U.S. 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 (g) of the
Securities Exchange Act of 1934
AUDIOGENESIS SYSTEMS, INC.
(Name of Small Business Issuer in Its Charter)
New Jersey 22-3487471
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7 Doig Road, Suite 3, Wayne, New Jersey 07470
(Address of Principal Executive Offices) (Zip Code)
(973) 696-9400
(Issuer's Telephone Number)
Securities to be registered pursuant to 12(b) of the Act: None
Securities to be registered pursuant to 12(g) of the Act:
Common Stock $.0001 Par Value
(Title of Class)
<PAGE>
TABLE OF CONTENTS
Page
PART I
ITEM 1. DESCRIPTION OF BUSINESS . . . . . . . . . . . . . . . . . . . . . 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION . . . . 7
ITEM 3. DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . . . . . . 8
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . .8
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS . . 10
ITEM 6. EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . . . .11
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . . . . . .11
ITEM 8. DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . .12
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS . . . . . . . . . . 13
ITEM 2. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . .13
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . 13
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES . . . . . . . . . . . . .13
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . . . . . . . .15
PART F/S
Financial Statements
PART III
ITEM 1. INDEX TO EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . 32
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Audiogenesis Systems, Inc. (the "Company" or "Audiogenesis") is a New
Jersey Corporation formed on January 14, 1997. Audiogenesis was formed to be
the successor to the business of Genesis Safety Systems, Inc., the Company's
predecessor ("Genesis"), after the business of Genesis was spun-out as part of
Genesis' acquisition of Oil Baltija Group, Ltd. ("Oil Baltija"). As part of
the acquisition agreement between Genesis and Oil Baltija, Genesis was
required to transfer all of its business assets and all of its liabilities to
the newly formed Audiogenesis. The transfer of the Genesis assets and
liabilities was accomplished on January 21, 1997, and as a result, the
business of Audiogenesis became essentially the same as the previous business
of Genesis.
In addition to the transfer of all of the assets and liabilities of
Genesis to Audiogenesis, the shareholders of record of Genesis (approximately
350) at the close of business on January 21, 1997 were granted a stock
dividend of one share of Audiogenesis for each share of Genesis owned on that
date. As a result, Audiogenesis at the close of business on January 21, 1997,
had the same shareholders as Genesis and the same assets and liabilities. The
primary difference between Genesis and Audiogenesis was and is that Genesis
had been quoted on the OTC Bulletin Board under the symbol GSIS and
Audiogenesis is not publicly traded. By filing this Form 10-SB so that
Audiogenesis is required to file periodic reports with the Securities and
Exchange Commission, Audiogenesis intends to start the process to have its
common stock quoted on the OTC Bulletin Board. To accomplish inclusion for
quotation on the OTC Bulletin Board, in addition to a successful filing of
this Form 10-SB (that is, the form becoming effective), Audiogenesis would
also need the support of an NASD broker-dealer who would file the appropriate
forms with the NASD; the support by that broker dealer or other broker-dealers
as market makers for the common stock of Audiogenesis; and the approval by the
OTC Bulletin Board of the listing for quotation of the Audiogenesis common
stock. Only when and if all of these things are accomplished would the common
stock of Audiogenesis become a publicly traded security. The price at which
the Audiogenesis common stock would then be traded cannot be predicted at this
time, as it would depend upon not only the status of the business of
Audiogenesis, but also stock market conditions.
A Brief History of Genesis Prior to Becoming Audiogenesis
- ---------------------------------------------------------
Genesis was formed in the State of New Jersey on July 13, 1981. Genesis
became a public company by conducting an offering of its securities under
Regulation A of the Securities Act of 1933 (the "Securities Act") on July 12,
1982. Thereafter, Genesis was initially traded through the medium of the
"pink sheets" operated by the National Quotation Bureau, and later by being
quoted on the OTC Bulletin Board under the symbol "GSIS". Genesis initially
was comprised of two main segments of business; a safety products sales
division, and a safety training division. In recent years, the safety
products sales division, which had operated stores at several locations in
<PAGE>
Fortune 500 companies, had been cut back to one safety store, the safety
training business had been expanded to include a broader range of audio-visual
products, and Genesis had focused its business upon development of two
devices; a device for the treatment of tinnitus (ringing in the ears), and an
ultrasonic echolocation device which is intended to provide information to the
visually impaired, and to sighted persons in situations of low visibility,
concerning their immediate surroundings. Both of these devices will be
discussed in detail in the section about the business of Audiogenesis.
On January 22, 1997, Genesis acquired Oil Baltija, which is a British
Virgin Islands corporation that owns LukOil Baltija, a crude oil and oil
products trading and retail company primarily located in Lithuania and Latvia,
with subsidiaries in Russia. Among other things LukOil Baltija operates a
number of gas station and oil storage facilities in the Baltic States. Oil
Baltija required that the former business of Genesis be transferred to another
company, that new management be chosen by Oil Baltija to replace the former
Genesis management, and that Genesis conduct a reverse stock split of one
share for each ten shares. As a result, the former management of Genesis is
not associated in any manner with Oil Baltija. Rather, the former management
of Genesis has become the management of Audiogenesis.
Current Business of Audiogenesis
- --------------------------------
Sales of Safety Equipment.
Audiogenesis operates a store which sells safety equipment under the
service mark SafeTvend(sm) at a major pharmaceutical corporation in the New
York area. Audiogenesis's safety store is located on the customer's premises,
and sells respirators, hard hats, safety glasses, protective clothing, and
other similar products which are used or worn by the customer's employees to
help protect them from industrial accidents and injuries. During fiscal year
1997, the SafeTvend(sm) store had sales of $505,746. During the nine months
ended June 30, 1998, the SafeTvend(sm) store had sales of $363,117. Although
the SafeTvend(sm) store provides positive cash flow from its operations, the
operating expenses of the Company as a whole, which include substantial
general and administrative costs and research and development costs with
respect to the tinnitus and echolocation devices, has caused net losses which
were $293,890 for fiscal 1997, and $131,662 for the nine months ended June 30,
1998. Such losses were due in part to the fact that neither of the devices
under development have generated any revenues.
Audio-Visual Products
During the 1980's, the Company developed and had marketed the Genesis
System 1000 Employee Safety Training Program. The system included color
slides, tape cassette, workbook, poster and associated equipment. The System
1000 was copyrighted, and was sold to more than 50 companies, including a
number of "Fortune 500" corporations, until the Company focused its business
upon other areas.
<PAGE>
With the increasing utilization of computers for audio-visual
presentations, the Company has broadened its safety training business to
include developing, producing and presenting customized audio-visual products
for business presentation. The Company has recently entered into an agreement
to produce a customized audio-visual production featuring a sales and
marketing program for domestic and international applications for a company
engaged in domestic and international freight forwarding.
AudioSelectron(sm)
Audiogenesis has developed a prototype belt-worn device which is designed
to treat tinnitus by combining auditory suppression with electro-stimulation.
The Company calls this device the AudioSelectron(sm).
What is Tinnitus?
Tinnitus is ringing in the ears, and can range from moderate to extremely
severe. Although tinnitus affects 50 million people in the United States, it
is not generally known that tinnitus can be an extremely serious, debilitating
medical condition, affecting virtually every aspect of a person's life.
Tinnitus sufferers frequently have severe insomnia, and significant
interference with their ability to communicate. Tinnitus may prevent
sufferers from using a standard telephone. In addition, exercise frequently
causes the condition to worsen, preventing even normal levels of physical
activity. The psychological effect of tinnitus upon an individual can be
devastating, sometimes resulting in suicide as the only perceived relief from
the torment of the condition. Sufferers may take such drastic measures as
having the auditory nerve surgically severed, thus becoming deaf (perhaps to
no avail, as the condition may continue nevertheless). Even in less severe
cases, there is generally a pervasive feeling of anxiety, and fear that the
tinnitus is symptomatic of more severe illnesses.
Tinnitus is often the result of head injuries or illness, although it may
appear spontaneously with no apparent trigger. The mechanisms which cause
tinnitus are not well understood, and treatment until recently has been
generally ineffectual.
The Company's officers, who have had significant experience in the area
of medical device sales and service, recognizing the need for improved
tinnitus treatment devices, worked with Abraham Shulman, M.D., one of the
foremost physicians actively treating tinnitus patients, to develop the
AudioSelectron(sm). Robert Guinta, the Company's Chairman of the Board, and
Sam DiGiralomo, the Company's CEO and President, each have over 20 years'
experience in the fields of sales and service of electronic medical
instruments in the area of otolaryngology, hearing and speech sciences, and
electro-acoustical devices. Dr. Schulman has been researching and writing
medical journal articles on the treatment of tinnitus by electro-stimulation
for more than fifteen years.
<PAGE>
The value of electrical stimulation for tinnitus treatment is now being
verified by an increasing number of studies being performed worldwide. Based
upon the apparent need and increasing acceptance of this type of tinnitus
treatment, Audiogenesis developed a prototype treatment device, and has been
exploring a number of alternatives to move this project forward. However, it
has not yet moved from the prototype and planning stage, primarily due to the
fact that the Company does not have sufficient funds to allocate for this
purpose. Audiogenesis intends to actively pursue this project by seeking debt
or equity capital, joint ventures with other companies, or licensing of the
technology to others.
Ultrasonic Echolocation Device
- ------------------------------
The Company has an exclusive worldwide license from the Virginia
Commonwealth University Intellectual Property Foundation (the "Foundation")
for its patented echolocation technology in the area of use by blind persons
and emergency services personnel.
The Theory of the Echolocation Device
For humans, the part of the ear known as the cochlea, is the principal
receptor and transmitter of sound frequencies. Researchers at Virginia
Commonwealth University discovered that humans could perceive very high
pitched frequencies, which are not normally able to be heard by humans (which
they named "ultrasound"), when a transmitting device was pressed against the
bones of the skull located behind the ear. These researchers believe that the
ultrasound is being transmitted by the bones of the skull to a part of the ear
known as the saccule, which is normally thought to involve only balance. This
transmission of sound does not involve air movement, which is the usual
mechanism for sound by which we hear. As a result of the bone conducted
sounds, the test subjects at the university have been able to listen to
ultrasonic signals bounced off objects and to differentiate between
differently shaped objects. Based upon data collected, the researchers
theorize that humans should be able to judge speed, distance, direction and
size of objects in their surroundings after being trained to perceive
differences in reflected ultrasound. This would theoretically permit a type
of orientation by sound similar to that used by bats and porpoises.
If a practical working device using the ultrasonic echolocation
technology could be developed, it would have applications for many different
types of military and civilian emergency services uses, such as firemen,
police, underwater rescue, as well as for use in murky water for emergency
repair, to aid in the assessment of damage of ships and underwater structures,
and as an aid to the visually impaired.
Details of the License Agreement
<PAGE>
As of September 30, 1997, the Company had paid $102,000 license fees.
The license provides for minimum royalty payments of $100,000 per year from
1997 to 2010. The license may be terminated by the Company upon 120 days'
written notice to the Foundation. The Company has entered into an agreement
with the Foundation to pay the remaining $50,000 of its 1997 minimum royalty
in three payments during October, November and December 1998. The first
payment of $15,000 for the October payment has been made.
Although the Company has been able to satisfy the payment obligations
(which have been amended from time to time) to maintain its license, the
Company's lack of available capital has prevented Audiogenesis from exploring
anything more than the rudimentary aspects of the technology, and the Company
now believes that the best approach would be to sublicense the technology to
companies that would have sufficient funding to explore the capabilities of
the technology.
Competition
- -----------
A number of companies with greater financial, technical, marketing and
sales resources than the Company, are marketing devices for the treatment of
tinnitus. If the Company's AudioSelectron(sm) reaches the stage where it will
be marketed, it will be in competition with a variety of different treatment
techniques and devices. A number of companies, all of which have greater
financial, technical, marketing and sales resources than the Company, offer
products for the blind and for emergency personnel. If the echolocation
technology were incorporated into such units, users would be compelled to
choose between very different devices, many of which have been in use for a
considerable period of time and have general acceptance among such personnel.
The Company's SafeTvend(sm) store is subject to competition not only from
companies which would offer similar services on-site at the customer's
premises, but also from direct distributors and manufacturers of the products
which would sell directly to such company. Virtually all of the competitors
have greater financial, technological, marketing and sales resources than the
Company. There are numerous organizations of varying sizes that engage in the
business of customized audio-visual presentations, most of these being
advertising agencies and organizations of similar nature. There is intense
competition for such business from a variety of organizations who have greater
financial technical, marketing and sales resources than the Company.
Employees
- ---------
The Company currently employs five full-time employees.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of Operation
<PAGE>
During the next twelve months, the Company will continue to operate the
SaveTvend(sm) store, as well as concentrating its efforts in the production of
customized audio-visual productions. If funding becomes available, the
Company would continue development of the AudioSelectron(sm), and would begin
the process of obtaining FDA approval for the device. This would include the
required clinical trials. At the present time, it is the Company's intention
to focus its efforts upon sublicensing the echolocation technology to a third
party rather than developing this technology in-house.
Assuming that the majority of the Company's business is directed toward
the SafeTvend(sm) store and the production of customized audio-visual
products, the Company believes that revenues from the SafeTvend(sm) store and
the existing contract to produce the customized audio-visual presentation, can
satisfy the Company's cash requirements for the next twelve months.
Further development of the AudioSelectron(sm) is dependent upon the
Company's raising additional funds during the next twelve months from a debt
or equity offering of its securities. At this time, the Company has no
present plans to seek such additional capital, and it is more likely that the
AudioSelectron(sm) project will remain shelved or that development of the
project will be continued by a third party through licensing agreements, sales
agreements, joint venture or other similar arrangement.
The Company believes that its present facilities and employees are
sufficient to carry on its business operations, and no changes are anticipated
during the next twelve months.
ITEM 3. DESCRIPTION OF PROPERTY
The Company does not own any real property but has a month to month lease
for 2600 square feet of office and warehouse space in Wayne, New Jersey at a
monthly rental of $1,922. Management believes that the facility is adequate
for its present needs.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the ownership as of the date of this
Registration Statement by each person who was known by the Company to
beneficially own more than five percent of any class of voting securities, and
the number of shares of Common Stock owned by each director and by all
directors and officers of the Company as a group, all of which is owned of
record and beneficially by such persons unless otherwise indicted:
<PAGE>
Title Name and Address No. of Shares Percent of
of class of Beneficial Owner and nature of class
Beneficial Ownership
Common Sam DiGiralomo
7 Doig Road, Suite 3
Wayne, NJ 07470 2,000,000(1) 20.58%
Common Robert R. Guinta
7 Doig Road, Suite 3
Wayne, NJ 07470 1,100,000(2)(3) 11.32%
Common Scott DiGiralomo
7 Doig Road, Suite 3
Wayne, NJ 07470 1,190,000(4) 12.25%
Common Stephen M. Robinson
172 Tuckerton Road
Medford, NJ 08055 1,000,000(5) 10.29%
Common Marshall Levine
6010 Dannenhauer Lane
Mays Landing, NJ 08330 1,195,222(6) 12.30%
Common Joseph and Teresa Guido
4 Lakeside Drive South
Forked River, NJ 08731 500,000(7) 5.15%
Common Frank and Elizabetta Magisano
711 South Main Street
Cedar Run, NJ 08092 510,000(8) 5.25%
Common All officers & directors
as a group (2 persons) 3,100,000 31.90%
- ----------------------
(1) Does not include options to purchase 1,000,000 shares of the Company's
common stock at $.50 per share.
