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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period __________ from to ______________.
0-25757
Commission file number
VERIDA INTERNET CORP.
(Exact name of Small Business Issuer as Specified in its Charter)
State of Nevada 98-0164651
(State or other jurisdiction (I.R.S. Employer
of Incorporation or Organization) or Identification Number)
50 California Street, Suite 1500, San Francisco, California USA 94111
(Address of Principal Executive Offices)
(415) 464-8600
(Issuer's Telephone Number, including Area Code)
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the Issuer's classes
of common equity, as of the latest practicable date: Common, $.00001
par value per share: 8,972,000 outstanding as of June 30, 1999
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [x]
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<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Balance Sheets
(Unaudited Prepared by Management)
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
<S> <C> <C>
ASSETS
Current
Cash and short-term deposits $ 274,138 $ 195,233
Prepaid expenses 3,091 -
Subscriptions receivable (Note 3) - 133,700
----------- ---------
277,229 328,933
Capitalized software development
costs, net (Note 5) 176,250 -
----------- ---------
Total Assets $ 453,479 $ 328,933
=========== =========
LIABILITIES
Current
Accounts payable and accrued
liabilities $ 2,000 $ 2,078
Due to related party (Note 5) 18,965 -
Loan payable to related party (Note 5) - 30,000
----------- ---------
Total Liabilities 20,965 32,078
----------- ---------
Stockholders' Equity
Common stock, $0.00001 par value;
100,000,000 shares authorized (Note 3)
(1999: 8,972,000 shares issued and
outstanding) (1998: 8,887,000 shares
issued and outstanding) 90 89
Additional paid-in capital 1,209,370 340,621
Deferred compensation (Note 3) (437,500) -
Deficit accumulated during the
development stage (339,446) (43,855)
----------- ---------
Total Stockholders' Equity 432,514 296,855
----------- ---------
Total Liabilities and Stockholders'
Equity $ 453,479 $ 328,933
=========== =========
</TABLE>
2
<PAGE> 3
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Statements of Operations
(Unaudited Prepared by Management)
<TABLE>
<CAPTION>
November 1,
Six Month Six Month 1996
Period Ended Period Ended (inception) to
June 30, June 30, June 30,
1999 1998 1999
<S> <C> <C> <C>
REVENUE
Interest income $ 4,435 $ 2,951 $ 9,912
---------- --------- ----------
OPERATING EXPENSES
Amortization 5,000 - 5,000
Product development 95,625 - 95,625
General and
administrative 104,818 20,476 155,775
Loss on sale of marketable
securities (Note 5) 92,958 - 92,958
---------- --------- ----------
298,401 20,476 349,358
---------- --------- ----------
Net loss for the period $ (293,966) $ (17,525) $ (339,446)
========== ========= ==========
Basic and diluted loss
per share (Note 4) $ (0.03) $ (0.00) $ (0.06)
========== ========= ==========
</TABLE>
2
<PAGE> 4
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Statements of Cash Flows
(Unaudited Prepared by Management)
<TABLE>
<CAPTION>
Six Month Six Month November 1, 1996
Period Ended Period Ended (inception) to
June 30, June 30, June 30,
1999 1998 1999
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss for the period $ (293,966) $ (17,525) $ (339,446)
Adjustments and changes in
non-cash working capital:
Amortization 5,000 - 5,000
Prepaid expenses (3,091) - (3,091)
Accounts payable and
accrued liabilities 61 78 4,639
Due to related party 16,326 - 16,326
Loss on sale of
marketable securities 92,958 - 92,958
---------- --------- ----------
Net cash used in
operating activities (182,712) (17,447) (223,614)
---------- --------- ----------
FINANCING ACTIVITIES
Common shares issued
for cash 433,700 59,010 650,710
Cost of common stock
offering - - (10,000)
Repayment of related
party loan (30,000) - (30,000)
Loan from related party - - 30,000
---------- --------- ----------
Net cash provided by
financing activities 403,700 59,010 640,710
---------- --------- ----------
INVESTING ACTIVITIES
Proceeds from sale of
marketable securities 81,972 - 81,972
Purchase of marketable
securities - - (174,930)
Purchase of software (50,000) - (50,000)
---------- --------- ----------
Net cash provided by (used
in) investing activities 31,972 - (142,958)
---------- --------- ----------
Net increase in cash 252,960 41,563 274,138
Cash position -
Beginning of period 21,178 153,670 -
---------- --------- ----------
Cash position -
End of period $ 274,138 $ 195,233 $ 274,138
========== ========= ==========
</TABLE>
3
<PAGE> 5
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Statements of Changes in Stockholders' Equity
(Unaudited Prepared by Management)
For the Six Month Periods Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Deferred
Shares Amount Capital Compensation
<S> <C> <C> <C> <C>
Balance at
December 31, 1998 8,887,000 $ 89 $ 340,621 $ -
Common stock issued for
cash at $5.00 per share 60,000 1 299,999
Common stock issued to
NetOpus Incorporated at
$5.25 per share (Note 5) 25,000 - 131,250
Deferred compensation
related to stock options 437,500 (437,500)
Net loss during the period
Loss on sale of marketable
securities realized
--------- ----- ----------- ----------
Balance at June 30, 1999 8,972,000 $ 90 $ 1,209,370 $ (437,500)
========= ===== =========== ==========
Balance at
December 31, 1997 3,600,000 $ 36 $ 147,964 $ -
Common stock issued for
cash at $0.001, $0.03
and $0.25 per share
(Note 3) 5,287,000 53 192,657
Net loss during the period
--------- ----- ----------- ----------
Balance at June 30, 1998 8,887,000 $ 89 $ 340,621 $ -
========= ===== =========== ==========
4-a
<PAGE> 6
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Statements of Changes in Stockholders' Equity
(Unaudited Prepared by Management)
For the Six Month Periods Ended June 30, 1999 and 1998
Deficit
Accumulated
During the Cumulative Total
Development Comprehensive Stockholders'
Stage Adjustment Equity
<S> <C> <C> <C>
Balance at
December 31, 1998 $ (45,480) $ (94,574) $ 200,656
Common stock issued for
cash at $5.00 per share 300,000
Common stock issued to
NetOpus Incorporated at
$5.25 per share (Note 5) 131,250
Deferred compensation
related to stock options -
Net loss during the period (293,966) (293,966)
Loss on sale of marketable
securities realized 94,574 94,574
---------- --------- ----------
Balance at June 30, 1999 $ (339,446) $ - $ 432,514
========== ========= ==========
Balance at
December 31, 1997 $ (26,330) $ - $ 121,670
Common stock issued for
cash at $0.001, $0.03 and
$0.25 per share (Note 3) 192,710
Net loss during the
period (17,525) (17,525)
---------- ---------- ----------
Balance at June 30, 1998 $ (43,855) $ - $ 296,855
========== ========== ==========
</TABLE>
4-b<PAGE> 7
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Notes to the Financial Statements
(Unaudited Prepared by Management)
For the Six Month Periods Ended June 30, 1999 and 1998
NOTE 1 - NATURE OF OPERATIONS
The Company was incorporated under the laws of the State of Nevada on
November 1, 1996 and is a development stage enterprise. The Company is
currently developing business-to-business electronic commerce solutions
for use on the Internet.
