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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of The Securities Exchange Act Of 1934
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JACOBSON RESONANCE ENTERPRISES, INC.
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(Name of Small Business Issuer in Its Charter)
Nevada 65-0684400
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(State or Other Jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
9960 Central Park Boulevard, #302
Boca Raton, Florida 33428
(561) 477-8020
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(Address and Telephone Number of Principal Executive Offices)
Copies of communications to:
William C. Phillippi, Esq.
Broad and Cassel
Broward Financial Centre
500 E. Broward Boulevard, Suite 1130
Fort Lauderdale, Florida 33394
Telephone No. (954) 764-7060
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Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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None
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Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value per share
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(Title of class)
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(Title of class)
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SPECIAL NOTE - FORWARD LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED IN THIS REGISTRATION STATEMENT, INCLUDING,
WITHOUT LIMITATION, STATEMENTS CONTAINING THE WORDS "BELIEVES," "ANTICIPATES,"
"EXPECTS" AND WORDS OF SIMILAR IMPORT CONSTITUTE "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS.
THIS DOCUMENT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
INCLUDING THE SUCCESS AND SUBSEQUENT ACCEPTANCE OF NEW MEDICAL RESEARCH AND
DEVELOPMENT; THE REGULATORY FRAMEWORK OF THE HEALTH CARE INDUSTRY; THE COMPANY'S
ABILITY TO CREATE, SUSTAIN, MANAGE OR FORECAST ITS GROWTH; ITS ABILITY TO
ATTRACT AND RETAIN KEY PERSONNEL; ITS ABILITY TO PROTECT TECHNOLOGY; CHANGES IN
ITS BUSINESS STRATEGY OR DEVELOPMENT PLANS; COMPETITION; DEMOGRAPHIC CHANGES;
BUSINESS DISRUPTIONS; ADVERSE PUBLICITY; AND INTERNATIONAL, NATIONAL AND LOCAL
GENERAL ECONOMIC AND MARKET CONDITIONS.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
The Company
Jacobson Resonance Enterprises, Inc. (the "Company"), is in the
development stage and has not had any significant revenue from operations to
date. The Company is a Nevada corporation incorporated on March 6, 1988, and
originally known as Pioneer Services International, Ltd. On June 4, 1996, the
Company acquired Jacobson Resonance Machines, Inc., a closely-held Florida
corporation, in exchange for 57,220,000 shares of the Company's common stock, or
a 92% equity interest in the Company. On July 30, 1998, the Company changed its
name to Jacobson Resonance Enterprises, Inc.
The Company is developing electromagnetic resonance technology patented
by Dr. Jerry I. Jacobson ("Jacobson Resonance") for applications in the medical,
commercial, agriculture and industrial industries. The Company is currently
negotiating, and will continue to use, joint venture and licensing arrangements,
as well as its own resources, to develop, manufacture, distribute and market
products using Jacobson Resonance for various applications.
The Technology
The principles behind Jacobson Resonance are derived from physics. Dr.
Jerry I. Jacobson, trained as a dentist and oral surgeon, developed an interest
in magnetotherapy through his extensive research and study of the work of Albert
Einstein. Einstein tried in vain to develop an algebraic unified-field equation,
which could potentially provide a semblance of order to the way nature works.
Although he failed to isolate the principle, Einstein was certain of its
possibility and named the principle the "Unified Field Equation." Dr. Jacobson
pinpointed the principle that eluded Einstein and became the first person in the
world to file a specification with the U.S. Patent Office conceiving the idea of
how quantum physics united with relativity. While Dr. Jacobson's specification
did not change quantum physics or relativity, he demonstrated a practical way to
unite them, adding a new dimension to quantum physics and extending Einstein's
theory of relativity.
Dr. Jacobson has quantified gravity as it relates to matter. According
to Dr. Jacobson, if energy equals mass times the speed of light squared, then
mass times the speed of light squared equals BVL-q where "B" stands for magnetic
field, "V" for velocity, "L" for length and "q" for a unit electrical charge of
one coulomb. Dr. Jacobson considers the Jacobson Resonance equation, mc(2) =
BVL-q, to be a fundamental law of nature. Reduced to layperson terms, the right
side of the equation equals energy created by the interaction of any conductive
body with a magnetic field. The left side of the equation represents
gravitational energy contained in a mass within a conductor.
With this newly discovered law of nature, Dr. Jacobson ventured into
terrain that was previously believed nonexistent. According to the laws of
quantum physics, the pico tesla fields and nanogauss fields (similar to the
magnetic profile of the brain, the heart and the liver) were
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too weak to produce heat or trigger chemical reactions. It followed that living
systems could not be beneficially influenced. Dr. Jacobson set out to build a
resonator machine (the "Jacobson Resonator") that would track this new law of
nature and, in due course, discover the appropriate resonance for a patient.
Once engaged, he firmly believed that living systems could be beneficially
influenced. The problem was connecting these very weak force-fields with
biochemically induced interactions.
Healthcare Applications
The Company is designing and developing electromedical and
electrotherapeutic medical devices that use Jacobson Resonance for the
non-invasive treatment of musculoskeletal injury and disease. The Company's
proprietary resonators employ a weak electromagnetic field in harmony with the
human body's electromagnetic field to produce gravity waves and
electromagnetically-induced vibrations, which in turn seem to render viruses and
bacteria incapable of invading healthy cells and to allow infected cells to
regain normalcy. This technology is based on the principle of magnetotherapy,
which attempts to treat human pathologies with magnetic force-fields.
The natural process of musculoskeletal tissue healing involves a
complex interaction of several physiological processes, which include the
stimulation of specific cells such as osteoblasts, fibroblasts and endothelial
cells. When an injury occurs, growth factors are produced at the healing site
which stimulate selected cells to initiate the healing cascade. In most cases,
these cells are able to initiate repair in response to an injury and restore the
musculoskeletal tissue to its original strength and structure. Cell stimulation
is a necessary component of tissue regeneration and is dependent upon certain
triggering events that activate the production of connective tissue.
Magnetotherapy, utilizing a non-invasive medical treatment that alters the
electromagnetic force-field of a patient, attempts to give the body's natural
healing process a push, by increasing the rate of production of the regenerative
tissues.
Currently, in treating human patients, the selection of the
electromagnetic field for a particular type of disorder requires trial based
upon theory. Achieving resonance has required time and patience because various
critical molecules must be identified for a particular disorder in order to
reorder electrophysiological states back to normalcy. To the Company's
knowledge, there is no other commercially available apparatus or device that is
attempting to lock into the patient's magnetic force field and produce
vibrations which reinforce and re-establish the normal structure of molecules
and coherent communication between atoms. There is increasing research and
interest in the phenomena discovered by Dr. Jacobson, and much of this interest
has been personally ignited by Dr. Jacobson's many articles and extensive
testing.
The Company is one of many engaged in magnetotherapy. However, its area
of interest sets it apart from its competitors. The Company uses very weak
force-fields involving pico tesla fields, nanogauss fields and even weaker
force-fields. Pico tesla fields are about 50,000,000 times weaker than the
earth's geomagnetic field, and nanogauss fields are about 500,000,000 times
weaker. To place this in proper perspective, magnetic resonance imaging systems
routinely use magnetic force-fields that are 20,000 times stronger than the
earth's geomagnetic field.
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The Company's approach to magnetotherapy is substantially different
from other companies. Most of its competitors work with much stronger
force-fields and most magnetotherapy systems rely on fields comparable to the
earth's geomagnetic field in strength. For example, Orthologic, Inc., which uses
magnetotherapy to heal bone fractures, employs a magnetic-field technology
combining a low energy, static magnetic field with a low-energy, alternating
magnetic field. That company believes the combination of these alternating
force-fields, termed second-generation magnetic-field technology, increases cell
stimulation. While previous first-generation technology utilized electromagnetic
bone-growth stimulators that only produced an alternating magnetic field, more
recent research has revealed that the use of combined static and alternating
magnetic-fields increases the potency of the treatment and therefore reduces the
required daily treatment time. The magnetic force of the technology used by this
company is in the range of the Earth's geomagnetic field.
By contrast, the electromagnetic force-fields emitted by the Jacobson
Resonator are between one million and ten million times weaker than the
electromagnetic force-fields emitted by the equipment produced by that company.
And that company's equipment is universally regarded as employing a low-energy
magnetic field.
Jacobson Resonators for Chronic Pain Reduction
The Company is using Jacobson Resonance for the reduction of chronic
pain. Osteoarthritis, rheumatoid arthritis, lower back injuries, tendinitis,
muscle spasms, sports injuries, carpal tunnel and tarsal tunnel syndromes,
neuropathy and migraine, tension, cluster, sinus and menstrual headaches all
cause chronic pain. Based on data developed by the National Chronic Pain
Outreach Association, an estimated 34 million people in the United States of
America suffer from chronic pain and approximately 50 million work days are lost
annually because of chronic pain.
There are currently seven different models of the Jacobson Resonator
used for the reduction of chronic pain, four of which are designed for clinical
use. The largest clinical model is comprised of a pair of Helmholtz coils that
are seven feet in diameter and placed on a common axis three and a half feet
apart (to encompass a full human frame). The next largest clinical model is
comprised of a pair of Helmholtz coils that are four feet in diameter (to treat
patients who are lying down.). A third clinical model is comprised of a pair of
Helmholtz coils that are 22 inches in diameter and placed on a common axis
eleven inches apart, which can be expanded to 16 inches or 20 inches. The fourth
clinical model is comprised of a pair of Helmholtz coils that are 18 inches in
diameter and placed on a common axis nine inches apart. The latter two models
can encompass a human head, joint or portion of a limb.
