SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant Section 12(b) or (g) of the Securities Exchange Act of 1934
INTERMOST CORPORATION
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(Name of Small Business Issuer in its charter)
Utah 87-0418721
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
38 Floor, Guomao Building, Renmin South Road
Shenzhen, China 518005
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(Address of principal executive offices)(Zip code)
Issuer's telephone number, including area code: 86 755 220 1941
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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None None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value
--------------------------------
(Title of class)
<PAGE>
This Form 10-SB contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Company's actual results could differ materially from
those set forth in the forward-looking statements. Certain factors that might
cause such a difference are discussed in the section entitled "Factors that May
Affect Future Results" under Item 2 of this Form 10-SB.
The Company operates through its various subsidiaries, all of which are
located outside of the United States. Unless otherwise indicated or the context
otherwise requires, the term Company refers collectively to Intermost
Corporation and its subsidiaries. All references to China or the PRC are to the
People's Republic of China. The Company's financial statements are presented in
United States Dollars ("US$"). The Company's sales are principally in Hong Kong
Dollars ("HK$") and Renminbi ("Rmb"). At December 31, 1998, the prevailing
exchange rate of US$ into HK$ and Rmb was US$1.00 = HK$7.746 and US$1.00 = Rmb
8.279.
Item 1. Business.
General
Intermost Corporation (the "Company"), a Utah corporation, through its
subsidiaries, is a leading provider of various Internet services in China,
including an electronic commerce platform, and Web site development and hosting.
The Company owns and operates the ChinaE.com web site (www.ChinaE.com). The
Company also provides business information services and value added Internet and
Intranet services to the Chinese market. The Company's operations are located in
China and Hong Kong.
History and Development of the Company
The Company was incorporated as La Med Tech, Inc. under the laws of the
State of Utah on March 6, 1985. The Company changed its name to Entertainment
Concepts International during 1987, to Lord & Lazarus, Inc. during 1988 and to
Utility Communication International, Inc. during 1996.
From inception through October of 1998, the Company's operations were
limited to efforts to identify and acquire, or merge with, one or more operating
businesses.
In October 1998, the Company acquired all of the issued and outstanding
shares of Intermost Limited ("IML"), a British Virgin Islands Company, in
exchange (the "Exchange") for the issuance of 4,970,000 shares of the Company's
common stock, representing 58.7% of the outstanding shares of the Company
following the Exchange. IML was formed in January of 1998 to develop a
Chinese-language internet business portal and provide state-of-the-art internet
services with a view to becoming a leading provider of such services in China.
Following the Exchange, the Company changed its name to Intermost Corporation,
terminated all of its prior activities, adopted the business plan of IML and
appointed the officers and directors of IML to replace previous management. The
Company's principal offices are located at 38th Floor, Guomao Building, Renmein
South Road, Shenzhen, China 518005, telephone number is 86-755-220-1941.
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The Internet Industry
The Internet is a global collection of thousands of computer networks
interconnected to enable commercial organizations, educational institutions,
government agencies and individuals to communicate electronically, access and
share information, and conduct business. Much of the growth to date in the use
of the Internet by businesses and individuals is due to the emergence of the
World Wide Web.
The World Wide Web is a network medium that includes an ever growing wide
range of content and activities. Within the Web there can be found content such
as magazines, news, sports information, radio broadcasts, corporate, product,
educational, research and political information, customer service, shopping,
electronic commerce, hotel and airline reservations, banking, games, and
discussion groups.
In recent years, the Internet has become a place where a wide range of
goods and services can be bought or sold, making cyberspace a global community,
a commercial medium, and a multibillion- dollar industry. According to the FTC,
business on the Internet "could explode" from $2.6 billion in 1996 to $220
billion in 2001. Furthermore, a recent US Government Report by the Commerce
Commission said that e-commerce could surpass $300 billion by 2002.
The growth in e-commerce is being fueled by two interrelated factors.
First, users are growing increasingly comfortable with the concept of using the
Web for retail shopping, due in part to growing confidence in credit card
transaction security. Second, the sheer number of Internet users is growing at a
dynamic rate. International Data Corporation estimates that there were about 69
million users of the Internet at the end of 1997 and that the number of users
will grow to 320 million by the end of 2002. Jupiter Communications estimates
that the number of Internet-connected households worldwide will grow from
approximately 45 million at the end of 1998 to approximately 66 million by the
end of 2000.
As a result, advertising on the Internet is already beginning to rival more
traditional print and broadcast media. The Internet Advertising Bureau (IAB)
reported that $906.5 million was spent on online advertising in 1997. According
to the report, conducted by Coopers & Lybrand, advertising revenues are on a
strong upward trend. This is clearly evidenced by the IAB's report that total
first quarter spending in 1998 reached $351.3 million, an increase of 271% over
the first quarter of 1997 and the eighth consecutive quarter of positive revenue
growth. Industry reports widely predict Internet advertising to easily top the
$1 billion mark in 1998. This continued vibrancy of Internet advertising
demonstrates that a growing number of advertisers now consider a strong presence
on the Internet as key to their overall branding strategies, which reinforces
the importance of the medium as an integral component to across-the-board
advertising coverage.
The overall growth of the Internet has translated into record sales and
growth, as well as relatively high stock price valuations, for several companies
engaged in services similar to ChinaE.com, including Yahoo, Excite, Lycos, and
Infoseek Corporation.
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Relative to the United States and Western Europe, the Internet is in its
infancy in China. Management believes that the number of Internet subscribers in
China has grown rapidly in recent years and that the rate of growth in use of
the Internet in China will continue to accelerate. In July, 1998 the China
Economic Times confirmed this trend reporting that the number of Chinese
Internet users rose by 132% over the preceding year to 1.175 million up from
505,000 at the beginning of the year. Industry analysts predict that Chinese net
usage could reach 7 million by 2001. Capital spending for equipment to
accommodate the anticipated rapid growth in Internet use is expected to grow in
China and around the world. China Information Technology Association has
estimated that spending on Internet and related computer networks will exceed
$12 billion between 1999 and 2001. International Data Corporation's ("IDC")
statistical analysis showed that global spending on information and
communications technology ("ICT") totaled $1.8 trillion in 1997, with spending
on ICT increasing at a rate of 27%, and total global spending increasing at a
rate of 5.5%. IDC also recently reported that the ICT industry is no longer
dominated by western economies, and listed Brazil and China in the top 10 ICT
markets.
Strategy
The Company's goal is to become the leading provider of Internet services
and products in China. The Company's strategy to achieve this objective
includes: (1) establishing the Company's web site, ChinaE.com, as a leading
Internet gateway and search engine that will serve as a home base for Chinese
Internet users; (2) expanding the ChinaE.com database to become the recognized
leader in Chinese language content on the Internet; (3) establishing e-commerce
joint ventures to market products in China; (4) establishing relationships with
advertisers seeking to penetrate the Chinese market; (5) offering a complete
range of Internet services to Chinese companies, including web design and
hosting; (6) offering network consulting services and solutions, including Y2K
solutions; and (7) acquiring strategic Internet-oriented business and assets.
Products and Services
The Company's principal product and service offerings include the
following:
-- Search Engine, Internet Gateway and Chinese Business Database. In July
1998, the Company launched its web site, ChinaE.com. Management believes that
ChinaE.com is one of the most comprehensive bilingual (both Chinese and English)
search engines and web directories presently in operation and that the site has,
as of May 1999, one of the highest volumes of user traffic of all Chinese
trade-related Internet sites. ChinaE.com, which included a database of more than
300,000 major businesses as of May 1999, allows Chinese users to search, in
Chinese language, for product information, company information and web site
directories. The site also contains information related to trade and business,
including trade regulations, investment opportunities and exhibition schedules.
The site includes a bulletin board where buyers and sellers can list information
on products and services. The Company updates the site, and the data base is
expanded, daily to enhance its content.
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Operation of ChinaE.com is at the heart of the Company's core operation.
While there are many search engines and data bases available to Internet users,
very few search engines or data bases are specifically designed to cater to
English and Chinese language searches, both in simplified and traditional
Chinese characters. Management believes that Chinese language search
capabilities and a large Chinese language data base will allow the Company to
build on its current foundation and transform the ChinaE.com site into an
Internet gateway that will serve as a home base for Chinese Internet users.
Management believes that search engines, increasingly recognized as the key
portals to the Internet, will benefit from the increasing number of Internet
users since advertisers will more likely advertise on Web sites that both
demonstrate a high volume of user traffic and provide programs designed to make
"surfing" the Web easier by offering search capabilities and a wide range of
visitor services. In fact, the Company notes that portals, which now attract 15%
of Internet page-views, receive 59% of Internet advertising, according to Ziff
Davis Publishing's ZDNet News. This share of Internet traffic is projected to
reach 20% and 30% of total advertising dollars by 2002.
Underlying the Company's strategy is an understanding of the need to
enhance, promote and support a perception that the Company's Internet offerings
are specifically designed to meet the needs of its target users. The Company
believes that it is necessary to provide the Chinese Internet user with content
that allows them an opportunity to access the largest available Chinese language
data base, to conduct the most comprehensive searches possible in their native
tongue and to act on the information provided.
ChinaE.com will seek to leverage its current resources and infrastructure
by continuing to expand its Chinese language content, including entering into
strategic relationships with third party developers of content, and investing in
or acquiring Internet-related technologies. Management believes that these
relationships will enhance the Company's product offerings while leveraging the
Company's development, sales and marketing resources.
ChinaE.com plans to capitalize on its position as a leading traffic site
for Chinese Internet users to attract advertisers, form e-commerce joint
ventures and market its Internet services.
The Company is focused on developing the type of compelling features and
services that will make the ChinaE.com site the premier one-stop Chinese
content, shopping and searching site on the Web.
-- E-Commerce and Advertising Services and Ventures. The Company offers a
complete line of services, and intends to enter into joint ventures, to
facilitate Internet-based advertising and sales of products and services, also
known as "E-commerce".
According to industry publications, every 100 days the number of E-commerce
transactions doubles. As more people gain access to the Web, every day, more of
them begin shopping online. Online shopping provides a level of convenience
consumers want, need and will soon demand. Additionally, in rural areas and
lesser developed countries such as China, online shopping offers access to goods
and services not otherwise available in stores. E-commerce offers a unique
opportunity for businesses of any size. And for those who automate their supply
chain, the opportunity for business-to-business in E-commerce becomes even
greater.
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The Company plans to become a leader in providing services to Chinese
businesses seeking to advertise or sell products and services over the Internet.
The Company's E-commerce group provides total solutions to customers
seeking to begin E-commerce, which include: (1) its strategists and marketing
consultants conduct marketing investigation workshops; (2) its content services
group provides clients with the strategy and materials needed to build a Web
site that maximizes their online investment; (3) its development group can work
with a customer's project team to develop the application; (4) its system
integration team will complete the development by integrating all hardware,
software, data and contents, into one unit; and (5) its testing staff will
conduct serious and thorough tests to ensure that the system works properly and
reliably. E-commerce solutions range from creation of banner advertising which
may appear on the Company's Web site or other web sites to the establishment of
a complete online shop where consumers may view catalogs, product information
and pricing information and order and pay for the products online.
In addition to its E-commerce service offerings, the Company intends to
enter into joint ventures with name brand manufacturers to sell products
directly from its Web site. The Company's initial efforts in establishing
E-commerce joint ventures have produced an agreement, in April 1999, with Yiwen
Book Import and Export Company to establish one of the largest online bookstores
of Chinese titles. Yiwen is a state-owned business affiliated with New China
Book Stores, the largest book retail chain in China. With over 120,000 titles in
inventory, New China Book Stores is believed to have one of the largest
collections of Chinese books in the world. Under the terms of the agreement with
Yiwen, the Company will design and manage the bookselling site and provide
E-commerce consulting services. Yinwen will provide warehouse space, access to
its product inventory and product delivery services.
Complementing its E-commerce efforts, the Company has entered into a letter
of intent to acquire a business involved in the development of a "cyber-cash"
system which management believes will facilitate more rapid growth in E-commerce
in China as a result of the relative lack of credit card usage in China. See "--
Strategic Acquisitions."
-- Web Design, Hosting and Maintenance Services. The Company is one of the
largest web site designing, hosting and maintenance companies in China. The
Company has developed web sites and provided hosting services for more than 100
public companies and thousands of other businesses in China.
-- Network Consulting Services and Solutions. The Company helps Chinese
businesses design and implement their internal network systems, and provides
ongoing technical support services. The Company also conducts seminars for
Internet professionals on latest computer technology affecting the Internet.
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China has begun construction of its China Wide Web, an enclosed version of
the Internet that allows controlled access to the world wide web. Called
Intranets, these protected versions of the Web are well suited for Chinese
governments and businesses which wish to monitor information flows. Intranets
allow companies to use current Internet technology for information publishing
and sharing over a corporate network. The Company plans to offer network
consulting services and solutions to this market utilizing its proprietary
database of Chinese companies.
In conjunction with its offering of network consulting services and
solutions, in August 1998, the Company formed a joint venture with Egan Systems,
Inc. to provide Year 2000 ("Y2K") remediation services to the Chinese market.
The joint venture, owned 49% by the Company and known as Tech 2020, is
formulating complete Y2K solutions for the Chinese market utilizing
state-of-the-art "Fix 2000" repair software. Company engineers and technicians
have undergone extensive training in the use of the software.
-- Strategic Acquisitions. In order to assure a position of leadership in
technology, services and product offerings, the Company expects, from time to
time, to evaluate and, where appropriate, enter into acquisitions, investments,
joint ventures and other transactions relating to Web-related business
opportunities.
In April 1999, the Company announced the signing of a letter-of-intent with
respect to its first proposed Internet-related acquisition pursuant to which the
Company expects to acquire Jiayin E-Commerce Company. Jiayin E-Commerce is a
privately-owned company formed in China to develop "cyber-cash" as an E-commerce
electronic payment system for the Chinese banking system. Jiayin E-Commerce is
working with the Shenzhen Financial Electronic Settlement Center, a government
agency under China's Central Banking System, in its efforts to develop a
cyber-cash system.
With the Company already engaged in E-Commerce activities, including
building one of the world's largest Chinese online bookstore market, the Company
knows that the limited distribution of credit cards greatly affects China's
E-commerce future. The cyber-cash system being created will allow the banks and
E-commerce companies to bypass the current limited access to credit cards with a
national debt system that works within government mandates. With the expected
rapid growth in the number of Internet users in China, the Company believes that
its acquisition of Jiayin E-Commerce will position it at the heart of all
E-Commerce transactions in China.
Pursuant to the letter-of-intent, the Company expects to acquire a
controlling interest in Jiayin E-Commerce. The acquisition of Jiayin E-Commerce
is expected, subject to negotiation of final acquisition terms, to be
consummated in the second half of 1999.
Marketing
The Company's marketing efforts center around its ChinaE.com and
Intermost.com web sites. The Company advertises and promotes its full range of
services and products on each of its web sites. Internet marketing strategies
include advertising and hyperlinks at other sites through partnerships with as
many sites as possible to trade ads and links. The Company will also market in
business directories and through its comprehensive database of corporate
companies.
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Competition
The market for Internet professional services is relatively new, intensely
competitive, rapidly evolving and subject to rapid technological change. The
Company expects competition to persist, intensify and increase in the future.
The Company's competitors can be grouped as follows: advertising and media
agencies such as Feichi Limited; Internet integrators and web presence providers
such as Xunye Limited; and large information technology consulting service
providers such as Andersen Consulting and EDS. Many of these competitors offer
comprehensive Internet technology solutions, and have longer operating
histories, larger installed customer bases; longer relationships with clients,
and significantly greater financial, technical and public relations resources
than the Company.
Additionally, the market for Intranet, Extranet and web site development is
relatively new and subject to continuing definition, and, as a result, may
better position the Company's competitors to compete in this market as it
matures. There are relatively low barriers to enter this market. The Company has
no patented technology to preclude competitors from entering the market; instead
as a professional service firm, the Company relies on the skill of its
personnel. Service will be compared based upon performance, price, creativity
and reliability. The Company believes its fees for services are competitive with
those of its competitors.