These financial statements have been prepared on the basis that the
Company will continue as a going concern. The Company has incurred
operating losses since its incorporation and significant acquisitions
in the future, if any, will likely require additional equity financing.
However, there can be no assurance that such acquisitions will occur,
or whether additional funds required, if any, would be available to the
Company when required or on terms acceptable to the Company. Such
limitations could have a material adverse effect on the Company's
business, financial condition or operations and these financial
statements do not include any adjustment that could result therefrom.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Accounting Principles and 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 disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the fiscal periods. Actual results may differ from
those estimates.
b) Translation of Foreign Currencies
Revenues and expenses arising from foreign currency transactions are
translated into United States dollars at the average rate for the
period. Monetary assets and liabilities are translated into United
States dollars at the rates prevailing at the balance sheet date.
Other assets and liabilities are translated into United States dollars
at the rates prevailing on the transaction dates. Exchange gains and
losses are recorded as income or expense in the period in which they
occur.
c) Financial Instruments and Financial Risk
The Company's financial instruments consist of current assets and
current liabilities. The fair values of the current assets and
liabilities approximate the carrying amounts due to the short-term
nature of these instruments.
5
<PAGE> 8
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Notes to the Financial Statements
(Unaudited Prepared by Management)
For the Six Month Periods Ended June 30, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
d) Accounting Pronouncements Recently Issued
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 128: Earnings per Share ("SFAS
128"), effective for fiscal periods ending after December 15, 1997 and
requiring restatement of all prior period earnings per share data.
SFAS 128 replaces the presentation of primary earnings per share
("EPS") with a presentation of both basic and diluted EPS for all
entities with complex capital structures. Basic EPS excludes dilutive
securities and is computed by dividing income available to common
shareholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if dilutive securities were converted into
common shares and is computed similarly to fully diluted EPS pursuant
to previous accounting pronouncements. SFAS 128 applies equally to
loss per share presentations.
The FASB issued Statement of Financial Accounting Standards No. 130:
Reporting Comprehensive Income ("SFAS 130"), effective for fiscal
periods beginning after December 15, 1997 and requiring restatement of
all comparative financial statements disclosed. SFAS 130 requires that
all items required to be recognized under accounting standards as
components of comprehensive income be reported as part of the basic
financial statements. The Company does not expect adoption of this new
standard to have a material effect on its financial reporting.
e) Cash and Short-term Deposits
Cash and short-term deposits include government treasury bills and
bankers' acceptances with initial maturities no longer than 90 days,
together with accrued interest.
f) Product Development Costs
Product development costs include expenses incurred by the Company to
develop, monitor and operate the Company's website. Product
development costs are expensed as incurred.
NOTE 3 - COMMON STOCK
a) Stock Options
During the 1999 fiscal period, stock options to purchase common shares
of the Company were granted, as follows:
6
<PAGE> 9
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Notes to the Financial Statements
(Unaudited Prepared by Management)
For the Six Month Periods Ended June 30, 1999 and 1998
NOTE 3 - COMMON STOCK (continued)
Number of Shares Price per Share Expiry Date
350,000 $ 4.00 June 14, 2004
680,000 $ 5.25 June 14, 2004
These stock options are subject to various vesting and resale
restrictions with the exception of a stock option to purchase 300,000
common shares at a price of $5.25 per share.
Refer to Note 5
b) Deferred Compensation
During the 1999 fiscal period, the Company recorded aggregate deferred
compensation cost of $437,500 as a result of granting stock options.
This amount represents the difference between the exercise price and
the quoted market price of the Company's common stock at the date of
grant. Stock options to purchase a total of 350,000 common shares were
granted below the quoted market price at an exercise price of $4.00 per
share.
The amortization of deferred compensation is charged to operations over
the vesting period of the stock options. No amortization was
recognized during the 1999 fiscal period.
c) Private Placements
During the 1999 fiscal period, the Company issued 3,320,000 shares
pursuant to private placements for total cash proceeds of $133,700 and
cancelled 3,000,000 shares previously issued pursuant to a private
placement for total cash proceeds of $30,000. Since these transactions
affect the Company's permanent capital, the financial statements for the
year ended December 31, 1998 were prepared giving retroactive effect to
these transactions.
Accordingly, the comparative figures for the 1998 fiscal period have
also been prepared giving retroactive effect to these transactions.
The 3,320,000 shares issued during the 1999 fiscal period are shown as
if they had been outstanding at the beginning of the 1998 fiscal
period. The 3,000,000 shares issued during the 1997 fiscal year and
cancelled during the 1999 fiscal period are not shown as being issued.
Refer to Note 5
7
<PAGE> 10
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Notes to the Financial Statements
(Unaudited Prepared by Management)
For the Six Month Periods Ended June 30, 1999 and 1998
NOTE 4 - LOSS PER SHARE
Net loss per common share is computed based on the weighted-average
number of common shares and common share equivalents outstanding.
For the 1999 fiscal period, stock options outstanding have not been
included in the computation of diluted loss per share as the inclusion
of these securities would be antidilutive. Consequently, no
differences existed between basic and diluted loss per share for the
periods presented. The weighted-average number of shares outstanding
after giving retroactive effect to subsequent share transactions are
8,906,006 for the 1999 fiscal period and 7,691,586 for the 1998 fiscal
period.
Refer to Note 3
NOTE 5 - RELATED PARTY TRANSACTIONS
a) Due to Related Party
During the 1999 fiscal period, the Company entered into two agreements
with a private company to design and produce the Company's internet site
and other corporate materials for an estimated total cost of $141,081
(1998 fiscal period - Nil), of which $132,971 was incurred by the
Company. The President of the Company is also the president of this
private company.