The clinical resonators require Food and Drug Administration clearance
before they can be commercially used in the United States of America. The
Company completed double blind and randomized clinical studies earlier in 1999,
and submitted to the FDA on May 27, 1999, its pre-market notification report for
the 18-inch Jacobson Resonator in the treatment of osteoarthritis pain of the
knee. At the request of the FDA, the Company filed an addendum to the report on
September 17, 1999. The Company is currently awaiting the FDA response.
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The clinical resonators also require CE-Mark approval before they can
be commercially used in the European Economic Union. In December 1998, the
Company filed its application for CE-Mark approval for the entire chronic pain
spectrum for the 18-inch Jacobson Resonator. On April 28, 1999, the 18-inch
Jacobson Resonator passed the technical homologation process, meaning that it
met all of the electrical, mechanical and electromagnetic requirements so that
human, clinical trials could begin in Europe. The Company performed the required
clinical trials beginning in early June 1999 and ending in early September 1999.
Also in early June 1999, the seven-foot model passed the technical homologation
process. Because of the 18-inch Jacobson Resonator clinical trials, no clinical
trials of the seven-foot model are expected to be required. The Company
anticipates receiving CE-Mark approval for both the 18-inch and seven-foot
models sometime in the early part of the fourth quarter of 1999. Once that
approval is received, the 22-inch and four-foot clinical models need only pass
the technical homologation process before they can be commercially used in the
European Economic Union.
The other three models of the Jacobson Resonator are portable models.
One portable model consists of a Helmholtz coil that is nine inches in diameter
for use on human limbs. A second portable model is an oval of nine inches by six
inches for the treatment of lower back pain. The third model is a single coil
that is five inches in diameter and designed for placement anywhere on the human
body. The portable models do not require either FDA approval for use in the
United States of America or CE-Mark approval for use in the European Economic
Union.
The Helmholtz coils are networks of flat and circular coils. Each coil
is connected in series to a power generator and attenuator. By design, Helmholtz
coils of equal diameter are paired and share a common axis that is equal in
length to the radius of either coil. An identical low-level current is conveyed
through each coil to ideally produce a homogeneous and evenly dispersed field of
magnetic intensity. The amplitudes used are in the pico tesla range and the
frequencies are extremely low, generally from 0-28 Hertz (EEG frequencies).
The Company is also working on a peripheral product, an "intensity
sweep" device. Once perfected, this device will be able to scan hundreds of weak
electromagnetic fields in a matter of minutes and identify the fields that
provide resonance. This technology will eliminate the time-consuming methodology
currently employed to determine resonance.
Quantum Resonance Technologies, Inc. ("QRTI"), builds the prototypes of
the Company's clinical and portable resonators and is also making the portable
resonators. Benvenutti Electrical Apparatus & Repair, Inc. ("B.E.A.R."), an
electrical apparatus manufacturer in Gulfport, Mississippi, collaborates with
QRTI and manufactures the Company's clinical resonators.
In early September 1999, the Company and Akron Bio-Medical Corporation
("ABM") signed a letter of intent, subject to a more definitive agreement, for
the licensing and distribution of the portable models of the Jacobson Resonator.
ABM would have the exclusive right to market and distribute the portable models
through television and radio with a non-exclusive right to market and distribute
them through other media. In addition, ABM would also become a manufacturer of
the clinical and portable models on a non-exclusive basis.
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The Company plans to distribute the clinical models of the Jacobson
Resonators in the United States of America through existing medical device
distributors. With respect to the portable models, the Company plans to place
them in chain stores and other locations where magnet therapy products are
currently being sold.
Alfonso Serrato is leading the European initiative. Mr. Serrato is a
director of the Company and a former executive officer of Medtronic, Inc., a New
York Stock Exchange company that is a leading manufacturer and distributor of
medical devices around the world. Mr. Serrato worked for Medtronic, Inc., in
various capacities, including Vice President of Worldwide Manufacturing and Vice
President of Pacing Operations, for approximately 18 years until 1996.
In March 1999, the Company signed a ten-year license agreement with
Serrato Enterprises L.L.C., an entity controlled by Mr. Serrato, for the
marketing and distribution of the Company's chronic pain reduction products in
Europe, Africa and the Middle East, excluding Israel and the nations that
formerly constituted the Union of Soviet Socialist Republics. For a summary of
the terms of this agreement, please see "Item 7. Certain Relationships and
Related Transactions." Serrato Enterprises L.L.C. also currently makes the
18-inch and seven-foot models of the Jacobson Resonator and will make all
clinical and portable models for sale in its marketing and distribution
territory. The Company expects to enter into a separate supply and manufacturing
agreement with Serrato Enterprises L.L.C. as well.
In early 1999, the Company and Serrato Enterprises L.L.C. began
construction of a research/testing and educational training facility in
Marbella, Spain. The facility will be operational sometime in the early part of
the fourth quarter of 1999.
Other Planned Uses of Jacobson Resonance
In addition to chronic pain treatment applications, the Company plans
to develop Jacobson Resonance for use in other medical, commercial, agricultural
and industrial applications. They include the following:
1. Jacobson Resonance has been shown to be effective in the
treatment of cardiac arrhythmias in dogs. The Company believes
that this study can lead to the Jacobson Resonator becoming a
required medical device for every hospital emergency room. It
hopes to license this use to a larger medical products company
for development, marketing and distribution.
2. Jacobson Resonance can restructure water molecules to create
greater inter-atomic communication and improve absorption,
coherence, cooperativity and harmony between systems, and
stability. Studies have demonstrated that resonated drinking
water may improve digestion, speed absorption of nutrients in
the gastrointestinal tract and provide ancillary benefits such
as greater regularity, increased stamina and improved
circulation. In July 1999, the Company announced the signing
of a letter of intent with Real Pure Beverage Group, LLC, of
Jackson, Mississippi, for the use of Jacobson Resonance in
multiple water and beverage products lines, including
exclusive marketing and distribution.
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Recently, B.E.A.R. built for the Company a new industrial
model of the Jacobson Resonator consisting of three coils each
ten feet in diameter that are placed vertically and connected
in series for water resonation. After its delivery to Real
Pure early in the fourth quarter of 1999, Real Pure will use
this machine to resonate its water products.
3. Resonation of cosmetics, nutraceuticals and pharmaceuticals
should promote their respective absorption rates and reduce
their respective toxicity to living systems. In July 1999, the
Company announced the signing of a letter of intent for
technology transfer and licensing with O2 Marketing Group,
Inc., a manufacturer of consumer-oriented oxygen products for
the cosmetics, nutraceutical and pharmaceutical industries.
The Company will grant O2 Marketing Group, Inc., an exclusive
license to use Jacobson Resonance for not less than ten years
covering the Republic of South Africa. O2 Marketing Group,
Inc., will grant the Company a license for not less than ten
years covering O2's pure-air system devices, technology and
products.
4. Preliminary testing has shown that resonated water increases
total plant weight and fruit weight of vegetables.
Government Regulation
United States of America
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In the United States of America, the Company's four clinical Jacobson
Resonators for reduction of chronic pain and future clinical products, if any,
are subject to extensive regulation by the federal Food and Drug Administration
(the "FDA"). Prior to commercial sale in the United States, each of the
Company's clinical products must undergo an extensive regulatory approval
process conducted by the FDA under the Federal Food, Drug and Cosmetic Act (the
"FDC Act"). The FDA regulates the clinical testing, manufacturing, labeling,
distributing, and promoting of medical devices. Noncompliance with applicable
requirements can result in failure to receive regulatory clearance or approval
of devices, total or partial suspension of production, fines, injunctions, civil
penalties, recall or seizure of products, and criminal prosecution.
Medical devices are classified into three classes (I, II, or III) on
the basis of the controls necessary to reasonably assure their safety and
effectiveness. After consultation with the FDA, the Company's clinical Jacobson
Resonators should be classified as Class II devices, subject to demonstration of
effectiveness through human clinical trials. They are subject to the general
control requirements of the FDC Act, including registration, labeling,
pre-market notification, and adherence to Good Manufacturing Practices. They
would not be subject to FDA pre-market approval ("PMA") that is required of
Class III devices.
In 1997, the Company filed its submission with the FDA seeking a
determination that the 18-inch clinical Jacobson Resonator qualified as a
nonsignificant risk ("NSR") device for the treatment of osteoarthritis pain of
the knee. On March 4, 1999, the FDA determined that the Company's clinical study
of the 18-inch clinical Jacobson Resonator to demonstrate
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effectiveness was an NSR device study because the resonator did not meet the
definition of a significant risk device under the applicable provision of the
investigational device exemption regulations. This determination in effect means
that the resonator meets the FDCA requirements as to safety.
The Company completed the double blind and randomized clinical studies
to demonstrate effectiveness in 1999, and submitted to the FDA on May 27, 1999,
its pre-market notification report for the 18-inch Jacobson Resonator in the
treatment of osteoarthritis pain of the knee. At the request of the FDA, the
Company filed an addendum to the report on September 17, 1999. The Company is
currently awaiting the FDA response.
The Company may decide, or may have to, obtain PMAs and PMA supplements
for its future products or other uses. A PMA application must be supported by
extensive data, including pre-clinical and clinical trial data, to demonstrate
the safety and effectiveness of the device for the uses specified in the PMA
application. The Company can not guarantee that any PMA application relating to
the Jacobson Resonator that is filed will be granted on a timely basis, if at
all.
If the Company does obtain a PMA, it may be required to file PMA
supplements for new or expanded uses of the Jacobson Resonator and for any
material modifications to it. If a PMA supplement is not accepted by the FDA for
a new or expanded use or material modification of the Jacobson Resonator, the
Company must commence and complete the entire pre-market approval process with
respect to such use or modification. The Company cannot guarantee that any PMA
supplement that it files will be accepted on a timely basis or at all.