(2) Including 300,000 shares held by Guinta Associates.
(3) Does not include options to purchase 250,000 shares of the Company's
common stock at $.50 per share.
<PAGE>
(4) Includes 80,000 shares owned by Monica DiGiralomo and 40,000 shares
owned by Christian DiGiralomo, wife and son of Scott DiGiralomo
(5) Does not include options to purchase 25,000 shares of the Company's
common stock at $.50 per share.
<PAGE>
(6) Includes shares owned by Marshall E. Levine; Behavioral Health
Services, P.A. Money Purchase Pension Plan & Trust; and Marshall E.
Levine, Trustee of Marshall E. Levine Ph.D. Profit Sharing Plan
(7) Comprised of 250,000 shares owned by Joseph Guido and 250,000 shares
owned by Teresa Guido, who are husband and wife
(8) Comprised of 250,000 shares owned by Frank Magisano and 260,000 shares
owned by Elizabetta Magisano, who are husband and wife
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the names and ages of the Company's
current Executive Officers and Directors, together with all positions and
offices held with the Company by such Executive Officers. Officers are
elected to serve until the meeting of the Board of Directors following the
next Annual Meeting of Shareholders or until their successors have been
elected and have qualified.
Name Age Executive Position
Officer/Director
- ---------------------------------------------------------------------
Sam DiGiralomo 55 1981 CEO, President, Treasurer
and Director
Robert R. Guinta 64 1981 Chairman of the Board,
Executive Vice President
Secretary
Sam DiGiralomo, a founder of the Company, President, Treasurer and a
director, has been an officer and director of the Company since the inception
of Genesis in July 1981. From 1975 to 1981, Mr. DiGiralomo served as Vice
President and General Manager of Guinta Associates, Inc., a sales and service
organization of electronic medical instruments in the field of otolaryngology,
hearing and speech sciences. His area of expertise included noise measuring
and hearing instruments. Mr. DiGiralomo has more than 20 years of management
and marketing experience in the field of occupational safety and electro-
acoustic devices. He has lectured at various trade associations and
universities and designed and authored several employee training programs.
Mr. DiGiralomo is a member of the American Society of Safety Engineers.
<PAGE>
Robert R. Guinta, a founder of the Company, Chairman of the Board,
Executive Vice President, and Secretary, has been an officer and Director of
the Company since July 1981. From 1965 to the present, Mr. Guinta has been
President and controlling shareholder of Guinta Associates, Inc., a sales and
service organization of electronic instruments in the field of otolaryngology,
hearing and speech sciences. He has over 25 years experience in the field of
medical electronics product development, manufacturing, marketing and sales.
From 1979 to the present, Mr. Guinta has been involved in manufacturing of
test and clinical instruments, including design and costing, for the electro-
acoustic and hearing health care markets. In 1980, Mr. Guinta directed the
set up of an FDA approved facility for testing and assembly of medical
devices. Mr. Guinta is an author and instructor in the area of medical
electronics, hearing and speech. Mr. Guinta was a member of the Mayor's
Council of the Environment for the City of New York, a director of the New
York Foundation of Otolaryngology, a member of the Acoustical Society of New
York, and a member and past president of the New York Audiology Study Group.
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth the compensation of the named executive
officers for each of the Registrant's last three completed fiscal years.
EXECUTIVE COMPENSATION SUMMARY TABLE
Annual Compensation Long term compensation
----------------------- --------------------------
Name and Year Salary Bonus Other Awards All
Principal ($) ($) Annual Restrict- Options/ LTIP Other
Position Compen- ed Stock SARs(#) Pay- Compensa-
sation ($) ($) outs($) tion ($)
- --------- ---- ------ ----- -------- --------- --------- ------ --------
Sam 1997 65,000 0 0 0 0 0 0
DiGiralomo, 1996 65,000 0 0 0 0 0 0
President, 1995 65,000 0 0 0 0 0 0
CEO
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following persons were granted options in Audiogenesis to replace the
options which had been terminated pursuant to the acquisition agreement with
Oil Baltija. All of such options have an exercise price of $.50 per share,
and expire on December 31, 1999.
Name of Optionee #Options
---------------- --------
Sam DiGiralomo 1,000,000
Scott DiGiralomo 25,000
Joanne Cammarata 25,000
Stephen M. Robinson 25,000
Robert R. Guinta 250,000
<PAGE>
The following shares have been reserved to be issued to the holders of
the Genesis options which remained outstanding after the acquisition of Oil
Baltija pursuant to the anti-dilution provisions of such options. Such shares
will be issued only in the event that such option holders exercise their
options in Oil Baltija (formerly Genesis), at no additional cost to the option
holders.
# Options Terminates:
------------ ----------
535,000 12/31/99
3,000 11/27/00
10,000 7/31/00
On February 7, 1997, the Company issued 3,000,750 shares of common stock to
two officers, one employee, and two consultants for their participation in the
Company's restructuring. The Company recorded $30,008 of non-cash
compensation expense related to this transaction. See Part II, Item 4 "Recent
Sales of Unregistered Securities" for details of such issuances.
On July 1, 1997, the Company borrowed $80,000 from Marshall E. Levine, an
affiliate of the Company, under a promissory note bearing interest at 8% per
annum.
On June 22, 1998 and June 29, 1998, the Company borrowed $12,000 and $1,500,
respectively, from Sam DiGiralomo, President of the Company, under promissory
notes bearing interest at 8% per annum.
On September 18, 1998, the Company entered into an agreement with Allstates
Air Cargo, Inc. to develop customized audio-visual products. The controlling
shareholder of Allstates Air Cargo, Inc. is Joseph Guido, an affiliate of the
Company.
The Company's legal counsel, Stephen M. Robinson, Esq., owns 1,000,000 shares
of common stock and has been granted 25,000 stock options.
ITEM 8. DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 50,000,000
shares of common stock, par value $.0001 per share ("Common Stock").
Common Stock
Holders of shares of Common Stock of the Company are entitled to cast one
vote for each share held at all shareholders meetings for all purposes,
including the election of directors, and to share equally on a per share basis
in such dividends as may be declared by the Board of Directors out of funds
legally available. Upon liquidation or dissolution, each outstanding share of
Common Stock will be entitled to share equally in the assets of the Company
legally available for distribution to shareholders after the payment of all
debts and other liabilities. Shares of Common Stock are not redeemable, have
no conversion rights and carry no preemptive or other rights to subscribe to
or purchase additional shares in the event of a subsequent offering. All
outstanding shares of Common Stock are and will be fully paid and non-
assessable, when issued.
<PAGE>
Non-Cumulative Voting
The Common Stock does not have cumulative voting rights which means that
the holders of more than fifty percent of the Common Stock voting for election
of directors can elect one hundred percent of the directors of the Company if
they choose to do so.
Dividends
There are no limitations or restrictions upon the right of the Board of
Directors to declare dividends out of any funds legally available
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
(a) Market Information. There is no public trading market for the
common stock of Audiogenesis, and no stock certificates have been distributed
to the Audiogenesis shareholders pending the effectiveness of this Form 10-SB.
The common stock of Genesis was quoted on the OTC Bulletin Board under the
symbol "GSIS". However, the market for Genesis common stock was sporadic and
thinly traded, and the price range of the common stock was not meaningful.
(b) Holders. There are 225 holders of record of Audiogenesis common
stock. The Company estimates that there are at least another 125 shareholders
whose stock is held in street name.
(c) Dividends. Neither Audiogenesis or its predecessor Genesis has
declared or paid any cash dividends on its common stock. Audiogenesis
presently, and for the foreseeable future, intends to retain all its earnings,
if any, for the development of the Company's business. The declaration and
payment of cash dividends in the future will be at the discretion of the Board
of Directors, and will depend upon a number of factors, including among
others, future earnings, operations, funding requirements, the general
financial condition of the Company, and such other factors as the Board of
Directors may deem relevant.
ITEM 2. LEGAL PROCEEDINGS
No material legal proceedings to which the Company or any of its property
is subject are pending, nor to the knowledge of the Company are any such legal
proceedings threatened.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
<PAGE>
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The following information sets forth certain information for
all securities the Company sold during the past three years without
registration under the Securities Act of 1933 (the "Securities Act"). All
transactions were effected in reliance on the exemption from registration
afforded by Section 4(2) of the Securities Act for transactions not involving
a public offering. There were no underwriters in any of these transactions.
On January 9, 1995, 275,000 shares of the common stock of Genesis were
issued to Robert J. Finkle in consideration of services rendered to such
company valued at $.06 per share.
On January 4, 1995, 17,018 shares of the common stock of Genesis were
issued to Marshall E. Levine in payment of the interest on a promissory note
owed to Marshall E. Levine by Genesis.
On April 24, 1995, 17,018 shares of the common stock of Genesis were
issued to Marshall E. Levine in payment of the interest on a promissory note
owed to Marshall E. Levine by Genesis.
On June 22, 1995, 25,000 shares of the common stock of Genesis were
issued to Marshall E. Levine in payment of the interest on a promissory note
owed to Marshall E. Levine by Genesis.
On July 31, 1995, 9,250 shares of the common stock of Genesis were issued
to Frank Vero, III, 9,250 shares were issued to Mark Summers, and 1,500 shares
were issued to Teela W. Banker, in consideration for the termination of an
acquisition agreement between PrintPerfect Express, Inc. and Genesis.
On August 2, 1995, 110,000 shares of the common stock of Genesis were
issued to Marshall E. Levine in consideration of the conversion into common
stock of all the principal and accrued interest on a certain promissory note
dated April 15, 1993 in the original principal amount of $50,000.
During the fiscal year ended September 30, 1995, 10,000 shares of the
common stock of Genesis were issued to Herbert B. Smith in payment of the
interest on a promissory note owed to Herbert B. Smith by Genesis.
On May 26, 1996, 9,300 shares of the common stock of Genesis were issued
to Frank Vero, III, to replace the 9,250 shares issued on July 31, 1995 which
were lost in the mail.
<PAGE>
On February 7, 1997, the Company issued the following 3,000,750 shares
of its restricted common stock in consideration of the termination of each of
the individuals' options to purchase the restricted common stock of the
Company's predecessor Genesis, such terminations being a condition of the
acquisition of Oil Baltija; additionally, in the case of Scott DiGiralomo, for
substantial uncompensated efforts expended on behalf of the Company over the
several previous years; further, in the case of Marshall E. Levine, in
consideration of Mr. Levine's agreement to transfer the outstanding
obligations of Genesis owed to Mr. Levine to Audiogenesis. The Company
recorded $30,008 of non-cash compensation expense related to this transaction.
1,000,000 shares Sam DiGiralomo
1,000,000 shares Scott DiGiralomo
500,000 shares Robert R. Guinta
250,000 shares Stephen M. Robinson
250,750 shares Marshall E. Levine
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The by-laws of the Company provide that every person who is or was a
director or officer, employee or agent of the Company, or any person who
serves or has served in any capacity with any other enterprise at the request
of the Company, shall be indemnified by the Company to the fullest extent
permitted by law. The Company shall indemnify the persons listed above
against all expenses and liabilities reasonably incurred by or imposed on them
in connection with any proceedings to which they have been or may be made
parties, or any proceedings in which they may have become involved by reason
of being or having been a director or officer of the Company, or by reason of
serving or having served another enterprise at the request of the Company,
whether or not in the capacities of directors or officers of the Company at
the time the expenses or liabilities are incurred.
<PAGE>
PART F/S
The following financial statements are filed as part of
this registration statement on Form 10-SB.
Report of Independent Accountants
Balance Sheets as of September 30, 1996 and 1997
and June 30, 1998 (unaudited)
Statements of Operations for the years ended September 30,
1995, 1996 and 1997 and the nine months ended June 30, 1997
and 1998 (unaudited)
Statements of Changes in Stockholders' Equity (Deficit) for the years
ended September 30, 1995, 1996 and 1997 and the nine
months ended June 30, 1998
Statements of Cash Flows for the years ended September 30, 1995,
1996 and 1997 and the nine months ended June 30, 1997 and 1998
Notes to Financial Statements
<PAGE>
AUDIOGENESIS SYSTEMS, INC.
AND SUBSIDIARY
FINANCIAL STATEMENTS
Years Ended
September 30, 1997, 1996 and 1995
<PAGE>
AUDIOGENESIS SYSTEMS, INC.
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Accountants F-2
Balance Sheets as of September 30, 1996 and 1997
and June 30, 1998 (unaudited) F-3
Statements of Operations for the years ended September 30,
1995, 1996 and 1997 and the nine months ended June 30, 1997
and 1998 (unaudited) F-4
Statements of Changes in Stockholders' Equity (Deficit) for the years
ended September 30, 1995, 1996 and 1997 and the nine
months ended June 30, 1998 F-5
Statements of Cash Flows for the years ended September 30, 1995,
1996 and 1997 and the nine months ended June 30, 1997 and 1998 F-6
Notes to Financial Statements F-7
F-2
<PAGE>
FALLON & FALLON
Certified Public Accountants
Airport Plaza
State Highway 36, Suite 102
Hazlet, New Jersey 07730
Telephone: (732) 888-2070
FAX: (732) 888-6245
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
of Audiogenesis Systems, Inc.
We have audited the accompanying balance sheet of Audiogenesis Systems, Inc.
as of September 30, 1997 and 1996, and the related statements of operations,
stockholders' equity (deficit), and cash flows for each of the three years in
the period ended September 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Audiogenesis Systems, Inc. as
of September 30, 1997 and 1996 and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 1997, in
conformity with generally accepted accounting principles.