At June 30, 1999, the Company owed $18,965 (June 30, 1998 - Nil) to
this private company.
b) Loan Payable to Related Party
During the 1999 fiscal period, the Company repaid a $30,000 loan from
a private company wholly-owned by a former President of the Company.
This amount relates to the cancellation during the 1999 fiscal period
of 3,000,000 shares issued during the 1997 fiscal year for total cash
proceeds of $30,000.
Refer to Note 3
c) Sale of Marketable Securities
During the 1999 fiscal period, the Company sold 59,800 shares of Trans-
Orient Petroleum Ltd. for cash proceeds of $81,972, net of commissions,
resulting in a loss of $92,958. These available-for-sale securities
were originally acquired at a cost of $174,930 and reported
historically at market value, with unrealized gains and losses included
as a component of comprehensive income.
8
<PAGE> 11
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Notes to the Financial Statements
(Unaudited Prepared by Management)
For the Six Month Periods Ended June 30, 1999 and 1998
NOTE 5 - RELATED PARTY TRANSACTIONS (Continued)
c) Sale of Marketable Securities
Trans-Orient Petroleum Ltd. is a public company with directors,
officers and/or principal shareholders in common with the Company.
d) Employment Agreements and Stock Options
The Company entered into an employment agreement with the Company's
Executive Vice President at a rate of $7,500 per month. The employment
agreement also provides for a stock option granted during the 1999
fiscal period to purchase 200,000 shares of the Company exercisable at
a price of $4.00 per share, subject to vesting provisions.
The Company entered into an employment agreement with the Company's
Chief Technology Officer at a rate of $4,000 per month. The employment
agreement also provides for a stock option granted during the 1999
fiscal period to purchase 150,000 shares of the Company exercisable at
a price of $4.00 per share, subject to vesting provisions.
e) Software Purchase Agreement
The Company entered into an agreement to purchase computer software
from NetOpus Incorporated in consideration of $181,250 consisting of
$50,000 in cash and 25,000 common shares of the Company at a deemed
price of $5.25 per share. The Company has the right to use, brand,
sell and market this computer software including the right to modify
and customize at the Company's expense as required. Additionally, the
Company has the right to share equally in any revenue generated from
any future sale or licensing of the modified computer software by
NetOpus Incorporated.
The Chief Technology Officer of the Company is the president of NetOpus
Incorporated.
f) Consulting Agreement
During the 1998 fiscal period, the Company incurred $18,000 in
consulting fees to a private company wholly-owned by the former
President of the Company.
NOTE 6 - INCOME TAXES
There are no income taxes payable by the Company at June 30, 1999.
9
<PAGE> 12
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Notes to the Financial Statements
(Unaudited Prepared by Management)
For the Six Month Periods Ended June 30, 1999 and 1998
NOTE 7 - NAME CHANGE
On March 11, 1999, the name of the Company was changed from Austral
Pacific Energy Corp. to Verida Internet Corp.
10
<PAGE> 13
ITEM 2. PLAN OF OPERATION
Verida Internet Corp. (the "Registrant") is incorporated under the
laws of the State of Nevada. The common shares of the Registrant trade
on the OTC Bulletin Board ("OTCBB") as operated by the National
Association of Securities Dealers Inc. under the symbol "VERY".
The head office of the Registrant is located at Suite 1500, 50
California Street, San Francisco, California 94111. The Registrant's
Internet web site address is www.verida.com.
Management has determined that consistent with the Registrant's new
business plan, part of its plan of operation for the next 12 months is
to secure the necessary technological assets to support the proposed
products and services to be offered by the Registrant.
The Registrant plans on offering a product "suite" of World Wide
Web ("Web") based services in order to allow potential clients to take
advantage of the technology of the Internet cost-effectively finding
and selling to customers online, while developing ongoing electronic
commerce relationships with them, which in turn will help establish
company brands and capture customer loyalty. The Registrant seeks to
build a suite of applications both to provide a broad spectrum of
services and functions to its clients and a maintainable infrastructure
to support day-to-day internal operations and site administration.
The suite of services intended to be offered by the Registrant to
its clients will be located on servers controlled by the Registrant,
allowing potential clients to access these services through their own
existing Internet connections utilizing standard Internet browsers such
as Netscape's "Communicator" or Microsoft's "Internet Explorer". The
client would not require any specialized software or hardware to use
the Registrant's services. The Registrant's products will be provided as
"web services" that can be accessed on a cost-effective, as-needed
basis at anytime over the Internet.
The Registrant's planned product suite proposes to offer four types
of services in support of business-to-business e-commerce under the
following names:
1. VeriPlace
The proposed VeriPlace service is intended to create and support
Internet business communities ("IBCs"). IBCs are industry specific
online markets or exchanges that provide a market for buyers and
sellers in a specific industry. The main purpose of the VeriPlace
service is to provide Web technology to the Registrant's clients which
will allow them to conduct e-commerce, and aggregate, search, organize
and distribute information within their specific industry. During the
second quarter ending June 30, 1999, the Registrant also began
investigating and researching various industries which the Registrant
believes would be promising areas in which to launch future IBCs. Over
the course of the next few months the Registrant intends to begin the
process of selecting, designing and building certain IBCs which, in its
opinion, are warranted to launch the Registrant into the business of
building business-to-business IBCs.
<PAGE> 14
2. VeriStore
The proposed VeriStore service will provide e-commerce
transactional capabilities to manage and process transactions between
the client and its customers. VeriStore will offer two different levels
of e-commerce solutions. The first level of service will be tailored
towards clients who do not currently have a Web presence to advertise
their products ("E-Stores"). The service will allow customers to use
the Registrant's own Internet storefront as their "retail" location and
the Registrant's virtual back office infrastructure for their own E-
Stores. With minimal programming or Internet expertise, clients will be
able to immediately develop a secure, fully customized, commerce ready
online storefront and ordering system without programming. Clients
would simply create their E-Store, which would profile their products,
provide ordering instructions and product pricing, by filling in their
information through user friendly Web forms.