Any products manufactured or distributed by the Company pursuant to FDA
clearance or approval are subject to pervasive and continuous regulation by the
FDA, including record-keeping requirements, reports of adverse experience with
the use of the device, post-market surveillance, post-market registry, and other
actions as deemed necessary by the FDA. Product labeling and promoting
activities are subject to scrutiny by the FDA and, in certain instances, by the
Federal Trade Commission. The Company and its agents may promote products only
for the products' approved indications. The Company cannot guarantee that the
FDA will not impose modifications to the labeling that could adversely affect
its ability to market, sell, or be reimbursed for the Jacobson Resonator. In
addition, the Company cannot guarantee that it will not become subject to FDA
actions should physicians prescribe the Jacobson Resonator for unapproved uses.
The portable models of the Jacobson Resonator are classified as Class I
devices because they are battery-operated, are of nonsignificant risk and have
no medical claims associated with them. As a result, they are not subject to FDA
approval before marketing, distribution and sale.
The Company is also subject to numerous federal, state, and local laws
relating to such matters as safe working conditions, manufacturing practices,
environmental protection, fire- hazard control, and disposal of hazardous or
potentially hazardous substances. The Company can not guarantee that it will not
be required to incur significant costs to comply with such laws and regulations
in the future, or that such laws or regulations will not have a material adverse
effect upon its business, financial conditions, results of operations, or cash
flows.
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International
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In order to market and sell the Jacobson Resonator or any future
products in foreign markets, the Company must comply with foreign government
regulations. These laws differ substantially from country to country. In Europe,
the Company will be required to comply with the Medical Device Directive, which
covers most medical devices. Under the Medical Device Directive, effective in
June 1998, medical devices must bear a CE mark to be marketed and sold in the
European Union. To obtain the CE mark, a manufacturer must demonstrate
compliance with product safety requirements as well as quality system
requirements. The CE mark is recognized by countries that are members of the
European Union and the European Free Trade Association. The Company has received
the Ila classification, which references a medical instrument that is
non-hazardous, and an active therapeutic and diagnostic device. Through CETECOM,
a Spanish firm certified by the European Commission, the Company applied for CE
Mark approval and expects to receive the approval in the early part of the
fourth quarter of 1999.
Members of the European Union must accept a CE mark for marketing
medical devices without imposing further requirements related to product safety
and performance. However, each country may require the use of its own language
on labels and instructions for use. In addition, National Competent Authorities,
which are required to enforce compliance with the requirements of the Medical
Device Directive, can restrict, prohibit, and recall CE-marked products if they
are considered to be unsafe. Such a decision must be confirmed by the European
Commission to be valid. Member countries may impose additional requirements as
long as they do not violate the Medical Device Directive or constitute technical
barriers to trade.
The Company can not say with certainty that the FDA or any foreign
regulatory authority will approve its current or future products in a timely
manner, if at all. If the Company experiences delays or failure in obtaining
such approvals, of if previously granted approvals are rescinded, or if the
Company fails to comply with existing or future regulatory requirements, then
its business, financial condition, results of operations and cash flows will be
materially and adversely affected.
Research and Development
Current university studies of the effects of Jacobson Resonance upon
biological systems consist of the following:
1. Nerve repair, growth and regeneration - Cornell University
Medical College in New York City has completed in vitro
sciatic nerve studies in mice, which demonstrated that
application of Jacobson Resonance stimulated growth, repair
and regeneration of damaged sciatic nerves of mice. Jacobson
Resonance especially enhanced the growth, repair and
regeneration of the myelin sheath without disturbing the
integrity of the cellular and subcellular structures. Similar
in vivo studies are ongoing in mice. The principal
investigator is Dr. Brij Saxena, a Professor of Endocrinology
and Biochemistry at the college, the Director of the
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Division of Reproductive Endocrinology in the Department of
Obstetrics and Gynecology at Cornell Medical Center /New York
Hospital, and a member of the Company's Scientific Advisory
Board.
2. Nerve regeneration - A study on the effect of Jacobson
Resonance upon a chemically induced motor neuropathy model in
mice is ongoing at Cornell University Medical College and
Fairleigh Dickinson University. The principal co-investigators
are the husband and wife team of Dr. Brij Saxena and Dr.
Anjali Saxena, Professor of Biology and a neuro-scientist at
Fairleigh Dickinson University.
3. Cardiac pacing - The Department of Cardiovascular Research of
the University of Oklahoma Health Sciences Center is
conducting studies in dogs and has determined that Jacobson
Resonance is effective in the treatment of cardiac arrhythmias
in dogs. The principal co-investigators are Dr. Benjamin
Scherlag, Research Director of the Cardiovascular Laboratory,
and Dr. William Yamanashi, Research Professor of Medicine and
a Medical Physicist. Drs. Scherlag and Yamanashi are both
members of the Company's Scientific Advisory Board.
4. Angina - Quantitative pain studies in rats to determine
whether Jacobson Resonance can reduce angina are occurring at
the University of Oklahoma Medical School. The initial data
appears promising. The principal investigator is Dr. Robert
Foreman, Chairman of Physiology.
5. Vegetable growth enhancement - The Vegetable Improvement
Center of Texas A&M University conducted a pilot study in late
1998 of the effects of resonated spring water on growth and
fruiting of yellow crookneck squash. Because of the promising
results of this study, the center conducted a second study
involving cucumber, radish and squash in 1999. The results
remain promising and studies will continue. The principal
investigator is Dr. Leonard Pike, the Director of the
Vegetable Improvement Center.
6. Epilepsy - A double blind and randomized clinical pilot study
was recently completed at the University of Oklahoma Health
Sciences Center to determine whether Jacobson Resonance can
reduce the frequency and severity of epileptic seizures. The
principal investigator was Dr. Kalarickal J. Oommen, Associate
Professor of Neurology and Director of Epilepsy Research. The
data from the study is currently being evaluated.
7. Cancer - In early October 1999, the Company announced that the
Veterinary Pharmacology Research Laboratory at Mississippi
State University has begun in vitro cancer research using the
22-inch clinical model of the Jacobson Resonator. The research
will evaluate the influence of electromagnetic fields in the
pico tesla range of strength upon cancer cells. The principal
investigator is Dr. Cody Coyne.
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During the first six months of 1999 and 1998, the Company spent $90,877
and $83,401, respectively, on research and development activities. During the
fiscal years ended December 31, 1998 and 1997, the Company spent $232,799 and
$104,647, respectively, on research and development activities.
Intellectual Property
The Company is the exclusive licensee of Jacobson Resonance from Dr.
Jacobson, who is the sole owner of all patents issued or pending. Dr. Jacobson
is also the sole owner of all relevant Jacobson Resonance intellectual property.
The Company has the exclusive rights to pursue whatever applications of Jacobson
Resonance that it wants. In return, the Company is obligated to pay Dr. Jacobson
a 3% or 4% royalty on revenues, depending upon the application.
Legal standards relating to the validity of patents covering medical
devices and biotechnological inventions and the scope of claims made under such
patents are still developing. For this reason, the Company cannot guarantee any
of the following:
1. that patent applications will result in the issuance of
patents in foreign countries;
2. that any patents licensed to the Company will be free from
challenge and that if challenged, they would be held to be
valid;
3. that any such patents will provide commercially significant
protection to the Company's technology, products, and
processes; or
4. that others will not develop substantially equivalent
proprietary information that is not covered by patents to
which the Company owns rights, or that others will not
otherwise obtain access to the Company's know-how.
The Company has not received any notices alleging, and is not aware of,
any infringement by the Company of any other entity's patents. However, because
of the volume of patents issued and patent applications filed relating to
medical devices, the Company cannot guarantee that current and potential
competitors and other third parties have not filed or will not file patent
applications, or have not received or will not receive patents, relating to
materials or processes it uses or propose to use. Accordingly, the Company
cannot guarantee that its products do not infringe any patents or proprietary
rights of third parties.
If another party claims subject matter identical to or overlapping with
subject matter Dr. Jacobson has claimed in a United States patent or patent
application, the Company may decide or be required to participate in
interference proceedings in the United States Patent and Trademark Office to
determine priority of invention. Loss of such an interference proceeding would
deprive the Company of patent protection sought or previously obtained by Dr.
Jacobson. Participating in such proceedings could result in substantial costs,
regardless of whether the eventual outcome is favorable.
In addition to patent protection, the Company relies on trade secrets,
proprietary know-how, and confidentiality and assignment of invention agreements
with its consultants and
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medical advisors to protect its intellectual property. The Company cannot say
with certainty that any intellectual property that it has will provide it with a
competitive advantage or will not be challenged or circumvented by its
competitors. The Company cannot say with certainty that its confidentiality and
assignment of invention agreements will not be breached or that it would have
adequate remedies for any such breach. Finally, the Company cannot say with
certainty that its proprietary know-how and intellectual property will not
become known or be independently discovered by others.
Litigation may be necessary to defend against claims of infringement,
to enforce patents and copyrights issued or licensed to the Company, or to
protect trade secrets. If the Company must litigate such issues, it may be
forced to incur substantial costs and to devote substantial resources and time.
The Company furthermore cannot guarantee that it would prevail in such
litigation, should it arise. In addition, if any relevant claims of third-party
patents are upheld as valid and enforceable, the Company could be prevented from
selling its products or otherwise be required to obtain licenses from the owners
of such patents. The Company cannot guarantee that such licenses would be
available or, even if available, would be on acceptable terms to it. If the
Company is forced to incur substantial costs in litigation or fails to obtain a
license, its business, financial condition, results of operations, and cash
flows may be materially and adversely affected.
