, Encino, CA 91316
with a copy to:
Kim R. McDaniel, Esq.
Nida & Maloney
800 Anacapa Street
Santa Barbara, California 93101
(b) If to EKSI, to:
Richard J.L. Herson
270 Rocky Run Road
Glen Gardner, NJ 08826
with a copy to:
Irving Rothstein, Esq.
Heller, Horowitz & Feit, P.C.
292 MadisonAvenue
New York, New York 10017
7.3 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but
-20-
<PAGE>
neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by AKI without the prior
written consent of EKSI.
7.4 Governing Law. This Agreement and the legal relations among
the parties hereto shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard
to its conflicts of law doctrine.
7.5 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
7.6 Headings. The headings of the Sections and Articles of this
Agreement are inserted for convenience only and shall not
constitute a part hereof or affect in any the meaning or
interpretation of this Agreement.
7.7 Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto in respect of
the subject matter contained herein, and supersedes all prior
agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto.
7.8 Third Parties. Except as specifically set forth or referred
to herein, nothing herein expressed or implied is intended or
shall be construed to confer upon or give to any person or
corporation other than the parties hereto and their successors or
assigns, any rights or remedies under or by reason of this
Agreement.
7.9 Severability. Any provision of this Agreement which is
invalid, illegal or unenforceable in any jurisdiction shall, as
to that jurisdiction, be ineffective to the extent of such
invalidity, illegality or unenforceability, without affecting in
any way the remaining provisions hereof in such jurisdiction or
rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.
7.10 Public Announcement. At all times at or before the Closing,
EKSI and AKI will not issue or make any reports, statements or
releases to the public or generally with respect to this
Agreement or the transactions contemplated hereby without the
consent of the other, which consent shall not be unreasonably
withheld unless counsel for such party determines that a public
disclosure is required by law or otherwise advisable to disclose.
7.11 Confidentiality. Each party hereto will hold, and will use
its best efforts to cause its affiliates, and their respective
representatives to hold, in strict confidence from any person
(other than any such affiliate or representative), unless (i)
compelled to disclose by judicial or administrative process
(including without limitation in connection with obtaining the
necessary approvals of this Agreement and the transactions
contemplated hereby of governmental or regulatory authorities) or
-21-
<PAGE>
by other requirements of law or (ii) disclosed in an action or
proceeding brought by a party hereto in pursuit of its rights or
in the exercise of its remedies hereunder, all documents and
information concerning the other party or any of its affiliates
furnished to it by the other party or such other party's
representatives in connection with this Agreement or the
transactions contemplated hereby.
ARTICLE VIII
POST CLOSING OBLIGATIONS
8.1 The parties hereto agree that following the Closing each
shall use its best efforts to quickly cause the Form and the
Statement to be filed and/or distributed, as necessary, with AKI
preparing the Form and EKSI the Statement.
8.2 Following effectiveness of the Form and distribution of the
Statement, EKSI will promptly distribute, pro rata, as a dividend
to its stockholders, all shares that it owns of the Surviving
Corporation.
8.3 The Surviving Corporation will, as promptly as practicable,
take all commercially reasonable steps necessary or desirable to
obtain all consents, approvals or actions of, make all filings
with and give all notices to governmental or regulatory
authorities or any other person required to consummate the
transactions contemplated hereby.
8.4 EKSI will cooperate with the Surviving Corporation in
connection with the performance of its obligations hereunder.
8.5 Pending the release of the escrowed funds by the Escrow
Agent, the current shareholder of AKI will not sell, pledge,
hypothecate or otherwise transfer the Shares.
-22-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed, all as of the day and year first above
written.
ADVANCED KNOWLEDGE, INC.
By: /s/ Buddy Young
-------------------------
Name: Buddy Young
ELECTRO-KINETIC SYSTEMS, INC.
By: /s/ Richard J. L. Herson
-------------------------
Name: Richard J.L. Herson
DMA RADTECH., INC.
By: /s/ Richard J. L. Herson
---------------------------
Name: Richard J.L. Herson
<PAGE>
PRODUCTION AGREEMENT
THIS NON EXCLUSIVE PRODUCTION AGREEMENT is made and entered into
by and between ADVANCED KNOWLEDGE, INC a Delaware Corporation,
hereinafter referred to as "ADVANCED" and The HATHAWAY GROUP,
hereinafter referred to as "HATHAWAY", collectively hereinafter
referred to as PRODUCERS.
RECITALS
A WHEREAS, It is the intention of the producers to co-finance the
production of up to six workforce training videos, hereinafter
referred to as "VIDEOS".