September 29, 1998
F-2
<PAGE>
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, September 30,
1998 1997 1996
--------- ---------------------
(unaudited)
Current assets:
Cash $ 3,873 $ 3,779 $ 6,018
Accounts receivable 40,825 40,066 41,392
Inventories 36,947 55,526 57,297
Other current assets 300 300 15,398
--------- --------- ---------
Total current assets 81,945 99,671 120,105
Equipment, net 2,188 2,964 2,026
Deposits 1,957 1,957 1,957
--------- --------- ---------
Total assets $ 86,090 $104,592 $124,088
========= ========= =========
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 25,778 $ 42,801 $ 44,626
Accrued expenses 253,466 137,579 136,665
Taxes payable 3,433 2,637 2,643
Bonds payable, related parties - - 25,000
Shareholder loan 93,500 80,000 -
--------- --------- ---------
Total current liabilities 376,177 263,017 208,934
Commitments and contingencies
Stockholders' equity (deficit):
Common stock (no par) authorized
shares 50,000,000, issued and
outstanding 9,709,872 at June 30,
1998 and September 30, 1997,
6,709,122 at September 30, 1996 1,149,858 1,149,858 1,119,850
Note receivable from officer - - ( 237,429)
Accumulated deficit (1,439,945) (1,308,283) ( 967,267)
--------- --------- ---------
Total stockholders' equity (deficit) ( 290,087) ( 158,425) ( 84,846)
Total liabilities and stockholders'
equity (deficit) $ 86,090 $ 104,592 $ 124,088
========= ========= =========
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended Years Ended
June 30, September 30,
(unaudited)
1998 1997 1997 1996 1995
Sales $363,117 $382,108 $505,746 $513,457 $497,019
Cost of sales 156,140 163,340 216,192 217,621 254,942
------- ------- ------- ------- -------
Gross profit 206,977 218,768 289,554 295,836 242,077
------- ------- ------- ------- -------
Operating expenses:
General and
administrative 194,650 191,041 254,721 214,527 263,535
Selling 63,413 77,995 105,922 84,570 55,258
Research and development 75,000 55,000 80,000 47,000 -
Restructuring charges - 189,053 189,053 - -
Depreciation 776 1,053 1,429 1,080 1,995
------- ------- ------- ------- -------
Total operating
expenses 333,839 514,142 631,125 347,177 320,788
------- ------- ------- ------- -------
Loss from operations (126,862) (295,374) (341,571) ( 51,341) (78,711)
------- ------- ------- ------- -------
Other income (expense):
Interest income - 5,045 5,045 19,147 16,540
Interest expense ( 4,800)( 3,561)( 4,490) ( 4,950)( 36,454)
------- ------- ------- ------- -------
Loss before income taxes (131,662) (293,890) (341,016) (37,144) (98,625)
Income taxes - - - - -
------- ------- ------- ------- -------
Net loss $( 131,662) $(293,890) $(341,016) $(37,144)$(98,625)
========= ========= ========= ======== =======
Weighted average of
common shares
outstanding 9,709,872 8,376,205 8,709,622 6,709,107 6,475,995
========= ========= ========= ======== ========
Net loss per common share $( .01) $( .04) $( .04) $( .01) $( .02)
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<C> <S> <S> <S> <S> <S>
Common Stock Note Total
Number of Receivable Accumulated Stockholders'
Shares Amount from Officer Deficit Equity (Deficit)
Balance at September
30, 1994 6,235,036 $ 993,980 $ (180,742) $ (831,498) $ ( 18,260)
Issuance of stock 474,036 121,220 - - 121,220
Increase in note
receivable from
officer - - ( 30,840) - ( 30,840)
Net loss for the year
ended September 30,
1995 - - - (98,625) ( 98,625)
---------- --------- ------------- ------------ -------------
Balance at September
30, 1995 6,709,072 1,115,200 (211,582) (930,123) ( 26,505)
Issuance of stock 50 4,650 - - 4,650
Increase in note
receivable from
officer - - ( 25,847) - ( 25,847)
Net loss for the year
ended September
30, 1996 - - - ( 37,144) ( 37,144)
---------- --------- ------------- ------------ -------------
Balance at September
30, 1996 6,709,122 1,119,850 (237,429) (967,267) ( 84,846)
Issuance of stock 3,000,750 30,008 30,008
Decrease in note
receivable from
officer 237,429 237,429
Net loss for the year
ended September
30,1997 - - - ( 341,016) (341,016)
---------- --------- ------------- ------------ -------------
Balance at September
30, 1997 9,709,872 1,149,858 - (1,308,283) (158,425)
---------- --------- ------------- ------------ -------------
Net loss for the nine
months ended June 30,
1998 (unaudited) - - - ( 131,662) (131,662)
---------- --------- ------------- ------------ -------------
Balance at June 30, 1998 9,709,872 $1,149,858 $ - $(1,439,945) $ (290,087)
========== ========= ============= ============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended Years Ended
June 30, September 30,
1998 1997 1997 1996 1995
(Unaudited)
Cash flows from
operating activities:
Net loss $(131,662) $(293,890) $(341,016) $(37,144) $(98,625)
Adjustments to
reconcile net loss
to net cash used
by operating
activities:
Depreciation 776 1,053 1,429 1,080 1,995
Provision for
inventory obsolescence - - - 5,851 -
Write-off of
license costs - - - 47,000 -
Non-cash
compensation expense - - 173,955 4,650 121,220
(Increase) decrease in
accounts receivable ( 759) 173,955 1,326 ( 4,260) 37,833
Decrease in inventory 18,579 5,845 1,771 3,430 7,032
(Increase) decrease in
prepaid expenses and
other current assets - 15,098 15,098 ( 2,181) ( 1,889)
Increase (decrease)in
accounts payable (17,023) ( 12,220) ( 1,825) 4,493 ( 47,586)
Increase (decrease)in
accrued expenses 115,887 14,888 914 44,765 43,334
Increase (decrease)in
taxes payable 796 - ( 6) 1,210 ( 1,169)
Increase (decrease)in
other current
liabilities 13,500 25,000 80,000 (28,000) -
-------- -------- --------- -------- ---------
Net cash provided by
operating activities 94 (70,271) ( 68,354) 40,894 62,145
-------- -------- --------- -------- ---------
Cash flows from
investing activities:
License purchase - - - - (25,000)
Capital expenditures - ( 2,367) ( 2,367) - -
-------- -------- --------- -------- ---------
Net cash used by
investing activities - (2,367) ( 2,367) - (25,000)
-------- -------- --------- -------- ---------
Cash flows from
financing activities:
Accrued interest on note
receivable from officer - ( 5,046) ( 5,046) (19,147) (16,539)
Principal payment on
notes payable - - - - (50,000)
Proceeds from bonds
payable, related parties - - - - 35,000
Principal payment on bonds
payable, related party - (25,000) (25,000) (10,000) -
Principal payment on note
receivable, related party - 98,528 98,528 ( 6,700) (14,300)
-------- -------- --------- -------- ---------
Net cash provided by
financing activities - 68,482 68,482 (35,847) (45,839)
-------- -------- --------- -------- ---------
Net increase (decrease)
in cash 94 ( 4,156) ( 2,239) 5,047 ( 8,694)
Cash - beginning
of period 3,779 6,018 6,018 971 9,665
-------- -------- --------- -------- ---------
Cash-end of period $ 3,873 $1,862 $ 3,779 $ 6,018 $ 971
======== ======== ========= ======== =========
Supplemental information:
Cash paid for interest: $ 0 $ 0 $ 0 $2,100 $ 1,050
Cash paid for
income taxes: $ 0 $ 0 $ 0 $ 0 $ 0
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited as to Information Related to the Nine Months
Ended June 30, 1998 and 1997)
1.Organization:
Audiogenesis Systems, Inc. (the "Company") was incorporated in the state of
New Jersey on January 14, 1997 as a wholly owned subsidiary of Genesis Safety
Systems, Inc. ("Genesis"). On January 22, 1997 Genesis completed the spin-off
of 100% of its operations into the Company. Genesis operations included
offering safety services, educational programs, and products to companies
primarily engaged in chemical and industrial production, and currently is
expanding its business by focusing on its core technologies, which include the
further development of a medical device for hearing disorders and its
Echolocation technology.
The Company has one wholly owned subsidiary, Biowaste Technologies Systems,
Inc. (BTS). BTS was formed on July 1, 1988 for the purpose of engaging in the
business of the management of infectious waste. BTS is in the development
stage and, although the Company has been actively exploring various
opportunities for this subsidiary, no revenues have been produced to date.
2.Summary of Significant Accounting Policies:
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Audiogenesis Systems, Inc. and Subsidiary (collectively the "Company").
All material intercompany accounts and balances have been eliminated.
Spin-Off
The Company is the successor of 100% of the operations of its former parent,
Genesis. The financial statements presented included all the operations of
the Company as well as all the operations of Genesis and have been accounted
for in a manner similar to that in a pooling of interests.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the year. Actual results
could differ from those estimates.
Research and Development
All costs of licensing certain technology the Company plans to develop and
market have been expensed as research and development.
Reclassification
Certain prior year amounts have been re-classified to conform to current
year presentation.
F-7
<PAGE>
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited as to Information Related to the Nine Months
Ended June 30, 1998 and 1997)
2.Summary of Significant Accounting Policies (continued):
Fair Value of Financial Instruments
The carrying value of cash, accounts receivable, accounts payable, accrued
expenses, taxes payable, bonds payable, and other current liabilities
approximates fair value because of the relatively short maturity of these
instruments.
Revenue Recognition
Revenues are recognized when a service is performed or a product is
sold.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
Inventories consist of finished goods, safety equipment and safety products.
Equipment
Equipment is recorded at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets, which is
generally five to seven years. Expenditures for maintenance and repairs,
which do not extend the economic useful life of the related assets, are
charged to operations as incurred. Gains or losses on disposal of equipment
are reflected in the statements of operations.
Earnings Per Share
Earnings per share appearing in the statements of operations for the years
ended September 30, 1997, 1996, and 1995 and the nine month ended June 30,
1998 and 1997 have been prepared in accordance with the Accounting Principles
Board Opinion No. 15. Such amounts have been computed based on the loss for
the period divided by the weighted average number of shares of common stock
outstanding during the period.
Income Taxes
Effective October 1, 1992, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 requires recognition of deferred tax liabilities and assets
for the expected future tax consequences of events that have been included in
the financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
F-8
<PAGE>
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited as to Information Related to the Nine Months
Ended June 30, 1998 and 1997)
2.Summary of Significant Accounting Policies (continued):
Adoption of Recently Issued Accounting Standards
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 123, Accounting for Stock Based Compensation ("SFAS 123"). SFAS
123 requires companies to estimate the fair value of common stock, stock
options, or other equity instruments issued to employees using pricing models
which take into account various factors such as current price of the common
stock, volatility and expected life of the equity instrument. No adjustment
was required to be made to the operating results of the Company as a result of
this adoption.
Major Customers
A significant portion of the Company's revenues have been earned from a major
customer. Receipts from this major customer are as follows:
June 30, September 30,
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
Number of customers
contributing 10% or
more of revenue 1 1 1 1 1
Total revenues from
major customer 363,117 382,108 505,746 $512,941 $496,291
Percentage of revenue
from major customer 100% 100% 100% 100% 100%
The loss of this major customer would have a material adverse effect on
the Company's financial position and results of operations.
Major Suppliers
A significant portion of the Company's purchases are bought from four major
suppliers. Purchases from these major suppliers are as follows:
June 30, September 30,
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
Total purchases from
major suppliers $120,271 $138,035 $188,609 $180,307 $170,004
Percentage of
purchases from
major suppliers 87% 88% 88% 86% 82%
The loss of these suppliers may have a material adverse effect on the
Company's financial position and results of operations.
F-9
<PAGE>
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited as to Information Related to the Nine Months
Ended June 30, 1998 and 1997)
3.Equipment:
Equipment consists of the following:
June 30, September 30,
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
Equipment and
furniture $27,116 $27,116 $27,116 $24,749 $24,749
Accumulated
depreciation 24,928 23,776 24,152 22,723 21,643
Net equipment $ 2,188 $ 3,340 $ 2,964 $ 2,026 $ 3,106
4. Income Taxes:
The tax effect of temporary differences and net operating loss carryforwards
which make up the significant components of the net deferred tax asset
recognized for financial reporting purposes are as follows:
June 30, September 30,
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
Deferred tax assets:
Accounts receivable $ - $ - $ - $ - $ -
Inventory 2,340 2,340 2,340 2,340 -
Net operating loss
carryforward 866,520 687,732 734,858 393,842 386,237
--------- --------- --------- --------- ---------
Subtotal 868,860 690,072 737,198 396,182 386,237
Valuation allowance (868,860) (690,072) (737,198) (396,182) (386,237)
--------- --------- --------- --------- ---------
- - - - -
========= ========= ========= ========= =========
As of September 30, 1997, the Company has available, for tax reporting
purposes, unused Federal and State net operating loss carryforwards of
approximately $735,000 and $733,000 , respectively. Such amounts will begin
to expire in the years 2006 and 1998, respectively.
5. Related Party Transactions:
The Company has borrowed money from two shareholders. Principle amounts due
these shareholders are as follows:
June 30, September 30,
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
$93,500 $25,000 $80,000 $ - $ -
========= ========= ========= ========= =========
F-10
<PAGE>
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited as to Information Related to the Nine Months
Ended June 30, 1998 and 1997)
5. Related Party Transactions (continued):
Interest accrues at 8% per annum.
The Company's legal counsel owns 1,000,000 shares of common stock and has been
granted 25,000 stock options.
The Company's officers and employees are due commissions and reimbursements of
expenses amounting to $77,876 at June 30, 1998 and $55,994 and $27,112 at
September 30, 1997 and 1996, respectively.
6. Commitments and Contingencies:
Facility Lease
The Company's non-cancelable lease agreement with an unaffiliated company
expired June 30, 1998.
Total rent expense for the years ended September 30, 1997, 1996 and 1995 was
$23,015, $22,037, and $21,381, respectively.
As of July 1, 1998, the Company is renting on a month-to-month basis for
$1,922 per month plus utilities.
License Agreement
On May 20, 1994, the Company entered into an agreement to acquire a license to
develop and market products using echo location technology. This technology
is currently in the research and development stage and, accordingly, all costs
are expensed. As of September 30, 1997, the Company has paid $102,000 to
acquire this license. Amounts due under this agreement include minimum
royalty payments of $100,000 per year from 1997 to 2010. As of June 30, 1998,
the Company has not paid $50,000 of its 1997 minimum royalty.
The Company may terminate this agreement upon 120 days' written notice and
upon payment of all amounts due through the effective date of the termination
date.
F-11
<PAGE>
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited as to Information Related to the Nine Months
Ended June 30, 1998 and 1997)
7. Common Stock:
During the fiscal year ended September 30, 1995, the company issued 295,000
shares of common stock to two vendors in satisfaction of accounts payable.