Competition
The development of electromedical and electrotherapeutic medical
devices that can emit a weak electromagnetic field in resonance with the human
body's electromagnetic field is in its infancy. To the Company's knowledge,
there are only two groups of scientists in the world that are dealing with the
pico tesla magnetic-fields.
One group is at Democrition University of Thrace, Alexandroupolis,
Greece. They are primarily engaged in research, but some treatment is being
performed for epilepsy and Parkinson's Disease. The supervising professor is Dr.
Photios Anninos, the Director of Medical Physics for Democrition University, who
is also a member of the Company's Scientific Advisory Board.
The only other known party working on force-fields this weak is Dr.
Reuven Sandyk, a medical physician in Long Island, New York. Dr. Sandyk is a
neurologist and he has been treating patients with Parkinson's, Alzheimer's and
Multiple Sclerosis. To the Company's knowledge, Dr. Sandyk has not secured an
FDA registration number for his resonator device and does not appear to be
inclined to go into commercial production with this apparatus. His resonator is
merely an extension of his neurological practice .
Both Dr. Sandyk and Dr. Anninos engage in exploratory research as an
extension of their respective practices. Dr. Sandyk, the only U.S.-based group,
does not appear to be inclined to navigate the time-consuming and expensive
route of securing FDA approval for his apparatus, which is a mandatory
precondition for pursuing commercial production of the device. Dr. Anninos, on
the other hand, limits his focus predominantly to epilepsy. Both Dr. Sandyk and
Dr.
11
<PAGE>
Anninos employ devices with multiple small coils producing heterogeneous fields
which, in the opinion of Dr. Jacobson, is not the correct approach.
Dr. Richard Markoll has established around the world about 150 clinics
focusing primarily on the treatment of osteoarthritis using magnetic
force-fields that are approximately one million to ten million times more
powerful than the force-fields emitted by the Jacobson Resonator. Dr. Markoll
seems to be content with limiting himself to this area. These clinics have been
in operation for many years. Dr. Markoll has secured a CE Mark but he has not
obtained FDA approval.
Finally, there is a company in Japan called Nikken, which produces
permanent magnets. These are very strong magnets which emit force-fields that
are millions and even billions of times stronger than the force-fields emitted
by the Jacobson Resonator. These magnets claim to improve circulation or to
treat pain. To the Company's knowledge, these claims have not been medically
substantiated and the FDA has never passed on the validity of these treatments.
The Company does not regard these permanent magnets as a true competitor.
In sum, the Jacobson Resonator does not appear to face direct
competition in either the United States of America or abroad.
Employees
The Company has three full-time employees and they are all executive
officers. They are Dr. Jerry I. Jacobson, Ms. Debra Jacobson and Mr. Frank
Chaviano. There are no collective bargaining agreements and no employment
contracts in force.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Plan of Operation
The Company is in the development stage and has not had any significant
revenue from operations to date. However, the Company anticipates FDA approval
of its 18-inch clinical Jacobson Resonator for treatment of chronic pain from
osteoarthritis of the knee and CE-Mark approval of its 18-inch and seven-foot
clinical Jacobson Resonators for treatment of the whole spectrum of chronic pain
in the fourth quarter of 1999. Receipt of those approvals will allow the
Company's licensees to make, market, distribute and sell those clinical products
on a commercial basis in the United States of America and Europe. In addition,
the Company's licensees are currently gearing up to make, market, distribute and
sell the Company's portable Jacobson resonators on a commercial basis. The
foregoing combination of events is expected to generate ongoing revenue for the
Company and thereby bring it out of the development stage into the operating
stage during the calendar year 2000.
Other possible sources of revenue for the Company during the rest of
1999 and/or calendar year 2000 include the following:
12
<PAGE>
1. Licensing revenue from a larger medical products company for
the development, marketing and distribution rights in
connection with the use of Jacobson Resonance in the treatment
of cardiac arrhythmias. The Company thinks that interest in
such a licensing arrangement will be generated by the
publication of the results of the completed research in
cardiac pacing at the University of Oklahoma Health Sciences
Center that Jacobson Resonance is effective in the treatment
of cardiac arrhythmias in dogs.
2. Licensing revenue from Real Pure Beverage Group, LLC, of
Jackson, Mississippi, for the use of Jacobson Resonance in
multiple water and beverage product lines, including exclusive
marketing and distribution. The Company has a letter of intent
with Real Pure and is currently negotiating a definitive
license arrangement.
3. Licensing revenue from O2 Marketing Group, Inc., a
manufacturer of consumer-oriented oxygen products for the
cosmetics, nutraceutical and pharmaceutical industries,
for an exclusive license to use Jacobson Resonance for not
less than ten years covering the Republic of South Africa. The
Company has a letter of intent with O2 and is currently
negotiating a definitive license arrangement.
4. Increases in revenue from its existing licensees for the
clinical Jacobson Resonators because of additional FDA and
CE-Mark approvals. After receipt of the currently pending
applications for FDA and CE-Mark approvals, the Company plans
to seek additional FDA approvals for the other three clinical
models of the Jacobson Resonator and for treatment of the
entire chronic pain spectrum, not just osteoarthritis of the
knee. It also plans to seek CE-Mark approval of the other two
clinical models of the Jacobson Resonator. These approvals
would broaden the product line in both the United States of
America and Europe and would broaden the applications for the
clinical Jacobson Resonators in the United States of America.
The Company will continue both use and product research and development
for Jacobson Resonance. The Company estimates that the ongoing university
research described in the part of Item 1 entitled "Description of Business-
Research and Development" will require about $200,000 of the Company's funds
through the middle of 2000. It anticipates continued prototyping of additional
models of the Jacobson Resonator for varying uses. It estimates that the costs
to the Company of such prototyping will be approximately $100,000 through the
middle of 2000.
13
<PAGE>
Liquidity and Capital Resources as of June 30, 1999
The Company's cash on hand at June 30, 1999, was $1,026,046, as
compared to $642,680 at December 31, 1998. Revenues for the first six months of
1999 were $16,581, as compared to $19,433 for the first six months of 1998. The
Company had a net loss of $2,845,269 for the first half of 1999, as compared to
a net loss of $374,438 for the first half of 1998, an increase of $2,470,831. Of
that amount, $2,089,099 comes from a one-time, non-cash interest expense as a
result of the Company's sale of convertible debentures and warrants to purchase
common stock in early June 1999; only $383,231 of the increase is attributable
to an increase in total operating expenses.
The Company's primary source of funds during the first half of 1999 was
a private offering of $999,100 in original principal amount of 2% Convertible
Debentures Due June 2, 2004, and warrants to purchase 900,000 shares of its
common stock at $.001 per share. The debentures are convertible at the option of
the holders at any time, and shall be converted at their maturity, into shares
of common stock at the lesser of (1) $3.00 per share or (2) 75% of the average
closing bid price per share for the five trading days immediately preceding the
conversion date, subject to a minimum conversion price of $0.50 per share.
Interest on the debentures is payable at conversion or maturity and can be in
the form of either cash or shares of common stock, at the option of the Company.
The Company received net offering proceeds of $891,390. To date, $874,280 in
principal amount of the debentures, plus accrued interest, have been converted
into 1,611,003 shares of common stock and all of the warrants have been
exercised.
The Company anticipates that its existing resources will be sufficient
to fund its plan of operation through the middle of 2000. By that time, the
Company expects to be generating sufficient revenue to fund its plan of
operation after then. However, if the Company by that time is not generating any
revenue or is generating insufficient revenue for such funding, then the Company
may have to seek additional funds through either debt or equity financing.
Liquidity and Capital Resources as of December 31, 1998
The Company's cash on hand at December 31, 1998, was $642,680, as
compared to $3,802 at the end of 1997. Revenues for 1998 dropped slightly to
$58,846, as compared to $66,286 for 1997. The Company had a net loss of $952,276
for 1998, as compared to a net loss of $315,319 for 1997.
The Company completed two private placements during 1998, which were
the Company's primary source of funds. In the first offering, the Company sold
4,675,850 shares of common stock at $0.15 per share and received net offering
proceeds of $663,970. In the second offering, the Company sold 2,017,999 units
at $0.35 per unit and received net offering proceeds of $692,174. Each unit
consisted of one share of common stock and a four-year warrant to purchase an
additional share of common stock for $0.45 per share.
14
<PAGE>
ITEM 3. DESCRIPTION OF PROPERTY
The Company is currently renting office space in Boca Raton, Florida,
pursuant to a lease that will expire on July 31, 2003, and in Juno Beach,
Florida, pursuant to a lease that will expire on August 31, 2000. The Boca Raton
office has 2,900 square feet of space and a current annual rent of $90,228. The
Juno Beach office has 325 square feet of space and a current annual rent of
$12,396.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of October 12, 1999, the beneficial
ownership of the voting securities of the Company by each person beneficially
owning more than 5% of such securities, by each of the directors and executive
officers of the Company, and by the directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent of Class
of Beneficial Owner (1) of Beneficial Ownership (2) Outstanding
- ----------------------- --------------------------- -----------------
<S> <C> <C>
Dr. Jerry I. Jacobson 45,000 shares of Series A
Convertible Preferred Stock (3) 100.0%
10,709,685 shares of
common stock (4) 29.8%
Alfonso Serrato 1,726,352 (5) 4.7%
Debra M. Jacobson 391,906 (6) 1.1%
Frank A. Chaviano 387,572 (7) 1.1%
All directors and executive officers 13,215,515 (8) 36.0%
as a group (4 persons)
</TABLE>
- ---------------
(1) The address of each person named in the table is c/o Jacobson Resonance
Enterprises, Inc., 9960 Central Park Boulevard, Suite 302, Boca Raton,
Florida 33428.