In addition to providing a client with the capability to create
and maintain an E-Store on the Web, VeriStore will also provide a
virtual back office infrastructure to enable clients to handle all
aspects of online transactions. The virtual back office services will
provide clients with the necessary tools to manage and process online
transactions that occur when the client's customer purchases goods from
their E-Store. The back office services will include: (1) processing of
the client's customers orders and sending confirmations (2) online
payment processing in real time (3) calculating applicable shipping
costs and taxes (4) running multiple reports detailing online sales
statistics for any given period and (5) managing customer quiries.
The back office services would also be available to clients who
already have established their own E-Store without the support of the
Registrant. While the client's E-Store Web page may be located elsewhere
on the Internet, it is intended that the back office services to be
offered by the Registrant will be flexible enough to be interoperable
with the client's pre-existing E-Store regardless of the design or
format in which it was created.
3. VeriMark
The proposed VeriMark service is intended to be a package of
automated online marketing solutions which will allow online marketers
to deploy, track and measure the cost effectiveness of their online
marketing efforts. The service will work as an automated electronic
marketing manager which will essentially automate the online marketing
process from the first customer contact to the "thank you" email at the
end of a sale.
The VeriMark service will allow its clients to accomplish online
marketing campaign management including the sending of marketing email,
the posting of banner ads, building databases of prospects, sending
fulfillment and follow-up materials to prospects, and tracking
effectiveness ratios and statistics.
<PAGE> 15
4. VeriBase
The proposed VeriBase service is intended to provide data
warehousing services to clients in order to allow clients to
electronically store their customer's contact and demographic
information, track customer and prospect activity from online sales and
marketing activities and perform analysis including demographic
profiling and modeling. Through the tracking and analysis tools the
Registrant's clients will have the ability to better understand and
profile customers which will help define and target future marketing
and prospecting efforts.
The VeriStore, VeriMark and VeriBase services are intended to
operate in an integrated manner where a client may use one or more of
the services in conjunction with another or as stand-alone services
where the client has the need for only one of the services.
The Registrant is taking steps to acquire technology and retain
personnel to enable it to provide secure and comprehensive Internet-
based electronic commerce ("e-commerce") solutions for business-to-
business transactions. During the second quarter ending June 30, 1999
the Registrant began a process to research, validate and select the
optimal mix of pre-built products and/or development technologies to
best deliver the Registrant's chosen and anticipated set of services to
its customers. In selecting the appropriate base technology the
Registrant reviewed various existing products and tools sets with the
goal of selecting a technology which offered maximum flexibility,
scalability and stability. The Registrant considers its business model
to be unique. Therefore, the Registrant requires a unique set of tools
to realize its business objectives. After reviewing the available
technologies in light of the Registrant's business goals, the Registrant
chose The Sales Associate System. The Sale Associate System is based
upon the Microsoft platform and includes store creation functionality,
shopping cart, secure transaction processing, extensive web-based
administration and integration with CyberCash and PaymentNet for real
time credit card processing
As a result of its findings, the Registrant taken the initial step
of acquiring e-commerce software technology by entering into a software
purchase agreement with NetOpus Incorporated ("NetOpus") in order to
purchase the core technology necessary to support the services the
Registrant intends to offer. NetOpus is a private company which owns
the rights to certain preexisting computer software marketed by NetOpus
as the "Sales Associate Store Creator" commerce system (the "Base
Technology"). Under the terms of the agreement, the Registrant
purchased the right to use, modify, customize, brand, sell and market
the Base Technology to provide online transaction processing
functionality and features within the sites that the Registrant
develops.
<PAGE> 16
The Base Technology has been provided by NetOpus in consideration
of a onetime fee paid by the Registrant to NetOpus. The onetime fee
consists of a combination of $50,000 and the issuance to NetOpus of
25,000 common shares of the Registrant. The 25,000 shares of the
Registrant will be restricted from resale for a period of 12 months
from the date of issuance. At the end of the twelve month period, the
shares may be re-sold at a rate that cannot exceed 2,083 shares per
month maximum or split adjusted.
The Registrant is currently in the process of upgrading and
modifying the purchased software to enhance and further support
proposed services to be offered by the Registrant. The Registrant may
acquire or license additional software technology through a technology
licensing or purchase agreement to ensure that other proposed services
offered by the Registrant are delivered in a timely and useable manner
as part of the plan of operations for the next 12 months.
Given the Registrant's current level of working capital and
operations being conducted to develop its products, it is expected that
the Registrant can satisfy its cash requirements until November 1999
before additional capital will have to be raised. Additional sources of
financing will most likely be sought through future private placements
of the Registrant's common shares rather than seeking interest-bearing
loans. However, the Registrant recognizes that as a result of its
limited, financial, managerial, or other resources, the number of
suitable financing options may be limited. Should these additional
sources of capital not be found the Registrant will modify its
operations to conserve working capital by concentrating on fewer
products and/or services being advanced.
In addition to the Registrant's two pre-existing Officers, Mr.
Michael Hinshaw and Mr. Mark Katsumata, the Registrant has recently
hired an additional two Executive Officers who have considerable
experience within the computer industry. Mr. Richard Cohn will fulfill
the duties of Executive Vice President of the Registrant while Mr.
Steve Zimmerman will fulfill the role of Chief Technology Officer. The
Registrant has also recently hired a new employee to direct the
Registrant's media and public relations. The Registrant is currently
seeking to secure new employees in software programming and technology
development and intends to hire any further employees on an as needed
basis.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Registrant is not a party to any legal proceedings.
<PAGE> 17
ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES
Placements of Securities
During the quarter ending June 30, 1999 the Registrant has issued
the following unregistered securities at the following prices. There
were no underwriters engaged and no underwriting discounts or
commissions paid. All common stock issues were made pursuant to
exemptions from registration contained in Regulation S, Rules 901-905
and Section 4(2) of the 1933 Securities Act.
Common Stock Issuance
Date Type of Security Number Proceeds Exemption
1999
05/13 Common Shares 60,000 $300,000 Reg. S (901-905)
07/07 Common Shares 25,000 [1] Section 4(2)
[1] NetOpus Incorporated, a private company owned and controlled by
Mr. Steve Zimmerman, entered into an agreement with the Registrant
on June 11, 1999 whereby NetOpus is to be issued 25,000 shares of
the Registrant at a settlement price of $5.25 per share under
section 4(2) as partial payment for the sale of its technology
assets. Mr. Zimmerman is also an Executive Officer of the
Registrant and as such, an affiliate of the Registrant. The
Registrant granted the shares to NetOpus on July 7, 1999.