Patents or Copyrights
The Company currently operates without any patents or copyrights; and no
special measures have been taken to protect its trade secrets, know-how or other
proprietary information. The Company did not incur research and development
expense during the last fiscal year. The Company's proprietary database has been
compiled as a trade secret; however no other protective measures have been
employed to safeguard its confidentiality or ownership.
Regulation
The Company is subject to and affected by Chinese laws, regulations,
administrative determinations, court decisions and similar constraints regarding
Internet usage and e-commerce. In an attempt to suppress politically subversive
propaganda and leakage of state secrets, early this year the Chinese government
announced a new set of regulations designed to control the Chinese people's use
of the Internet. The regulations provide that Internet source providers
operating within China will be subject to supervision by public security
officials and will be held responsible for illicit materials disseminated on the
Internet. Although Hong Kong will not be subject to these regulations, the
Chinese laws will likely force service providers to cover their increased risk
as a vigilante for controversial information through increased prices or other
indirect means which may have a negative effect upon consumer demand. Although
these regulations are generally unfavorable for the industry, the Company does
not believe that they will significantly impact its growth and development.
Additionally, censorship regulations may have actually spurred the growth of the
Chinese Intranet or protected versions of the Web in order to monitor
information flows. There is no assurance that new and stricter government
regulations will not be imposed which could significantly adversely impact the
Company.
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Employees
As of May 1, 1999, the Company had 45 full-time employees, (5 management
executives, 15 engineering/technical staff, 5 administrative and clerical and 20
sales persons) and the Company anticipates the need to hire additional computer
programmer/systems specialists to support the Company's expansion plan. None of
the Company's employees is a member of any labor union, and the Company has
never experienced any business interruption as a result of any labor disputes.
The Company does not provide any special benefit or incentive programs for its
employees.
Item 2. Management's Discussion and Analysis or Plan of Operation.
General
The following discussion should be read in conjunction with the Company's
financial statements appearing elsewhere herein.
Prior to October of 1998, the Company was engaged in limited operations
relating to efforts to identify and acquire, or merge with, one or more
operating businesses. In October 1998, the Company acquired Intermost Limited
and adopted the business plan of IML. The acquisition of IML has been accounted
for using the purchase method of accounting with the transaction being accounted
for as a "reverse acquisition." The Company does not consider the operations
prior to the acquisition of IML to be material to an understanding of the
Company. Accordingly, this discussion relates to the operations of IML for all
periods presented, excluding the former operations of the Company prior to the
acquisition of IML.
IML was formed in January of 1998 to establish a position as a leading
provider of Internet technologies and services, business information services,
value-added network consulting services and other related products and services
in China. Revenues are generated through a combination of consulting service
fees, advertising fees, web site design, hosting and maintenance fees and
information fees. The Company expects that future revenues will include
E-commerce fees.
Following the Exchange, the Company changed its year end to June 30 to
conform with the fiscal year of IML. From inception (January 1998) to June 30,
1998, the Company was involved in limited organizational activities and had no
operating revenues. The Company began revenue producing activities in the first
quarter of fiscal 1999 (ended September 30, 1998).
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Following is summary financial information reflecting the operations of the
Company for each of the periods from inception to June 30, 1998 and each of the
three fiscal quarters ended September 30, 1998, December 31, 1998 and March 31,
1999, as well as for the nine months ended March 31, 1999.
<TABLE>
Period from
Inception Three Months Ended Nine Months
(1/8/98) to ------------------------------------------------- Ended
6/30/98 9/30/98 12/31/98 3/31/99 3/31/99
--------------- -------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
Revenues $ 0 $ 63,197 $ 69,535 $ 108,459 $ 244,103
Direct costs 0 13,861 14,077 64,268 92,206
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Gross profit 0 49,336 55,458 44,191 151,897
Selling, general
and administrative
expense 1,602 30,370 64,886 95,930 197,922
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------------ --------------- -------------- --------------
Operating income
(loss) (1,602) 18,966 (9,428) (51,739) (46,025)
Other income 0 3,053 72 32 104
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------------ --------------- -------------- --------------
Net income (loss) $ (1,602) $ 22,019 $ (9,356) $ (51,707) $ (45,921)
============ =============== ============== ============== =================
</TABLE>
Results of Operations
Nine Months Ended March 31, 1999 and Period from Inception to June 30, 1998
Inasmuch as the Company conducted no revenue producing operations prior to
June 30, 1998, the following discussion of results of operations does not
include discussions of comparable periods from prior fiscal years.
Revenues. The Company had no revenues for the period from inception to June
30, 1998. For the nine months ended March 31, 1999, the Company had total
revenues of $244,103, with quarterly revenues rising from $63,197 for the
quarter ended September 30, 1998 (the first quarter of operations), to $69,535
for the quarter ended December 31, 1998 and to $108,459 for the quarter ended
March 31, 1999.
Revenues to date have been derived principally from web site design,
establishment and maintenance services and, to a lesser degree, web
advertisement. Initial web design and establishment fees have ranged from $3,000
to $10,000, depending on the complexity and scale of the web sites.
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Direct Costs. Direct costs consist principally of salary for sales
personnel and computer network technicians, development costs for software and
computer systems, depreciation and amortization associated with the same. The
Company had no direct costs for the period from inception to June 30, 1998. For
the nine months ended March 31, 1999, the Company had total direct costs of
$92,206, with quarterly direct costs rising from $13,861 for the quarter ended
September 30, 1998, to $14,077 for the quarter ended December 31, 1998 and to
$64,268 for the quarter ended March 31, 1999.
The increase in direct costs has been principally attributable to a
combination of the increase in revenue and costs associated with special web
site development packages offered to certain new customers. Through the offer of
special web site development packages, the Company has secured a number of large
enterprises as new clients, including a number of Chinese publicly traded
companies. Management believes that attracting and maintaining large well known
Chinese public companies as clients will enhance the Company's reputation and
exposure and allowing the Company to attract additional clients which is
expected to more than offset the costs offering special web site development
packages.
Selling, General and Administrative Expense. Selling, general and
administrative expense ("SG&A") consists principally of (1) sales commissions,
advertising, trade show and seminar expenses, and direct-field sales expense,
(2) salary for administrative staff, and (3) corporate overhead. SG&A totaled
$1,602 for the period from inception to June 30, 1998. For the nine months ended
March 31, 1999, SG&A totaled $197,922, with quarterly SG&A expense rising from
$30,370 for the quarter ended September 30, 1998, to $64,886 for the quarter
ended December 31, 1998 and to $95,930 for the quarter ended March 31, 1999.
The increase in SG&A has been principally attributable to a combination of
(1) aggressive marketing efforts associated with the commencement and growth of
revenue producing operations, including costs associated with sales commissions,
attendance at two international trade conferences, industry journal advertising
and other related expenses, and (2) an increase in administrative support staff
and corporate overhead to support anticipated growth in revenues.
Other Income. Other income consists principally of proceeds from the
disposal of office equipment and interest income. The Company had no other
income for the period from inception to June 30, 1998. For the nine months ended
March 31, 1999, other income totaled $104.
Liquidity and Capital Resources
At March 31, 1999, the Company had a cash balance of $553,704 and working
capital of $647,841.
The Company's primary sources of financing have been cash from the sale of
common stock and, to a lesser degree, cash provided by operating activities and
various loans from shareholders and directors.
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Operations used $170,689 of cash during the nine months ended March 31,
1999. Funds used in operations primarily relate to the loss incurred during the
period, increases in trade and other receivables and increases in other current
and non-current assets, all relating to the start-up and growth of operations,
which were partially offset by an increase in trade payables.
Investing activities used $33,367 during the nine months ended March 31,
1999. Funds used in investing activities consist of purchases of equipment to
support operations.
Financing activities provided $757,758 of cash during the nine months ended
March 31, 1999. The cash provided by financing activities was attributable to
the receipt of proceeds from the sale of common stock during the period.
Subsequent to March 31, 1999, the Company received approximately $130,000 of
additional proceeds from the sale of common stock.
The Company had no long term debt at March 31, 1999.
Management believes that the funds on hand at March 31, 1999 and received
from completion of the common stock offering are adequate to support the
Company's operations for at least the following twelve months. Depending upon
the rate of growth, the Company may seek additional capital in the future to
support expansion of operations and acquisitions.
Year 2000 Issue
The Year 2000 Issue is the result of potential problems with computer
systems or any equipment with computer chips that use dates where the date has
been stored as just two digits (e.g. 98 for 1998). On January 1, 2000, any clock
or date recording mechanism including date sensitive software which uses only
two digits to represent the year, may recognize a date using 00 as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruption of operations, including among other things,
a temporary inability to process transactions, send invoices, or engage in
similar activities.
The Company has begun operations within the last year and has acquired
computers, equipment and software which it believes are Y2K compliant. Further,
the Company has trained specialists and offers Y2K remediation services.
Accordingly, the Company believes that Y2K compliance will have no material
impact on the Company, its financial position or results of operations.
The Company has planned to communicate with others with whom it does
significant business to determine their Year 2000 Compliance readiness and the
extent to which the Company is vulnerable to any third party Year 2000 issues.
However, there can be no guarantee that the systems of other companies on which
the Company's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the
Company's system, would not have a material adverse effect on the Company.
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Factors That May Affect Future Results
The Company's operating results have been, and will continue to be,
affected by a wide variety of factors that could have a material adverse effect
on revenues and profitability during any particular period, including the level
and rate of acceptance of our products and services by the Chinese people,
continued growth in use of the Internet in China, entry of new competition
(including established companies from outside of China and companies with
substantially greater resources than the Company), fluctuations in the level of
orders for services which are received and can be delivered in a quarter,
rescheduling or cancellation of orders by customers, competitive pressures on
selling prices, changes in product, service or customer mix, rapid changes in
technology, dependence upon certain key employees, availability and cost of
computer technicians, loss of any strategic relationships, the Company's ability
to introduce new products and services on a timely basis, new product and
service introductions by the Company's competitors, requirements for additional
capital to support future growth and acquisitions, fluctuations in exchange
rates, and general economic conditions, among others.
In addition to the general factors noted above, the Company may be impacted
by the ongoing Asian financial crisis. Countries in the Asia Pacific region have
recently experienced weaknesses in their currency, banking and equity markets.
These weaknesses could adversely affect, among other things, consumer demand for
discretionary goods in the region (perhaps including the Company's products and
services which may be considered expenditures by consumers), and the U.S. dollar
value of the Company's foreign currency denominated sales (e.g., to the extent
sales are denominated in Renminbi or Hong Kong dollars). In addition, the
Company's interest income and expense may be sensitive to fluctuations in the
general level of Hong Kong and Chinese interest rates. However, as the Company
conducts substantially all of its operations, including substantially all of its
sales and expenses, in Renminbi or Hong Kong dollars, management does not
believe the Company is exposed to undue risk arising from fluctuations of the
exchange rates between those currencies and the U.S. dollar.
Inflation
Inflation has historically not had a material effect on the Company's
operations. When the price of products and services increases, the Company
believes that it will be able to pass those higher prices on to the customer.
Accordingly, the Company believes inflation will not have a material effect on
its future operations.
Item 3. Properties.
The Company's executive offices are located in a leased 7,000-square foot
office facility located at 38th Floor, Guomao Building, Renmin South Road,
Shenzhen, China. The lease for this facility expires on July 7, 2000.
The Company also maintains offices in Beijing, China and in Hong Kong. The
Hong Kong office is provided through an affiliation with Corporate Conventions
International Limited on a rent free basis.
13
<PAGE>
Management believes that the Company's facilities are adequate to support
operations for the foreseeable future.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
Common Stock
The following table is furnished as of May 1, 1999, to indicate beneficial
ownership of shares of the Company's Common Stock by (1) each shareholder of the
Company who is known by the Company to be a beneficial owner of more than 5% of
the Company's Common Stock, (2) each director and named officer of the Company,
individually, and (3) all officers and directors of the Company as a group. The
information set out in the following table was supplied by such persons.
<TABLE>
Name and Address of Number of Shares
Beneficial Owner (1) Beneficially Owned (2) Percent (2)
- -------------------- ------------------------ ------------------
<S> <C> <C>
Allied Point Limited (3)(6)........................... 2,381,207 24.2%
Jun LIANG (6)......................................... 1,190,604 (3)(4) 12.1%
Andy LIN (6).......................................... 1,190,604 (3)(5) 12.1%
Jeffrey MARTIN (7)(8)................................. 1,050,000 10.7%
Shim YANG............................................. 750,000 7.6%
Wai Ho LI............................................. 600,000 6.1%
Sai Keung CHAN........................................ 350,000 3.6%
All officers and directors as a group (5 persons)..... 4,081,207 41.4%
</TABLE>
- ----------------
(1) Unless otherwise noted, each person or group identified possesses sole
voting and investment power with respect to the shares shown opposite the
name of such person or group.
(2) Includes shares of common stock not outstanding, but which are subject to
options and warrants exercisable within 60 days of the date of the
information set forth in this table, which are deemed to be outstanding for
the purpose of computing the shares held and percentage of outstanding
common stock with respect to the holder of such options or warrants. Such
shares are not, however, deemed to be outstanding for the purpose of
computing the percentage of any other person.
(3) Allied Point Limited is a corporation organized under the laws of the
British Virgin Islands and is owned 50% by Jun Liang and 50% by Andy Lin.
Therefore, Mr. Liang and Mr. Lin may be deemed to be the beneficial owners
of 1,190,604 shares each.
(4) Excludes 450,000 shares held by Ms. Shuxian XU, the mother-in-law of Mr.
Jun LIANG. Jun LIANG disclaims any beneficial ownership of those shares.
(5) Excludes 450,000 shares held by Mr. Frank Gangming LIN, the adult son of
Mr. Andy LIN. Andy LIN disclaims any beneficial ownership of those shares.
(6) Address is 38th Floor, Guomao Building, Renmin South Road, Shenzhen, China.
(7) Includes 1,000,000 shares held by Forbes Investment Ltd., a corporation
organized under the laws of the British Virgin Islands and owned 100% by
Jeffrey Martin.
(8) Address is 179 Fairway Point Circle, Orlando, Florida 32828.
14
<PAGE>
Item 5. Directors, Executive Officers, Promoters and Control Persons.
Identification of Directors, Executive Officers and Certain Significant
Employees
The following table sets forth certain information regarding the directors
and executive officers of the Company.
Name Age Position
------- ----- ----------
Jun LIANG................ 37 President and Director
Andy LIN................. 52 Executive Vice President and Director
Sai Keung CHAN........... 44 Secretary and Director
Wai Ho LI................ 43 Director
Shim YANG................ 42 Director
Terms of Office
The directors named above will serve until the first annual meeting of the
Company's shareholders. Thereafter, directors will be elected for one-year terms
at the annual shareholders' meeting. Officers will hold their positions at the
pleasure of the Board of Directors, absent any employment agreement, of which
none currently exist or are contemplated.
The directors and officers initially will devote their time to the
Company's affairs on an "as needed" basis, the amount of which is undetermined
at this time.
Business Experience
Jun LIANG co-founded the Company's predecessor, IML, in January 1998 and
has served as its President and a Director since inception and as President and
a Director of the Company since the Exchange in October 1998. Prior to forming
IML, he was the president of China Business Resources, a Hong Kong company
engaged in information technology and Chinese business database in books and
CD-ROM format, from 1994 to 1998. Mr. Liang graduated from Beijing Shijou
University in 1982 with a Bachelor of Science degree in Chemical Engineering and
from Stanford University in 1986 with a Master of Science degree in Chemical
Engineering.
Andy LIN co-founded the Company's predecessor, IML, in January 1998 and has
served as its Vice President and a Director since inception and as Vice
President and a Director of the Company since the Exchange in October 1998.
Prior to forming IML, he was the vice president of China Business Resources from
1994 to 1998. Mr. Lin graduated from Tsinghua University in 1970 with a Bachelor
degree and from the Chinese Academy of Sciences in 1981 with a Master of Science
degree in computer science.