The company issued 69,036 shares of common stock to two shareholders in
satisfaction of interest payable. The company issued 110,000 shares of common
stock to one shareholder in satisfaction of a note payable. Prices for the
shares of common stock for these transactions range from $0.06 to $0.88 per
share.
On May 29, 1996, the Company issued 50 shares of common stock. The Company
recorded $4,650 of non-cash compensation expense related to this transaction.
The Company's parent, Genesis, cancelled 1,325,000 options as a result of the
spin-off of the Company. The Company has reissued these options at the same
expiration date (12/31/99) and exercise price ($.50 per share).
The Company had an additional 548,000 options outstanding to purchase common
stock at various prices prior to the spin-off. The options remain outstanding
with the Company's predecessor. If exercised, they entitled the optionee to
receive a share of the Company. The Company would not receive any additional
consideration in such event. Accordingly, the Company has reserved 548,000
shares of common stock for this purpose.
On February 7, 1997, the Company issued 3,000,750 shares of common stock to
two officers, one employee, and two consultants for their participation in the
Company's restructuring. The Company recorded $30,008 of non-cash
compensation expense related to this transaction.
8. Restructuring Charges:
On January 22, 1997 the Company's parent, Genesis, completed a spin-off of the
Company. Certain assets of Genesis were not transferred to the Company, but
rather distributed to a major shareholder as remuneration for his efforts in
effectuating the reorganization. This cost in addition to the price of stock
issued for the same reason have been expensed as restructuring charges.
9. Note to Interim Financial Statements (unaudited)
Basis of Presentation
The interim unaudited financial statements reflect adjustments, consisting
only of normal recurring accruals, which are, in the opinion of Company's
management, necessary for a fair presentation of the financial position and
results of operation for the periods presented. Sales and the net loss for
any interim period are not necessarily indicative of the results for a full
year.
F-12
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
The following list describes the exhibits filed as part of
this registration statement on Form 10-SB:
Exhibit No. Description of Document
- ----------- -----------------------
3.01 Articles of Incorporation of Audiogenesis Systems,
Inc. dated January 14, 1997
3.02 By-laws of Audiogenesis Systems, Inc.
10.01 Echolocation Technology License Agreements
10.02 Agreement with Allstates Air Cargo, Inc. dated 9/18/98
10.03 Promissory Note to Marshall E. Levine Ph.D. Profit Sharing Plan
11.01 Statement re: Computation of Earnings per Share
21.01 List of Subsidiaries of Registrant
23.01 Consent of Fallon & Fallon, CPA's
27.01 Financial Data Schedule
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
AUDIOGENESIS SYSTEMS, INC.
/s/ Sam DiGiralomo
By: Sam DiGiralomo, President
Date: October 21, 1998
<PAGE>
Exhibit 3.01
Certificate of Incorporation Filed
of January 14, 1997
AudioGenesis Systems, Inc. Lonna R. Hooks
Secretary of State
THIS IS TO CERTIFY THAT there is hereby organized a corporation under and
by virtue of N.J.S. 14A:1-1 et seq., the "New Jersey Business Corporation
Act".
FIRST: The name of the corporation is AudioGenesis Systems, Inc.
SECOND: The address of the corporation's initial registered office is 172
Tuckerton Road, Medford, NJ 08055. The name of the registered agent at such
address is Stephen M. Robinson, Esq.
THIRD: The purpose for which this corporation is organized is to engage in
any activity within the purposes for which corporations may be organized under
the "New Jersey Business Corporation Act", N.J.S. 14A:1-1 et seq.
FOURTH: The aggregate number of shares which the corporation shall have
authority to issue is 50,000,000 shares of stock with a par value of $.0001
per share.
FIFTH: The number of directors constituting the initial Board of Directors of
this corporation is two (2). The name and address of each person who is to
serve as such director is:
Sam DiGiralomo, 7 Doig Road, Wayne, NJ, 07470
Robert R. Guinta, 7 Doig Road, Wayne, NJ, 07470
SIXTH: The name and address of the incorporator is Capital Information
Service, Inc., 172 West State Street, Trenton, NJ 08608.
In Witness Whereof, each individual incorporator, being over eighteen
years of age has signed this certificate; or if the incorporator be a
corporation has caused this certificate to be signed by its duly authorized
officer this 13th day of January, 1997.
/x/ Ruth Schneider Executive Vice
President
Ruth Schneider Executive Vice President
Capitol Information Service, Inc.
172 West State Street
Trenton, NJ 08608
205333
FILED FOR: Stephen M. Robinson, Esq.
Stephen M. Robinson, P.A.
172 Tuckerton Road
Medford, NJ 08055
<PAGE>
Exhibit 3.02
BY-LAWS
OF
AUDIOGENESIS SYSTEMS, INC.
ARTICLE I. OFFICES
Registered Office
1.01 The Corporation shall continuously maintain a registered office
in the State of New Jersey and a registered agent having a business office at
the registered office. The Corporation's initial registered office and
registered agent shall be as set forth in the Corporation's certificate of
incorporation. When the registered office is changed or when the registered
agent is changed, dies, resigns, or becomes disqualified, the Board shall
determine the address of a new registered office or designate a successor
registered agent or both, and shall cause the proper officers of the
Corporation to file the required certificates with the secretary of state of
New Jersey.
Principal Place of Business
1.02 The Board of Directors has full power and authority to establish
and to change the principal place of business at any time to another location
within or outside of the State of New Jersey.
Other Places of Business
1.03 Other places of business or offices may at any time be
established by the Board at any place or places within or outside the State of
New Jersey.
ARTICLE II. SHAREHOLDERS AND SHAREHOLDERS' MEETINGS
Annual Meeting
2.01 The annual meeting of shareholders of the Corporation shall be
held at the time and place, either within or outside of the State of New
Jersey, fixed by the Board of Directors. The Secretary of the Corporation
shall cause written notice of the time, place and purposes, including the
election of directors, of the meeting to be transmitted to shareholders within
the time periods prescribed by law.
Special Meetings
2.02 A special meeting of shareholders of the Corporation may be
called for any purpose and at any time by the President or pursuant to a
resolution adopted by the Board of Directors. Special meetings may also be
called by the Secretary or, in the case of the death, absence, incapacity or
refusal of the Secretary, by any other officer on the written request of
shareholders who hold, in the aggregate, at least ten percent of the shares of
stock of the Corporation entitled to vote on the matter to be acted on at the
<PAGE>
meeting. The shareholders' written request must set forth the purpose or
purposes of the special meeting. In all instances in which a special meeting
is called, the Secretary shall cause written notice of the time, place and
purposes of the meeting to be transmitted to shareholders within the time
periods prescribed by law.
Consents Instead of Meeting
2.03(a) Except as otherwise provided in New Jersey Statutes Section
14A:5-6(1), any action required or permitted to be taken at a meeting of
shareholders may be taken without a meeting, provided that every shareholder
who is entitled to vote on the action consents in writing to the action.
(b) In spite of subparagraph (a) above, any action to be taken
by the shareholders, other than the annual election of directors, may be taken
without a meeting and without the unanimous written consent of the
shareholders, provided that
1. Before the action, the Corporation obtains the written
consent of shareholders who would have been entitled to cast the minimum
number of votes necessary to authorize the action at a meeting at which all
shareholders entitled to vote on the action were present and voting;
2. If any shareholder has the right to dissent from the action,
the Board shall fix a date on which written consents are tabulated, if no
shareholder may dissent, the fixing of a date for tabulation shall be
optional.
3. No consent shall be counted that is received more than sixty
days after the date on which the Board authorizes the solicitation of consents
or, in a case in which consents (or proxies for consents) are solicited from
all shareholders who would have been entitled to vote at a meeting called to
authorize the proposed action, more than sixty days after the date of mailing
of solicitations of consents (or of proxies for consents); and
4. To the extent (if any) and in the manner required by New
Jersey Statutes Section 14A:5-6(2), the Secretary of the Corporation shall
provide advance written notice of the proposed action and the conditions
precedent to that action to all nonconsenting shareholders who would have been
entitled to notice of a meeting to vote on the action.
(c) All written consents obtained by the Corporation pursuant to this
paragraph 2.03 shall be filed in the minute book of the Corporation promptly
after submission by the shareholders. Written consents may be executed
together or in counterparts.
(d) Any action taken pursuant to this paragraph 2.03 shall have the
same effect, for all purposes, as if taken at a shareholders' meeting.
Quorum
2.04 Except as otherwise required by New Jersey Statutes Sections
14A:5-2 and 14A:5-3, the presence at a meeting in person or by proxy of the
holders of shares entitled to case a majority of the votes of all shares
issued and outstanding shall constitute a quorum. The shareholders present at
a meeting at which a quorum is present may continue to do business until
adjournment, despite the withdrawal of enough shareholders to leave less than
a quorum. If an insufficient number of shareholders is present at a meeting, <PAGE>
in person or by proxy, to constitute a quorum, those shareholders who are
present and who are entitled to vote at the meeting shall have the power to
adjourn the meeting until enough shareholders are present to constitute a
quorum.
Adjournment of Meetings
2.05 Any annual or special shareholders' meeting may be adjourned by
the holders of a majority of the voting shares of the Corporation who are
present in person or by proxy at the meeting. If the new time and place for
the meeting are announced at the time of adjournment, and the only business to
be transacted after reconvening could have been transacted at the original
meeting, then no further notice of the new time and place for the meeting need
be given to the shareholders. If, however, after the adjournment, the Board
of Directors fixes a new record date for the meeting, new notice of the
meeting shall be given to each shareholder of record, as determined on a new
record date.
Voting
2.06(a) At every meeting of shareholders, each person entitled to
vote and present at the meeting in person or by proxy shall have one vote for
each full voting share of the Corporation that stands in that person's name on
the books of the Corporation. If the Corporation has more than one class of
shares outstanding on the applicable record date, then the foregoing provision
shall apply only to the common shares of the Corporation; the shareholders of
all other classes shall vote their shares in the manner provided in the
certificate of incorporation as amended from time to time.
(b) If the Corporation holds its own shares, the Corporation shall
not vote those shares at any meeting and those shares shall not be counted in
determining the total number of outstanding shares at any given time. If the
Corporation holds a majority of the shares entitled to vote for the election
of directors of another domestic corporation or a foreign corporation, shares
of the Corporation held by the other domestic or foreign corporation may not
be voted at any meeting of shareholders of the Corporation for any purpose.
(c) Except as otherwise provided in New Jersey Statutes Section
14A:5-11 with regard to multiple classes or series of shares, whenever any
action, other than the election of directors, is to be taken by vote of the
shareholders, the action shall be authorized by a majority of the votes cast
at a meeting of shareholders by the holders of shares entitled to vote unless
a greater plurality is required by the certificate of incorporation or by the
New Jersey Business Corporation Act.
Record Date
2.07 The Board of Directors shall fix, in advance, the record date
for the determination of shareholders entitled to notice of and to vote at any
annual or special meeting of shareholders. The record date shall not be more
than sixty days or less than ten days before the date of the meeting. If the
Board fails to fix a record date for any shareholders' meeting, the record
date shall be the close of business on the day before the day on which notice
of the meeting is given, or if no notice is given, the next day before the
date on which the meeting is held.
Proxies
<PAGE>
2.08 Every shareholder entitled to vote at a meeting of shareholders
may authorize another person or persons to act by written proxy (which may be
in the form of a telegram or cable or its equivalent) given by the shareholder
or the shareholder's agent. No proxy shall be valid for more than eleven
months, unless a longer time is expressly provided in the proxy. Unless it is
coupled with an interest or is otherwise irrevocable as provided in New Jersey
Statutes Section 14A:5-19(3), a proxy shall be revocable at will. The grant
of a later proxy revokes any earlier proxy unless the earlier proxy is
irrevocable. A proxy shall not be revoked by the death or incapacity of the
shareholder but shall continue in force until revoked by the personal
representative or guardian of the shareholder. The presence at any
shareholders' meeting of any shareholder who has given a proxy shall not
revoke the proxy unless the shareholder files a written notice of revocation
with the Secretary of the meeting before the voting of that proxy or the
voting of the shares subject to the proxy by written ballot. A person named
in a proxy as the attorney or agent of a shareholder may, if the proxy so
provides, substitute another person to act in his or her place, including any
other person named as an attorney or agent in the same proxy. The
substitution shall not be effective until an instrument effecting it is filed
with the Secretary of the Corporation.
Voting of Pledged Shares
2.09 Any person who has pledged shares entitled to vote at an annual
or special meeting of shareholders of this Corporation shall have the right to
vote those shares until they have been transferred into the name of the
pledgee or the nominee of the pledgee.
Voting of Redeemable Shares
2.10 If the Corporation issues redeemable shares, the holders of
those shares shall not be en titled to vote on any matter on or after the date
on which (a) written notice of redemption of the shares has been mailed to
the holders of those shares, and (b) a sum sufficient to redeem the shares has
been deposited with a bank or trust company with irrevocable authorization to
pay the redemption price to the shareholders on the surrender of the share
certificates.
Officers of Meetings
2.11 The President, if present, shall preside at all meetings of
shareholders. In the absence of the President, the most senior Executive Vice
President (or, in the absence of any Executive Vice Presidents, the most
senior Vice President) present at the meeting, shall preside. The Secretary
of the Corporation shall, if present, act as secretary at all meetings of
shareholders. In the absence of the Secretary, any assistant secretary of the
Corporation who is present may act as secretary of the meeting. If no
assistant secretary is present, a temporary secretary for that particular
meeting shall be designated by the presiding officer.
Order of Business
2.12 The order of business at all meetings of the shareholders,
unless changed by a majority vote of the shares entitled to vote at the
meeting, shall be as follows:
(a) Call to order;
<PAGE>
(b) Report on presence of quorum;
(c) Reading or waiver of proof of mailing of notice of meeting and
minutes of preceding meeting;
(d) Designation of inspectors of election, if any;
(e) Election of directors (if applicable);
(f) Old business;
(g) New Business;
(h) Reports of officers; and
(i) Adjournment.
Use of Ballots
2.13 Elections of directors and other matters requiring shareholder
approval need not be by ballot unless a shareholder requests a vote by ballot
on a particular issue before the commencement of voting on that issue.
Inspectors
2.14(a) Before any annual or special meeting of shareholders, the
Board of Directors may appoint one or more inspectors to act as such at the
meeting.
(b) In connection with any annual or special meeting of shareholders,
if inspectors are not appointed by the Board of Directors or if they fail to
qualify, the presiding officer at the meeting may and, on the request of any
shareholder entitled to vote at the meeting, shall appoint one or more
individuals to act as inspectors at the meeting.
(c) If an individual appointed as inspector fails to appear, qualify,
or act as an inspector, the vacancy may be filled by the Board of Directors
before the applicable meeting or at the meeting by the presiding officer at
the meeting.