(2) For all entries in the table other than the one for Dr. Jerry I.
Jacobson, the figures represent beneficial ownership of shares of the
Company's common stock.
(3) Each share of the Series A Convertible Preferred Stock is entitled to
1,000 votes on all matters submitted to a vote of the Company's
shareholders. As a result, Dr. Jacobson controls 69.0% of the combined
voting power of the Company's outstanding shares of preferred and
common stock. The Series A Convertible Preferred Stock is not entitled
to any dividends and has a liquidation preference equal to its par
value, which is a total of
15
<PAGE>
$45.00. At the option of Dr. Jacobson, up to one-third of the
outstanding shares of the Series A Convertible Preferred Stock can be
converted into shares of the Company's common stock beginning in May of
each of the years 2000, 2001 and 2002. The conversion ratio is 1,000
shares of common stock for each share of preferred stock.
(4) This figure does not include beneficial ownership of shares of the
Company's common stock by Debra M. Jacobson, the wife of Dr. Jacobson,
as to which shares Dr. Jacobson disclaims any beneficial interest. Ms.
Jacobson's beneficial ownership is separately listed in the table.
Together Dr. and Ms. Jacobson beneficially own 11,101,591 shares, or
30.8%, of the Company's common stock. This figure also excludes 200,000
shares owned of record by the Perspectivism Foundation, of which Dr.
Jacobson is the founder and a director. Dr. Jacobson disclaims any
beneficial interest in those shares.
(5) This figure represents 1,167,495 shares owned of record by Mr. Serrato,
542,857 shares subject to warrants held by Mr. Serrato, and 16,000
shares subject to options granted to Mr. Serrato. It excludes 28,571
shares owned of record by Mr. Serrato's wife and 28,571 shares subject
to warrants held by her. Mr. Serrato disclaims any beneficial interest
in those shares.
(6) This figure represents 311,906 shares owned of record by Ms. Jacobson
and 80,000 shares subject to options granted to Ms. Jacobson. It does
not include beneficial ownership of shares of the Company's common
stock by Dr. Jerry I. Jacobson, the husband of Ms. Jacobson, as to
which shares Ms. Jacobson disclaims any beneficial interest. Together
Dr. and Ms. Jacobson beneficially own 11,101,591 shares, or 30.8%, of
the Company's common stock. This figure also excludes 200,000 shares
owned of record by the Perspectivism Foundation, to which Ms. Jacobson
donated the shares and of which Ms. Jacobson is a director. Ms.
Jacobson disclaims any beneficial interest in those shares.
(7) This figure represents 307,572 shares owned of record by Mr. Chaviano
and 80,000 shares subject to options granted to Mr. Chaviano.
(8) This figure represents 12,496,658 shares owned of record by the
Company's directors and executive officers as a group, 176,000 shares
subject to options granted to them and 542,857 shares subject to
warrants held by them. Taking into account the 45,000 shares of the
Company's Series A Convertible Preferred Stock owned by Dr. Jacobson,
the Company's directors and executive officers collectively control
71.3% of the combined voting power of the Company's outstanding shares
of preferred and common stock.
16
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the names and ages of the directors and
executive officers and directors of the Company, as well as the positions held
by such persons:
<TABLE>
<CAPTION>
Name Age Position (1)
---- --- ------------
<S> <C> <C>
Dr. Jerry I. Jacobson (2) 53 Chairman of the Board, President
and Chief Executive Officer
Alfonso Serrato 55 Director
Debra M. Jacobson (2) 48 Senior Vice President, Treasurer, Secretary
and Director
Frank A. Chaviano 51 Senior Vice President
</TABLE>
- ----------------
(1) All directors and officers are elected for terms of for one year and until
their successors have been elected and qualified. Vacancies in the existing
board are filled by majority vote of the remaining directors. Board members are
serving without compensation. Officers serve at the pleasure of the Board.
(2) Dr. Jerry I. Jacobson and Debra M. Jacobson are husband and wife.
Dr. Jerry I. Jacobson has been the Chairman, President and Chief
Executive Officer of the Company since June 1996 and of its privately-held
predecessor since March 1995. Dr. Jacobson holds a Bachelor of Arts degree in
Philosophy from Brooklyn College of the City University of New York and D.D.S.
and D.M.D degrees from Temple University. He has also received extensive
informal training in physics after auditing 25 courses at different universities
in the New York City metropolitan area. Dr. Jacobson has also been a student of
Albert Einstein's work throughout his life. Since his discovery of a new law of
nature, Dr. Jacobson has focused his science, denoted as Jacobson Resonance, on
medical therapy for more than a decade. His publishing credits include more than
60 articles, more than 15 abstracts, three book chapters and two books. He holds
seven issued, allowed or pending United State of America patents, for three of
which there are currently patents issued or pending in 75 foreign countries.
Alfonso Serrato has been a director of the Company since June 1998. Mr.
Serrato worked for Medtronic, Inc., a New York Stock Exchange company that is a
leading manufacturer and distributor of medical devices around the world, from
1978 until 1996 in various capacities. His positions included Vice President of
Worldwide Manufacturing and Vice President of Pacing Operations. He is the
controlling person of Serrato Enterprises, L.L.C., a licensee of the Company and
the entity that is spearheading the Company's European initiatives.
Debra M. Jacobson has been a director, the Treasurer and the Secretary
of the Company since August 1996 and Senior Vice President of the Company since
September 1999. She has
17
<PAGE>
been married to Dr. Jacobson and served as his private secretary for
approximately 25 years. As Dr. Jacobson has suffered from glaucoma for over 20
years, Ms. Jacobson has been invaluable as a research assistant and editor.
Previously, Ms. Jacobson worked as a flight attendant for Eastern Airlines and
as a secretary. She is a graduate of the prestigious Katherine Gibbs Secretarial
School in New York, New York.
Frank A. Chaviano joined the Company as Vice President in 1997 and
subsequently became Senior Vice President and Chief Operating Officer.
Previously, Mr. Chaviano served from 1996 to 1997 as Senior Vice President of
American Healthcorp responsible for physician practice management and
development. From 1994 until 1996, he was Senior Vice President of Integrated
Health Services, Inc., and from 1992 until 1994, he was Senior Vice President of
Integracare, Inc. In those positions Mr. Chaviano assisted with the acquisition
and development of more than 100 medical practices.
ITEM 6. EXECUTIVE COMPENSATION
Dr. Jacobson, the Company's Chief Executive Officer, does not receive
any cash or non-cash compensation from the Company. None of the executive
officers of the Company received more than $100,000 in annual salary and bonus
in any of the last three full fiscal years of the Company.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is the exclusive licensee of Jacobson Resonance from Dr.
Jacobson, who is the sole owner of all patents issued or filed. Dr. Jacobson is
also the sole owner of all relevant Jacobson Resonance intellectual property.
The Company has the exclusive rights to pursue whatever applications of Jacobson
Resonance that it wants through October 2004. In return, the Company is
obligated to pay Dr. Jacobson a 3% or 4% royalty on revenues, depending upon the
application.
The Company in March 1999 entered into a ten-year license agreement
with Serrato Enterprises L.L.C., an entity controlled by Alfonso Serrato, a
director of the Company, for the marketing and distribution of the Company's
chronic pain reduction products in Europe, Africa and the Middle East, excluding
Israel and the nations that formerly constituted the Union of Soviet Socialist
Republics. The stated term of the agreement runs through the year 2008 and
contains two automatic renewals thereafter of five year each, but is subject to
earlier termination by either party upon at least 90 days' prior written notice
to the other party. The Company is to receive a sales royalty of 16% of gross
sales payable on a quarterly basis within 30 days after the end of each calendar
quarter. The Company is also to receive a manufacturing license override fee of
$1,000 for each 18" and 22" Jacobson Resonator and $1,500 for each seven foot
Jacobson Resonator ordered by and delivered to the licensee. These fees are
payable within 45 days of initial shipment of the product from the manufacturing
facility.
Mr. Serrato in November 1998 made a $60,000 one-year loan to the
Company with interest at 7% per annum. He had the option at any time to convert
the loan and any accrued
18
<PAGE>
interest into shares of the Company's common stock at $0.21 per share, which
approximated the fair market value of the Company's common stock at the time the
loan was made. In March 1999, he converted the loan and accrued interest into
291,305 shares of the Company's common stock.
From time to time since late 1997 on approximately a quarterly basis,
the Company has issued shares of its common stock to its executive officers
either in lieu of cash compensation or as bonuses. For more information on these
issuances, please see Item 4 of Part II entitled "Recent Sales of Unregistered
Securities." Debra Jacobson, a director as well as an executive officer of the
Company, has received stock in most of these issuances. The following table sets
forth pertinent information on the issuances to Ms. Jacobson:
<TABLE>
<CAPTION>
Number of Value per Aggregate
Date Shares Share Value
---- ------ ----- -----
<S> <C> <C> <C> <C>
November 1997 5,000 $0.15 $ 750
July 1998 83,334 0.35 29,167
October 1998 25,000 0.25 6,250
December 1998 30,000 0.25 7,500
March 1999 98,572 0.35 34,500
May 1999 200,000 0.35 70,000
</TABLE>
ITEM 8. DESCRIPTION OF SECURITIES
The Company's Articles of Incorporation authorize the issuance of 100
million shares of Common Stock, $.001 par value per share, of which 35,760,718
shares were outstanding as of September 30, 1999. The Company's Articles of
Incorporation also authorize the issuance of five million shares of preferred
stock, $.001 par value per share, including 45,000 shares of Series A
Convertible Preferred Stock. As of September 30, 1999, all of the 45,000 shares
of Series A Convertible Preferred Stock were outstanding. None of the other
shares of preferred stock were outstanding as of that same date.