Sai Keung CHAN joined the Company's predecessor, IML, as Secretary and a
Director in January 1998 and assumed the same positions with the Company
following the Exchange in October 1998. Mr. Chan received a law degree from the
University of Southampton, U.K. and is a practicing attorney in Hong Kong and an
appointed Attesting Officer of the People's Republic of China.
15
<PAGE>
Wai Ho LI joined the Company's predecessor, IML, as a Director in January
1998 and assumed the same positions with the Company following the Exchange in
October 1998. Prior to joining IML, Mr. Li was served as a field project
management consultant.
Shim YANG joined the Company's predecessor, IML, as a Director in January
1998 and was appointed a Director of the Company following the Exchange in
October 1998. Mr. Yang is a financial consultant and business development
specialist in Hong Kong. Mr. Yang received a Bachelors degree in Economics from
the University of Foreign Trade, China in 1982.
Item 6. Executive Compensation
Neither the Company nor IML has paid compensation to any officer in excess
of $100,000 for any fiscal year, or portion of a fiscal year. During the period
from inception to June 30, 1998, IML paid no compensation to Jun Liang, the
Company's chief executive officer. During the nine months ended March 31, 1999,
the Company and IML paid $15,384 of compensation to Jun Liang.
Beginning January 1, 1999, until the Company acquires sufficient revenues
through the operation of its business, the Company pays each of its executive
officers HK$20,000 per month. The Company currently pays its non-employee
directors HK$5,000 per month. The Company reimburses its officers and directors
for any out-of-pocket expenses incurred on behalf of the Company. The Company
does not have any pension, profit-sharing, stock bonus, or other benefit plans.
The Company expects to enter into employment agreements with key employees, to
implement comprehensive compensation arrangements with its officers and
directors and to adopt benefit plans in the future at the discretion of the
Board of Directors. The Board plans to adopt a stock option plan under which
2,000,000 shares of common stock would be reserved for issuance pursuant to
options to be granted to key employees.
Item 7. Certain Relationships and Related Transactions.
None.
Item 8. Description of Securities.
At May 1, 1999, the Company's authorized capital stock consisted of
100,000,000 shares of common stock, $.001 par value, of which 9,849,381 shares
were issued and outstanding, and 5,000,000 shares of preferred stock, $.001 par
value, of which no shares were issued and outstanding.
Common Stock
The holders of common stock are entitled to one vote per share on all
matters to be voted on by the stockholders. Subject to preferences that may be
applicable to any outstanding shares of preferred stock, holders of common stock
are entitled to receive out of funds legally available therefor dividends as our
Board of Directors may declare from time to time. Upon a liquidation,
dissolution or winding up of the Company, holders of common stock are entitled
to share ratably in all assets remaining after payment of liabilities and the
liquidation preferences of any outstanding shares of preferred stock. Holders of
common stock have no preemptive, conversion, subscription or other rights. There
are no redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and nonassessable.
16
<PAGE>
Preferred Stock
Under the Certificate of Incorporation, as amended and restated, the Board
of Directors will have the authority, without further action by stockholders, to
issue up to 5,000,000 shares of preferred stock in one or more series and to fix
the rights, preferences, privileges, qualifications and restrictions granted to
or imposed upon such preferred stock, including dividend rights, conversion
rights, voting rights, rights and terms of redemption, liquidation preference
and sinking fund terms, any or all of which may be greater than the rights of
the common stock. The issuance of preferred stock could adversely affect the
voting power of holders of common stock and reduce the likelihood that such
holders will receive dividend payments and payments upon liquidation. Such
issuance could have the effect of decreasing the market price of the common
stock. The issuance of preferred stock could have the effect of delaying,
deterring or preventing a change in control of the Company. We have no present
plans to issue any shares of preferred stock.
Anti-Takeover Provisions
Except as described above regarding the Company's authorized preferred
stock, there are no provisions in the Company's Certificate of Incorporation or
Bylaws which would, or could, have the effect of delaying, deferring or
preventing a change in control of the Company.
Transfer Agent and Registrar
The transfer agent and registrar for the Company's common stock is OTC
Stock Transfer, Inc., P.O. Box 65665, Salt Lake City, Utah 84165.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters.
Market Information
There is no established public trading market for the Company's Common
Stock. The Common Stock trades on a sporadic basis under the symbol IMOT on the
OTC Bulletin Board. There is no assurance that an established trading market
will develop in the Company's shares or that any such market which may develop
will be sustained.
Holders
At May 1, 1999, there were approximately 465 record holders of the
Company's Common Stock.
Dividends
The Company has not paid any dividends to date, and has no plans to do so
in the immediate future.
17
<PAGE>
Shares Issuable Pursuant to Warrants and Options or Eligible for Resale Under
Rule 144 or Pursuant to Registration Rights
At May 1, 1999, there were no warrants, options or convertible securities
outstanding and exercisable to purchase, or convertible into, common stock of
the Company.
As of May 1, 1999, the Company had outstanding 9,849,381 shares of common
stock. Of these shares, 4,665,200 shares are freely tradable without restriction
or registration under the Securities Act by persons other than "affiliates," as
defined by Rule 144 promulgated under the Securities Act. The remaining
5,184,181 shares are "restricted shares" as that term is defined by Rule 144, of
which no shares are currently eligible for resale.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted securities
for at least one year, including persons who may be deemed "affiliates" of the
Company, would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of one percent of the number of shares
of common stock then outstanding or the average weekly trading volume of the
common stock during the four calendar weeks preceding the filing of a Form 144
with respect to such sale. Sales under Rule 144 are also subject to certain
manner of sale provisions and notice requirements and to the availability of
current public information about the Company. In addition, a person who is not
deemed to have been an affiliate of the Company at any time during the 90 days
preceding a sale and who has beneficially owned the shares proposed to be sold
for at least two years would be entitled to sell such shares under Rule 144(k)
without regard to the requirements described above.
The Company cannot predict the effect, if any, that the sales of common
stock or the availability of such shares for sale in the public market will have
on the market price for the Company's common stock prevailing from time to time.
Nevertheless, sales of substantial amounts of common stock in the public market
after the restrictions described above lapse could adversely affect prevailing
market prices for the common stock and impair the Company's ability to raise
capital through an offering of equity securities in the future.
At May 1, 1999, the Company had no obligation to register shares under the
Securities Act of 1933 for sale by any persons.
Item 2. Legal Proceedings.
The Company is from time to time a party to lawsuits incidental to its
business. The Company and its management are not presently aware of any pending
or threatened proceedings which, individually or in the aggregate, are believed
to be material.
Item 3. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None
18
<PAGE>
Item 4. Recent Sales of Unregistered Securities.
In October 1998, the Company issued 4,970,000 shares of common stock in
exchange for all of the issued and outstanding shares of Intermost Limited
("IML"), a British Virgin Islands Company. The shares were issued to the four
shareholders of IML. The transaction was carried out without the use of an
underwriter and without the payment of commissions pursuant to the exemption set
forth in Section 4(2) of the Securities Act of 1933, as amended.
In April 1999, the Company completed an offering of 1,298,700 shares of
common stock for $999,999 in cash. The shares were sold without the use of an
underwriter. Commissions totaling $29,160 were paid in connection with the
offering. The offering and sale was made pursuant to the exemption set forth in
Regulation D, Rule 504 of the Securities Act of 1933, as amended.
Item 5. Indemnification and Exclusion of Liability of Directors and Officers
So far as permitted by the Utah Business Corporation Act, the Company's
Articles of Incorporation provide that the Company will indemnify its directors
and officers against expenses and liabilities they incur to defend, settle or
satisfy any civil or criminal action brought against them on account of their
being or having been Company directors or officers unless, in any such action,
they are adjudged to have acted with gross negligence or to have engaged in
willful misconduct. Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended, (collectively, the "Acts") may be permitted to directors, officers or
controlling persons pursuant to forgoing provisions, the Company has been
informed that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Acts and is,
therefore, unenforceable.
19
<PAGE>
PART F/S
Index to Financial Statements
Intermost Corporation and Subsidiaries
Page
------
Pro Forma Financial Information
Statement Regarding Pro Forma Financial Information...................... 23
Intermost Limited
Independent Auditors' Report............................................. 24
Income Statement for the Period from January 2, 1998 (inception)
to June 30, 1998....................................................... 25
Balance Sheet as of June 30, 1998........................................ 26
Statement of Cash Flows for the Period from January 2, 1998 (inception)
to June 30, 1998....................................................... 27
Notes to Financial Statements............................................ 28
Intermost Corporation
Balance Sheet as of March 31, 1999....................................... 30
Statements of Operations for the Nine Months Ended March 31, 1999........ 31
Statements of Cash Flows for the Nine Months Ended March 31, 1999........ 32
Notes to Financial Statements............................................ 33
Utility Communications International, Inc.
Independent Auditors' Report............................................. 35
Balance Sheets as of December 31, 1997 and December 31, 1996............. 36
Statements of Operations for the Years Ended December 31, 1997, 1996 and
1995 and the Period March 6, 1985 (inception) to December 31, 1997..... 37
Statement of Changes in Stockholders' Equity for the Period from March
31, 1985 (inception) to December 31, 1997.............................. 38
Statement of Cash Flows for the Years Ended December 31, 1997, 1996 and
1995 and the Period March 6, 1985 (inception) to December 31, 1997..... 40
Notes to Financial Statements............................................ 41
Balance Sheet as of September 30, 1998................................... 43
Statements of Operations for the Nine Months Ended September 30, 1998.... 44
Statements of Cash Flows for the Nine Months Ended September 30, 1998.... 45
Notes to Financial Statements............................................ 46
20
<PAGE>
PART III
Item 1. Index to Exhibits.
2.1 Articles of Incorporation
2.2 Bylaws
6.1 Joint Venture Agreement re: Tech 2020
6.2 Supply Agreement for Online Bookstore
8.1* Exchange Agreement with Shareholders of Intermost Limited
27.1 Financial Data Schedule
* To be filed by amendment
21
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant has caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
INTERMOST CORPORATION
Date: June 7, 1999 /s/ Jun Liang
-----------------------------
By: Jun Liang, President
22
<PAGE>
INTERMOST CORPORATION
Statement Regarding Pro Forma Financial Information
Intermost Corporation (formerly known as Utility Communication
International, Inc., and referred to herein as "UCI" for periods prior to
October 1998 and the "Company" for periods after September 1998), a Utah
corporation, acquired 100% of the stock of Intermost Limited ("IML"), a British
Virgin Island company, in October of 1998. UCI issued 4,970,000 shares of its
common stock, or approximately 58.7% of the outstanding shares of the Company,
in exchange for the shares of IML (the "Exchange").
Immediately prior to the Exchange, UCI had no assets and no liabilities and
its operations were limited to seeking potential acquisition or merger
candidates. Prior to the Exchange, UCI reported financial results based on a
December 31 fiscal year end and IML reported financial results based on a June
30 year end. Following the Exchange, the Company changed its year end to June 30
to conform to the year end of IML. Pursuant to the terms of the Exchange, the
Company abandoned the prior activities of UCI and adopted IML's business plan.
The Exchange has been accounted for using the purchase method of accounting
with the transaction being accounted for as a "reverse acquisition" with IML
being treated as the acquiring company and UCI as the acquired company. Under
this accounting treatment, IML is treated as the Company for accounting purposes
for all periods presented. As UCI had no material assets, liabilities or
operations, no pro forma balance sheet or statement of operations data is being
presented. Accordingly, other than stockholders equity data, the pro forma
balance sheet of the Company at June 30, 1998 and September 30, 1998, giving
effect to the Exchange, is identical to the balance sheet of IML as of those
dates, except that pro forma common stock would be $8,456 at June 30, 1998 and
$8,456 at September 30, 1998, pro forma additional paid-in capital would be $0
at June 30, 1998 and $0 at September 30, 1998 and pro forma retained deficit
would be $1,602 at June 30, 1998 and pro forma retained earnings would be
$20,618 at September 30, 1998. Likewise, other than per share data, the pro
forma statement of operations data of the Company for the periods ended June 30,
1998 and September 30, 1998, giving effect to the Exchange, is identical to the
statement of operations of IML for those periods, except that pro forma loss per
share would be $0.00 for the period ended June 30, 1998 and pro forma earnings
per shares would be $0.00 for the period ended September 30, 1998 and pro forma
weighted average shares outstanding would be 8,455,706 for both of those
periods.
23
<PAGE>
To the directors
Intermost Ltd.
(Incorporated in the British Virgin Islands with limited liability)
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have audited the accompanying balance sheet of Intermost Ltd. (a development
stage company) at June 30, 1998, the income statement and the statement of cash
flows for the period from January 2, 1998 (date of incorporation) to June 30,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Intermost Ltd. at June 30, 1998
and the results of operations, and cash flows for the period from January 2,
1998 (date of incorporation) to June 30, 1998, in conformity with generally
accepted accounting principles in the United States of America.
Chu and Chu
Certified Public Accountants
Hong Kong, November 6, 1998
24
<PAGE>
INTERMOST LTD.
INCOME STATEMENT
For the period from January 2, 1998 (date of incorporation)
to June 30, 1998
Note
US$ HK$
SALES - -
COST OF SALES - -
------ -------
GROSS PROFIT - -
GENERAL AND ADMINISTRATIVE EXPENSES 1,602 12,500
------ -------
OPERATING LOSS BEFORE INCOME TAX 1,602 12,500
INCOME TAX (3) - -
------ -------
NET LOSS FOR THE PERIOD AND
ACCUMULATED LOSSES AT THE END
OF THE PERIOD 1,602 12,500
======= =======
The notes on pages 5 to 6 form an integral part of financial statements.
25
<PAGE>
INTERMOST LTD.
BALANCE SHEET
As at June 30, 1998
Note
US$ HK$
ASSETS
CURRENT ASSETS
Receivables from shareholders 2 16
------ -------
TOTAL ASSETS 2 16
====== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued liabilities 1,602 12,500
------ -------
TOTAL LIABILITIES 1,602 12,500
SHAREHOLDERS' EQUITY
Capital stock (4) 2 16
Accumulated losses (1,602) (12,500)
------ -------
TOTAL SHAREHOLDERS' EQUITY (1,600) (12,484)
------ -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 2 16
====== =======
Approved by the Board of the Directors on November 6, 1998
- ---------------------------------- -----------------------------------
Director Director
The notes on pages 5 to 6 form an integral part of these financial statements.
26
<PAGE>
INTERMOST LTD.
STATEMENT OF CASH FLOWS
For the period from January 2, 1998 (date of incorporation)
to June 30, 1998
US$ HK$
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (1,602) (12,500)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Changes in operating assets and liabilities
Receivables from shareholders (2) (16)
Accrued liabilities 1,602 12,500
------ -------
NET CASH USED IN OPERATING ACTIVITIES (2) (16)
------ -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of capital stock 2 16
------ -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2 16
------ -------
NET INCREASE IN CASH AND CASH EQUIVALENTS ------ -------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD - -
------ -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD - -
====== =======
The notes on pages 5 to 6 form an integral part of these financial statements.
27
<PAGE>
INTERMOST LTD.
NOTES TO THE FINANCIAL STATEMENTS
For the period from January 2, 1998 (date of incorporation)
to June 30, 1998
(1) ORGANISATION AND PRINCIPAL ACTIVITIES
Intermost Ltd. was incorporated in the British Virgin Islands.
The company has been in the development stage since its incorporation and
has not commenced principal operations.
(2) PRINCIPAL ACCOUNTING POLICIES
(a) Basis of preparation of financial statements
The shareholders of the company have confirmed to provide such
financial assistance as is necessary to maintain the company as a
going concern. On the strength of this assurance, the financial
statements have been prepared on a going concern basis.
(b) Cash and cash equivalents
The cash and cash equivalents include cash on hand and demand deposits
with banks with original term to maturity of three months or less.
Demand deposits are stated at cost which approximates market and are
subject to minimal credit risks.