(d) Before performing their duties, all inspectors shall sign an oath
or affirmation to execute faithfully the duties of inspector with strict
impartiality and according to the best of their abilities.
(e) No person shall be elected a director at a meeting at which he or
she has served as an inspector.
Voting List
2.15 At each shareholders' meeting, the Secretary or any assistant
secretary shall produce a list of shareholders entitled to vote at the
meeting. The list shall be certified to be complete by the Secretary or
assistant secretary or by a transfer agent duly appointed by the Board of
Directors. The list, which may consist of cards or any equipment that permits
a visual display, shall be arranged alphabetically within each class and
series, with the address of, and the number of shares held by, each
shareholder of record. The list constitutes prima facie evidence of the
identity of the shareholders entitled to vote at the meeting and may be
inspected by any shareholder during the meeting.<PAGE>
ARTICLE III. BOARD OF DIRECTORS
Responsibilities and Nature of the Board
3.01(a) Except as otherwise provided in the Corporation's certificate
of incorporation, the business and affairs of the Corporation shall be managed
by the Board of Directors. Directors must be at least eighteen years of age,
but need not be residents of New Jersey, citizens of the United States, or
shareholders of the Corporation unless the Corporation's certificate of
incorporation so requires.
(b) In discharging his or her duties to the Corporation and in
determining what he or she reasonably believes to be in the best interest of
the Corporation, a director may, in addition ton considering the effects of
any action on the shareholders, consider any of the following: (1) the
effects of the action on the Corporation's employees, suppliers, creditors,
and customers; (2) the effects of the action on the community in which the
Corporation operates; and (3) the long-term as well as short-term interests of
the Corporation and its shareholders, including the possibility that these
interests may best be served by the continued independence of the Corporation.
(c) If on the basis of the above factors, the Board of Directors
determines that any proposal or offer to acquire the Corporation is not in the
best interest of the Corporation, it may reject such proposal or offer. If
the Board of Directors determines to reject any such proposal or offer, the
Board of Directors shall have no obligation to facilitate, remove any barriers
to, or refrain from impeding the proposal or offer.
Number of Directors
3.02 The Board of Directors shall consist of not less than one nor
more than ten Directors. The precise number of Directors within this range
shall be fixed by the Board of Directors each year before the annual meeting
of shareholders. The Board of Directors immediately following the adoption of
these by-laws shall consist of two Directors.
Regular Meetings
3.03 Regular meetings of the Board of Directors shall be held,
without call or notice, immediately following the annual meeting of
shareholders of the Corporation, and with notice at any other time that the
Board of Directors so determines.
Special Meetings
3.04 A special meeting of the Board may be called for any purpose at
any time by the President or by two Directors.
Notice of Meetings
3.05 The Secretary shall give notice of the time, date, and place of
each special meeting of the Board and of each regular meeting of the Board
other than the meeting that immediately follows the annual meeting of
shareholders. Notice shall be given at least two days before the meeting if
given orally, at least three days before the meeting if given by cable,
telegram, telecopier, or overnight messenger, and at least five days before
the meeting if given by mail or in any other manner. Any notice given by mail
shall be deposited in the United States deposited with the United States <PAGE>
Postal Service, postage prepaid and addressed to the director's last known
residence or business address. The notice need not specify the business to be
transacted at the meeting or its purpose.
Location of Meetings
3.06 Meetings of the Board of Directors may be held at any place
within or outside the State of New Jersey, provided that the regular meeting
of the Board following the annual meeting of shareholders is held at the same
location as the annual meeting.
Unanimous Consent Instead of Meeting
3.07 Any action required or permitted to be taken pursuant to
authorization voted at a meeting of the Board may be taken without a meeting
on the written consent of each member of the Board of Directors. Written
consents by all of the members of the Board shall have the same effect as a
unanimous vote of the Board for all purposes.
Quorum
3.08 Except as otherwise provided by the certificate of
incorporation, each Director shall have one vote at meetings of the Board, and
the participation of the Directors with a majority of the votes of the entire
Board shall constitute a quorum for the transaction of business.
Voting
3.09 Except as otherwise provided by law or the certificate of
incorporation of the Corporation, every act or decision by a majority of the
Directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the Board of Directors.
Use of Communication Equipment
3.10 Where appropriate communication facilities are reasonably
available, any or all of the members of the Board of Directors may participate
in part or in all of a meeting of the Board my means of a conference telephone
or by any other means of communication by which all persons participating in
the meeting are able to hear each other.
Resignation and Removal
3.11(a) Any Director may resign at any time by written notice to the
Corporation. A resignation shall be effective on receipt by the Corporation
or at any later date specified by the resigning Director in the notice of
resignation.
(b) Any Director may be removed for cause by the Board. The Board
shall also have the power to suspend Directors pending a final determination
that cause exists for removal.
Vacancies
3.12(a) A vacancy or vacancies in the Board of Directors shall be
deemed to exist (1) in the case of the death, resignation, or removal of any
Director; (2) if the authorized number of Directors shall be increased; or (3) <PAGE>
if, at any meeting at which Directors are to be elected, the shareholders fail
to elect the authorized number of Directors to be elected at the meeting. No
reduction of the authorized number of Directors shall have the effect of
removing any Director prior to the expiration of his or her term of office.
(b) Vacancies in the Board of Directors existing for any reason,
including vacancies arising as a result of an increase in the number of
Directors, may e filled by the affirmative vote of a majority of the remaining
Directors then in office, even if their number is insufficient to constitute a
quorum, or by a sole remaining director. A Director so elected to fill a
vacancy shall hold office until a successor is elected and qualified at the
next annual meeting of the shareholders.
(c) If a Director resigns from the Board effective at some future
date, the future vacancy may be filled by the affirmative vote of a majority
of the Directors then in office, including the Director who has resigned, even
if their number is insufficient to constitute a quorum. The term of the newly
elected Director will begin when the resignation becomes effective. A
Director elected to fill a future vacancy shall hold office from the effective
date of the predecessor's resignation until a successor is elected and
qualified at the next annual or special meeting of the shareholders.
(d) The shareholders may elect a Director or Directors at any time to
fill any vacancy or vacancies not filled by the Directors.
(e) If, for any reason, the Corporation has no Directors in office,
any shareholder, or the executor or administrator of a deceased shareholder,
has the right to call a special meeting of shareholders for the election of
Directors. Any shareholder electing to exercise this right shall give notice
of the meeting in accordance with paragraph 2.02 of these by-laws.
Common Directorships; Directors' Personal Interest
3.13(a) It shall not be necessary for a Director to leave a meeting
of the board or abstain from voting merely because the Board may be voting on
(1) a transaction between the Corporation and that Director or (2) a
transaction between the Corporation and one or more entities in which that
Director is interested, whether as a director of that entity or otherwise, and
whether alone or with other Directors, provided that one or more of the
conditions set forth in New Jersey Statutes Section 14A:6-8(1) is satisfied.
(b) Common or interested Directors may be counted in determining the
presence of a quorum at a Board meeting at which a transaction described in
subparagraph 3.13(a) above is authorized, approved or ratified.
Presiding Officer
3.14 The President, if a member of the board of Directors, shall
preside at all meetings of the board at which he or she is present. If the
President is not present, the Board shall select one person form among its
members present at the meeting to preside at the meeting. If the Secretary or
any Assistant Secretary is present at meetings of the Board, that person shall
record the minutes; if neither the Secretary nor assistant secretary is
present, the Board shall select one person from among its members present at
the meeting to record the minutes.
Adjournments
<PAGE>
3.15 A majority of the members of the Board present at a meeting of
the Board may adjourn any Directors' meeting to meet again at a time and place
fixed in the resolution adjourning the meeting. Notice need not be given if
the period of adjournment does not exceed ten days, and the time and place of
the adjourned meeting are fixed in the resolution.
Compensation of Directors
3.16 Directors shall be compensated for their services and reimbursed
for their expenses as employees, officers, Directors, and members of Board
committees. The Board shall periodically determine a reasonable basis for
compensation, and a majority of the Board must adopt any resolution
determining compensation. The Board may, if it deems it appropriate, provided
for reduced or no additional compensation for Board members who are
compensated employees of the Corporation.
Dissenting Votes
3.17 Any Director who disagrees with any action taken by the Board of
Directors shall have the right to record a dissent in the minute books of the
Corporation; provided, however, that the legal effect of that action shall be
governed by applicable law.
ARTICLE IV. COMMITTEES
Establishment of Committees
4.01 The Board of Directors may designate an executive committee from
among its members, consisting of two or more Directors, and may at any time
designate additional committees, each of which shall consist of two or more
Directors, by the affirmative vote of a majority of the entire Board. Subject
to the limitations contained in paragraph 4.08 below, the executive committee
shall have the maximum authority permitted by law in effect at the time of the
exercise of that authority. Each additional committee shall have the
authority, not exceeding the authority of the executive committee, specified
by the Board in resolutions adopted by a majority of the entire Board.
Presiding Officer and Secretary
4.02 If the President is a member of any committee, the President
shall serve as the chairperson of the committee. If the President is not a
member of a committee, then the committee may choose one of its members to act
as chairperson, unless the Board designates a chairperson. Each committee
shall from time to time designate a secretary of the committee who shall keep
a record if its proceedings.
Vacancies
4.03 Vacancies in the membership of any committee may be filled by
the Board, pursuant to a resolution adopted by a majority of the entire Board,
for the unexpired term of the member whose death, resignation, removal or
disability caused the vacancy.
Meetings
4.04 Each committee shall adopt its own rules of procedure. Each
committee shall meet at whatever times it may determine by resolution, and <PAGE>
shall also meet whenever called together by the Board. Members of committees
may attend meetings through the medium of communications equipment, in the
same manner as members of the Board; any committee may act by unanimous
written consent instead of a meeting, in the same manner as the Board. Written
consents submitted by all of the members of a committee shall have the same
effect as a unanimous vote of the committee for all purposes.
Notice of Meetings
4.05 If a committee establishes regular meeting dates, it shall not
be necessary to give notice of a regular meeting. Notice of every special
meeting shall be given in the manner and within the time periods specified in
these by-laws with respect to notices of special meetings of the Board.
Quorum; Voting
4.06 Except as otherwise provided by the certificate of
incorporation, each Director shall have one vote at a meeting of the Board
committee, and the participation of the Directors with a majority of the votes
of the committee shall constitute a quorum for the transaction of business. A
quorum at any meeting of any committee shall be a majority of the entire
committee, except that if any committee consists of only one member, then that
one Director constitutes a quorum. Every act or decision by a majority of the
Directors present at a duly held committee meeting at which a quorum is
present shall be regarded as the act of the committee.
Reports
4.07 Actions taken at a meeting of any committee shall be reported to
the board at its next meeting, except that when the meeting of the Board is
held within two days after a committee meeting, the report may be made at the
second Board meeting following the committee meeting.
Limitations on Powers
4.08 No committee of the board shall have authority to do any of the
following:
(a) Make, alter or repeal any by-law of the Corporation;
(b) Elect or appoint any Director, or remove any officer or Director;
(c) Submit to the shareholders any action that requires their
approval; or
(d) Amend or repeal any resolution adopted by the Board that by its
terms is amendable or repealable only by the Board.
Powers of the Board
4.09 By resolution adopted by a majority of the entire Board, the
Board shall have the power to:
(a) Appoint one or more Directors to serve as alternate members of
any committee and to act in the absence or disability of members of any
committee with all the powers of the absent or disabled members;
<PAGE>
(b) Abolish any committee at its pleasure; and
(c) Remove any Director from membership on any committee at any time,
with or without cause.
ARTICLE V. WAIVER OF NOTICE
Requirements for Waiver
5.01 Any notice required to be given pursuant to these by-laws may be
waived in writing either before or after the meeting that is the subject of
the notice. Copies of the waivers shall be filed in the minute book of the
Corporation promptly after they are given. The attendance of any Director,
committee member, or shareholder at a meeting without protesting the lack of
notice before the conclusion of the meeting constitutes a waiver of the right
to notice.
Nature of Business
5.02 A waiver of notice of a Board meeting need not specify the
nature of business transacted or to be transacted at the meeting or the
purpose of the meeting. A waiver of notice of a shareholders' meeting shall
specify the nature of business transacted or to be transacted at the meeting
and the purpose of the meeting.
ARTICLE VI. OFFICERS
Election
6.01 The officers of the Corporation shall consist of a President, a
Treasurer, a Secretary, and any other officers, including without limitation
one or more Executive Vice Presidents, one or more Vice Presidents, one or
more Assistant Treasurers, and one or more Assistant Secretaries as the Board
deems necessary. All officers shall be elected by the Board of Directors.
The President, Treasurer, Secretary, and any other officers that the Board
considers appropriate shall be elected at the regular Board meeting
immediately following the annual meeting of shareholders. Any two or more
offices may be held by the same person; provided, however, that no officer
shall be authorized to verify any instrument in more than one capacity if the
instrument is required by law to be executed, acknowledged, or verified by two
or more officers.
Additional Officers
6.02 The Board of Directors may from time to time elect any other
officers that it deems necessary, who shall hold their offices for the terms
and have the powers and duties prescribed by the Board.
Election and Term of Office; Removal
6.03 Each officer shall hold office from the date elected until the
next annual election of officers, and until a successor has been elected
unless the officer has previously resigned or been removed. All officers of
the Corporation shall hold office at the pleasure of the Board of Directors.
Vacancies
<PAGE>
6.04 Any vacancy in the offices of President, Treasurer, and
Secretary shall be filled promptly by the Board. Any vacancy in any other
office may be filled by the Board at its discretion.
Removal, Suspension and Resignation
6.05(a) Any officer elected by the Board may be removed by the Board
either with or without cause. Any officer elected by the shareholders may be
removed, without cause, only by the shareholders. However, the Board may
suspend for cause the authority of an officer appointed by the shareholders
pending shareholder action. The removal or suspension of an officer shall be
without prejudice to any contract rights that the officer may have. Election
of an officer shall not, in and of itself, create contract rights.
(b) Any officer may resign at any time by giving written notice to
the Board or to the President. The resignation will be effective on receipt,
or at any later time specified in the resignation. Unless otherwise specified
in the resignation, its acceptance is not necessary to make it effective.
Powers and Duties
6.06 The officers of the Corporation shall have the responsibilities
set forth in these by-laws. The officers may have additional responsibilities
as determined by the Board of Directors, the Executive Committee (if any),
and, in the case of all officers other than the President, the President,
provided that any additional responsibilities are not inconsistent with the
provisions of these by-laws. Without limiting the foregoing, the officers
shall have the following duties and responsibilities:
(a) The President shall be the chief executive officer of the
Corporation and, as such, shall have general supervision over the business and
affairs of the Corporation, subject to the control of the Board of Directors.