Common Stock
Holders of shares of Common Stock are entitled to one vote for each
share on all matters to be voted on by the stockholders. Holders of Common Stock
have no cumulative voting rights. Holders of shares of Common Stock are entitled
to share ratably in dividends, if any, as may be declared from time to time by
the Board of Directors in its discretion, from funds legally available therefor.
In the event of a liquidation, dissolution or winding up of the Company, the
holders of shares of Common Stock are entitled to share pro rata all assets
remaining after payment in full of all liabilities. Holders of Common Stock have
no preemptive rights to purchase the Company's common stock. There are no
conversion rights or redemption or sinking fund provisions with respect to
19
<PAGE>
the common stock. All of the outstanding shares of Common Stock are fully paid
and non-assessable.
Preferred Stock
The Company's Board of Directors has authority, without action by the
shareholders, to issue all or any portion of the authorized but unissued
preferred stock in one or more series and to determine the voting rights,
preferences as to dividends and liquidation, conversion rights, and other rights
of such series.
The holder of shares of the Series A Convertible Preferred Stock is
entitled to 1,000 votes for each share on all matters to be voted on by the
stockholders. The holder of the Series A Convertible Preferred Stock has no
cumulative voting rights. The Series A Convertible Preferred stock is not
entitled to any dividends and has a liquidation preference equal to its par
value, which is a total of $45.00. At the option of the holder, up to one-third
of the outstanding shares of the Series A Convertible Preferred Stock can be
converted into shares of the Company's Common Stock beginning in May of each of
the years 2000, 2001 and 2002. The conversion ratio is 1,000 shares of common
stock for each share of Series A Convertible Preferred Stock.
Transfer Agent
The transfer agent for the Common Stock is Florida Atlantic Stock
Transfer, Inc., located at 7130 Nob Hill Road, Tamarac, Florida 33321.
20
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
The Company's Common Stock is traded on the OTC Bulletin Board(R) under
the Symbol "JRSE." The following table sets forth the range of the high and low
sales prices for the Common Stock on the OTC Bulletin Board(R) for each of the
first two calendar quarters of 1999 and each calendar quarter of 1998 and 1997.
The source of the following information is AOL Online quotation services. These
prices reflect inter-dealer prices, without retail markup, mark-down or
commission and may not represent actual transactions.
<TABLE>
<CAPTION>
Quarter Ending High Low
-------------- ---- ---
<S> <C> <C> <C>
June 30, 1999 $3.12 $1.53
March 31, 1999 2.60 0.21
December 31,1998 0.50 0.18
September 30, 1998 0.6875 0.28
June 30, 1998 1.375 0.38
March 31, 1998 1.50 0.33
December 31, 1997 0.55 0.25
September 30, 1997 0.56 0.38
June 30, 1997 1.125 0.4375
March 31, 1997 2.06 1.00
</TABLE>
As of October 12, 1999, the Company had 619 shareholders of record.
The Company has not declared or paid any dividends on its Common Stock.
The Company currently intends to retain future earnings to fund the development
and growth of its business, and therefore does not anticipate paying any cash
dividends in the foreseeable future. Any future determination to declare and pay
dividends will be made by the Board of Directors of the Company in light of the
Company's earnings, financial position, capital requirements, credit agreements
and such other factors as the Board of Directors deems relevant.
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not Applicable.
21
<PAGE>
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In June 1996, the Company issued 57,220,000 shares of its common stock
to the sole shareholder of Jacobson Resonance Machines, Inc., in connection with
its acquisition of that company. The Company relied upon the exemption from
registration contained in Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act") for this stock issuance.
In May 1997, the Company converted 45,000,000 shares of its common
stock held by Dr. Jerry I. Jacobson, the Chairman, President and Chief Executive
Officer of the Company, into 45,000 shares of Series A Convertible Preferred
Stock. The Company relied upon the exemption from registration contained in
Section 4(2) of the Securities Act for this stock conversion.
In July 1996, the Company issued 10,000,000 shares of its common stock
to private investors at $0.10 per share for a total offering price of
$1,000,000. The Company relied upon the exemption from registration contained in
Rule 504 promulgated pursuant to the Securities Act for this stock issuance. The
Company later reacquired 3,000,000 of these shares in consideration for
cancellation of the corresponding subscription receivable.
In June through December 1997, the Company issued 760,000 shares of its
common stock to three accredited investors for gross offering proceeds of
$140,000. One of the three investors also received 5,000 shares of the Company's
common stock valued at $934 for financial advisory services rendered. The
Company relied upon the exemption from registration contained in Section 4(2) of
the Securities Act for these stock issuances.
In March 1998, the Company raised $660,700 in a private placement by
selling 4,404,663 shares of its common stock at $0.15 per share to accredited
investors. The Company also issued 271,187 shares of its common stock for
payment of commissions in connection with this offering. The Company relied upon
the exemption from registration provided by Rule 506 of Regulation D promulgated
pursuant to the Securities Act for this offering.
In June 1998, the Company completed a second private placement to
accredited investors and issued 2,017,999 shares of its common stock at $0.35
per share, or an aggregate of $706,300. The Company also issued warrants to
purchase 2,107,999 shares at a price of $0.45 per share that can be exercised
until December 2002. The Company paid $14,126 in commissions with respect to
this offering. The Company relied upon the exemption from registration provided
by Rule 506 of Regulation D promulgated pursuant to the Securities Act for this
offering.
In March 1999, the Company issued 291,305 shares of its common stock to
one of its directors in satisfaction of a loan in the amount of $60,000 made to
the Company by that director. The conversion price was $0.21 per share, which
approximated the fair market value of the Company's common stock at the time
when the loan was made. The Company relied upon the exemption from registration
contained in Section 4(2) of the Securities Act for this stock issuance.
In June 1999, the Company made a private offering of $999,100 in
original principal amount of 2% Convertible Debentures Due June 2, 2004, and
warrants to purchase 900,000 shares of its common stock at $.001 per share. The
debentures are convertible at the option of
22
<PAGE>
the holders at any time, and shall be converted at their maturity, into shares
of common stock at the lesser of (1) $3.00 per share or (2) 75% of the average
closing bid price per share for the five trading days immediately preceding the
conversion date, subject to a minimum conversion price of $0.50 per share.
Interest on the debentures is payable at conversion or maturity and can be in
the form of either cash or shares of common stock, at the option of the Company.
The Company received net offering proceeds of $891,390. To date, $874,280 in
principal amount of the debentures, plus accrued interest, have been converted
into 1,611,003 shares of common stock and all of the warrants have been
exercised. The Company relied upon the exemption from registration provided by
Rule 504 of Regulation D promulgated pursuant to the Securities Act for this
offering.
From time to time since late 1997 on approximately a quarterly basis,
the Company has issued shares of its common stock to its executive officers
either in lieu of cash compensation or as bonuses. The Company has relied upon
the exemption from registration contained in Section 4(2) of the Securities Act
for these stock issuances. The following table sets forth pertinent information
on these issuances:
<TABLE>
<CAPTION>
Number of Number of Value per Aggregate
Date Recipients Shares Share Value
---- ---------- ------ ----- -----
<S> <C> <C> <C> <C>
November 1997 4 20,000 $0.15 $3,000
April 1998 2 170,000 0.15 25,500
July 1998 3 138,335 0.35 48,417
October 1998 3 100,000 0.25 25,000
December 1998 3 90,000 0.25 22,500
March 1999 3 250,716 0.35 87,751
May 1999 2 275,000 0.35 96,250
</TABLE>
In October 1996 and February 1997, the Company issued 18,857 shares and
4,114 shares, respectively, of its common stock to an unaffiliated medical
equipment vendor at a mutually agreed value of $1.75 per share, or an aggregate
of $33,000 and $7,200, respectively, for the acquisition of medical research
equipment. The Company relied upon the exemption from registration contained in
Section 4(2) of the Securities Act for these stock issuances.
In December 1997 and January and June 1999, the Company issued 2,000
shares, 40,000 shares and 7,133 shares, respectively, of its common stock valued
at $0.15 per share, $0.22 per share and $1.88 per share, respectively, or an
aggregate of $300, $8,800 and $13,410, respectively, to an unaffiliated attorney
for legal services rendered. The Company relied upon the exemption from
registration contained in Section 4(2) of the Securities Act for these stock
issuances.
In October 1998, the Company issued 94,880 shares of its common stock
at a contractually agreed value of $0.35 per share, or $33,211 in the
aggregate, to four members of its Sports Legends Committee for services. The
Company also granted these individuals options to purchase an aggregate of
142,857 shares of the Company's common stock at $0.35 per share for a three-year
period. The Company relied upon the exemption from registration provided by Rule
701 promulgated pursuant to the Securities Act for these securities issuances.
23
<PAGE>
From time to time, the Company has issued shares of its common stock to
members of its Scientific Advisory Board for services rendered. The Company has
relied upon the exemption from registration contained in Section 4(2) of the
Securities Act for these stock issuances. The following table sets forth
pertinent information on these issuances:
<TABLE>
<CAPTION>
Number of Value per Aggregate
Date Shares Share Value
---- ------ ----- -----
<S> <C> <C> <C> <C>
February 1997 4,000 (1) $0.15 $600
November 1997 5,000 (1) 0.15 750
January 1998 2,000 0.15 300
July 1998 750 0.35 525
July 1998 750 0.35 525
October 1998 10,000 0.25 2,500
October 1998 1,500 (1) 0.25 375
February 1999 1,300 (1) 0.55 715
May 1999 750 (1) 0.35 263
June 1999 650 (1) 1.88 1,222
</TABLE>
- ------------------
(1) One member of the Scientific Advisory Board received all of these stock
issuances for services rendered.