(c) Translation of foreign currencies
The company's financial records are maintained in Hong Kong dollars
and the financial statements are stated in both United States dollars
and Hong Kong dollars.
All monetary assets and liabilities i.e. cash and amount owed by or to
the company denominated in currencies other than Hong Kong dollar at
the end of the period are translated into Hong Kong dollars. at the
approximate rates of exchange ruling at the balance sheet date. All
transactions denominated in currencies other than Hong Kong dollars
during the period are translated at the exchange rates prevailing on
the respective transaction dates.
Realized and unrealized foreign exchange gains or losses, if any, have
been credited or charged, respectively, to the income statement.
28
<PAGE>
(3) INCOME TAX
Provision for Hong Kong profits tax has not been made as the company
incurred an operating loss during the period.
The were no deferred tax liabilities at June 30, 1998.
US$ HK$
(4) CAPITAL STOCK
Authorised
50,000 ordinary shares of US$1 each 50,000 390,000
====== =======
Issued and fully paid
2 ordinary share of US$1 each at par value 2 16
====== =======
29
<PAGE>
INTERMOST CORPORATION
BALANCE SHEET
March 31, 1999
(Unaudited)
ASSETS
Current assets
Cash $ 553,704
Accounts receivable 24,051
Inventory 1,667
Deposits and other receivables 107,350
Deferred expenses 10,629
--------
Total current assets 697,401
--------
Fixed assets, net 31,091
Goodwill 8,446
Deferred assets 31,304
--------
$ 768,242
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,498
Other payables 48,194
Tax payable (132)
--------
Total current liabilities 49,560
--------
Stockholders' Equity
Preferred Stock
5,000,000 shares authorized, $.001 par value;
none issued -
Common Stock
100,000,000 shares authorized, $.001 par value;
9,540,641 shares issued 9,541
Capital in excess of par value 756,665
Accumulated deficit (47,524)
--------
Total stockholders' equity 718,682
--------
$ 768,242
========
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
INTERMOST CORPORATION
STATEMENT OF OPERATIONS
Nine Months Ended March 31, 1999
(Unaudited)
REVENUES:
Sales $ 244,103
Less: Direct cost 92,206
--------
Gross profit 151,897
EXPENSES:
Selling and administrative 197,922
-------
LOSS FROM OPERATIONS (46,025)
OTHER INCOME (EXPENSE):
Interest income 2
Other income 102
-------
NET LOSS $ (45,921)
=======
NET LOSS PER COMMON
SHARE
Basic $ (0.01)
=======
AVERAGE OUTSTANDING
SHARES 8,455,706
=========
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
INTERMOST CORPORATION
STATEMENT OF CASH FLOWS
Nine Months Ended March 31, 1999
(Unaudited)
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss $ (45,921)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 2,276
Deferred assets (31,304)
Changes in operating assets and liabilities:
Increase in accounts receivable (24,051)
Increase in inventories (1,667)
Increase in other current assets (117,979)
Decrease in accounts payable (104)
Increase in accrued liabilities 48,061
---------
Net cash used in operations (170,689)
---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of plant and equipment (33,367)
---------
Net cash used in investing activities (33,367)
---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of common stock 757,750
Proceeds from issuance of shares by subsidiary 8
--------
Net cash from financing activities 757,758
--------
Net increase (decrease) in cash 553,702
Cash at beginning of period -
--------
Cash at end of period $ 553,702
========
The accompanying notes are an integral part of these financial statements.
32
<PAGE>
INTERMOST CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
(Unaudited)
1. INTERIM FINANCIAL PRESENTATION
The interim financial statements are prepared pursuant to the requirements
for reporting on Form 10-QSB. The interim financial statements and notes
thereto should be read in conjunction with the financial statements and
notes included elsewhere herein at and for the year ended June 30, 1998. In
the opinion of management, the interim financial statements reflect all
adjustments of a normal recurring nature necessary for a fair statement of
the results for the interim period presented.
2. ACQUISITION OF INTERMOST LIMITED, CHANGE IN YEAR END AND NAME CHANGE
The Company acquired 100% of the stock of Intermost Limited ("IML"), a
British Virgin Island company, in October of 1998. The Company issued
4,970,000 shares of its common stock, or approximately 58.7% of the
outstanding shares of the Company, in exchange for the shares of IML (the
"Exchange").
Following the Exchange, the Company changed its year end to June 30 to
conform to the year end of IML. Pursuant to the terms of the Exchange, the
Company changed its name from Utility Communications International, Inc. to
Intermost Corporation and abandoned its prior activities and adopted IML's
business plan.
The Exchange has been accounted for using the purchase method of accounting
with the transaction being accounted for as a "reverse acquisition" with
IML being treated as the acquiring company. Under this accounting
treatment, IML is treated as the Company for accounting purposes for all
periods.
3. FORGIVENESS OF INDEBTEDNESS
During the nine months ended March 31, 1999, accounts payable in the amount
of $3,200 were forgiven by a creditor of the company.
33
<PAGE>
INTERMOST CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
(Unaudited)
(Cont'd)
4. STOCKHOLDERS' EQUITY
Stock Split
-----------
On November 20, 1998, the company completed a 2-for-1 stock split of its
common stock and, following the stock split, reauthorized capital stock of
the company consisting of 100,000,000 shares of common stock, $.001 par
value, and 5,000,000 shares of preferred stock, $.001 par value.
Sale of Common Stock
--------------------
During the nine months ended March 31, 1999, the Company sold 1,084,935
shares of common stock for net proceeds of $757,750.
34
<PAGE>
Board of Directors
Utility Communications International, Inc.
Salt Lake City, Utah
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have audited the accompanying balance sheets of Utility Communications
International, Inc. (a development stage company) at December 31, 1997, and
December 31, 1996 and the statements of operations, stockholders' equity, and
cash flows for the years ended December 31, 1997, 1996, and 1995 and the period
March 6, 1985 (date of inception) to December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and 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 Utility Communications
International, Inc. at December 31, 1997, and December 31, 1996, and the results
of operations, and cash flows for the years ended December 31, 1997, 1996 and
1995 and the period March 6, 1985 (date of inception) to December 31, 1997, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has been in the development state since its
inception and has suffered recurring losses from operations, which raises
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are described in Note 4. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Andersen Andersen & Strong, L.C.
Salt Lake City, Utah
July 30, 1998
35
<PAGE>
UTILITY COMMUNICATIONS INTERNATIONAL, INC.
(A Development Stage Company)
BALANCE SHEETS
December 31, 1997, and December 31, 1996
<TABLE>
December 31, December 31,
1997 1996
-------------- ---------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ - $ -
------- --------
Total Current Assets - -
======= ========
CURRENT LIABILITIES
Accounts payable $ 3,200 $ 3,100
------- --------
Total Current Liabilities 3,200 3,100
======= ========
STOCKHOLDERS' EQUITY
Preferred stock
5,000,000 shares authorized, at $0.001 par
value; none issued - -
Common stock 1,743 1,693
100,000,000 shares authorized at $0.001 par
value; 1,742,853 shares issued and outstanding at
December 31, 1997; 1,692,853 at December 31, 1996
Capital in excess of par value 282,320 234,792
Deficit accumulated during the development stage (287,263) (239,585)
------- -------
Total Stockholders' Equity (deficiency) (3,200) (3,100)
------- -------
$ - $ -
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
UTILITY COMMUNICATIONS INTERNATIONAL, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1997, 1996 and 1995
and the Period March 6, 1985
(Date of Inception) to December 31, 1997
<TABLE>
1997 1996 1995 March 6, 1985
(Date of Inception) to
December 31, 1997
------------- ------------- ------------- -----------------------
<S> <C> <C> <C> <C>
REVENUES $ - $ - $ - $ 50
EXPENSES 47,678 11,355 200 287,313
------------- ------------- ------------ -----------------------
NET LOSS $ (47,678) $ (11,355) $ (200) $ (287,263)
============= ============= ============ =======================
NET LOSS PER COMMON SHARE
Basic $ (.028) $ (.007) $ -
============= ============= ============
AVERAGE OUTSTANDING SHARES
Basic 1,693,127 1,692,853 193,058
============= ============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
UTILITY COMMUNICATIONS INTERNATIONAL, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Period from March 6, 1985 (Date of Inception)
to December 31, 1997
<TABLE>
Common Stock Capital in Accumulated
Excess of Deficit
Par Value
-----------------------------
Shares Amount
------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
Balance March 6, 1985 (date of inception) - $ - $ - $ -
Issuance of common stock for cash at $.77 - 1985 26,391 26 20,294 -
Issuance of common stock for cash- -
net issuance costs at $2.60 - 1985 66,667 67 172,933
Net operating loss for the period
ended December 31, 1985 - - - (50,523)
Issuance of common stock for Trust
of Ama trust certificates at $.30 - 1986 100,000 100 29,900 -
Net operating loss for the year ended
December 31, 1986 - - - (6,515)
Net operating loss for the year ended
December 31, 1987 - - - (1,036)
Net operating loss for the year ended
December 31, 1988 - - - (14,741)
Net operating loss for the year ended
December 31, 1989 - - - (116,600)
Net operating loss for the year ended
December 31, 1990 - - - (12,650)
Net operating loss for the year ended
December 31, 1991 - - - (24,955)
Net operating loss for the year ended
December 31, 1992 - - - (335)
Net operating loss for the year ended
December 31, 1993 - - - (264)
Net operating loss for the year ended
December 31, 1994 - - - (411)
Net operating loss for the year ended
December 31, 1995 - - - (200)
----------- ------------ ------------- -----------------
Balance December 31, 1995 193,058 193 223,127 (228,230)
</TABLE>
38
<PAGE>
UTILITY COMMUNICATIONS INTERNATIONAL, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (continued)
Period from March 6, 1986 (Date of Inception)
to December 31, 1997
<TABLE>
Common Stock Capital in Accumulated
Excess of Deficit
Par Value
--------------------------------
Shares Amount
----------------- ----------- ---------------- --------------
<S> <C> <C> <C> <C>
Reduction of outstanding shares
resulting from reverse stock split-
August 16, 1996 (205) - - -
Issuance of common stock for
expenses at $.0088 - August 16, 1996 500,000 500 3,888 -
Issuance of common stock for
expenses at $.0088 - October 9, 1996 1,000,000 1,000 7,777 -
Net operating loss for the year
ended December 31, 1996 - - - (11,355)
------------- ----------- ---------------- ------------------
Balance December 31, 1996 1,692,853 1,693 234,792 (239,585)
Issuance of common stock for
expenses at $.952 - Dec 1997 50,000 50 47,528 -
Net operating loss for the year
ended December 31, 1997 - - - (47,678)
------------- ----------- ---------------- ------------------
Balance December 31, 1997 1,742,853 $ 1,743 $ 282,320 $ (287,263)
============= =========== ================ ==================
</TABLE>
The accompanying notes are an integral part of these financial statement.
39
<PAGE>
UTILITY COMMUNICATIONS INTERNATIONAL, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the Years Ended December 31, 1997, 1996 and 1995
and the Period from March 6, 1985 (Date of Inception) to December 31, 1997
<TABLE>
1997 1996 1995 March 6, 1985
(Date of Inception)
to December 31, 1997
------------ ------------ ----------- -------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss $(47,678) $(11,355) $ (200) $(287,263)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation - - - 894
Issuance of capital stock for expenses 47,578 11,355 - 58,933
Loss on investments - - - 104,884
Increase in accounts payable 100 - 200 5,010
------------ ------------ ----------- -----------------------
Net Cash From Operations - - - (117,542)
------------ ------------ ----------- -----------------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase - sale of assets - net - - - (136,495)
------------ ------------ ----------- -----------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of common stock - - - 193,320
Loans from shareholders - - - 60,717
------------ ------------ ----------- -----------------------
Net Increase (Decrease) in Cash - - - -
Cash at Beginning of Period - - - -
------------ ------------ ----------- -----------------------
Cash at End of Period $ $ $ $ -
- - -
============ ============ =========== =======================
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Issuance of 100,000 shares of common stock for
Trust of Ama trust certificates - 1986 $
30,000
-----------------------
Issuance of 1,500,000 shares of common stock for expenses - 1996 $
13,165
-----------------------
Issuance of 50,000 shares of common stock for expenses - 1997 $
47,578
-----------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
UTILITY COMMUNICATIONS INTERNATIONAL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Company was incorporated under the laws of the state of Utah on March
6, 1985 with authorized common stock of 100,000,000 shares at a par value
of $.001 with the name of La Med Tech, Inc. During 1987 the name was
changed to Entertainment Concepts International and then during 1988 the
name was changed to Lord and Lazarus, Inc. On August 16, 1996 the name was
changed to Utility Communications International, Inc.
On August 16, 1996 the articles of incorporation were amended to authorize
preferred stock of 5,000,000 shares at a par value of $.001.
On August 16, 1996 the Company completed a reverse stock split of 300
shares of outstanding stock for one share. This report has been prepared
showing after stock split shares from inception.
The company has been in the development stage since inception and has been
engaged in seeking acceptable business opportunities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Methods
------------------
The Company recognizes income and expenses based on the accrual method of
accounting.
Dividend Policy
---------------
The Company has not yet adopted a policy regarding payment of dividends.
Income Taxes
------------
At December 31, 1997, the Company had net operating losses carry forward of
$272,263. The tax benefit from the losses carry forward has been fully
offset by a valuation reserve because the use of the future tax benefit is
undeterminable since the Company has no operations. The loss carryforward
expires in the years starting in 2001 through 2013.
Earnings (Loss) Per Share
-------------------------
Earnings (loss) per share amounts are computed based on the weighted
average number of shares actually outstanding, after the stock split, using
the treasury stock method in accordance with FASB No. 128.
Financial Instruments
---------------------
The carrying amounts of financial instruments, including accounts payable,
are considered by management to be their estimated fair values. These
values are not necessarily indicative of the amounts that the Company could
realize in a current market exchange.
41
<PAGE>
UTILITY COMMUNICATIONS INTERNATIONAL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Estimates and Assumptions
-------------------------
Management uses estimates and assumptions in preparing financial statements
in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of the assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported revenues and expenses. Actual results could vary from the
estimates that were assumed in preparing these financial statements.
3. RELATED PARTY TRANSACTIONS
The statement of changes in stockholders' equity shows a total of 1,742,853
shares of common stock issued of which 1,540,000 shares were issued to
related parties.
The officers and directors of the Company are involved in other business
activities and they may, in the future, become involved in additional
business ventures which also may require their attention. If a specific
business opportunity becomes available, such persons may face a conflict in
selecting between the Company and their other business interests. The
Company has formulated no policy for the resolution of such conflicts.
4. GOING CONCERN
The Company intends to acquire interests in various business opportunities
which, in the opinion of management, will provide profit to the Company.
Continuation of the Company as a going concern is dependent upon obtaining
additional working capital and the management of the Company has developed
a strategy, which it believes will accomplish this objective through
additional equity funding which will enable the Company to operate in the
future.
Management recognizes that, if it is unable to raise additional capital, it
cannot conduct any operations in the future.
42
<PAGE>
UTILITY COMMUNICATIONS INTERNATIONAL, INC.
(A Development Stage Company)
BALANCE SHEET
September 30, 1998
(Unaudited)
ASSETS
Current Assets
Cash $ -
---------
Total Current Assets -
---------
$ -
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ -
---------
Total Current Liabilities -
---------
Total Liabilities -
---------
Stockholders' Equity
Preferred Stock
5,000,000 shares authorized, $.001 par value;
none issued -
Common Stock
100,000,000 shares authorized, $.001 par value;
3,485,706 shares issued 3,486
Capital in excess of par value 280,577
Deficit accumulated during the development stage (284,063)
---------
Total Stockholders' Equity -
---------
$ -
=========
The accompanying notes are an integral par of these financial statements.
43
<PAGE>
UTILITY COMMUNICATIONS INTERNATIONAL, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
Nine Months Ended September 30, 1998
(Unaudited)
REVENUES $ 3,200
EXPENSES -
---------
NET INCOME $ 3,200
=========
NET INCOME PER COMMON
SHARE
Basic $ 0.00
=========
AVERAGE OUTSTANDING
SHARES 3,485,706
=========
The accompanying notes are an integral par of these financial statements.