The President shall be a member ex officio of each standing committee to which
he or she is not personally appointed. Subject to the control of the Board of
Directors, the President may enter into any contract or execute and deliver
any instruments on behalf of the Corporation. The President shall preside at
all meetings of the shareholders and at all meetings of the Board of Directors
that he or she attends. In general, the President shall perform all duties
incident to the office of the President, and any other duties that may be
assigned by the Board of Directors.
Vice President
(b) In the order of their seniority unless otherwise determined by
the Board of Directors, the Executive Vice Presidents (if any) shall perform
the functions of the President in the absence or disability of the President.
In addition, they shall perform all other functions prescribed by the
President or the Board of Directors. In the order of their seniority unless
otherwise determined by the Board of Directors, the Vice Presidents (if any)
shall perform the functions of the President in the absence or disability of
the President and the Executive Vice President. They shall perform all other
duties and have whatever other powers prescribed by the President or the Board
of Directors.
Treasurer
(c) The Treasurer shall have charge and custody of, and be
responsible for, all funds and securities of the Corporation. The Treasurer
shall deposit all funds in the name of the Corporation in the institutions <PAGE>
selected by the Board of Directors. The Treasurer shall keep or cause to be
kept books of account on behalf of the Corporation and shall make these books
available to any of the Directors of the Corporation during business hours at
the office of the Corporation where the books and records are kept. In
general, the Treasurer shall perform all the duties incident to the office of
the Treasurer and any other duties as may be assigned by the President or the
Board of Directors.
Assistant Treasurer
(d) Assistant Treasurers shall perform all of the duties and
responsibilities of the Treasurer whenever the Treasurer is unavailable to
perform the duties of the office, and shall perform all other duties as may be
assigned to them by the Board of Directors, the President or the Treasurer.
Secretary
(e) The Secretary, if present, shall act as secretary at all meetings
of the Board of Directors and of the shareholders and shall keep the minutes
of those meetings in a book or books to be provided for that purpose. The
Secretary shall cause notices of meetings to be given in accordance with these
by-laws. In general, the Secretary shall perform all the duties incident to
the office of the Secretary and any other duties as may be assigned by the
President or the Board of Directors.
Assistant Secretaries
(f) Assistant Secretaries shall perform all of the duties and
responsibilities of the Secretary whenever the Secretary is unavailable to
perform the duties of the office, and shall perform all other duties and
exercise all other powers as may be assigned to them by the Board of
Directors, the President or the Secretary.
ARTICLE VII. SHARES
Form and Signature
7.01 The certificates for shares of the Corporation shall be in the
form determined by the Board of Directors, subject to these by-laws, the
certificate of incorporation, and applicable provisions of law. Each
certificate shall indicate that the Corporation is organized under the laws of
the State of New Jersey, and shall set forth the registered holder's name and
the number of shares. Each certificate shall e signed by the President or any
Executive Vice President and the Treasurer, any assistant Treasurer, the
Secretary or any Assistant Secretary, and shall bear the seal of the
Corporation or its facsimile. If any certificate is countersigned by a
transfer agent or registrar who is not an officer or any employee of the
Corporation, any and all other signatures may be facsimiles. If any officer,
transfer agent, or registrar who has signed, or whose facsimile signature has
been placed on, any certificate shall have ceased to serve in that capacity
before the certificate is issued, the certificate may be issued by the
Corporation with the same effect as if that person continued to serve in his
or her former capacity at the date of the certificate's issue. Provided that
it otherwise complies with the requirements of this paragraph 7.01 and
applicable provisions of law, a card that is punched, magnetically coded, or
otherwise treated so as to facilitate machine or automatic processing may be
used by the Corporation as a share certificate.<PAGE>
Description of Rights and Preferences
7.02 If the Corporation is at any time authorized to issue shares of
more than one class, then each share certificate issued by the Corporation
shall contain the following information on the face or back of the
certificate, ore shall state that the Corporation will furnish the following
information to any shareholder on request and without charge:
a. The designations, relative rights, preferences and limitations of
the shares of each class and series authorized to be issued, so far as they
have been determined; and
b. The authority of the Board to divide the shares into classes or
series and to determine and change the relative rights, preferences and
limitations of any class or series.
Replacement Certificates
7.03 The Board of Directors may direct that a new share certificate
be issued to replace any certificate alleged to have been lost, destroyed, or
wrongfully taken, on written notice received from the shareholder before the
Corporation is informed that the share has been acquired by a bona fide
purchaser. The notice required from the shareholder shall be in the form of
an affidavit showing that the certificate has been lost, destroyed or
wrongfully taken. When authorizing the issuance of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
certificate's issuance, require the shareholder or the shareholder's legal
representative to file a bond with the Corporation in whatever reasonable sum
as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost,
destroyed or wrongfully taken.
Transfer of Securities
7.04 The Corporation's registered securities shall be transferable
only on the books of the Corporation. Transfer shall be permitted only by the
person in whose name the securities appear on the Corporation's books, by that
person's legal representative, or by that person's attorney if authorized by
power of attorney duly executed and filed with the Corporation or its transfer
agent. Transfers of registered securities may be made on surrender to the
Corporation or to its agents of an outstanding certificate or certificates
representing the security with a duly executed assignment and authorization to
transfer endorsed on or attached to the certificate, together with proof of
the authenticity of the signature and of the power of the assignor to transfer
the security as the Corporation or its agents may require. On surrender, the
Corporation or its agent shall issue a new certificate to the person entitled
to it, cancel the old certificate, and record the transaction on its books.
Except as provided in these by-laws or by the laws of the State of New Jersey,
the person in whose name registered securities stand on the books of the
Corporation shall be deemed the owner for all purposes.
Record date for Dividends or Rights
7.05 The Board of Directors may fix, in advance, a date as the record
date for determining the shareholders entitled to receive payment of any
dividend or the allotment of any right. The record date may in no case be
more than sixty days before the event to which it relates. If the Board of
Directors does not fix a record date in connection with these matters, then <PAGE>
the record date with respect to these matters shall be at the close of
business on the day on which the Board adopts the resolution authorizing a
dividend or allotment of rights.
Issue of New Shares or Sale of Treasury Shares
7.06 Shares of the Corporation that are authorized but not yet issued
and treasury shares may be issued or sold from time to time for the
consideration determined by the Board of Directors, but in no case for less
than par value, subject to the provisions of the certificate of incorporation
and the New Jersey Business Corporation Act.
ARTICLE VIII. FISCAL YEAR
Designation
8.01 The fiscal year of the Corporation shall end on the last day of
September each year.
ARTICLE IX. AMENDMENTS
Amendments in General
9.01 The power to alter, amend, or repeal these by-laws is vested in
both the shareholders and the Board of Directors, subject to paragraphs 9.02
and 9.03 below.
Amendments by Shareholders
9.02 Any by-law made or amended by the Board of Directors may be
amended or repealed by the shareholders, and new by-laws may be added by the
shareholders. The shareholders may provide as to any or all by-laws that by-
law provisions adopted by them may not be altered or repealed by the Board.
Amendments by the Board of Directors
9.03 Any by-law made or amended by the shareholders may be amended or
repealed by the Board of Directors, and new by-laws may be added by the Board
of Directors unless the shareholders prescribe in the by-law that it shall not
be altered or repealed by the Board.
ARTICLE X. MISCELLANEOUS
Seal
10.01 The Corporation's seal shall be inscribed with the name of the
Corporation, the year of its incorporation, and the words "New Jersey". The
seal may be used by causing it or a facsimile to be impressed or reproduced on
a document or instrument, or affixed to a document or instrument.
Maintenance of Books and Records
10.02 The Corporation shall maintain books and records of account and
minutes of the meetings of its shareholders and Directors, including meetings
of committees of the Board. These documents shall be maintained at one or
more locations within or outside the State of New Jersey, the location or
locations to be designated by the Board of Directors. Each of these documents <PAGE>
shall be in written form or in any other form capable of being converted into
written form within a reasonable time.
Inspection of Corporate Records
10.03 Any shareholder of record of the Corporation who has been a
shareholder of record for at least six months immediately preceding his or her
demand and any person holding at least five percent of the outstanding shares
of any class or series shall have the right, on at least five days' written
demand to the President or the Secretary of the Corporation and for a purpose
deemed proper under any applicable law, to examine in person, by in person or
by an agent or attorney, during usual business hours, the minutes of the
Corporation's shareholders' meeting and the Corporation's record of its
shareholders and to make extracts. The examination shall take place where the
minutes and record are maintained.
Execution of Contracts
10.04 The Board of Directors may authorize any person to enter into
any contract or execute any instrument in the name of and on behalf of the
Corporation. Authorization may be general or specific.
Voting Shares of Other Corporations
10.05 The President and any Executive Vice President or Vice
President are authorized to vote any shares of any other corporation or
corporations standing in the name of the Corporation. This authority may be
exercised by these officers either in person, by proxy, or by a duly executed
power of attorney.
Bonds
10.06 The seal of the Corporation and any or all signatures of the
officers or other agents of the Corporation on a bond of the Corporation and
on any coupon attached to the bond may be facsimiles if the bond is
countersigned by an officer or other agent of a trustee or by other certifying
or authenticating authority. If any officer or other agent of the Corporation
who has signed or whose facsimile signature has been placed on a bond or
coupon has ceased to be an officer or agent before the bond is issued, the
bond may be issued by the Corporation with the same effect as if that person
were an officer or agent at the date of its issue.
Indemnification
10.07 Every person who is or was a director or officer, employee or
agent of the Corporation, or any person who serves or has served in any
capacity with any other enterprise at the request of the Corporation, shall be
indemnified by the Corporation to the fullest extent permitted by law. The
Corporation shall indemnify the persons listed above against all expenses and
liabilities reasonably incurred by or imposed on them in connection with any
proceedings to which they have been or may be made parties, or any proceedings
in which they may have become involved by reason of being or having been a
director or officer of the Corporation, or by reason of serving or having
served another enterprise at the request of the Corporation, whether or not in
the capacities of directors or officers of the Corporation at the time the
expenses or liabilities are incurred.
<PAGE>
ARTICLE XI. EMERGENCY PROVISIONS
11.01 The following provisions shall govern and shall supersede any
other provisions in these by-laws in the event of an emergency.
(a) For purposes of this Article XI, the following terms shall have
the following meanings:
1. "Emergency" shall mean an emergency in the conduct of the
business of the Corporation resulting from an attack on the United States or
any nuclear or atomic disaster
2. "Emergency list" shall mean the most current list in effect
pursuant to paragraph 11.02.
3. "Listed officers" shall mean the officers listed on the
"emergency list".
4. "Principal headquarters" shall mean the principal place of
business of the Corporation. If use of the principal place of business is not
practical during an emergency, the "principal headquarters" shall mean the
place of business at which the largest number of employees remain employed by
the Corporation during the emergency.
(b) In the event of an emergency, the senior officer of the
Corporation present at the principal headquarters shall call an initial
emergency meeting of the Board of Directors to be held as soon as practicable
after the commencement of the emergency. The officer shall use his or her
best efforts to notify each Director and each listed officer of the time and
location of the meeting, but no action taken at the meeting or during the
emergency shall be invalidated by reason of the fact that any Director or
listed officer could not be notified of the time and location of the meeting.
(c) A Director or listed officer may participate in any Board meeting
held during the emergency by means of any communications device that enables
him or her to hear the person presiding at the meeting and enables the
presiding officer to hear that Director or listed officer. It shall not be
necessary for each Director or listed officer to hear all other Directors and
listed officers.
(d) For purposes of the initial emergency meeting, the Board of
Directors shall be deemed to consist of the Directors who attend or otherwise
participate at the initial emergency meeting together with those listed
officers who both (1) attend or otherwise participate at the initial emergency
meeting and (2) are designated as "Special Directors" by the Directors
participating at the meeting, by the Senior Officer. The number of listed
officers who shall be designated as Special Directors shall be the lesser of
(1) the number of listed officers participating at the meeting or (2) the
difference between the number of Directors on the Board immediately before the
commencement of the emergency and the number of Directors participating at the
initial emergency meeting. If the number of Special Directors to be
designated is smaller than the number of listed officers participating at the
meeting, the listed officers shall be designated in the order of priority set
forth in the emergency list.
(e) Actions to be taken at the initial emergency meeting shall
require the affirmative vote of a majority of the Directors and Special
Directors participating at the meeting. No quorum requirement shall apply
with respect to the meeting.<PAGE>
(f) At the initial emergency meeting, the Directors and Special
Directors shall adopt whatever procedures they deem appropriate with respect
to further Board meetings during the course of the emergency, provided that
the following conditions shall apply:
1. At these further Board meetings, the Board shall be deemed to
consist of all Directors who participate at the meetings, together with those
listed officers who were designated as Special Directors for purposes of the
initial emergency meeting.
2. No quorum requirements shall apply with respect to these
meetings. Actions to be taken at these meetings shall require the affirmative
vote of a majority of the Directors and Special Directors participating at the
meetings.
3. The procedures to be developed shall, to the maximum extent
feasible under the circumstances, be consistent with the provisions of these
by-laws that apply in the absence of any emergency; provided, however, that
any procedure used shall be valid unless it bears no reasonable relationship
to the circumstances.
11.02 The Board of Directors shall maintain a list of officers
eligible to participate in Board meetings as Special Directors pursuant to
paragraph 11.01. The list shall set forth the titles of the eligible officers
and shall rank these listed officers in order of priority. In the event that
the Corporation fails to maintain this list, the emergency list shall be as
follows:
(a) President;
(b) Executive Vice Presidents (if any), in the order in which they
were elected;
(c) Vice Presidents (if any), in the order in which they were
elected;
(d) Treasurer; and
(e) Secretary.
<PAGE>
Exhibit 10.01
Contract C-94-011
GENESIS, INC. AND CIT - ECHO LOCATION AGREEMENT
This agreement is made between Genesis, Inc. (Genesis), a corporation
organized under the laws of Now Jersey, and the Center for Innovative
Technology (CIT), a corporation organized under the laws of the Commonwealth
of Virginia,
1. INTRODUCTION
1.1 CIT possesses two patents on technology developed by Martin Lenhart
and related to echo location using supersonic bone conduction hearing aid and
method (CIT Case No. 066). This technology is described more fully in U.S.
Patent Nos. 4,982,434 and 5,047,994. Hereafter, this technology is referred to
as the Technology. The inventors of the Technology have assigned their
interests in the Technology to Virginia Commonwealth University (VCU), which
has assigned its interest to CIT. CIT has applied for patent protection on all
or a portion of the Technology.
1,2 CIT and VCU desire that the Technology be used in the public interest
and made available to the public quickly and efficiently,
1.3 Genesis is able to develop and bring to market the Technology. it
desires to obtain the license rights set forth in this agreement.