Stock Options Granted
During the quarter ending June 30, 1999 the Registrant issued
options under its 1999 Stock Option Plan to directors, officers and key
employees to acquire its common shares in the following amounts:
Exercise
Date Type of Security Number Price Term
1999
06/14 Stock Option 500,000 $5.25 5 years [1]
06/14 Stock Option 105,000 $5.25 5 years [2]
06/14 Stock Option 350,000 $4.00 5 years [2]
06/14 Stock Option 75,000 $5.25 5 years [3]
All the above options were issued under Section 4(2) of the 1933
Securities Act. None of the options were exercised during the quarter
ending June 30, 1999.
Footnotes begin on following page.
<PAGE> 18
[1] The option to acquire 200,000 shares of the Registrant was issued
to the President of the Registrant and will vest upon the
following schedule: at 6 months from granting he can exercise his
option with respect to 25% of the total granted; at 12 months from
granting he can exercise his option with respect to a further 25%
of the total granted; at 24 months from granting he can exercise
his option with respect to a further 25% of the total granted and
at 36 months from granting he can exercise his option with respect
to a final 25% of the total granted. The shares acquired on the
exercise of the option carry resale restrictions which provide
that up to a maximum of 10% of the total vested may be sold in any
30 day period. The President of the Registrant was also granted a
second option to acquire 300,000 shares of the Registrant. These
options are not subject to any vesting or resale provisions.
[2] The options where issued to various directors, officers and key
employees. With respect to each individual receiving these
options, the options will vest upon the following schedule: at 6
months from granting the individual can exercise their option with
respect to 25% of the total granted; at 12 months from granting
the individual can exercise their option with respect to a further
25% of the total granted; at 24 months from granting the
individual can exercise their option with respect to a further 25%
of the total granted and at 36 months from granting the individual
can exercise their option with respect to a final 25% of the total
granted. The shares acquired on the exercise the option carry
resale restrictions which provide that up to a maximum of 10% of
the total vested may be sold in any 30 day period.
[3] The option was issued to a key employee and will vest upon the
following schedule: at 12 months from granting the individual can
exercise their option with respect to 12.5% of the total shares
granted and thereafter the employee may exercise a further 12.5%
in each 6 month period. The shares acquired on the exercise of the
option carries resale restrictions which provide that up to a
maximum of 10% of the total vested may be sold in any 30 day
period.
Use of Proceeds
As discussed above in the Item 2 "Management Discussion" section,
the Registrant paid a one time fee consisting of $50,000 and the
issuance of 25,000 common shares to NetOpus as consideration for the
purchase of the Base Technology.
During the six months ending June 30, 1999 the Registrant incurred
$104,818 in office and miscellaneous expenses.
Also see ITEM 5(b)
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
<PAGE> 19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended June 30, 1999, no matters were submitted
to the Registrant's security holders.
ITEM 5. OTHER INFORMATION
(a) On June 14, 1999 the Registrant approved of the
implementation of a Stock Option Plan which authorizes the granting of
options to acquire up to a maximum of 3,000,000 common shares of the
Registrant to persons employed or associated with the Registrant,
including without limitation any employee, director, general partner,
officer, attorney, accountant, consultant or advisor. The Stock Option
Plan is intended to advance the best interests of the Registrant by
providing additional incentive to those persons who have a substantial
responsibility for its management, affairs, and growth by increasing
their proprietary interest in the success of the Registrant, thereby
encouraging them to maintain their relationships with the Registrant.
Further, the availability and offering of Stock Options under the Plan
supports and increases the Registrant's ability to attract, engage and
retain individuals of exceptional talent upon whom, in large measure,
the sustained progress, growth and profitability of the Registrant for
the shareholders depends.
(b) During the six month period ending June 30, 1999, the
Registrant entered into two agreements with a private company to design
and produce the Registrant's internet site and other corporate materials
for an estimated total cost of $141,081 (1998 fiscal period - Nil), of
which $132,971 was incurred by the Registrant. The President of the
Registrant is also the president of this private company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following Exhibits are a part of this Form 10-Q.
Exhibit Description
Number
27.3 Financial Data Schedule
99.3 Share Option Plan
<PAGE> 20
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
VERIDA INTERNET CORP.
(Registrant)
Dated: August 12, 1999 By: /s/ Michael Hinshaw
Michael Hinshaw, President
Dated August 12, 1999 By: /s/ Mark Katsumata
Mark Katsumata, Principal
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Financial Condition at June 30, 1999 (Unaudited)
and the Consolidated Statement of Income for the six months ended June 30,
1999 (Unaudited) and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 274,138
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 277,229
<PP&E> 181,250
<DEPRECIATION> (5,000)
<TOTAL-ASSETS> 453,479
<CURRENT-LIABILITIES> 20,965
<BONDS> 0
0
0
<COMMON> 1,209,460
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 453,479
<SALES> 0
<TOTAL-REVENUES> 4,435
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 298,401
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (293,966)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (293,966)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
<PAGE> 22
EXHIBIT 99.3
VERIDA INTERNET CORP.
1999 NONQUALIFYING STOCK OPTION PLAN
ARTICLE I
Purpose of Plan
This 1999 NONQUALIFYING STOCK OPTION PLAN (the "Plan") of VERIDA
INTERNET CORP. (the "Company") for persons employed or associated with
the Company, including without limitation any employee, director,
general partner, officer, attorney, accountant, consultant or advisor,
is intended to advance the best interests of the Company by providing
additional incentive to those persons who have a substantial
responsibility for its management, affairs, and growth by increasing
their proprietary interest in the success of the Company, thereby
encouraging them to maintain their relationships with the Company.
Further, the availability and offering of Stock Options under the Plan
supports and increases the Company's ability to attract, engage and
retain individuals of exceptional talent upon whom, in large measure,
the sustained progress, growth and profitability of the Company for
the shareholders depends.
ARTICLE II
Definitions
For Plan purposes, except where the context might clearly
indicate otherwise, the following terms shall have the meanings set
forth below:
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"Committee" shall mean the Compensation Committee, or such other
committee appointed by the Board, which shall be designated by the
Board to administer the Plan. The Committee shall be composed of two
or more persons as from time to time are appointed to serve by the
Board and may be members of the Board.
<PAGE> 23
"Common Shares" shall mean the Company's Common Shares $0.00001
par value per share, or, in the event that the outstanding Common
Shares are hereafter changed into or exchanged for different shares or
securities of the Company, such other shares or securities.