44
<PAGE>
UTILITY COMMUNICATIONS INTERNATIONAL, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
Nine Months Ended September 30, 1998
(Unaudited)
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income $ 3,200
Adjustments to reconcile net income to
net cash provided by operating
activities:
Decrease in accounts payable (3,200)
-------
Net Cash From Operations -
-------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net Cash From Investing Activities -
-------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net Cash From Financing Activities -
-------
Net Increase (Decrease) in Cash -
Cash at Beginning of Period -
-------
Cash at End of Period $ -
=======
The accompanying notes are an integral part of these financial statements.
45
<PAGE>
UTILITY COMMUNICATIONS INTERNATIONAL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
1. INTERIM FINANCIAL PRESENTATION
The interim financial statements are prepared pursuant to the requirements
for reporting on Form 10-QSB. The interim financial statements and notes
thereto should be read in conjunction with the financial statements and
notes included elsewhere herein at and for the year ended December 31,
1997. In the opinion of management, the interim financial statements
reflect all adjustments of a normal recurring nature necessary for a fair
statement of the results for the interim period presented.
2. FORGIVENESS OF INDEBTEDNESS
During the nine months ended September 30, 1998, accounts payable in the
amount of $3,200 were forgiven by a creditor of the company.
3. SUBSEQUENT EVENTS
Stock Split
-----------
On November 20, 1998, the company completed a 2-for-1 stock split of its
common stock and, following the stock split, reauthorized capital stock of
the company consisting of 100,000,000 shares of common stock, $.001 par
value, and 5,000,000 shares of preferred stock, $.001 par value.
Acquisition of Intermost Limited and Change of Name
---------------------------------------------------
In October 1998 the company acquired 100% of the stock of Intermost Limited
("IML"), a British Virgin Island company. The company issued 4,970,000
shares of its common stock, or approximately 58.7% of the outstanding
shares of the company, in exchange for the shares of IML (the "Exchange").
Pursuant to the terms of the Exchange, the company abandoned its prior
activities, adopted IML's business plan and changed its name to Intermost
Corporation.
46
<PAGE>
RESTATED ARTICLES OF INCORPORATION
OF
INTERMOST CORPORATION
Pursuant to the provisions of Section 16-10a-1007 of the Utah Revised
Business Corporation Act, Intermost Corporation, a Utah corporation, hereinafter
referred to as the "Corporation" hereby adopts the following Restated Articles
of Incorporation, which do not contain any amendments to the articles of
incorporation:
Article I
NAME
The name of the corporation (hereinafter called the "Corporation") is
Intermost Corporation.
Article II
PERIOD OF DURATION
The period of duration of the Corporation is perpetual.
Article III
PURPOSES AND POWERS.
The purpose for which this Corporation is organized is to engage in the
design, development and marketing of medical and surgical instruments and
devices. The Company may also invest in any other products, properties, and/or
businesses which may have potential for profit.
Article IV.
AUTHORIZED SHARES
The Corporation shall have the authority to issue one hundred million
(100,000,000) shares of common stock, par value $.001 per share ("Common Stock")
and five million (5,000,000) shares of preferred stock, par value $.001 per
share. Shares of any class of stock may be issued, without shareholder action,
from time to time in one or more series as may from time to time be determined
by the board of directors. The board of directors of this Corporation is
expressly granted authority, without shareholder approval, and within the limits
of the Utah Revised Business Corporations Act, to:
(a) designate in whole or in part, the preferences, limitations and
relative rights, of any class of shares before the issuance of any
shares of that class:
<PAGE>
(b) create one or more series within a class of shares, fix the number of
shares of each such series, and designate, in whole or in part, the
preferences, limitations, and relative rights of the series, all
before the issuance of any shares of that series;
(c) alter or revoke the preferences, limitations, and relative rights
granted to or imposed upon any wholly unissued class of shares or any
wholly unissued series of any class of shares; or
(d) increase or decrease the number of shares constituting any series, the
number of shares of which was originally fixed by the board of
directors, either before or after the issuance of shares of the
series; provided that the number may not be decreased below the number
of shares of the series then outstanding, or increased above the total
number of authorized shares of the applicable class of shares
available for designation as a part of the series.
The allocation between the classes, or among the series of each class, of
unlimited voting rights and the right to receive the net assets of the
Corporation upon dissolution, shall be as designated by the board of directors.
All rights accruing to the outstanding shares of the Corporation not expressly
provided for to the contrary herein or in the Corporation's bylaws or in any
amendment hereto or thereto shall be vested in the Common Stock. Accordingly,
unless and until otherwise designated by the board of directors of the
Corporation, and subject to any superior rights as so designated, the Common
Stock shall have unlimited voting rights and be entitled to receive the net
assets of the Corporation upon dissolution.
Article V.
COMMENCEMENT OF BUSINESS
The Corporation shall not commence business until at least One Thousand
Dollars ($1,000) has been received by the Corporation as consideration for the
issuance of its shares.
Article VI.
INITIAL REGISTERED OFFICE AND INITIAL REGISTERED AGENT
The address of the initial registered office of the Corporation is 255 East
400 South #150, Salt Lake City, Utah 84111, and the initial registered Agent at
such office is Jerry L. Smith.
<PAGE>
Article VII.
DIRECTORS
The Corporation shall be governed by a Board of Directors consisting of no
less than three (3) and no more then nine (9) directors. Directors need not be
stockholders of the Corporation. The number of Directors constituting the
initial Board of Directors is three (3) and the names and post office addresses
of the persons who shall serve as Directors until their successors are elected
and qualified are:
Richard L. Adams
1824 South 11th East
Salt Lake City, UT 84105
Dan Lundergan
926 McClelland Street
Salt Lake City, UT 84105
Jerry L. Smith
1052 Noturne Drive
Salt Lake City, UT 84116
Article VIII.
INCORPORATORS
The name and post office address of each incorporator is:
Richard L. Adams
1824 South 11th East
Salt Lake City, UT 84105
Dan Lundergan
926 McClelland Street
Salt Lake City, UT 84105
Jerry L. Smith
1052 Noturne Drive
Salt Lake City, UT 84116
Article IX.
PRE-EMPTIVE RIGHTS
There shall be no pre-emptive rights to acquire unissued and/or treasury
shares of stock of the Corporation.
<PAGE>
Article X.
VOTING OF SHARES
Each outstanding share of common stock of the Corporation shall be entitled
to one vote on each matter submitted to a vote at the meeting of the
stockholders. Each stockholder shall be entitled to vote his or its shares in
person or by proxy, executed in writing by such stockholders, or by his duly
authorized attorney-in-fact. At each election of Directors, every stockholder
entitled to vote in such election shall have the right to vote, in person or by
proxy, the number of shares owned by him or it for as many persons as there are
Directors to be elected and for whose election he or it has the right to vote,
but the Shareholder shall have no right to accumulate his or its votes with
regard to such election.
Article XI.
LIMITATION ON LIABILITY
To the fullest extent permitted by the Utah revised Business Corporation
Act or any other applicable law as now in effect or as it may hereafter be
amended, a director of the Corporation shall have no personal liability to the
Corporation or its shareholders for monetary damages for any action taken or
failure to take any action as a director.
Article XII.
SHAREHOLDER CONSENT
Shareholders of the Corporation shall be able to take shareholder action
through a consent of the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take the action
at a meeting at which all shares entitled to vote thereon were present and voted
as provided in the Utah Revised Business Corporation Act Section 16-10a-704.
By executing these Restated Articles of Incorporation, the president and
secretary of the Corporation do hereby certify that on November 10, 1998, the
foregoing Restated Articles were authorized and approved by unanimous consent of
the board of directors; and no shareholder consent was required.
Dated: _______ of November, 1998.
-------------------------
Brad Petersen, President
-------------------------
Gayle Petersen, Secretary
<PAGE>
State of Utah )
)
County of Salt Lake )
On the ____ day of November, 1998, personally appeared before me the
undersigned notary public, Brad Petersen and Gayle Petersen, who being by me
first duly sworn, declared that they are the president and secretary,
respectively, of the above named corporation, that they signed the foregoing
Restated Articles of Incorporation and that the statements contained therein are
true and correct.
Notary Public
AMENDED BYLAWS
OF
INTERMOST CORPORATION
(formerly Utility Communications International, Inc.)
(amended and effective as of November 1, 1998)
ARTICLE I
OFFICES
------------
1.01 REGISTERED OFFICE AND AGENT
The registered office or the registered agent, or both, may be changed by
resolution of the Board of Directors, upon filing the statement required by law.
1.02 PRINCIPAL OFFICE
The principal office of the Corporation shall be at 38th Floor, Guomao
Building, Renmin South Road, Shenzhen, China provided that the Board of
Directors shall have power to change the location of the principal office in its
discretion.
1.03 OTHER OFFICES
The Corporation may also maintain other offices at such places within or
without China, or the State of Utah, as the Board of Directors may from time to
time appoint or as the business of the Corporation may require.
ARTICLE II
SHAREHOLDERS
------------
2.01 PLACE OF MEETING
All meetings of shareholders, both regular and special, shall be held
either at the principal office of the Corporation, or at such other place as
shall be designated in the notice of the meeting.
2.02 ANNUAL MEETING
The annual meeting of shareholders for the election of directors and for
the transaction of all other business which may come before the meeting shall be
held at such date and time as may be specified by the Board of Directors as set
forth in the notice of meeting.
The annual meeting of shareholders may be held for any other purpose in
addition to the election of directors which may be specified in a notice of such
meeting. The meeting may be called by resolution of the Board of Directors or by
a writing filed with the secretary signed either by a majority of the directors
or by shareholders owning a majority in amount of the entire capital stock of
the Corporation issued and outstanding and entitled to vote at any such meeting.
<PAGE>
2.03 NOTICE OF SHAREHOLDERS' MEETING
A written or printed notice stating the place, day and hour of the meeting,
and in case of a special meeting, the purpose or purposes for which the meeting
is called, shall be delivered not less than ten (10) nor more than sixty (60)
days before the date of the meeting, either personally or by mail, by or at the
direction of the president, secretary or the officer or person calling the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the shareholder at his address as it appears on the
share transfer books of the Corporation, with postage thereon prepaid.
2.04 VOTING OF SHARES
Each outstanding share, regardless of class, shall be entitled to one vote
on each matter submitted to a vote at a meeting of shareholders, except to the
extent that the voting rights of the shares of any class or classes are
modified, limited or denied by the Articles of Incorporation or by law.
Treasury shares, shares of its own stock owned by another corporation the
majority of the voting stock of which is owned or controlled by this
Corporation, and shares of its own stock held by this Corporation in a fiduciary
capacity shall not be voted, directly or indirectly, at any meeting, and shall
not be counted in determining the total number of outstanding shares at any
given time.
A shareholder may vote either in person or by proxy executed in writing by
the shareholder or by his duly authorized attorney-in-fact. No proxy shall be
valid after eleven (11) months from the date of its execution unless otherwise
provided in the proxy. Each proxy shall be revocable unless expressly provided
therein to be irrevocable, and in no event shall it remain irrevocable for a
period of more than eleven (11) months.
At each election for directors, every shareholder entitled to vote at such
election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be elected and
for whose election he has a right to vote, or if authorized by the Articles of
Incorporation, to cumulate his votes by giving one candidate as many votes as
the number of such directors multiplied by the number of his shares shall equal,
or by distributing such votes on the same principal among any number of such
candidates. Any shareholder who intends to cumulate his votes as herein
authorized shall give written notice of such intention to the secretary of the
Corporation on or before the day preceding the election at which such
shareholder intends to cumulate his votes.
-2-
<PAGE>
2.05 CLOSING TRANSFER BOOKS AND FIXING RECORD DATE
For the purpose of determining shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof, or entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may provide
that the share transfer books shall be closed for a stated period not exceeding
sixty (60) days. If the stock transfer books shall be closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten (10) days immediately
preceding such meeting. In lieu of closing the stock transfer books, the ByLaws
or, in the absence of an applicable ByLaw, the Board of Directors may fix in
advance a date as the record date for any such determination of shareholders,
not later than sixty (60) days and, in case of a meeting of shareholders, not
earlier than ten (10) days, prior to the date on which the particular action
requiring such determination of shareholders is to be taken. If the share
transfer books are not closed and no record date is fixed for the determination
of shareholders entitled to notice of or to vote at a meeting of shareholders,
or shareholders entitled to receive payment of a dividend, the date on which
notice of the meeting is mailed or the date on which the resolution of the Board
of Directors declaring such dividend is adopted, as the case may be, shall be
the record date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof, except where the determination has been made through the closing of
share transfer books and the stated period of closing has expired.
2.06 QUORUM OF SHAREHOLDERS
Unless otherwise provided in the Articles of Incorporation, the holders of
a majority of the shares entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of shareholders, but in no event shall a
quorum consist of the holders of less than one-third (1/3) of the shares
entitled to vote and thus represented at such meeting. The vote of the holders
of a majority of the shares entitled to vote and thus represented at a meeting
at which a quorum is present shall be the act of the shareholders' meeting,
unless the vote of a greater number is required by law, the Articles of
Incorporation or the ByLaws.
2.07 VOTING LISTS
The officer or agent having charge of the share transfer books for the
shares of the Corporation shall make, at least ten (10) days before each meeting
of shareholders, a complete list of the shareholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for a period of
ten (10) days prior to such meeting, shall be kept on file at the registered
office of the Corporation and shall be subject to inspection by any shareholders
at any time during usual business hours. Such list shall also be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any shareholder during the whole time of the meeting. The original
share transfer books shall be prima-facie evidence as to who are the
shareholders entitled to examine such list or transfer books or to vote at any
meeting of shareholders.
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<PAGE>
2.08 ACTION BY CONSENT OF SHAREHOLDERS
In lieu of a formal meeting, action may be taken by written consent of such
number of the shareholders as is required by either State law or the
Corporation's Bylaws for passage of such corporate action.
ARTICLE III
DIRECTORS
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3.01 BOARD OF DIRECTORS
The business and affairs of the Corporation shall be managed by a Board of
Directors. Directors need not be residents of the State of Utah or shareholders
in the Corporation.
3.02 NUMBER AND ELECTION OF DIRECTORS
The number of directors shall be not less than three (3) nor more than
seven (7). The number of directors constituting the board shall be fixed from
time to time by the Directors provided that the number may be increased or
decreased from time to time by an amendment to these ByLaws, but no decrease
shall have the effect of shortening the term of any incumbent director. At each
annual election the shareholders shall elect directors to hold office until the
next succeeding annual meeting.
3.03 VACANCIES
Any vacancy occurring in the Board of Directors may be filled by the
affirmative vote of the remaining directors, though less than a quorum of the
Board. A director elected to fill a vacancy shall be elected for the unexpired
term of his predecessor in office. Any directorship to be filled by reason of an
increase in the number of directors shall be filled by election at an annual
meeting or at a special meeting of shareholders called for that purpose.
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<PAGE>
3.04 QUORUM OF DIRECTORS
A quorum for purposes of all Board meetings and the transaction of business
thereat shall consist of a majority of the Directors. The act of the majority of
the directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors.
3.05 ANNUAL MEETING OF DIRECTORS
Within thirty (30) days after each annual meeting of shareholders, the
Board of Directors elected at such meeting shall hold an annual meeting at which
they shall elect officers and transact such other business as shall come before
the meeting.
3.06 REGULAR MEETING OF DIRECTORS
A regular meeting of the Board of Directors may be held at such time as
shall be determined from time to time by resolution of the Board of Directors.
3.07 SPECIAL MEETINGS OF DIRECTORS
The secretary shall call a special meeting of the Board of Directors
whenever requested to do so by the President or by two directors. Such special
meeting shall be held at the time specified in the notice of meeting.