2. OPTION
2,1 CIT grants to Genesis an option to acquire the license described in
the section entitled "License." In return for this option, Genesis will pay to
CIT $22,000 on the effective date of this agreement and perform the other
obligations set forth below, except for those obligations maturing only upon
grant of the license. The "effective date" is the date upon which the last
of the parties to this agreement executes it.
2.2 The option may be exercised at any time prior to July 1, 1995. The
option may only be exercised by delivering to CIT written notification of the
exercise of the option together with a payment of $25,000. Upon exercise of
the option, Genesis shall have the license set forth in this agreement,
3. LICENSE
3,1 If Genesis exercises its option, CIT will grant to Genesis the
following license.
3.2 CIT grants to Genesis an exclusive, worldwide license of the following
nature. In return for the royalty payments and other promises set forth in
this agreement, CIT will not assert its right to exclude Genesis from use of
the Technology by virtue of CIT's rights under any patent or under any other
form of intellectual property protection accorded the Technology where the
Technology is used for echo location deviced for use by blind persons and
civilian (not military) emergency services personnel (hereafter, "the Field of
(GENESIS.AG2) page 1
<PAGE>
Use). This license is exclusive in that CIT will not enter into an agreement
with any other entity under which CIT would agree to refrain from asserting
its right to exclude the entity or others from use of the Technology in the
Field of Use.
3.3 Genesis shall develop and demonstrate to CIT a prototype device for
echo location by May 15, 1995, Genesis shall initiate human clinical testing
of such a device by December 31, 1995.
3.4 in return for the license granted by CIT Genesis shall pity to CIT
$50,000 by May 15, 1996.
3,5 In return for the license granted by CIT Genesis shall pay to CIT a
running royalty of 5% of its (worldwide) net revenues arising from sales of
products using the Technology where such products are either made or used in a
country in which a patent exists or patent protection has been applied for and
not finally rejected. Other sales shall bear a royalty of 2,5%. "Net revenues"
means Genesis's gross revenues related to the Technology less the sum of the
following: A) sales, tariff duties and/or use taxes directly imposed and with
reference to particular sales; B) outbound transportation: C) amounts
representing uncollectible billings; and D) amounts allowed or credited on
returns. Revenues shall be determined on an accrual basis in accordance with
generally Accepted accounting principles.
3.6 When a product is disposed of other than by sale, e.g., leased, net
revenues shall include the selling price at which products of similar kind and
quality, sold in similar quantities, are currently being offered for sale by
Genesis (or other manufacturers if Genesis is not currently offering such
products of similar kind and quality for sale).
3,7 The royalty rates set forth in Paragraph 3,5 above shall be reduced by
20% for products which are produced in Virginia. "Produced in Virginia,, means
that at least 50% of the cost of physically making each salable unit of
product shall &rise from work performed in Virginia.
5,8 In the event Genesis provides any service using the Technology, rather
than selling a product using the Technology, Genesis shall Include in not
revenues an amount equal to the selling price at which the products which make
use of the Technology would be sold to a third party by Genesis In an arms.
length transaction. In the event Genesis makes use of a method which is part
of the Technology Genesis shall include in net revenues an amount equal to the
selling price of the products used to implement the method.
3.9 If in calendar year 1997 and each year thereafter, Genesis's running
royalty payments to CIT are less than $100,000, Genesis shall pay to CIT an
amount sufficient to bring the total payments up to $100,000,
3.10 Genesis shall, within thirty (30) days from the end of each calendar
quarter, deliver to CIT a report giving such particulars of the business
conducted by Genesis during the preceding three month period under this
license as are pertinent to royalty accounting under this agreement.
Simultaneously with the delivery of each calendar quarterly report, Genesis
(GENESIS.AG2) page 2
<PAGE>
shall pay to CIT royalties due and payable for the period covered by such
report under this agreement. If no royalties are due, it shall be so reported.
4. SUBLICENSE
4.1 Genesis shall have the right to grant sublicenses, all of which shall
be subordinate to this agreement. Genesis shall pay to CIT royalties on
products produced by sublicensees as if Genesis had produced the Products
itself, Genesis shall also provide to CIT reports on the activities of each
sublicensee which reports shall contain the name-of the sublicenses and the
same information as is required of Genesis under this agreement.
4.2 In addition to the royalty payments due to CIT arising from the
activities of sublicensees of Genesis, as provided in the paragraph above,
Genesis shall pay to CIT 20% of all amounts it receives from a sublicensees in
excess of the royalties payable under this agreement by operation of the
paragraph above in each calendar quarter.
5. TERMINATION
5.1 This license shall expire on the date upon which the last U.S. patent
on the Technology expires. If no U.S. patent is granted then this license
shall expire on December 31, 2010.
5.2 CIT, at its option, may terminate this license upon notice to Genesis
for material breach of this agreement, Such termination shall not be CIT's
exclusive remedy for breach and Genesis shall remain liable for damages
arising from its breach after such termination, Material breach includes, but
is not limited to, failure to pay royalties when due and failure of Genesis to
diligently pursue introduction of the Technology into the market and sales of
products based on the Technology, It is envisaged by the parties that a
failure to diligently pursue introduction of the Technology and sales may
occur if Genesis is involved in a proceeding for the reorganization of
Genesis and, consequently, is unable to devote sufficient resources to the
work,
6. MISCELLANEOUS PROVISIONS
6.1 Genesis shall keep records containing all particulars which may be
necessary for the purpose of showing the royalty payable to CIT, These records
shall be open at all reasonable times for three (3) years following the end of
the calendar year to which they pertain to the inspection of an independent
certified public accounting firm retained by CIT at its sole expense for the
purpose of verifying Genesis's royalty reports,
6.2 This agreement shall be construed, governed, interpreted and applied
in accordance with the internal laws of the Commonwealth of Virginia, U.S.A.
except that questions affecting the validity, construction and effect of any
patent shall be determined by the laws of the country in which the patent was
granted.
(GENESIS.AG2) Page 3
<PAGE>
6.3 CIT and VCU retain the right to make use of the Technology for the
purpose of research.
6.4 Genesis agrees to mark products employing the Technology with
appropriate patent notices.
6.5 CIT is not obligated by this agreement to prosecute any infringement
actions.
6.6 If the Technology was developed with funds provided by the United
States, this agreement is subject to all applicable laws, regulations, and the
terms of any agreement under which funds were provided. This includes any
rights of the United States to use the Technology for governmental purposes,
any limits on the place of manufacture of products using the Technology, and
any obligations to make products based on the Technology available within a
reasonable time, These government rights are set forth at 35 USC Section 203
and Section 204 and other locations. These provisions are incorporated in this
agreement by reference and the exercise of theme rights by the United States
shall not constitute breach of this agreement.
6.7 All payments shall be made in United States dollars, Any currency
conversion required shall be made at the exchange rate published in The Wall
Street Journal on the last day of the calendar quarter for which the payment
is made.
6,8 Any unpaid amounts due hereunder shall bear interest at the rate of
18% or, if greater, the prime rate as published in The Wall Street Journal,
compounded daily until paid. This provision does not excuse any failure to pay
and does not limit any remedies for breach. In the event of breach of this
agreement the breaching party shall pay to the non-breaching party all costs,
including attorney's fees, of enforcing this agreement,
6.9 Neither CIT, nor the inventors, nor any Virginia university or other
agency of the Commonwealth of Virginia make any representations as to
patentability or protectability, validity, enforceability, freedom of the
Technology from infringement of the rights of others, likelihood of
successfully converting the Technology Into commercial 'products or whether or
not the Technology is satisfactory for the purposes intended,
6.10 Genesis warrants that every individual with a personal interest in
Genesis, as that term is defined in the Virginia Conflict of Interest Act, has
complied with the terms of that act and that no violation of that act will
result from this agreement.
6.11 The parties hereto acknowledge that thin instrument sets forth the entire
agreement of the parties an to the subject matter hereof and shall not be
modified except by the execution of a written instrument signed by the
parties.
(GENESIS.AG2) Page 4
<PAGE>
ACCEPTED AND AGREED TO:
CENTER FOR INNOVATIVE TECHNOLOGY
By: /s/ Linwood Holten 6/14/94
- ------------------------------- -------
(Name] Date
[Title]
GENESIS, Inc.
/s/ Sam DiGiralomo 5/20/94
- ------------------------------- -------
By: Date
[name] Sam DiGiralomo
[title] President
[GENESIS.AG2] Page 5
<PAGE>
Genesis 7 Doig Road, Wayne, New Jersey 07470
Safety Systems, Inc. 201/696-9400 * Fax 201/696-8779
September 20, 1995
Mr. Louis P. Berneman
Director, Licensing and Business Development
Virginia's Center for Innovative Technology
CIT Tower, Suite 600
2214 Rock Hill Road
Herndon, VA 22070-4005
RE: Genesis and CIT - Echo Location Agreement
Dear Mr. Berneman:
As previously discussed, this letter will serve to correct the dates in
paragraphs 3.3 and 3.4 of our Echo Location Agreement dated June 14, 1994.
Paragraph 3.3 of the Agreement states:
Genesis shall develop and demonstrate to CIT a prototype device for echo
location by May 15, 1995. Genesis shall initiate human clinical testing of
such a device by December 31, 1995.
The amended paragraph 3.3 shall now read:
Genesis shall develop and demonstrate to CIT a prototype device for echo
location by May 15, 1996. Genesis shall initiate human clinical testing, of
such a device by December 31, 1996.
Paragraph 3.4 of the Agreement states:
In return for the license granted by CIT Genesis shall pay to CIT $50,000
by May 15, 1996.
The amended paragraph 3.4 shall now read:
In return for the license granted by CIT Genesis shall pay to CIT $50,000
by May 15, 1997.
Please execute this amendment to our Agreement by signing both documents and
returning one to me.
Sincerely,
/s/ Sam DiGiralomo Agreed to by:
Sam DiGiralomo
President /s/ Robert G. Templin, Jr.
cc: S. Robinson, Esq. Date: 9/27/95
Robert G. Templin, Jr.
President, CIT
<PAGE>
VIRGINIA'S CENTER FOR INNOVATIVE TECHNOLOGY
Jobs + Companies + Competitiveness
December 12,1995
Mr. Sam DiGiralomo
President
Genesis Safety Systems
7 Doig Road
Wayne, NJ 07470
Dear Mr. DiGiralomo:
Based on my conversation last week with Bob Guinta, I propose that we amend
the Agreement between Genesis Safety Systems, Inc. and the Center for
Innovative Technology, dated May 20, 1994, (CIT Contract C-94-01 1) to add the
military market for emergency services personnel for an additional license fee
of $5000-00 due in May, 1997. Specifically,
Amend paragraph 3.2 to delete "(not military)". The new sentence would read:
"In return for the royalty payments and other promises set forth in this
agreement, CIT will not assert its right to exclude Genesis from use of the
technology by virtue of CIT's rights under any patent or under any other form
of intellectual property protection accorded the Technology when the
Technology is used for echo location device for use by blind persons and
civilian emergency services personnel (hereafter, "the Field of Use.")"
Amend paragraph 3.4 (as amended September 20, 1995) to read:
"In return for the license granted by CIT Genesis shall pay to CIT $55,000 by
May 15, 1997."
Please execute this amendment to our Agreement by signing both documents and
returning one to me.
Sincerely,
/s/ Catherine S. Renault
Catherine S. Renault
Managing Director
Agreed to by:
/s/ Robert G. Templin /s/ Sam DiGiralomo
Robert G. Templin Sam DiGiralomo
President President
Center for Innovative Technology Genesis Safety Systems
Date: 12-11-95 Date: 12-11-95
CIT Tower + Suite 600 + 2214 Rock Hill Road + Herndon, VA 22070-4005
TEL: (703) 689-3000 + FAX: (703) 689-3041
VIRGINIA'S CENTER FOR INNOVATIVE TECHNOLOGY
Jobs + Companies + Competitiveness
<PAGE>
March 18, 1997
Mr. Sam DiGiralomo
President
Audiogenesis Systems, Inc.
7 Doig Road, Suite 3
Wayne, New Jersey 07470
RE: Genesis, Inc., and CIT - EchoLocation Agreement
Contract C-94-011
CIT Docket No. 066
Dear Sam:
This letter will serve to amend the name of Genesis, Inc. to Audiogenesis
Systems, Inc. and to amend Paragraph 5 of the above identified Agreement dated
June 14, 1994 by adding additional paragraphs 5.3, 5.4 and 5.5 concerning
Audiogenesis' fight to terminate said Agreement.
The amendments to the above identified Agreement will be as follows:
1 . All references to "Genesis, Inc. (Genesis)", a corporation organized under
the laws of the State of New Jersey, shall be amended to change the name to
Audiogenesis Systems, Inc. ("Audiogenesis"), a corporation organized under the
laws of the State of New Jersey.
2.Paragraph 5.3 shall be added to the Agreement stating: "Audiogenesis shall
have the right to terminate this Agreement upon 120 days' written notice to
C.I.T., and upon payments of all
amounts due C.I.T. through the effective date of termination."
3.Paragraph 5.4 shall be added to the Agreement stating: "Following
termination of this Agreement for any reason, Audiogenesis agrees, for itself,
all affiliates, successors and assigns, that it shall not use any of the
Technology until such time as the last patent claiming any part of the
Technology shall have expired."
CIT Tower + Suite 600 + 2214 Rock Hill Road + Herndon, VA 20170-4200
TEL: (703) 689-3000 + FAX: (703) 689-3041 + WWW:http://www.cit.org
<PAGE>
4. Paragraph 5.5 shall be added to the Agreement stating: "Upon termination
of this Agreement for any reason, nothing herein shall be construed to release
either party from any obligations that matured prior to the effective date of
such termination.
Very truly yours,
/s/ Dennis H. Penn
Dennis H. Penn
Director Intellectual Property and Licensing
Agreed to By:
/s/ Robert G. Templin, Jr.
Robert G. Templin, Jr.
President
The Center for Innovative Technology
Agreed to By:
/s/ Sam DiGiralomo 3-20-97
Sam DiGiralomo
President
Audiogenesis Systems, Inc.
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT ("Agreement"), is entered into
this 6th day of August, 1997 ("Effective Date"), by and among The Center for
Innovative Technology, a Virginia Corporation located in Herndon, Virginia
(hereinafter referred to as "CIT"), and Virginia Commonwealth University
Intellectual Property Foundation located in Richmond, Virginia (hereinafter
referred to as "VCUIPF"), and Audiogenesis Systems, Inc., a New Jersey
Corporation located in New Jersey (hereinafter referred to as "Audiogenesis").