In October 1998, the Company issued 3,000 shares of its common stock
valued at $0.25 per share, or $750 in the aggregate, to an individual for
clinical research services rendered. The Company relied upon the exemption from
registration contained in Section 4(2) promulgated pursuant to the Securities
Act for this stock issuance.
24
<PAGE>
In December 1998, the Company issued 1,000 shares to each of two
individuals for services rendered. The shares were valued at $0.25 per share, or
$500 in the aggregate. The Company relied upon the exemption from registration
contained in Section 4(2) of the Securities Act for these stock issuances.
In June 1999, the Company issued 75,000 shares of its common stock
valued at $1.00 per share, or $75,000, to an individual unaffiliated with the
Company as compensation for investor relations services rendered. The Company
relied upon the exemption from registration contained in Section 4(2) of the
Securities Act for this stock issuance.
In November 1998, the Company granted options to purchase an aggregate
of 608,500 shares of its common stock at $0.35 per share to 17 grantees
pursuant to its 1998 Stock Option Plan. The grantees consisted of three
executive officers, one non-employee director, eight members of the Company's
Scientific Advisory Board and five persons who provided services to the Company.
The exercise period for all of the options is five years from date of grant. The
options vest 50% upon issuance, 30% one year from date of issuance, 10% two
years from date of issuance and 10% three years from date of issuance. The
Company relied upon the exemption from registration provided by Rule 701
promulgated pursuant to the Securities Act for these securities issuances.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation eliminate the personal
liability of a director or officer to the Company or its stockholders for
damages for breach of fiduciary duty as a director or officer, except for (1)
acts or omission that involve intentional misconduct, fraud or a knowing
violation of law or (2) the payment of distributions in violation of the
applicable provisions of the Nevada General Corporation Law. The Company's
bylaws and the applicable provisions of the Nevada General Corporation Law
permit indemnification of the Company's directors and officers so long as the
statutory requirements for such indemnification are met. In addition, the
Company's maintains $1,000,000 of directors' and officers' liability insurance
coverage.
PART F/S
The unaudited financial statements of the Company as of June 30, 1999,
and for the six months ended June 30, 1999 and 1998, are included in this report
at Pages F-1 through F- 6. The audited financial statements of the Company as of
December 31, 1998, and for the two years ended December 31, 1998 and 1997, are
included in this report at Pages F-7 through F-17.
25
<PAGE>
<TABLE>
<CAPTION>
JACOBSON RESONANCE ENTERPRISES, INC.
A DEVELOPMENT STAGE ENTERPRISE
BALANCE SHEET
(Unaudited)
June 30,
1999
-------------
<S> <C>
CURRENT ASSETS
Cash $ 1,026,046
Prepaid Expenses 17,511
-------------
Total Current Assets 1,043,557
Property and Equipment, at Cost, (Net of Accumulated
Depreciation of $10,324) 9,911
Patent Costs 96,809
Deferred Debt Costs (Net of Accumulated Amortization of $1,810) 107,700
Deposits 3,995
-------------
Total Assets $ 1,261,972
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 11,748
-------------
Total Current Liabilities 11,748
-------------
LONG TERM LIABILITIES
Debentures Payable 999,100
-------------
STOCKHOLDERS' EQUITY
Preferred Stock $.001 Par Value, 5,000,000 Shares Authorized;
Issued and Outstanding, 45,000 Shares 45
Common Stock, $.001 Par Value, 100,000,000 Shares Authorized;
Issued and Outstanding, 34,142,897 Shares 34,143
Additional Paid in Capital 4,666,799
Deficit Accumulated During the Development Stage (4,405,189)
Treasury Stock Common (600,000 Shares at Cost) (600)
Subscriptions Receivable (44,074)
-------------
Total Stockholders' Equity 251,124
-------------
Total Liabilities and Stockholders' Equity $ 1,261,972
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-1
<PAGE>
<TABLE>
<CAPTION>
JACOBSON RESONANCE ENTERPRISES, INC.
A DEVELOPMENT STAGE ENTERPRISE
STATEMENTS OF OPERATIONS
(Unaudited)
For the Period
from Inception
For the Six Months Ended June 30, to June 30,
1999 1998 1999
------------ ------------ ----------------
<S> <C> <C> <C>
REVENUES $ 16,581 $ 19,433 $ 141,713
------------ ------------ ------------
COSTS AND EXPENSES:
General and Administrative 692,736 316,981 1,913,506
Research and Development 90,877 83,401 571,813
------------ ------------ ------------
Total Operating Expenses 783,613 400,382 2,485,319
------------ ------------ ------------
Other Income (Expense)
Interest Income 11,686 6,511 28,690
Interest Expense (2,089,923) -- (2,090,273)
------------ ------------ ------------
NET LOSS $ (2,845,269) $ (374,438) $ (4,405,189)
============ ============ ============
PER SHARE INFORMATION:
Net Loss Per Share:
Basic $ (0.09) $ (0.01)
============ ============
Diluted $ (0.09) $ (0.01)
============ ============
Shares Used to Compute Net Loss Per Share
Basic 32,959,188 26,961,971
============ ============
Diluted 32,959,188 26,961,971
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
JACOBSON RESONANCE ENTERPRISES, INC.
A DEVELOPMENT STAGE ENTERPRISE
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period from Inception to June 30, 1999
(Unaudited)
COMMON STOCK PREFERRED STOCK ADDITIONAL
--------------------------- ------------------------- PAID-IN
ISSUED AMOUNT ISSUED AMOUNT CAPITAL
------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Issuance of Founders Stock at Par $.001 57,220,000 $ 57,220 -- $ -- $ (57,220)
Recapitalization - June 4, 1996 4,905,000 4,905 -- -- (4,905)
Issuance of Common Stock at $.10 Per Share 10,000,000 10,000 -- -- 990,000
Issuance of Common Stock at $1.75 Per Share 18,857 19 -- -- 32,981
Purchase of Treasury Stock at Cost -- -- -- -- --
Conversion of Common Stock to Preferred Stock (45,000,000) (45,000) 45,000 45 44,955
Net Loss -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 27,143,857 27,144 45,000 45 1,005,811
Issuance of Common Stock for Services Rendered at
Prices Between $.15 and $1.75 Per Share 40,114 40 -- -- 12,744
Issuances of Common Stock from Private Placement at
Prices Between $.15 and $.25 Per Share 760,000 760 -- -- 139,240
Issuances of Common Stock out of Proceeds of
Subscription Receivable -- -- -- -- --
Net Loss -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1997 27,943,971 27,944 45,000 45 1,157,795
Reacquisition of Common Shares and (3,000,000) (3,000) -- -- (450,000)
Collection of Subscription Receivable
Cash Collection of Subscription Receivable -- -- -- -- --
Issuance of Common Stock from Private
Placement at a Price of $.15 per Share 4,675,850 4,676 -- -- 659,294
Issuance of Common Stock from Private
Placement at a Price of $.35 per Share 2,017,999 2,018 -- -- 690,156
Issuance of Common Stock for Services
Rendered at Prices between $.15 and $.35 per Share 663,223 663 -- -- 176,415
Fair Value of Options Issued to Consultants -- -- -- -- 2,063
Net Loss -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance December 31, 1998 32,301,043 32,301 45,000 45 2,235,723
(CONTINUED TABLE)
DEFICIT
ACCUMULATED
DURING
DEVELOPMENT SUBSCRIPTION TREASURY STOCKHOLDERS'
STAGE RECEIVABLE STOCK EQUITY
------------ ------------- ----------- -------------
Issuance of Founders Stock at Par $.001 $ -- $ -- $ -- $ --
Recapitalization - June 4, 1996 -- -- -- --
Issuance of Common Stock at $.10 Per Share -- (526,550) -- 473,450
Issuance of Common Stock at $1.75 Per Share -- -- -- 33,000
Purchase of Treasury Stock at Cost -- -- (600) (600)
Conversion of Common Stock to Preferred Stock -- -- -- --
Net Loss (292,325 -- -- (292,325)
----------- ----------- ---- ----------
Balance, December 31, 1996 (292,325) (526,550) (600) 213,525
Issuance of Common Stock for Services Rendered at
Prices Between $.15 and $1.75 Per Share -- -- -- 12,784
Issuances of Common Stock from Private Placement at
Prices Between $.15 and $.25 Per Share -- -- -- 140,000
Issuances of Common Stock out of Proceeds of
Subscription Receivable -- 5,000 -- 5,000
Net Loss (315,319) -- -- (315,319)
----------- ----------- ---- ----------
Balance, December 31, 1997 (607,644) (521,550) (600) 55,990
Reacquisition of Common Shares and -- 450,000 -- (3,000)
Collection of Subscription Receivable
Cash Collection of Subscription Receivable -- 27,476 -- 27,476
Issuance of Common Stock from Private
Placement at a Price of $.15 per Share -- -- -- 663,970
Issuance of Common Stock from Private
Placement at a Price of $.35 per Share -- -- -- 692,174
Issuance of Common Stock for Services
Rendered at Prices between $.15 and $.35 per Share -- -- -- 177,078
Fair Value of Options Issued to Consultants -- -- -- 2,063
Net Loss (952,276) -- -- (952,276)
----------- ----------- ---- ----------
Balance December 31, 1998 (1,559,920) (44,074) (600) 663,475
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
JACOBSON RESONANCE ENTERPRISES, INC.