3.08 PLACE OF DIRECTORS MEETINGS
All meetings of the Board of Directors (annual, regular or special) shall
be held either at the principal office of the Corporation or at such other
place, either within or without the State of Utah, as shall be specified in the
notice of meeting.
3.09 NOTICE OF DIRECTORS MEETINGS
All meetings of the Board of Directors (annual, regular or special) shall
be held upon five (5) days written notice stating the date, place and hour of
meeting delivered to each director either personally or by mail or at the
direction of the president or the secretary or the officer or person calling the
meeting.
In any case where all of the directors execute a waiver of notice of the
time and place of meeting, no notice thereof shall be required, and any such
meeting (whether annual, regular or special) shall be held at the time and at
the place (either within or without the State of Utah) specified in the waiver
of notice. Attendance of a director at any meeting shall constitute a waiver of
notice of such meeting, except where the directors attends a meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
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<PAGE>
Neither the business to be transacted at, nor the purpose of, any annual,
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
3.10 COMPENSATION
Directors, as such, shall not receive any stated salary for their services,
but by resolution of the Board of Directors a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each annual, regular or
special meeting of the Board, provided, that nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
3.11 ACTION BY CONSENT OF DIRECTORS
In lieu of a formal meeting, action may be taken by written consent of such
number of the directors as is required by either State law or the Corporation's
Bylaws for passage of such corporate action.
3.12 COMMITTEES
The board of directors may, by resolution passed by a majority of the whole
board, designate an executive committee and one or more other committees, each
committee to consist of one or more of the directors of the Corporation. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee.
Any such committee, to the extent provided in the resolution of the board
of directors, shall have and may exercise all the powers and authority of the
board of directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to making, altering or repealing any bylaw of the
Corporation; electing or appointing any director, or removing any officer or
director; submitting to shareholders any action that requires shareholders'
approval; or amending or repealing any resolution theretofore adopted by the
board which by its terms is amendable or repealable only by the board. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors. Each committee
shall keep regular minutes of its meetings and report the same to the board of
directors when required.
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<PAGE>
ARTICLE IV
OFFICERS
-----------
4.01 OFFICERS ELECTION
The officers of the Corporation shall consist of a president, one or more
vice presidents, a secretary, and a treasurer. The board of directors may also
choose, at its discretion, a Chairman of the Board, Vice Chairman of the Board,
Chief Executive Officer, Chief Operating Officer, one or more assistant
secretaries and one or more assistant treasurers. All such officers shall be
elected at the annual meeting of the Board of Directors provided for in Article
III, Section 5. If any office is not filled at such annual meeting, it may be
filled at any subsequent regular or special meeting of the Board. The Board of
Directors at such annual meeting, or at any subsequent regular or special
meeting may also elect or appoint such other officers and assistant officers and
agents as may be deemed necessary. Any two or more offices may be held by the
same person, except the offices of president and secretary.
All officers and assistant officers shall be elected to serve until the
next annual meeting of directors (following the next annual meeting of
shareholders) or until their successors are elected; provided, that any officer
or assistant officer elected or appointed by the Board of Directors may be
removed with or without cause at any regular or special meeting of the Board
whenever in the judgment of the Board of Directors the best interests of the
Corporation will be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed. Any agent appointed
shall serve for such term as shall be specified, subject to like right of
removal by the Board of Directors.
4.02 VACANCIES
If any office becomes vacant for any reason, the vacancy may be filled by
the Board of Directors.
4.03 POWER OF OFFICERS
Each officer shall have, subject to these ByLaws, in addition to the duties
and powers specifically set forth herein, such powers and duties as are commonly
incident to his office and such duties and powers as the Board of Directors
shall from time to time designate. All officers shall perform their duties
subject to the directions and under the supervision of the Board of Directors.
The president may secure the fidelity of any and all officers by bond or
otherwise.
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<PAGE>
4.04 CHAIRMAN OF THE BOARD
The Chairman of the Board shall preside at all meetings of the stockholders
and of the Board of Directors.
4.05 VICE CHAIRMAN OF THE BOARD
The Vice Chairman of the Board shall, at the request, or in the absence or
disability, of the Chairman of the Board, perform the duties and exercise the
powers of such office.
4.06 CHIEF EXECUTIVE OFFICER
The Chief Executive Officer of the Corporation shall have general
supervision of the business, affairs and property of the Corporation, and over
its several officers. In general, the Chief Executive Officer shall have all
authority incident to the office of Chief Executive Officer and shall have such
other authority and perform such other duties as may from time to time be
assigned by the Board of Directors or by any duly authorized committee of
directors. The Chief Executive Officer shall have the power to fix the
compensation of elected officers whose compensation is not fixed by the Board of
Directors or a committee thereof and also to engage, discharge, determine the
duties and fix the compensation of all employees and agents of the Corporation
necessary or proper for the transaction of the business of the Corporation. If
the Chief Executive Officer is not also the Chairman of the Board, then the
Chief Executive Officer shall report to the Chairman of the Board or the Vice
Chairman, as the case may be.
4.07 PRESIDENT
The President shall be the chief operating officer of the Corporation and,
subject to the direction of the Board of Directors, or any duly authorized
committee of directors, shall have general supervision of the operations of the
Corporation. In general, but subject to any contractual restriction, the
President shall have all authority incident to the office of President and chief
operating officer and shall have such other authority and perform such other
duties as may from time to time be assigned by the Board of Directors or by any
duly authorized committee of directors or by the Chairman of the Board of
Directors. The President shall, at the request or in the absence or disability
of the Chairman or Vice Chairman of the Board, or the Chief Executive Officer,
perform the duties and exercise the powers of such officer.
4.08 VICE PRESIDENTS
Each vice president shall have such powers and duties as the Board, the
Chief Executive Officer or the President assigns to him or her.
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<PAGE>
4.09 SECRETARY AND ASSISTANT SECRETARIES
The secretary shall attend all meetings of the Board and all meetings of
the shareholders and shall record all votes and the minutes of all proceedings
and shall perform like duties for the standing committees when required. He
shall give or cause to be given notice of all meetings of the shareholders and
all meetings of the Board of Directors and shall perform such other duties as
may be prescribed by the Board. He shall keep in safe custody the seal of the
Corporation, and when authorized by the Board, affix the same to any instrument
requiring it, and when so affixed, it shall be attested by his signature or by
the signature of an assistant secretary.
The assistant secretary shall, in the absence or disability of the
secretary, perform the duties and exercise the powers of the secretary, and they
shall perform such other duties as the Board of Directors shall prescribe.
In the absence of the secretary or an assistant secretary, the minutes of
all meetings of the Board and shareholders shall be recorded by such person as
shall be designated by the president or by the Board of Directors.
4.10 TREASURER AND ASSISTANT TREASURERS
The treasurer shall have the custody of the corporate funds and securities
and shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such depositories as
may be designated by the Board of Directors.
The treasurer shall disburse the funds of the Corporation as may be ordered
by the Board of Directors, taking proper vouchers for such disbursements. He
shall keep and maintain the Corporation's books of account and shall render to
the president and directors an account of all of his transactions as treasurer
and of the financial condition of the Corporation and exhibit his books, records
and accounts to the president or directors at any time. He shall disburse funds
for capital expenditures as authorized by the Board of Directors and in
accordance with the orders of the president, and present to the president for
his attention any requests for disbursing funds if in the judgment of the
treasurer any such request is not properly authorized. He shall perform such
other duties as may be directed by the Board of Directors or by the president.
If required by the Board of Directors, he shall give the Corporation a bond
in such sum and with such surety or sureties as shall be satisfactory to the
Board for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
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<PAGE>
The assistant treasurers in the order of their seniority shall, in the
absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer, and they shall perform such other duties as the Board
of Directors shall prescribe.
ARTICLE V
CERTIFICATES OF STOCK: TRANSFER, ETC.
-------------------------------------
5.01 CERTIFICATES OF STOCK
The certificates for shares of stock of the Corporation shall be numbered
and shall be entered in the Corporation as they are issued. They shall exhibit
the holder's name and number of shares and shall be signed by the president or a
vice president and the secretary or an assistant secretary or if the Board of
Directors determines, by any one of the afore named officers and shall be sealed
with the seal of the Corporation or a facsimile thereof. If the Corporation has
a transfer agent or a registrar, other than the Corporation itself or an
employee of the Corporation, the signatures of any such officer may be
facsimile. In case any officer or officers who shall have signed or whose
facsimile signature or signatures shall have been used on any such certificate
or certificates shall cease to be such officer or officers of the Corporation,
whether because of death, resignation or otherwise, before said certificate or
certificates shall have been issued, such certificate may nevertheless be issued
by the Corporation with the same effect as though the person or persons who
signed such certificates or whose facsimile signature or signatures shall have
been used thereon had been such officer or officers at the date of its issuance.
Certificates shall be in such form as shall in conformity to law be prescribed
from time to time by the Board of Directors.
The Corporation may appoint from time to time transfer agents and
registrars, who shall perform their duties under the supervision of the
secretary.
5.02 TRANSFERS OF SHARES
Upon surrender to the Corporation or the transfer agent of the Corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction upon its books.
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<PAGE>
5.03 REGISTERED SHAREHOLDERS
The Corporation shall be entitled to treat the holder of record of any
share or shares of stock as the holder in fact thereof and, accordingly shall
not be bound to recognize any equitable or other claim to or interest in such
share on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by law.
5.04 LOST CERTIFICATE
The Board of Directors may direct a new certificate or certificates to be
issued in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate to be lost. When
authorizing such issue of a new certificate or certificates, the Board of
Directors in its discretion and as a condition precedent to the issuance
thereof, may require the owner of such lost or destroyed certificate or
certificates or his legal representative to advertise the same in such manner as
it shall require or to give the corporation a bond with surety and in form
satisfactory to the Corporation (which bond shall also name the Corporation's
transfer agents and registrars, if any, as obligees) in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
or other obligees with respect to the certificate alleged to have been lost or
destroyed, or to advertise and also give such bond.
ARTICLE VI
DIVIDEND
-----------
6.01 DECLARATION
The Board of Directors may declare at any annual, regular or special
meeting of the Board and the Corporation may pay, dividends on the outstanding
shares in cash, property or in the shares of the Corporation to the extent
permitted by, and subject to the provisions of, the laws of the State of Utah.
6.02 RESERVES
Before payment of any dividend there may be set aside out of any funds of
the Corporation available for dividends such sum or sums as the directors from
time to time in their absolute discretion think proper as a reserve fund to meet
contingencies or for equalizing dividends or for repairing or maintaining any
property of the Corporation or for such other purpose as the directors shall
think conducive to the interest of the Corporation, and the directors may
abolish any such reserve in the manner in which it was created.
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<PAGE>
ARTICLE VII
MISCELLANEOUS
7.01 INFORMAL ACTION
Any action required to be taken or which may be taken at a meeting of the
shareholders, directors or members of the executive committee, may be taken
without a meeting if a consent in writing setting forth the action so taken
shall be signed by such number of the shareholders, directors, or members of the
executive committee as is required by law, as the case may be, entitled to vote
with respect to the subject matter thereof, and such consent shall have the same
force and effect as a vote of the shareholders, directors, or members of the
executive committee, as the case may be, at a meeting of said body.
7.02 SEAL
The corporate seal shall be circular in form and shall contain the name of
the Corporation, the year of its incorporation and the words "UTAH", and
"CORPORATE SEAL". The seal may be used by causing it or a facsimile to be
impressed or affixed or in any other manner reproduced. The corporate seal may
be altered by order of the Board of Directors at any time.
7.03 CHECKS
All checks or demands for money and notes of the Corporation shall be
signed by such officer or officers or such other person or persons as the Board
of Directors may from time to time designate.
7.04 FISCAL YEAR
The fiscal year of the Corporation shall be determined by resolution of the
Board of Directors.
7.05 AMENDMENTS
These ByLaws may be altered, amended or repealed in whole or in part by the
affirmative vote of the Board of Directors.
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<PAGE>
ARTICLE VIII
INDEMNIFICATION OF OFFICERS AND DIRECTORS
-----------------------------------------
8.01 RIGHT TO INDEMNIFICATION
Each person who was or is made a party or is threatened to be made a party
to or is otherwise involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she is or was a director, officer, employee or
agent of the Corporation or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan (hereinafter an "indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the laws of the State of
Utah, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than such law permitted the
Corporation to provide prior to such amendment), against all expense, liability
and loss (including attorneys fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) reasonably incurred or suffered by
such indemnitee in connection therewith and such indemnification shall continue
as to an indemnitee who has ceased to be a director, officer, employee or agent
and shall inure to the benefit of the indemnitee's heirs, executors and
administrators; provided, however, that except as provided in Section 2 hereof
with respect to proceedings to enforce rights to indemnification, the
Corporation shall indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation. The right
to indemnification conferred in this Section shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, if Utah law requires, an
advancement of expenses incurred by an indemnitee in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such indemnitee, including, without limitation, service to an
employee benefit plan) shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee,
to repay all amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal (hereinafter a
"final adjudication") that such indemnitee is not entitled to be indemnified for
such expenses under this Section or otherwise.
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<PAGE>
8.02 RIGHT OF INDEMNITEE TO BRING SUIT
If a claim under Section 1 of this Article is not paid in full by the
Corporation within sixty days after a written claim has been received by the
Corporation, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be twenty days, the indemnitee may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that, and (ii) in any suit by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking the Corporation
shall be entitled to recover such expenses upon a final adjudication that, the
indemnitee has not met the applicable standard of conduct set forth in Utah law.
Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such suit that indemnification of the indemnitee is
proper in the circumstances because the indemnitee has met the applicable
standard of conduct set forth in Utah law nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct, or, in the case of such suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Article or otherwise shall be on the Corporation.
8.03 NON-EXCLUSIVITY OF RIGHTS
The rights to indemnification and to the advancement of expenses conferred
in this Article shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, the Corporation's certification of
incorporation, bylaw, agreement, vote of stockholders or disinterested directors
or otherwise.
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<PAGE>
8.04 INSURANCE
The Corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under Utah law.
-15-
JOINT VENTURE AGREEMENT
TECH 2020 LTD.
THIS AGREEMENT, made and entered into effective for all purposes as of the
17th day of August 1998, by and between EGAN SYSTEMS, INC. (a Delaware
corporation) and INTERMOST LIMITED (a British Virgin Islands
corporation),(hereinafter referred to individually and collectively as a
"Venturer" and the "Venturers", respectively).
W I T N E S S E T H:
In consideration of the mutual covenants set forth herein, the Venturers
hereby agree as follows:
ARTICLE I
FORMATION OF JOINT VENTURE
Section 1.01. Formation of Joint Venture. The Venturers hereby enter into
and form partnership and joint venture (the "Joint Venture") for the limited
purposes and scope set forth herein. Except as expressly provided for herein to
the contrary, the rights and obligations of the Venturers and the administration
and termination of the Joint Venture shall be governed by the laws of New York.
Section 1.02. Purposes and Scope of Joint Venture. The purposes and scope
of the Joint Venture shall be for the performance of computer and computer
related operations and systems development, upgrading, integrating, technical
support, supervisor, marketing, training and software development.
Section 1.03 Name of Joint Venture. The business and affairs of the Joint
Venture shall be conducted under the name of Tech 2020 Ltd., or of such
variations thereof of such nominees therefor as the Venturers may select.
Section 1.04 Assumed Name Certificate. The Venturers shall execute all
assumed or fictitious name certificate or certificates required by law to be
filed in connection with the formation of the Joint Venture and shall cause such
certificate or certificates to be filed in the assumed name records of Egan
Systems, Inc.
Section 1.05 Scope of Venturer's Authority. Except as otherwise expressly
and specifically provided in this Agreement, none of the Venturers shall have
any authority to act for, or to assume any obligations or responsibility on
behalf of, any other Venturers or the Joint Venture.
Section 1.06 Principal Place of Business. The principal place of business
of the Joint Venture shall be Shenzhen, China, or such other address as the
Venturers may from time to time select. All books, records and papers of the
Venture shall be kept at the principal place of business.