B. WHEREAS, HATHAWAY is experienced in the creation and
production of workforce training videos; and,
C. WHEREAS, ADVANCED has established a company for the purpose of
producing and distributing workforce training videos.
BASED THEREON, the parties hereto agree as follows:
1. PRODUCTION: During the next 24 months a series of up to six
VIDEOS will be produced by Hathaway. The first Video to be
produced is entitled, 12 ANGRY MEN-TEAMS THAT DON'T QUIT. The
second Video to be produced in the series will be based on the
Cuban missile crisis. The subject matter and content of the
remaining four Videos will be determined by mutual agreement.
2. FINANCING: The cost of production of all VIDEOS will be borne
equally by Advanced and Hathaway. Prior to the start of
production of any Video in the series, both parties must agree on
the overall production budget.
3. COPYRIGHT: Each Video will be registered with the United
States Copyright office, and will contain the appropriate
copyright information on all copies. The copyrights will be
registered in the names of both Advanced and Hathaway. Not
withstanding the name appearing on the copyright registration, it
is expressly agreed by both parties that Advanced and Hathaway
equally own each copyright.
4. DISTRIBUTION: The VIDEOS will be distributed by Advanced
Knowledge in conjunction with a network of other industry
distributors hereinafter referred to as sub-distributors. Both
parties must approve any sub-distribution agreement relating to
the distribution of the VIDEOS.
<PAGE>
5. REVENUES: Following the recoupment of the funds advanced by
each party to cover production and distribution expenses for the
VIDEOS, revenues derived from their sale will be shared equally
between Advanced and Hathaway.
6. CREDITS: On all VIDEOS, Hathaway will receive, "Produced By"
credit, and Advanced will receive, "Presented By" credit. Such
credit to be positioned on the VIDEOS in accordance with general
industry standards.
7. NON EXCLUSIVITY: Both Advanced and Hathaway expressly
understands that this is a non-exclusive agreement. Nothing in
this agreement prevents either party from producing
workforce-training videos outside the scope of this agreement, or
from entering into similar agreements with other entities.
8. NOTICES: All notices to be given hereunder shall be personally
delivered or sent by certified mail, return receipt requested,
with postage prepaid, to the parties at the following addresses
(or to such other or further addresses as the parties may
hereafter designate by like notice similarly sent):
Advanced Knowledge The Hathaway Group
17337 Ventura Blvd. 9 East 40th Street
Encino, CA 91316 New York, N.Y. 10016
9. ARBITRATION: In the event a dispute arises out of, or relates
to this Agreement, or any term, condition or provision hereof,
such dispute shall be settled by arbitration held pursuant to the
rules of the American Arbitration Association. Such arbitration
shall be binding and conclusive upon the parties. The arbitrator
shall be an attorney or judge knowledgeable in the matters
relating to such dispute. The arbitrator shall award to the
prevailing party to any such dispute, a reasonable sum for costs,
expenses and attorneys' fees incurred in connection therewith.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as set forth below, and the effective date of this
Agreement shall be January 5, 1998.
ADVANCED KNOWLEDGE, INC. THE HATHAWAY GROUP
By: /s/ Buddy Young By: /s/ Steve Katten
Title: President Title: President
DATED: 1/5/98 DATED: 1/5/98
-2-
<PAGE>
FILM & VIDEOTAPE
DISTRIBUTION AGREEMENT
THIS AGREEMENT is entered into as of February 1, 1998, by and
between AIMS Multimedia (Producer) and Advanced Knowledge
(Distributor) collectively referred to as the "Parties" and
individually as "Party."
1. DISTRIBUTORSHIP: Producer hereby grants to Distributor the
non-exclusive right to promote and advertise to qualified users
in the United States selected video programs, hereinafter
referred to as the "Product." Distributor agrees to exercise
diligent efforts in merchandising the Product in a manner
mutually acceptable and profitable to the parties. Distributor
agrees to pay an initial fee of $1,000.00 to be applied against
opening orders.
2. TERM: The initial term of this Agreement is for a period from
April 1, 1998, through and including April 1, 2001. This
Agreement will be automatically extended for a 12-month period of
time unless written notice is provided as described in paragraph
12.
3. PROMOTION: Promotion will be the responsibility of the
Distributor unless otherwise agreed to by the parties. Promotion
includes, but is not limited to, the production of promotional
materials required to provide maximum Distributor activity and
telemarketing services.
4. PRICING: Current catalog prices will be guaranteed through
December 31, 1998, but will be subject to change on an annual
basis.