"Company" shall mean VERIDA INTERNET CORP., a Nevada corporation,
and any parent or subsidiary corporation of VERIDA INTERNET CORP., as
such terms are defined in Section 425(e) and 425(f), respectively of
the Code.
"Optionee" shall mean any person employed or associated with the
affairs of the Company who has been granted one or more Stock Options
under the Plan.
"Stock Option" or "NQSO" shall mean a stock option granted
pursuant to the terms of the Plan.
"Stock Option Agreement" shall mean the agreement between the
Company and the Optionee under which the Optionee may purchase Common
Shares hereunder.
ARTICLE III
Administration of the Plan
1. The Committee shall administer the plan and accordingly, it
shall have full power to grant Stock Options, construe and interpret
the Plan, establish rules and regulations and perform all other acts,
including the delegation of administrative responsibilities, which it
believes reasonable and proper.
2. The determination of those eligible to receive Stock
Options, and the amount, price, type and timing of each Stock Option
and the terms and conditions of the respective stock option agreements
shall rest in the sole discretion of the Committee, subject to the
provisions of the Plan.
3. The Committee may cancel any Stock Options awarded under the
Plan if an Optionee conducts himself in a manner which the Committee
determines to be inimical to the best interest of the Company and its
shareholders as set forth more fully in paragraph 8 of Article X of
the Plan.
<PAGE> 24
4. The Board, or the Committee, may correct any defect, supply
any omission or reconcile any inconsistency in the Plan or in any
granted Stock Option, in the manner and to the extent it shall deem
necessary to carry it into effect.
5. Any decision made, or action taken, by the Committee or the
Board arising out of or in connection with the interpretation and
administration of the Plan shall be final and conclusive.
6. Meetings of the Committee shall be held at such times and
places as shall be determined by the Committee. A majority of the
members of the Committee shall constitute a quorum for the transaction
of business, and the vote of a majority of those members present at
any meeting shall decide any question brought before that meeting. In
addition, the Committee may take any action otherwise proper under the
Plan by the affirmative vote, taken without a meeting, of a majority
of its members.
7. No member of the Committee shall be liable for any act or
omission of any other member of the Committee or for any act or
omission on his/her own part, including, but not limited to, the
exercise of any power or discretion given to him/her under the Plan
except those resulting from his/her own gross negligence or willful
misconduct.
8. The Company, through its management, shall supply full and
timely information to the Committee on all matters relating to the
eligibility of Optionees, their duties and performance, and current
information on any Optionee's death, retirement, disability or other
termination of association with the Company, and such other pertinent
information as the Committee may require. The Company shall furnish
the Committee with such clerical and other assistance as is necessary
in the performance of its duties hereunder.
ARTICLE IV
Shares Subject to the Plan
1. The total number of shares of the Company available for
grants of Stock Options under the Plan shall be 3,000,000 Common
Shares, subject to adjustment as herein provided, which shares may be
either authorized but unissued or reacquired Common Shares of the
Company.
<PAGE> 25
2. If a Stock Option or portion thereof shall expire or
terminate for any reason without having been exercised in full, the
unpurchased shares covered by such NQSO shall be available for future
grants of Stock Options.
ARTICLE V
Stock Option Terms and Conditions
1. Consistent with the Plan's purpose, Stock Options may be
granted to any person who is performing or who has been engaged to
perform services of special importance to management in the operation,
development and growth of the Company.
2. Determination of the option price per share for any stock
option issued hereunder shall rest in the sole and unfettered
discretion of the Committee.
3. All Stock Options granted under the Plan shall be evidenced
by agreements which shall be subject to applicable provisions of the
Plan, and such other provisions as the Committee may adopt, including
the provisions set forth in paragraphs 2 through 11 of this Article V.
4. All Stock Options granted hereunder must be granted within
ten years from the date this Plan is adopted.
5. No Stock Option granted hereunder shall be exercisable after
the expiration of ten years from the date such NQSO is granted. The
Committee, in its discretion, may provide that an option shall be
exercisable during such ten year period or during any lesser period of
time. The Committee may establish installment exercise terms for a
Stock Option such that the NQSO becomes fully exercisable in a series
of cumulating portions. If an Optionee shall not, in any given
installment period, purchase all the Common Shares which such Optionee
is entitled to purchase within such installment period, such
Optionee's right to purchase any Common Shares not purchased in such
installment period shall continue until the expiration or sooner
termination of such NQSO. The Committee may also accelerate the
exercise of any NQSO.
<PAGE> 26
6. A Stock Option, or portion thereof, shall be exercised by
delivery of (i) a written notice of exercise to the Company specifying
the number of Common Shares to be purchased, and (ii) payment of the
full price of such Common Shares, as fully set forth in paragraph 7 of
this Article V. No NQSO or installment thereof shall be reusable
except with respect to whole shares, and fractional share interests
shall be disregarded. Not less than 100 Common Shares may be
purchased at one time unless the number purchased is the total number
at the time available for purchase under the NQSO. Until the Common
Shares represented by an exercised NQSO are issued to an Optionee,
he/she shall have none of the rights of a shareholder.
7. The exercise price of a Stock Option, or portion thereof,
may be paid:
A. In United States dollars, in cash or by cashier's
check, certified check, bank draft or money order, payable to the
order of the Company in an amount equal to the option price; or,
B. At the discretion of the Committee, through the
delivery of fully paid and nonassessable Common Shares, with an
aggregate fair market value (determined as the average of the
highest and lowest reported sales prices on the Common Shares as
of the date of exercise of the NQSO, as reported by such
responsible reporting service as the Committee may select, or if
there were not transactions in the Common Shares on such day,
then the last preceding day on which transactions took place), as
of the date of the NQSO exercise equal to the option price,
provided such tendered shares, or any derivative security
resulting in the issuance of Common Shares, have been owned by
the Optionee for at least thirty (30) days prior to such
exercise; or,
C. By a combination of both A and B above.
The Committee shall determine acceptable methods for tendering
Common Shares as payment upon exercise of a Stock Option and may
impose such limitations and prohibitions on the use of Common Shares
to exercise an NQSO as it deems appropriate.
8. With the Optionee's consent, the Committee may cancel any
Stock Option issued under this Plan and issue a new NQSO to such
Optionee.