<PAGE>
ARTICLE II
MANAGEMENT OF JOINT VENTURE
Section 2.01. Management of Joint Venture. The overall management and
control of the business and affairs of, and the authority to make all decisions
affecting the Joint Venture shall at all times be vested in the Venturers, but
the implementation of such management, control and decisions, except as
otherwise herein provided, shall be in the Managing Venturer (which term, as
used herein, shall be deemed to mean Egan Systems, Inc. until a new Managing
Venturer shall be appointed pursuant to Section 2.03 herein below) and may be
exercised by the said Managing Venturer to act in his behalf. The Managing
Venturer shall be responsible for the implementation of the decisions of the
Venturers and for conducting the ordinary and usual business and affairs to the
Joint Venture. Without in any way limiting the generality of the foregoing, the
following Joint Venture matters shall be effectuated only after the complete
concurrence of one hundred percent (100%) shall first have been received by the
Managing Venturer:
1. Borrowing any sum of money in excess of Five Thousand and No/100 Dollars
($5,000.00);
2. Determining when and whether distributions should be made to the
Venturers, as more fully set forth in Section 5.03. hereof;
3. Making any expenditure or incurring any obligation by or of the Joint
Venture in excess of Five Thousand and No/100 Dollars ($5,000.00);
4. Determining the maximum and minimum working capital requirements of the
Joint Venture;
5. Maintaining all funds of the Joint Venture in a Joint Venture account in
such banks selected by the Venturers;
6. Selling, transferring or assigning all or any part of the Interest
and/or any other substantial Joint Venture assets, distributing the proceeds
therefrom and, if then appropriate, terminating the Joint Venture in accordance
with the Article VI herein below.
Section 2.02 Compensation of Venturers. Except as may be expressly provided
for herein or hereafter approved by the Venturers, no payment will be made by
the Joint Venture to any Venturers for the services of such Venturer except as
mutually agreed upon by each party to the agreement. The Venturers, however,
shall be reimbursed by the Joint Venture for the reasonable out-of-pocket
expenses incurred in connection with the business and affairs of the Joint
Venture, including all legal, accounting, travel and other similar expenses
reasonably incurred in connection with the business of the Joint Venture.
2
<PAGE>
Section 2.03 Change of Managing Venturer. At any time upon unanimous
consent, a successor Managing Venturer may be appointed from the Venturers
herein. Upon such appointment, the Venturer previously acting as the Managing
Venturer hereunder shall be relieved of any and all responsibility for the
management of the Joint Venture after the date of such appointment. The relief
of any Venturer from acting as the Managing Venturer shall in no way adversely
affect its Percentage Interest hereunder (either equity or right to cash
distribution).
Section 2.04 Budgets. Not less often than once each fiscal year, the
Managing Venturer shall prepare and submit to the Venturers for their
consideration an operational budget ("Budget") setting forth the estimated
receipts and expenditures (capital, operating and other) of the Joint Venture
for the period covered by the Budget. When approved by the Venturers, Managing
Venturer shall in good faith use its best efforts to implement the Budget and
shall be authorized, without the need for further approval by the Venturers, to
make the expenditures and incur the obligations provided for the Budget.
Section 2.05 Contracts with Related Parties. The Managing Venturer shall
not enter into any contract, agreement, lease, venture of goods, services or
space with any part or entity related to or affiliated with any Venturer or with
respect to which any Venturer of party or entity related to or affiliated with
any Venturer has any direct or indirect ownership or control unless such
contract, agreement, lease or other arrangement has been approved by the
Venturers.
Section 2.06 Consent and Approval. In any instance under this Agreement in
which the consent or approval of a Venturer to any proposed action is required,
such consent or approval shall be deemed to have been given unless written
objection to such proposed action, stating with particular grounds therefor, is
sent by such objecting Venturer to the other Venturers within five (5) days
after receipt of a written request for such consent or approval.
ARTICLE III
CAPITAL CONTRIBUTION
Section 3.01. Initial Contribution.
a) Egan Systems, Inc. shall contribute Technology hardware (including but
not limited to mainframes) training, technical support, patent rights
and cash in the amount to be determined on a pro rata basis.
b) Intermost Limited shall contribute office space and manpower in the
PRC, supervision for PRC projects, PRC contracts, marketing and cash
in the amount to be determined on a pro rata basis.
Section 3.02 Loans by Joint Venturers. The Venturers may make future
advances of money, from time to time, to the Joint Venture or on its behalf, for
costs, expenses or expenditures growing out of the ownership and operation of
the Joint Venture property. However, unless a Venturers making such an advance
is obligated hereunder to make such advance as an additional capital
distribution to the Joint Venture but shall be treated, for Joint Venture
accounting purposes, as a loan to the Joint Venture, bearing no interest unless
otherwise agreed by the Venturers in writing.
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ARTICLE IV
ADDITIONAL CONTRIBUTION
Section 4.01 Contributions by Venturers. From time to time, additional
funds may be required to service the existing venture indebtedness and/or pay
operation expenses.
Section 4.02 Additional Contributions. If, from time to time, the Venturer
does not have sufficient funds to pay all costs and discharge all current
indebtedness, the Managing Venturer shall constitute a demand that each
Venturer, within thirty (30) days thereafter, contribute to the Joint Venture an
additional sum of money equal to the product obtained by multiplying the
additional amount of funds revenues required by such Venturer's Equity
Percentage Interest as set forth in Section 5.01 hereof.
Section 4.03 Failure of a Venturer to Make Additional Contribution. If any
Venturer fails or refuses to contribute to its additional contribution or
contributions as required under Section 4.02 herein above, the Managing Venturer
shall be entitled to declare forfeited to the Joint Venture, as liquidated
damages for such Venturer's breach thereof, the amount of the defaulting
Venturer's initial contribution (if any) made pursuant to Section 3.01 herein
above. In addition, the Managing Venturer may also solicit payment from those
existing Venturers who made their additional contribution or contributions in
full and on time, (or should all such Venturers fail to contribute the
defaulting Venturer or Venturers' share from any third party) of the entire
amount of the additional contribution for the defaulting Venturer. If the share
due by the defaulting Venturer is so paid, (a) the person or persons making such
payment shall become a Venturer or Venturers hereunder (if such person or
persons was or were not theretofore a Venturer); (b) the entire Percentage
Interest of the defaulting Venturer shall be allocated to the person or persons
making such payment in ratio of the payment so made; (c) the defaulting Venturer
shall cease to be a Venturer hereunder and to own any right, title or interest
in and to the Joint Venture or any assets of the Joint Venture; and (d) the
defaulting Venturer shall become obligated to execute, have acknowledged and
deliver to the Managing Venturer upon the Managing Venturer's request and
without further consideration of any nature being payable to the defaulting
Venturer, any instrument, including, without limitation, any withdrawal or
amendment to the assumed name certificate filed on behalf of the Joint Venture,
which the Managing Venturer determines it necessary or reasonably appropriate to
evidence such default and withdrawal; provided, however, that until such time as
the defaulting Venture's Percentage Interest is so reallocated, (i) all of the
Joint Venture items as would have been allocated and/or distributed to the
defaulting Venturer shall be allocated and/or distributed solely to the
non-defaulting Venturers in accordation to the ratio which respective Percentage
Interests bear to each other, and (ii) the defaulting Venturer shall be and
remain liable for his share of # debts and liabilities to the same extent as if
such default had never occurred.
ARTICLE V
ACCOUNTING AND DISTRIBUTIONS
Section 5.1 Ownership of Joint Venture. The Interest in Tech 2020 Ltd.
Joint Venture shall be owned initially by the Venturers in the percentage
interests (herein referred to as the "Percentage Interests") set forth opposite
each of their names below as tenants-in-common unless otherwise stipulated in
writing signed by all Venturers, such ownership being subject to all the terms
and provisions of this Agreement:
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Egan Systems, Inc. 51.00 %
Intermost Limited 49.00 %
100.00 %
Section 5.02 Tax Status, Allocations and Reports.
a) Any provision hereof to the contrary notwithstanding, solely for
United States federal income tax purposes, each of the Venturers
hereby recognizes that the Joint Venture may be subject to all
provisions of Subchapter K of Chapter 1 of the Subtitle A of the
United States Internal Revenue Code of 1954; provided, however, the
filing of U.S. Partnership Returns of Income shall not be construed to
extend the purposes of the Joint Venture or expand the obligations or
liabilities of the Venturers. At the request of any Venturer, the
Joint Venture shall file an election under Section 754 of the United
States Internal Revenue Code of 1954.
b) The Managing Venturer shall cause to be prepared all tax returns and
statements, if any, which must be filed on behalf of the Joint Venture
with any taxing authority, shall submit copies of all such returns and
statements to all the Venturers and shall make timely filing thereof.
c) Solely for federal and state income tax purposes, except as herein
otherwise specifically provided, all income, deductions, credits,
gains and losses of the Joint Venture shall be allocated to the
Venturers in accordance with their Percentage Interests as stated
herein, unless otherwise amended.
Section 5.03 Distributions to Venturers. At the end of each calendar
quarter, the Managing Venturer shall determine reasonable working capital
requirements of the Joint Venture. As used in this Section 5.03, the term
"Distributable Funds" shall mean the amount by which the total of cash owned by
the Joint Venture from time to time is in excess of the reasonable working
capital requirements of the Joint Venture. Within fifteen (15) days after the
end of each calendar quarter for which it has been determined that
Distributable. Funds exist, such Distributable Funds shall be distributed to the
Venturers in accordance with their Percentage Interests.
Section 5.04 Accounting.
a) The fiscal year of the Joint Venture shall end on the last day of
December of each year.
b) The books of account of the Joint Venture shall be kept and maintained
at all times at the place of places selected by the Managing Venturer.
The books of account shall be maintained on a cash basis.
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c) The Managing Venturer shall prepare and furnish to each of the
Venturers promptly after the close of each calendar year an unaudited
statement, certified by Managing Venturer to be true and correct to
the best of his knowledge and belief, showing the operation of the
Joint Venture for such year, the balance in each Venturer's capital
account, the unpaid balance due under all obligations of the Joint
Venture and all other information reasonably requested by any
Venturer.
d) Each Venturer shall have the right at all reasonable times during
usual business hours to audit, examine and make copies or extract from
the books of account of the Joint Venture. Such right may be exercised
through any agent or employee of such Venturer designated by him or by
an independent public accountant designated by such Venturer. Each
Venturer shall bear all expenses incurred in any examination made for
such Venturer's account.
Section 5.05 Bank Accounts. Funds of the Joint Venture shall be deposited
in a Joint Venture account or accounts in the bank or banks selected by the
Venture. Withdrawals from bank accounts shall be made only by the Managing
Venturer to act in its behalf. All bank statements shall be returned to the
office of the Managing Venturer from the bank or banks.
Section 5.06 Liabilities. Unless otherwise provided herein, as between the
parties hereto, each of the Venturers shall be severally liable for and hereby
agree to discharge in accordance with such Venturer's Percentage Interest, all
debts, obligations and other liabilities incurred or assumed in accordance with
the terms of this Agreement.
Section 5.07 Accounting and Application of Proceeds. Upon the sale,
disposition or refinancing of all or substantially all of the property of the
Joint Venture, an accounting through the effective date of such sale,
disposition or refinancing shall be made of the income, expenses, assets and
liabilities of the Joint Venture and the proceeds of such sale, disposition or
refinancing shall be applied or distributed as follows:
a) First to the payment of all expenses incurred in connection with such
sale, disposition or refinancing;
b) Next to the payment of all operating expenses incurred or accrued
through the effective date of such sale, disposition or refinancing,
including expense reimbursements to the Venturers;
c) Next to the payment or satisfaction of all non-expense cash
disbursements, including debt service, accrued or acquired to be
disbursed through effective date of the sale, disposition or
refinancing;
d) Next to the repayment of any loans to the Joint Venture made by any of
the Venturers or any other person, corporation or entity;
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e) The remaining proceeds, if any, shall be distributed to the Venturers
in accordance with their Percentage Interest in the Joint Venture and
its property.
ARTICLE VI
TERM, TERMINATION AND TRANSFERS OF INTEREST
Section 6.01 Term. The Joint Venture shall be in effect for a term
beginning on the date hereof and continuing until:
a) The express written consent of all Venturers agreeing to the
termination is first obtained;
b) Any other act occurs which, by law, would require that the Joint
Venture be terminated;
c) The withdrawal, bankruptcy, death, retirement or insanity of any
Venturer, or the occurrence of any other act which would legally
disqualify or impede the Managing Venturer from acting hereunder;
provided, however, that, if within forty-five (45) days after the
effective date of such withdrawal, bankruptcy, death, retirement or
adjudication of insanity or other occurrence, the remaining Venturers
holding at least sixty percent (60%) of the total Percentage Interests
hereunder elect to reconstitute the Joint Venture, same shall be
reconstituted on the same terms, provisions and conditions as are set
forth herein; or
d) In any event the expiration of ten (10) years from the date hereof.
Section 6.02 Voluntary Termination. No Venturer shall have the right to
voluntarily terminate the Joint Venture.
Section 6.03 Voluntary Transfer of Joint Venture's Interests. No Venturer
may sell, pledge, assign, give or in any manner transfer all or any portion of
his Joint Venture interest without the prior written consent of all of the other
Venturers. If any Venturer desires to sell, pledge, assign, give or in any
manner transfer all or any portion of his Joint Venture interest, such Venturer
shall first give written notice to all the Venturers, which notice shall state:
a) The extent of the interest to be conveyed;
b) The complete terms upon which the Venturer seeks to convey or encumber
the interest, including the purchase price therefor; and
c) The complete terms, including the name and address of any offer or, or
any offers he has received relating to the conveyance of such
interest.
Upon receipt of such notice, the other Venturers shall then have, in
addition to their right to deny consent to such transfer, a preferential right
to purchase, in accordance with their respective Percentage Interests, the
interest described therein upon the terms set forth therein, which might shall
be exercised, if at all, in the manner specified in Section 6.05 herein below.
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Section 6.04 Involuntary Transfer of Joint Venture Interests. If:
a) Any Venturer shall file a voluntary petition in bankruptcy or shall be
adjudicated bankrupt or insolvent, or shall file any petition or
answer seeking any composition, readjustment, liquidation, dissolution
or similar relief for him under the present or any future federal
bankruptcy act or any other present or insolvency or other relief for
debtors, or shall seek or consent to or acquiesce in the appointment
of any trustee, receiver conservator or liquidator or said Venturer or
of all or any substantial part of his properties or his interest in
the Joint Venture shall be appointed without the consent or
acquiescence of said Venturer and such appointment shall remain
unvacated and unstayed for an aggregate of sixty (60) days (whether or
not consecutive); or
b) Any Venturer shall admit in writing his inability to pay his debts as
they mature; or
c) Any Venturer shall give notice to any governmental body of his
insolvency or pending insolvency or suspension or pending suspension
of operations; or
d) Any Venturer shall make an assignment for the benefit of creditors or
take any other similar action for the protection or benefit of
creditors' or
e) Any Venturer becomes divorced or judicially separated from his spouse
pursuant to court order by which he is or may be required to transfer
all or a portion of his Joint Venture interest to such spouse;
Then such Venturer shall give written notice of such fact to all the
Ventures, whereupon all the Venturers shall have a preferential right to
purchase, in accordance with their respective Percentage Interests, the entirety
of the Venturer's Joint Venture interest, at its fair market value as determined
hereinafter in Section 6.06, which right shall be exercised, if at all, in the
manner specified in Section 6.05 herein below.