WHEREAS, CIT is the owner of certain patents and patent applications
related to echo location using supersonic bone conduction which are described
in U.S. Patent Nos. 4,982,434 and 5,047,994 (hereinafter the "Patents") which
are the subject of License Contract C-94-011 entered into by CIT and
Audiogenesis, formerly known as Genesis, Inc., on June 14, 1994, and that
License Contract was amended on September 27, 1995, December 12, 1995, and
March 20, 1997 (the License Contract and its three amendments are attached as
Exhibit A and are hereinafter referred to collectively as the License
Agreement);
WHEREAS, CIT wishes to assign all future rights and responsibilities
under the License Agreement to VCUIPF, and VCUIPF wishes to assume all future
rights and responsibilities of CIT under the License Agreement;
NOW THEREFORE, for and in consideration of good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto agree as follows:
1. Assignment and Assumption
1.1 From the Effective Date of this Agreement, CIT hereby assigns,
transfers, and sets over to VCUIPF, its successors and assigns, except for any
monetary obligation of Audiogenesis to CIT accruing prior to the Effective
Date of this Agreement, all of its remaining right, title and interest in and
to, and all of CIT's obligations arising under the License Agreement, and
VCUIPF accepts the assignment from CIT and agrees to be bound by all of the
terms and assumes any and all obligations of CIT under the License Agreement.
1.2 In consideration for the assignment, VCUIPF agrees to pay CIT twenty-
five percent (25%) of all revenues derived from Audiogenesis, its successors
or assigns, for its use of the technology defined in the Patents. VCUIPF's
obligation to pay CIT under this provision will survive any termination and
renegotiated license governing the Patents which is entered into by VCUIPF and
Audiogenesis or their successors or assigns.
1.3 CIT simultaneously herewith executes assignment documents assigning
the Patents to VCUIPF and agrees forthwith to record these assignments, at
C.I.T.'s expense in the U.S. Patent and Trademark Office.
2. Mutual Releases and Warranties and Indemnification
2.1 CIT hereby releases VCUIPF from any and all claims and liabilities,
known or unknown, whether now existing or hereafter arising, that CIT may have
against VCUIPF with respect to the License Agreement, and VCUIPF hereby
releases CIT from any and all claims and liabilities, known or unknown,
whether now existing or hereafter arising, that VCUIPF may have against CIT
with respect to the License Agreement.
<PAGE>
2.2 CIT makes no representations or warranties to VCUIPF concerning the
validity, originality, infringement, fitness for the particular purpose, or
any other aspect of the technology that is described in the Patents.
2.3 VCUIPF hereby indemnifies and agrees to hold CIT harmless from any
claim or claims made by any party against VCUIPF and/or CIT arising out of the
License Agreement, or the manufacture, marketing, advertising or sale of any
product related to the technology set forth in the Patents by any third party,
whether a direct purchaser of such product or otherwise. VCUIPF shall be
responsible for all representations and warranties made by it to licensees
including but not limited to Audiogenesis and to purchasers of products
related to the technology set forth in the Patents including but not limited
to representations and warranties concerning quality, safety, and
effectiveness of such products.
3. Consent to Assignment
3. 1 Audiogenesis consents to the assignment set forth in Article 1. 1 of
this Agreement.
3.2 Audiogenesis agrees to make all reports, notices, reimbursements and
payments due under the License Agreement to VCUIPF.
3.3 Audiogenesis acknowledges and affirms its obligations to CIT with
respect to any monetary obligation to C.I.T. which accrues prior to the
Effective Date of this Agreement. CIT. acknowledges that there are no such
outstanding obligations.
4. Miscellaneous
4.1 Counterparts-This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but such counterparts shall
together constitute but one and the same Agreement.
4.2 Entire Agreement-This Agreement and all attachments referenced
herein, together constitutes the entire agreement among the parties hereto
pertaining to the subject matter hereof, and supersedes all prior and
contemporaneous agreements, understandings, negotiations, and discussions of
the parties, whether oral or written, and there are no warranties,
representations, or other agreements between the parties in connection with
the subject matter hereof
4.3 Governing Law and Jurisdiction-This Agreement shall be construed and
interpreted according to the laws of the Commonwealth of Virginia. Each of the
parties hereto hereby irrevocably and unconditionally agrees to submit to the
jurisdiction and venue of the State and Federal Courts which include Herndon,
Virginia in their respective districts for purposes of resolving any actions,
suits or proceedings brought under this Agreement, and not to object to
convenience of the forum.
4.4 Severability-The provisions of this Agreement are severable, and in
the event that any provisions of this Agreement shall be determined to be
invalid or unenforceable, such invalidity and unenforceability shall not in
any way affect the validity or enforceability of the remaining provisions
hereof
4.5 C.I.T. agrees to execute and deliver any And all additional papers,
documents and other assurances and do any and all acts and things reasonably <PAGE>
necessary to confirm, preserve and protect VCUIPF's ownership of the Patents
and Audiogenesis' rights under the License Agreement.
4.6 Each of C.I.T., VCUIPF and Audiogenesis acknowledge that as of the date of
this agreement it has no knowledge of an event or circumstance which would
constitute a breach by any party under the License Agreement,
ACCEPTED AND AGREED TO:
THE CENTER FOR INNOVATIVE TECHNOLOGY
BY: /s/ Robert G. Templin, Jr. 11/20/97
- -------------------------------- --------
Robert G. Templin, Jr., President Date
VIRGINIA COMMONWEALTH UNIVERSITY
INTELLECTUAL PROPERTY FOUNDATION
BY: /s/ Richard C. Larsen 11/24/97
- -------------------------------- --------
Date
AUDIOGENESIS SYSTEMS, INC.
By: /s/ Sam DiGiralomo 11/17/97
- -------------------------------- --------
Sam DiGiralomo Date
<PAGE>
Exhibit 10.02
AGREEMENT
This Agreement, made this 18th day of September, 1998, by and between
Audiogenesis Systems, Inc., a New Jersey Corporation, (hereinafter
"Audiogenesis"), having its principal place of business at 7 Doig Road, Wayne,
New Jersey, 07470, and Allstates Air Cargo, Inc., having its principal place
of business at 4 Lakeside Drive South, PO Box 959, Forked River, New Jersey,
08731, (hereinafter "Allstates").
WITNESSETH:
WHEREAS, Audiogenesis is a Company that has been engaged in the
business of developing, producing, and presenting customized audio-visual
products and programs of various subjects for sale to "Fortune 1000 Companies"
since 1981; and
WHEREAS, Audiogenesis has the experience, expertise, equipment and
staff to produce customized audio-visual productions including slide, video,
printed, interactive CD, and various other forms of presentations; and
WHEREAS, Audiogenesis has significant experience and expertise in
providing domestic and international sales and marketing skills; and
WHEREAS, Audiogenesis has the resources to provide its unique
experience and expertise to increase the sales and profitability of its
customers; and
WHEREAS, Audiogenesis has the professional skills to provide to its
customers substantial public relations to increase the knowledge and awareness
of others with respect to the customer's profile and strengths; and
WHEREAS, Allstates is a domestic and international air carrier and
freight forwarder and provides air, ground and marine transportation services
directly to its customers and through a network of independent contractors;
and
WHEREAS, Allstates intends to expand and improve its program of
training to its management, employees and affiliates with respect to sales,
marketing and distribution, in order to increase its income; and
WHEREAS, Allstates intends to enhance its image and make others more
aware of the Company's services and capabilities;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the sufficiency of which
is hereby acknowledged, the parties agree as follows:
1. Audiogenesis agrees to provide and will produce for Allstates three
(3) customized audio-visual productions featuring a sales and marketing
program for domestic and international applications; a presentation with
respect to promoting Allstates' company image; and a presentation for domestic
and international distribution services and capabilities; and Allstates agrees
to authorize Audiogenesis to begin to produce said presentations and programs.
<PAGE>
2. Allstates agrees to compensate Audiogenesis using the following
payment schedule:
a. On October 7, 1998, Allstates will pay to Audiogenesis by check
$100,000.00 on account.
b. On November 9, 1998, Allstates will pay to Audiogenesis by check
$50,000.00 for work in progress.
c. On December 9, 1998, Allstates will pay to Audiogenesis by check
$50,000.00 for work in progress.
d. On January 8, 1999, Allstates will pay to Audiogenesis by check
$100,000.00 for all work completed.
3. This Agreement shall be interpreted and construed in accordance
with the laws of the State of New Jersey without giving affect to conflict of
laws principles. If any provision herein is prohibited by the laws of state
or other jurisdiction held to be applicable, such provision shall be limited
to the extent necessary so that it does not render this Agreement invalid,
unlawful or unenforceable in whole or in part under such laws; all other
provisions of this Agreement shall remain in full force and effect.
4. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors, assigns, and legal
representatives.
5. This Agreement shall be deemed to be an Agreement made under the
laws of the State of New Jersey, and for all purposes it shall be construed in
accordance with and governed by the laws of the State of New Jersey.
6. No delay or failure by a party to exercise any right under this
Agreement, and no partial or single exercise of that right, shall constitute a
waiver of that or any other right, unless otherwise expressly provided herein.
7. This Agreement may not be and shall not be deemed or construed to
have been modified, amended, rescinded, canceled, or waived in whole or in
part, except by a written instrument signed by the parties hereto.
8. This Agreement constitutes and expresses the entire Agreement and
understanding between the parties hereto in reference to all the matters
referred to herein, and any previous discussions, promises, representations,
and understanding relative thereto are merged into the terms of this Agreement
and shall have no further force and effect.
AUDIOGENESIS SYSTEMS, INC. ALLSTATES AIR CARGO, INC.
/s/ Sam DiGiralomo /s/ Joseph M. Guido
By: Sam DiGiralomo By: Joseph M. Guido
President President
<PAGE>
Exhibit 10.03
INCORPORATED UNDER THE LAWS OF THE
STATE OF NEW JERSEY
AUDIOGENESIS SYSTEMS, INC.
$80,000 $80,000
7 Doig Road
Wayne, New Jersey 07470
TWO YEAR EIGHT PERCENT BOND
AUDIOGENESIS SYSTEMS, INC., a New Jersey Corporation, hereinafter called the
Corporation, for value received, hereby promises to pay the sum of EIGHTY
THOUSAND AND 00/100 ($80,000.00)
To MARSHALL E. LEVINE, Ph.D. PROFIT SHARING PLAN
with offices at 564 Gravelly Run, Mays Landing, New Jersey, 08330; with
interest from July 1, 1997 at the rate of eight percent per annum, with
principal and interest due on June 30, 1999.
The following is a statement of the rights of the holder of this Bond and
the conditions to which this Bond is subject, to which the holder hereof, by
the acceptance of this Bond, assents:
1. Subordination. The Corporation and each holder of this Bond, by his
acceptance hereof, agree that the payment of the principal of and interest on
this Bond is hereby expressly subordinated to the prior payment of the
principal of and interest on all existing or future obligations of the
Corporation for money borrowed from any bank, trust company, insurance
company, or other financial institution engaged in the business of lending
money, hereinafter called the Senior Indebtedness. Upon any receivership,
insolvency, assignment for the benefit of creditors, bankruptcy,
reorganization or arrangement with creditors (whether or not pursuant to
bankruptcy or other insolvency laws), sale of all or substantially all of the
assets, dissolution, liquidation, or any other marshalling of the assets and
liabilities of the Corporation, or in the event the Bonds shall be declared
due and payable upon the occurrence of an event of default (as specified
herein), (i) no amount shall be paid by the Corporation in respect of the
principal of or interest on this Bond at the time outstanding, unless and
until the principal of and interest on the Senior Indebtedness then
outstanding shall have been paid in full; and (ii) no claim or proof of claim
shall be filed with the Corporation by or on behalf of the holder of this Bond
which shall assert any right to receive any payments in respect of the
principal of and interest on this Bond except subject to the payment in full
of the principal of and interest on all of the Senior Indebtedness then
outstanding.
2. Prepayment. The Corporation may at any time, at its own option,
prepay in whole or in part the principal sum, plus accrued interest to date of
payment, on 30 days' written notice served by certified mail to the registered
address of the owner of the Bond.
3. Registered owner. The Corporation may treat the person whose name
appears above as the absolute owner hereof for the purpose of receiving
payment of, or on account of, the principal or interest due hereon and for all
other purposes.
<PAGE>
4. Release of shareholders, officers and directors. This Bond is the
obligation of the Corporation only, and no recourse shall be had for the
payment thereof or the interest thereon against any shareholder, officer or
director of the Corporation, either directly or through the Corporation, by
virtue of any statute for the enforcement of any assessment or otherwise, all
such liability of shareholders, directors and officers as such being released
by the holder hereof by the acceptance of this Bond.
IN WITNESS WHEREOF, the Corporation has caused this Bond to be issued and
signed by its duly authorized officers and its corporate seal hereto affixed
this 1st day of July, 1997.
AUDIOGENESIS SYSTEMS, INC.
ATTEST:
(Seal)
ROBERT R. GUINTA, Secretary SAM DiGIRALOMO, President
<PAGE>
Exhibit 11.01
EARNINGS PER SHARE SCHEDULE
Calculation of net income
Net Income (loss) ($131,662)
Assumed interest expense reduction 0
Assumed interest income increase 0
----------
($131,622)
==========
Calculation of weighted average number of shares
Weighted average shares outstanding 9,709,872
Common stock equivalents 0
----------
9,709,872
==========
Net income (loss) per share
($ 0.01)
==========
<PAGE>
Exhibit 21.01
LIST OF SUBSIDIARIES OF REGISTRANT
1. Biowaste Technologies Systems, Inc., an inactive New Jersey corporation
wholly owned by the Registrant.
<PAGE>
Exhibit 23.01
CONSENT FOR INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our report on Audiogenesis Systems, Inc. dated
September 29, 1998 in this Registration Statement on Form 10-SB of
Audiogenesis Systems, Inc.
FALLON & FALLON
Certified Public Accountants
Hazlet, NJ
October 23, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,873
<SECURITIES> 0
<RECEIVABLES> 40,825
<ALLOWANCES> 0
<INVENTORY> 36,947
<CURRENT-ASSETS> 81,945
<PP&E> 27,116
<DEPRECIATION> 24,928
<TOTAL-ASSETS> 86,090
<CURRENT-LIABILITIES> 376,177
<BONDS> 0
0
0
<COMMON> 1,149,858
<OTHER-SE> (1,439,945)
<TOTAL-LIABILITY-AND-EQUITY> 86,090
<SALES> 363,117
<TOTAL-REVENUES> 363,117
<CGS> 156,140
<TOTAL-COSTS> 333,839
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,800
<INCOME-PRETAX> (131,662)
<INCOME-TAX> 0
<INCOME-CONTINUING> (131,662)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (131,662)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