<PAGE> 27
9. Except by will, the laws of descent and distribution, or
with the written consent of the Committee, no right or interest in any
Stock Option granted under the Plan shall be assignable or
transferable, and no right or interest of any Optionee shall be liable
for, or subject to, any lien, obligation or liability of the Optionee.
Upon petition to, and thereafter with the written consent of the
Committee, an Optionee may assign or transfer all or a portion of the
Optionee's rights and interest in any stock option granted hereunder.
Stock Options shall be exercisable during the Optionee's lifetime only
by the Optionee or assignees, or the duly appointed legal
representative of an incompetent Optionee, including following an
assignment consented to by the Committee herein.
10. No NQSO shall be exercisable while there is outstanding any
other NQSO which was granted to the Optionee before the grant of such
option under the Plan or any other plan which gives the right to the
Optionee to purchase stock in the Company or in a corporation which is
a parent corporation (as defined in Section 425(e) of the Code) of the
Company, or any predecessor corporation of any of such corporations at
the time of the grant. An NQSO shall be treated as outstanding until
it is either exercised in full or expires by reason of lapse of time.
11. Any Optionee who disposes of Common Shares acquired on the
exercise of a NQSO by sale or exchange either (i) within two years
after the date of the grant of the NQSO under which the stock was
acquired, or (ii) within one year after the acquisition of such
Shares, shall notify the Company of such disposition and of the amount
realized upon such disposition. The transfer of Common Shares may
also be restricted by applicable provisions of the Securities Act of
1933, as amended.
ARTICLE VI
Adjustments or Changes in Capitalization
1. In the event that the outstanding Common Shares of the
Company are hereafter changed into or exchanged for a different number
of kinds of shares or other securities of the Company by reason of
merger, consolidation, other reorganization, recapitalization,
reclassification, combination of shares, stock split-up or stock
dividend:
<PAGE> 28
A. Prompt, proportionate, equitable, lawful and adequate
adjustment shall be made of the aggregate number and kind of
shares subject to Stock Options which may be granted under the
Plan, such that the Optionee shall have the right to purchase
such Common Shares as may be issued in exchange for the Common
Shares purchasable on exercise of the NQSO had such merger,
consolidation, other reorganization, recapitalization,
reclassification, combination of shares, stock split-up or stock
dividend not taken place;
B. Rights under unexercised Stock Options or portions
thereof granted prior to any such change, both as to the number
or kind of shares and the exercise price per share, shall be
adjusted appropriately, provided that such adjustments shall be
made without change in the total exercise price applicable to the
unexercised portion of such NQSO's but by an adjustment in the
price for each share covered by such NQSO's; or,
C. Upon any dissolution or liquidation of the Company or
any merger or combination in which the Company is not a surviving
corporation, each outstanding Stock Option granted hereunder
shall terminate, but the Optionee shall have the right,
immediately prior to such dissolution, liquidation, merger or
combination, to exercise his/her NQSO in whole or in part, to the
extent that it shall not have been exercised, without regard to
any installment exercise provisions in such NQSO.
2. The foregoing adjustment and the manner of application of
the foregoing provisions shall be determined solely by the Committee,
whose determination as to what adjustments shall be made and the
extent thereof, shall be final, binding and conclusive. No fractional
Shares shall be issued under the Plan on account of any such
adjustments.
<PAGE> 29
ARTICLE VII
Merger, Consolidation or Tender Offer
1. If the Company shall be a party to a binding agreement to
any merger, consolidation or reorganization or sale of substantially
all the assets of the Company, each outstanding Stock Option shall
pertain and apply to the securities and/or property which a
shareholder of the number of Common Shares of the Company subject to
the NQSO would be entitled to receive pursuant to such merger,
consolidation or reorganization or sale of assets.
2. In the event that:
A. Any person other than the Company shall acquire more
than 20% of the Common Shares of the Company through a tender
offer, exchange offer or otherwise;
B. A change in the "control" of the Company occurs, as
such term is defined in Rule 405 under the Securities Act of
1933;
C. There shall be a sale of all or substantially all of
the assets of the Company;
any then outstanding Stock Option held by an Optionee, who is deemed
by the Committee to be a statutory officer ("insider") for purposes of
Section 16 of the Securities Exchange Act of 1934 shall be entitled to
receive, subject to any action by the Committee revoking such an
entitlement as provided for below, in lieu of exercise of such Stock
Option, to the extent that it is then exercisable, a cash payment in
an amount equal to the difference between the aggregate exercise price
of such NQSO, or portion thereof, and, (i) in the event of an offer or
similar event, the final offer price per share paid for Common Shares,
or such lower price as the Committee may determine to conform an
option to preserve its Stock Option status, times the number of Common
Shares covered by the NQSO or portion thereof, or (ii) in the case of
an event covered by B or C above, the aggregate fair market value of
the Common Shares covered by the Stock Option, as determined by the
Committee at such time.
<PAGE> 30
3. Any payment which the Company is required to make pursuant
to paragraph 2 of this Article VII, shall be made within fifteen (15)
business days, following the event which results in the Optionee's
right to such payment. In the event of a tender offer in which fewer
than all the shares which are validily tendered in compliance with
such offer are purchased or exchanged, then only that portion of the
shares covered by an NQSO as results from multiplying such shares by
a fraction, the numerator of which is the number of Common Shares
acquired purchase to the offer and the denominator of which is the
number of Common Shares tendered in compliance with such offer, shall
be used to determine the payment thereupon. To the extent that all or
any portion of a Stock Option shall be affected by this provision, all
or such portion of the NQSO shall be terminated.
4. Notwithstanding paragraphs 1 and 3 of this Article VII, the
Company may, by unanimous vote and resolution, unilaterally revoke the
benefits of the above provisions; provided, however, that such vote is
taken no later than ten business days following public announcement of
the intent of an offer of the change of control, whichever occurs
earlier.
ARTICLE VIII
Amendment and Termination of Plan
1. The Board may at any time, and from time to time, suspend or
terminate the Plan in whole or in part or amend it from time to time
in such respects as the Board may deem appropriate and in the best
interest of the Company.
2. No amendment, suspension or termination of this Plan shall,
without the Optionee's consent, alter or impair any of the rights or
obligations under any Stock Option theretofore granted to him/her
under the Plan.
3. The Board may amend the Plan, subject to the limitations
cited above, in such manner as it deems necessary to permit the
granting of Stock Options meeting the requirements of future
amendments or issued regulations, if any, to the Code.