Section 6.05 Exercise of Preferential Purchase Right. If the Venturers, or
any of them, desire to exercise affirmatively the preferential purchase rights
granted in Section 6.03 and 6.04 herein above, or desire to refuse to consent to
the transfer proposed under Section 6.03 herein above, he or they shall do so by
giving written notice thereof to the Selling Venturer (which term, as used in
this Article VI shall include such Venturer's trustee, receive or other
representative, or the appropriate court, all as the case may be) within
forty-five (45) days after their receipt of notice of the facts provided for
therein. Upon the giving of a notice exercising affirmatively the preferential
purchase right, the notifying Venturers (hereinafter referred to collectively in
this Article VI as the "Purchasing Venturer") shall be obligated to consummate
the purchase thereof at the Joint Venture's offices determined in accordance
with Section 1.06 herein above within thirty (30) days after the expiration of
the aforesaid forty-five (45) day time period. The purchase price shall be paid
by the Purchasing Venturer at the consummation thereof either entirely in cash
or, if the preferential right arose under Section 6.03 herein above, on the
terms as specified in the notice called for therein. Coincident with such
purchase, the Percentage Interest of the Selling Venturer shall be reduced or
eliminated, as the case may be, and the Percentage Interest of the Purchasing
Venturer shall be proportionately increased. If one or more, but not all, of the
Venturers entitled thereto did not affirmatively exercise their preferential
purchase right, which additional right shall be exercised within ten (10) days
after the expiration of the forty-five (45) day time period provided for herein
above. If such Venturers affirmatively exercise their additional preferential
purchase right, they shall be obligated to consummate the purchase of the
additional interest covered thereby within thirty (30) days after the expiration
of the aforesaid forty-five (45) day time period. If the Venturers fail, refuse
or neglect to exercise affirmatively their preferential purchase right and, if
in instances arising under Section 6.03 no Venturer notifies the Selling
Venturer of his refusal to consent to the transfer, all within the said
forty-five (45) day time period:
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a) Where there right arose under Section 6.03, they shall have
irrevocably waived their preferential purchase right as to that
particular offer on the specific interest described in the notice; and
b) the Selling Venturer may then sell the interest to any person (but
only to the person and on the terms described in the notice where the
preferential purchase right arose under Section 6.03) within, but not
after, sixty (60) days from the date of the Selling Venturer's notice;
provided, however, that in instances where the preferential purchase
right arose under Section 6.03 herein above, the Selling Venturer
shall not be entitled to sell his interest to any different person or
on any different terms than as described in the notice provided for
therein unless he shall have first again offered the interest to the
other Ventures as herein above provided.
Section 6.06 Determination of Fair Market Value. Where, according to
Section 6.04 herein above, the fair market value of a Joint Venture interest
must first be determined, such determination shall be made in accordance with
the provisions of this Section 6.06. First, in instances where the Selling
Venturer gives written notice of the operative facts recited therein, such
Venturer gives written notice of the operative facts recited therein, such
Venturer shall also, coincident therewith, include the name, mailing address and
telephone number of an appraiser appointed by him to determine such fair market
value. (In all other instances the name, mailing address and telephone number of
the first appraiser shall be sent by the Purchasing Venturer coincident with the
exercise of their preferential purchase rights). Second, the Purchasing Venturer
shall then appoint one (1) appraiser and furnish the name, mailing address and
telephone number of the appraiser so appointed to the Selling Venturer, it being
understood that the Purchasing Venturer shall only be entitled to appoint one
(1) appraiser regardless of the actual number of persons affirmatively
exercising their preferential purchase right. If the Purchasing Venturer fails
to appoint a second appraiser, then the first appraiser shall proceed to
determine the fair market value of the Joint Venture interest to be conveyed and
such determination shall be binding on the Selling and Purchasing Venturer. If,
however, a second appraiser is appointed, then the two (2) appraisers shall meet
and attempt to reach a determination of the fair market value. If they cannot do
so, the two (2) appraisers shall then select a third appraiser and the three (3)
appraisers shall then make such determination. If the two (2) appraisers cannot
agree on the third appraiser, then a third appraiser shall be appointed by the
Senior Federal District Judge for the Southern District of New York, and
application to such court may be made by either Venturer. Each Venturer shall
pay the fees and expenses of his or their own appraiser and one-half (1/2) the
fees and expenses of any third appraiser.
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Section 6.07. Failure to Comply. Any purported sale or assignment
consummated without first complying with this Article VI shall, as between the
existing Venturers on the one hand and the intended transferee on the other
hand, by null and void.
Section 6.08. Survival of Liabilities. No sale or assignment of a Joint
Venture interest shall release the Selling Venturer from those liabilities to
the Joint Venture which survive such assignment or sale as a matter of law.
Section 6.09. Transfers Subject to This Agreement. In the event of any
transfer or transfers permitted under this Article VI, the interest so
transferred shall be and remain subject to all terms and provisions of this
Agreement. The assignee or transferee shall be deemed to have assumed all the
obligations hereunder relating to the interests or rights so transferred and
shall bear such obligation jointly and severally with his or its transferor.
Section 6.10. Accounting. Upon termination of the Joint Venture, the
Venturers or the remaining Venturer, as the case may be, shall make, or cause to
be made, a final accounting of the Joint Venture and its assets and liabilities,
profits and losses, and shall distribute and disburse the funds or property of
the Joint Venture, to the extent available, as follows:
(a) First to the payment of all operating expenses incurred or accrued
through the effective date of termination;
(b) Next to the payment of all or the satisfaction of all non-expense cash
disbursements, including debt servicing, accrued or acquired to be
disbursed through the effective date of the termination;
(c) Next to the repayment of any loans made to the Joint Venture by any
person, corporation or entity other than the Venturers;
(d) Next to the repayment of any loans to the Joint Venture made by the
Venturer;
(e) The remaining proceeds, if any, shall be distributed to the Venturers
in accordance with their Percentage Interest in the Joint Venture and
its property.
ARTICLE VII
DISSOLUTION
Section 7.01. Final Accounting. Upon termination of the Joint Venture, as
permitted herein, the Joint Venture shall be dissolved and an accounting shall
be made of the account of the Joint Venture, of each Venturer's interest herein,
and of the Joint Venture's assets, liabilities and operations from the date of
the last previous accounting to the date of such dissolution.
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Section 7.02. Distribution Following Dissolution (No Reconstitution). Upon
the dissolution of the Joint Venturer, where no reconstitution is effected
pursuant to Section 6.01(d) herein above, the Managing Venturer (or, in the
event the dissolution is caused by acts or occurrences attributable to the
Managing Venturer and falling within Section 6.01(d) herein above, the
Non-Managing Partner shall act as Liquidating Trustee (hereinafter so referred
to) and shall immediately proceed to terminate the business of the Joint
Venture. The Liquidating Trustee shall first determine or have determined the
fair market value of all Joint Venture properties and then attempt to sell all
Joint Venture properties (except cash and current receivables) at such prices
and on such terms as the Liquidating Trustee, in the exercise of his best
business judgment under the circumstances then presented, deems in the best
interest of all the Venturers; provided, however, the Liquidating Trustee may,
if he deems such action to be more in the interests of the Venturers than an
outright sale, transfer any such property without the sale thereof to all the
Venturers, in undivided interests, and in accordance with their Percentage
Interest (subject to any indebtedness thereon). The proceeds of any sale of
Joint Venture properties and all Joint Venture cash shall be distributed to the
extent that funds are available therefor in accordance with the Percentage
Interest of the Venturers. The Venturers, or any one of them, shall have the
right to purchase any Joint Venture property to be sold on liquidation provided
that the terms on which such sale is made are no less favorable to the remaining
Venturers than would otherwise be available from third parties.
Section 7.03. Distributions Following Dissolution (Reconstitution). If the
Joint Venture is dissolved but a reconstitution is effected pursuant to Section
6.01(d) herein above, the Joint Venture shall pay, to the extent it has current
funds available therefor, and shall obligate itself to pay to the extent that
current funds are not available therefor, to those of the Venturers who elect
not to become (or otherwise not entitled to become) a member of the
reconstituted Joint Venture, which fair market value shall be determined in
accordance with Section 6.06 herein above. In instances where the fair market
value determination is to be made for purposes of this Section 7.03, the term
Selling Venturer (as used in Section 6.06) shall refer to those Venturers
entitled to the distribution hereunder and the term Purchasing Venturer (as used
in Section 6.06) shall refer to the Joint Venture.
ARTICLE VIII
GENERAL
Section 8.01. Notices. All notices, demands or requests provided for or
permitted to be given pursuant to this Agreement must be in writing and shall be
deemed to have been properly given if mailed by first class United States mail,
postage prepaid and registered or certified with return receipt requested, or by
delivering same in person to the intended addressee or by prepaid telegram.
Notice so mailed shall be effective upon the expiration of three (3) business
days after its deposit. Notice given in any other manner shall be effective only
if and when received by the intended addressee. For purposes of notice, the
addresses of the parties shall be as follows:
Egan Systems, Inc. 1501 Lincoln Avenue
Holbrook, NY 11741
Attention: Ed Egan
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Intermost Limited 4703, 47/F, Central Plaza
18 Harbour Road
Wanchai, Hong Kong
Attention: June Liang
By giving to the other parties at least thirty (30) days' written notice
thereof, the parties hereto and their respective successors and assigns shall
have the right, from time to time and at any time during the term of this
Agreement, to change their respective addresses and each shall have the right to
specify as its address any other address. All payments to be made pursuant
hereto to any Venturer shall be made at the address set forth above for such
Venturer. All such payments shall be effective upon receipt.
Section 8.02. Insurance. The Joint Venture shall carry and maintain in
force such insurance in such companies and for such amounts as the Venturers
shall determine is appropriate for the Joint Venture. All such policies of
insurance shall name the Joint Venture and all Venturers as named insureds, as
their respective interests may appear. The premiums of all such insurance shall
be a cost and expense to be borne by the Joint Venture.
Section 8.03. Governing Laws. This Agreement and the obligations of the
Venturers hereunder shall be interpreted, construed and enforced in accordance
with the laws of New York.
Section 8.04. Fees and Commission. Each Venturer hereby represents and
warrants to the other Venturers that there are no claims for brokerage,
commissions, finder's or other similar fees in connection with the transactions
covered by this Agreement insofar as such claims are based on arrangements or
agreements made by or on his behalf, and each Venturer hereby agrees to
indemnify and hold harmless the other Venturers from and against all
liabilities, costs, damages and expenses arising from any such claims.
Section 8.05. Entire Agreement. This Agreement contains the entire
agreement between the parties hereto relative to the formation of a Joint
Venture to invest in and operate the Land. No variations, modifications or
changes herein or hereof shall be binding upon any party hereto unless set forth
in a document duly executed by or on behalf of such party.
Section 8.06. Waiver. No consent or waiver, expressed or implied, by any
Venturer or the Joint Venture to or of any breach or default by any other
Venturer in the performance by the other of his obligations hereunder shall be
deemed or construed to be a consent or waiver to or of any other breach or
default in the performance by such other party of the same or any other
obligations of such Venturer hereunder. Failure on the part of any Venturer or
the Joint Venture to complain of any act or failure to act of any of the other
Venturers or to declare any of the other Venturers in default, irrespective of
how long such failure continues, shall not constitute a waiver of the Joint
Venture or such Venturer of his rights hereunder.
Section 8.07. Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
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Section 8.08. Binding Agreement. Subject to the restrictions on transfers
and encumbrances set forth herein, this Agreement shall inure to the benefit of
and be binding upon the undersigned Venturers and their respective heirs,
executors, legal representatives, successors and assigns. Whenever, in this
instrument a reference to any party or Venturer is made, such reference shall be
deemed to include a reference to the heirs, executors, legal representatives,
successors and assigns of such party of Venturer.
Section 8.09. Time of Essence. Time shall be of the essence in performance
of any obligation and payment of any sum required by this Agreement.
Section 8.10. Headings. The headings used in this Agreement are for
organizational purposes only and do not constitute substantive matters to be
considered in construing the terms of this Agreement.
Section 8.11. Amendments. Subject to the provisions of this Agreement, this
Agreement may be amended or modified by an affirmative vote of the Venturer or
Venturers owning a majority in interest, as set out in Section 5.01 of this
Agreement, but only by a written instrument executed by such Venturer or
Venturers owning a majority in interest.
Section 8.12. Terminology. All personal pronouns used in this Agreement,
whether used in the masculine, feminine or neuter gender, shall include all
other genders; the singular shall include the plural and vice versa, and shall
refer solely to the parties signatories thereto except where otherwise
specifically provided. Title of the articles and sections are for convenience
only and neither limit or amplify the provisions of the agreement itself, and
all references herein to articles, section or subdivisions itself, and all
reference herein to article, section or subdivision thereof unless specified
reference is made to such other articles, section or subdivisions of another
document or instrument.
IN WITNESS WHEREOF, this Agreement is executed effective as of the date
first set forth above.
EGAN SYSTEMS, INC.
By: /S/
---------------------------
INTERMOST LIMITED
By: /S/
---------------------------
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THE STATE OF )
----------------
)
COUNTY OF )
-------------------
BEFORE ME, the undersigned authority, on this day personally appeared
_______________, known to me to be the person whose name is subscribed to the
foregoing instrument and acknowledged to me that he executed the same for the
purposes and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this ____ day of _________, 1998.
----------------------------------
NOTARY PUBLIC IN AND FOR
----------------- COUNTY,
Name:
-----------------------------
My Commission Expires:
------------
THE STATE OF )
----------------
)
COUNTY OF )
------------------
BEFORE ME, the undersigned authority, on this day personally appeared
_______________, known to me to be the person whose name is subscribed to the
foregoing instrument and acknowledged to me that he executed the same for the
purposes and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this ____ day of _________, 1998.
---------------------------------
NOTARY PUBLIC IN AND FOR
----------------- COUNTY,
Name:
---------------------------
My Commission Expires:
---------
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Supply Agreement for Online Bookstore
(Translation)
Party A : Intermost Limited
Party B : Shenzhen Yiwen Book Import and Export Co.
Through friendly consultation, both parties have worked out the following
agreement:
Party A shall set up an on-line bookstore in the internet, selling books to both
domestic and oversees customers.
Party B is a holder of the special Import and Export Permit for Books granted by
the State Government. Party B shall supply books to Party A from its titles
in inventory.
Party B shall provide its latest book catalogue to Party A through e-mail once a
week.
Party A shall promptly transmit the book orders its has got from the on-line
internet bookstore. Party B shall be responsible for getting the books and
delivering the books as ordered in 3 days.
Should Party B be unable to deliver the books ordered by the customers as
scheduled, Party B shall notify Party A promptly and specify the delivery
time.
Based on the actual number of books purchased, Party B shall pay for the books
at a 10% discount on the list price of the books. Payments shall be settled
once a month.
Party A shall pay RMB5000 to Party B in advance as deposit. This deposit shall
be used to settle the amount payable for the books purchased by Party A.
Party B shall be responsible for handling certain matters related to the import
and export of the books ordered (e.g. customs, mailing, etc.)
According to the actual implementation of this Agreement, both parties may
consult with each other to amend certain terms and conditions of this
Agreement, such as discount and payment methods, etc.
The term for the Agreement shall be 3 years, effective from the date of
execution.
Any relevant issues not stipulated in this Agreement shall be resolved by
consultation between the two parties.
<PAGE>
This Agreement shall have 4 copies, each party shall keep two copies.
Party A : Intermost Limited Party B : Shanzhen Yiwen Book
Import & Export
Address: Rm. 4703, Central Plaza, Address: Ground Floor, South Block,
Wanchai, Hong Kong West Wing, Xincheng Bldg.,
13 Shennanchong Road,
Shendzhen City
Date : March 29, 1999 Date : March 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 553,704
<SECURITIES> 0
<RECEIVABLES> 24,051
<ALLOWANCES> 0
<INVENTORY> 1,667
<CURRENT-ASSETS> 697,401
<PP&E> 31,091
<DEPRECIATION> 0
<TOTAL-ASSETS> 768,242
<CURRENT-LIABILITIES> 49,560
<BONDS> 0
0
0
<COMMON> 9,541
<OTHER-SE> 709,141
<TOTAL-LIABILITY-AND-EQUITY> 768,242
<SALES> 244,103
<TOTAL-REVENUES> 244,103
<CGS> 92,206
<TOTAL-COSTS> 92,206
<OTHER-EXPENSES> 197,922
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (45,921)
<INCOME-TAX> 0
<INCOME-CONTINUING> (45,921)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (45,921)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