5. OBLIGATIONS: Producer will provide Distributor with 3/4"
preview masters of all designated programs for $50.00 per copy,
from which Distributor will make 1/2" VHS preview copies for
direct shipment to its customers. Producer will also provide a
copy of ancillary support materials to the Distributor, which may
be Xeroxed and used for previews to its customers. Should it be
necessary for AIMS Multimedia to fulfill a preview request,
Advanced Knowledge will be billed $40.00 per title (no discount)
plus shipping and handling.
6. TERMS OF SALE: Sale and/or rental copies will be shipped by
Producer to the Distributor or to the Distributor's customers per
faxed orders, and billed to Distributor, less 45%. Shipping and
handling charges will be added to the invoice as follows; $3.50
per title, $8.95 minimum. Request for special handling will
require additional charges. Invoice terms shall be F.O.B.
Producer's facility, net thirty (30) days. Distributor will be
responsible for all invoicing to its customers.
<PAGE>
7. RESTRICTIONS: No showing of any Produce shall be allowed on
television except by written consent of Producer, which consent
may be withheld for any reason. In addition, Producer may impose
other reasonable restrictions so long as Distributor is given
advance written notice thereof. Distributor agrees not to commit
any act which would infringe on or destroy any copyright or other
proprietary interest of Producer in the product.
8. TITLE: Distributor acknowledges that title to all Product
remains with Producer and further acknowledges that Distributor
has no right to vest title or any right or liens in favor of
itself or any third party. Distributor shall not alter the
Product without the consent of the Producer.
9. INDEPENDENT CONTRACTOR: Distributor is an independent
contractor in regard to services rendered by it under this
Agreement. This Agreement does not create a Status in Distributor
of Agent or Representative of Producer.
10. INDEMNIFICATION: The Producer and Distributor agree to
indemnify, reimburse, defend and hold each other and their
subsidiaries harmless from any claim, demand or judgment made,
asserted or obtained against them including all costs,
disbursements and expenses incurred in connection with any claim
of copyright infringement libel, slander, unfair competition or
other alleged unethical business behavior due to the activities
of the Producer or Distributor. Producer shall not be liable for
damages or breach of any warranty herein unless given written
notice within five (5) days after any such damage or alleged
breach, and details thereof by Distributor as well as full
control of the defense and statement of such claim including the
right to engage counsel of its choice. Producer shall not be
liable for loss of profits or consequential damages. Distributor
shall cooperate fully with Producer in the defense or adjustment
of any such claim.
11. LIMITATION OF LIABILITY: Neither the Producer nor the
Distributor shall be liable for any act, delay or omission
occasioned by an act of God or the public enemy, or by riot,
insurrection, strikes, labor disturbances or any failure or delay
by any transportation company or agency for any act, delay or
omission due to their negligence.
12. NOTICE: This Agreement may be terminated by either party by
providing thirty (30) days notification at the address set forth
on the last page here of which notice shall be deemed sufficient
when sent by registered mail, properly addressed, with full
postage affixed, unless otherwise herein provided. Upon
termination, all unsold inventory will be returned to the
Producer.
13. ARBITRATION CLAUSE:
a) With respect to any and all disputes and/or claims arising out
of, or related to, this agreement and/or all previous agreements
-2-
<PAGE>
between Producer and Distributor, both parties agree to
resolution by arbitration. The claim, or arbitration matter,
shall be settled by in persona arbitration in Los Angeles County
in accordance with the then rules of the American Arbitration
Association ("AAA") provided, however, that the AAA shall be
directed by the parties to appoint and designate a single
arbitrator who is a retired Judge of the Superior Court of the
State of California. Determination of the arbitration on all
matters referred to it hereunder shall be final and binding on
the parties hereto. The award of such arbitration may be
confirmed or enforced in any court jurisdiction. The arbitrator
designated shall have full access to such records and physical
facilities of the parties hereto as may be required by such
arbitrator. With respect to such arbitration, the parties shall
have all rights of discovery available pursuant to the California
Code of Civil Procedure and they hereby incorporate the
provisions of California Code of Civil Procedure 1283.05 into
this agreement.
b) The costs and expenses of the arbitrator and the attorneys'
fees and costs of each of the parties incurred in such
arbitration shall be apportioned between the parties by such
arbitrator based upon such arbitrator's determination of the
merits of the respective positions.
EXECUTED as of the day and year aforesaid.
PRODUCER: DISTRIBUTOR:
AIMS Multimedia Advanced Knowledge
By:/s/ Jeffrey M. Sherman By:/s/ Buddy Young, Pres.
Jeffrey M. Sherman Buddy Young
President President
Date: 3/31/98 Date: 3/16/98
-3-
<PAGE>