4. No NQSO may be granted during any suspension of the Plan or
after termination of the Plan.
<PAGE> 31
ARTICLE IX
Government and Other Regulations
The obligation of the Company to issue, transfer and deliver
Common Shares for Stock Options exercised under the Plan shall be
subject to all applicable laws, regulations, rules, orders and
approval which shall then be in effect and required by the relevant
stock exchanges on which the Common Shares are traded and by
government entities as set forth below or as the Committee in its sole
discretion shall deem necessary or advisable. Specifically, in
connection with the Securities Act of 1933, as amended, upon exercise
of any Stock Option, the Company shall not be required to issue Common
Shares unless the Committee has received evidence satisfactory to it
to the effect that the Optionee will not transfer such shares except
pursuant to a registration statement in effect under such Act or
unless an opinion of counsel satisfactory to the Company has been
received by the Company to the effect that such registration is not
required. Any determination in this connection by the Committee shall
be final, binding and conclusive. The Company may, but shall in no
event be obligated, to take any other affirmative action in order to
cause the exercise of a Stock Option or the issuance of Common Shares
purchased thereto to comply with any law or regulation of any
government authority.
ARTICLE X
Miscellaneous Provisions
1. No person shall have any claim or right to be granted a
Stock Option under the Plan, and the grant of an NQSO under the Plan
shall not be construed as giving an Optionee the right to be retained
by the Company. Furthermore, the Company expressly reserves the right
at any time to terminate its relationship with an Optionee with or
without cause, free from any liability, or any claim under the Plan,
except as provided herein, in an option agreement, or in any agreement
between the Company and the Optionee.
2. Any expenses of administering this Plan shall be borne by
the Company.
3. The payment received from Optionee from the exercise of
Stock Options under the Plan shall be used for the general corporate
purposes of the Company.
<PAGE> 32
4. The place of administration of the Plan shall be in the
State of Nevada and the validity, contraction, interpretation,
administration and effect of the Plan and its rules and regulations,
and rights relating to the Plan, shall be determined solely in
accordance with the laws of the State of Nevada.
5. Without amending the Plan, grants may be made to persons who
are foreign nationals or employed outside the United States, or both,
on such terms and conditions, consistent with the Plan's purpose,
different from those specified in the Plan as may, in the judgment of
the Committee, be necessary or desirable to create equitable
opportunities given differences in tax laws in other countries.
6. In addition to such other rights of indemnification as they
may have as members of the Board or Committee, the members of the
Committee shall be indemnified by the Company against all costs and
expenses reasonably incurred by them in connection with any action,
suit or proceeding to which they or any of them may be party by reason
of any action taken or failure to act under or in connection with the
Plan or any Stock Option granted thereunder, and against all amounts
paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by the Company) or paid
by them in satisfaction of a judgment in any such action, suit or
proceeding, except a judgment based upon a finding of bad faith;
provided that upon the institution of any such action, suit or
proceeding a Committee member shall in writing, give the Company
notice thereof and an opportunity, at its own expense, to handle and
defend the same before such Committee member undertakes to handle and
defend it on his/her own behalf.
7. Stock Options may be granted under this Plan from time to
time, in substitution for stock options held by employees of other
corporations who are about to become employees of the Company as the
result of a merger or consolidation of the employing corporation with
the Company or the acquisition by the Company of the assets of the
employing corporation or the acquisition by the Company of stock of
the employing corporation as a result of which it become a subsidiary
of the Company. The terms and conditions of such substitute stock
options so granted my vary from the terms and conditions set forth in
this Plan to such extent as the Board of Director of the Company at
<PAGE> 33
the time of grant may deem appropriate to conform, in whole or in
part, to the provisions of the stock options in substitution for which
they are granted, but no such variations shall be such as to affect
the status of any such substitute stock options as a stock option
under Section 422A of the Code.
8. Notwithstanding anything to the contrary in the Plan, if the
Committee finds by a majority vote, after full consideration of the
facts presented on behalf of both the Company the Optionee, that the
Optionee has been engaged in fraud, embezzlement, theft, commission of
a felony or proven dishonesty in the course of his/her association
with the Company or any subsidiary corporation which damaged the
Company or any subsidiary corporation, or for disclosing trade secrets
of the Company or any subsidiary corporation, the Optionee shall
forfeit all unexercised Stock Options and all exercised NQSO's under
which the Company has not yet delivered the certificates and which
have been earlier granted the Optionee by the Committee. The decision
of the Committee as to the case of an Optionee's discharge and the
damage done to the Company shall be final. No decision of the
Committee, however, shall affect the finality of the discharge of such
Optionee by the Company or any subsidiary corporation in any manner.
Further, (subject to the Committee in their sole discretion
substituting terms in any particular Optionee's Stock Option Agreement
which are different than the foregoing) if Optionee voluntarily
terminates employment with the Company, the Optionee shall forfeit all
unexercised stock options.
ARTICLE XI
Securities Regulations
The securities issued pursuant to this Plan are "restricted
securities" as defined in Rule 144 of the Securities Act of 1933 and
may not be resold except in compliance with the registration
requirements of the Securities Act of 1933 or an exemption therefrom.
Ninety (90) days after the Company becomes subject to the reporting
requirements of Section 13 of 15(d) of the Securities Exchange Act of
1934, securities issued pursuant to the Plan may be resold by persons
other than affiliates in reliance upon Rule 144 without compliance
with paragraphs (c), (d), (e) and (h) thereof, and affiliates without
compliance with paragraph (d) thereof. The Company is currently not
subject to the reporting requirements of the Securities Exchange Act
of 1934.
<PAGE> 34
ARTICLE XII
Written Agreement
Each Stock Option granted hereunder shall be embodied in a
written Stock Option Agreement which shall be subject to the terms and
conditions prescribed above and shall be signed by the Optionee and by
the President or any Vice President of the Company, for and in the
name and on behalf of the Company. Such Stock Option Agreement shall
contain such other provisions as the Committee, in its discretion
shall deem advisable.
ARTICLE XIII
Effective Date
This Plan shall become unconditionally effective as of the date
of approval of the Plan by the Board of Directors of the Company. No
Stock Option may be granted later than ten (10) years from the
effective date of the Plan; provided, however, that the Plan and all
outstanding Stock Options shall remain in effect until such NQSO's
have expired or until such options are canceled.