A DEVELOPMENT STAGE ENTERPRISE
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Continued)
For the Period from Inception to June 30, 1999
(Unaudited)
DEFICIT
ACCUMULATED
COMMON STOCK PREFERRED STOCK ADDITIONAL DURING
--------------------------- ------------------------- PAID-IN DEVELOPMENT
ISSUED AMOUNT ISSUED AMOUNT CAPITAL STAGE
------------ ------------ ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1998 32,301,043 32,301 45,000 45 2,235,723 (1,559,920)
Issuance of Common Stock for Services
Rendered at Prices between $.22 and
$2.69 per Share 650,549 651 - - 282,761 -
Issuance of Common Stock for Repayment
of Debt 291,305 291 - - 60,883 -
Issuance of Common Stock for Exercise
of Warrants 900,000 900 - - 1,754,100 -
Beneficial Conversion Feature on
Convertible Debentures - - - - 333,332 -
Net Loss - - - - - (2,845,269)
----------- --------- ------- ----- ----------- ------------
Balance, June 30, 1999 34,142,897 $ 34,143 45,000 $ 45 $4,666,799 $(4,405,189)
----------- --------- ------- ----- ----------- ------------
(CONTINUED TABLE)
SUBSCRIPTION TREASURY STOCKHOLDERS'
RECEIVABLE STOCK EQUITY
------------ -------- -------------
Balance December 31, 1998 (44,074) (600) 663,475
Issuance of Common Stock for Services
Rendered at Prices between $.22 and
$2.69 per Share - - 283,412
Issuance of Common Stock for Repayment
of Debt - - 61,174
Issuance of Common Stock for Exercise
of Warrants - - 1,755,000
Beneficial Conversion Feature on
Convertible Debentures - - 333,332
Net Loss - - (2,845,269)
--------- ------ ----------
Balance, June 30, 1999 $ (44,074) $ (600) $ 251,124
--------- ------ ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
JACOBSON RESONANCE ENTERPRISES, INC.
A DEVELOPMENT STAGE ENTERPRISE
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Period
from Inception
For the Six Months Ended June 30, to June 30,
1999 1998 1999
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
Net Loss $(2,845,269) $ (374,438) $(4,405,189)
Adjustments to Reconcile Net Loss to Net Cash Flows
Used in Operating Activities:
Depreciation 2,583 2,394 10,324
Amortization 1,810 -- 1,810
Fair Value of Common Stock Issued for Services Rendered 283,412 -- 473,274
Fair Value of Common Stock Issued for Interest Expense 824 -- 824
Stock Issued for Conversion of Warrants
Attributed to Interest 1,753,200 -- 1,753,200
Beneficial Conversion Feature of Debentures 333,333 -- 333,333
Fair Value of Options Issued -- -- 2,063
Changes is Operating Assets and Liabilities:
Prepaid Expenses 3,123 (10,638) (17,511)
Other -- (13,990)
Accounts Payable (32,029) -- 11,747
Interest Payable -- -- 350
Deposits -- 5,100 (3,995)
----------- ----------- -----------
Net Cash Flows Used in Operating Activities (499,013) (391,572) (1,839,770)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Purchase of Fixed Assets (4,000) (9,091) (20,235)
Patent Costs (5,011) (17,263) (96,809)
----------- ----------- -----------
Net Cash Flows Used in Investing Activities (9,011) (26,354) (117,044)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Purchase of Treasury Stock -- -- (600)
Proceeds from Note Payable -- -- 60,000
Proceeds From Issuance of Debentures 890,490 -- 890,490
Proceeds From Exercise of Warrants 900 -- 900
Proceeds from Issuance of Common Stock
from Subscriptions Receivable -- 473,388 653,976
Proceeds from Issuance of Common Stock -- 299,697 1,378,094
----------- ----------- -----------
Net Cash Flows Provided by Financing Activities 891,390 773,085 2,982,860
----------- ----------- -----------
Net Increase in Cash and Cash Equivalents 383,366 355,159 1,026,046
Cash - Beginning of Period 642,680 3,802 --
----------- ----------- -----------
Cash - End of Period $ 1,026,046 $ 358,961 $ 1,026,046
=========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
- -----------------------------------
Cash paid for:
Income Taxes $ -- $ -- $ --
=========== =========== ===========
Interest $ -- $ -- $ --
=========== =========== ===========
NONCASH INVESTING AND FINANCING ACTIVITIES:
- -------------------------------------------
Issuance of Common Stock for Repayment of Debt $ 60,350 $ -- $ --
=========== =========== ===========
Subscriptions Receivable for Issuance of Common Stock $ -- $ -- $ 698,050
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
JACOBSON RESONANCE ENTERPRISES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
For the Six Months Ended June 30, 1999
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Jacobson Resonance
Enterprises, Inc., have been prepared in accordance with generally accepted
accounting principles for interim financial information. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
six months ended June 30, 1999, are not necessarily indicative of the results
that may be expected for the year ending December 31, 1999. For further
information refer to the financial statements and footnotes for the year ended
December 31, 1998 included elsewhere herein.
NOTE 2 - STOCKHOLDERS' EQUITY
During the six months ended June 30, 1999, the Company issued 650,549 common
shares for services. The services were charged to operations and have been
recorded at the quoted market value at the date of issuance or per an agreement
which aggregated $283,412.
The Company issued 291,305 common shares for the repayment of debt of $60,350
and interest expense of $824.
The Company issued $1,000,000 in 2% convertible debentures due June 2, 2004, and
warrants to purchase 900,000 shares of its common stock at $.001 per share. The
Company received net proceeds of approximately $890,000 after costs which are
being amortized over the life of the debentures. As a result of the conversion
feature (75% of the quoted market of the common stock) and the beneficial aspect
to the recipient, the Company recognized an interest charge of $333,333. The
debentures were immediately convertible and the $333,333 of interest has been
charged to current operations.
Additionally, warrants to purchase 900,000 shares of the Company's common stock
were exercised for $900 when the market price was $1.95 a share. As these
warrants were issued and exercised at the time of the issuance of the
debentures, the difference between the market value and the warrant exercise
price was also considered a beneficial conversion price for accounting purposes.
Accordingly, this transaction resulted in a $1,754,100 charge to interest
expense in the current period.
Subsequent to June 30, 1999, through August 6, 1999, $874,280 of the 2%
convertible debentures were converted into common stock. On July 16, 1999,
$100,000 of principal plus interest was converted into 144,645 shares of common
stock, on July 22, 1999, $225,000 of principal plus interest was converted into
363,892 shares of common stock and on August 6, 1999 $549,280 of principal plus
interest was converted into 1,102,466 shares of common stock.
F-6
<PAGE>
To the Board of Directors
Jacobson Resonance Enterprises, Inc.
Boca Raton, Florida
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheets of Jacobson Resonance
Enterprises, Inc. (a development stage enterprise) as of December 31, 1998 and
1997, and the related statements of operations, changes in stockholders' equity,
and cash flows for the years ended December 31, 1998 and 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Jacobson Resonance Enterprises,
Inc. (a development stage enterprise) as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for the years ended December 31,
1998 and 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. The Company is in the development
stage and has no significant revenue from operations. It is utilizing technology
which may require substantial expenditures to successfully market. The Company
must successfully complete its product development and marketing efforts. As a
result the Company may need additional funds. These factors raise substantial
doubt about the ability of the Company to continue as a going concern.
Management's plans in regard to these matters are described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of the foregoing uncertainties.
Millward & Co. CPAs
Fort Lauderdale, Florida
January 29, 1999
F-7
<PAGE>
<TABLE>
<CAPTION>
JACOBSON RESONANCE ENTERPRISES, INC.
A DEVELOPMENT STAGE ENTERPRISE
BALANCE SHEETS
December 31,
--------------------------------
1998 1997
------------ ----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 642,680 $ 3,802
Prepaid Expenses 20,634 6,675
----------- -----------
Total Current Assets 663,314 10,477
Property and Equipment, at Cost, (Net of Accumulated Depreciation of
$7,741 and $2,898 at December 31, 1998 and 1997, respectively) 8,494 3,690
Patent Costs 91,798 50,190
Deposits 3,995 3,675
----------- -----------
Total Assets $ 767,601 $ 68,032
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note Payable $ 60,350 $ --
Accounts Payable 43,776 12,042
----------- -----------
Total Current Liabilities 104,126 12,042
----------- -----------
STOCKHOLDERS' EQUITY
Preferred Stock $.001 Par Value, 5,000,000 Shares Authorized;
Issued and Outstanding, 45,000 Shares in 1998 and
45,000 Shares in 1997 45 45
Common Stock, $.001 Par Value, 100,000,000 Shares Authorized;
Issued and Outstanding, 32,301,043 Shares in 1998
and 27,943,971 Shares in 1997 32,301 27,944
Additional Paid in Capital 2,235,723 1,157,795
Deficit Accumulated During the Development Stage (1,559,920) (607,644)
Treasury Stock Common (600,000 Shares) (600) (600)
Subscriptions Receivable (44,074) (521,550)
----------- -----------
Total Stockholders' Equity 663,475 55,990
----------- -----------
Total Liabilities and Stockholders' Equity $ 767,601 $ 68,032
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
<TABLE>
<CAPTION>
JACOBSON RESONANCE ENTERPRISES, INC.
A DEVELOPMENT STAGE ENTERPRISE
STATEMENTS OF OPERATIONS
For the Year Ended For the Period
December 31, from Inception
-------------------------------------------- to December 31,
1998 1997 1998
------------- ------------ ---------------
<S> <C> <C>
REVENUES $ 58,846 $ 66,286 $ 125,132
------------ ------------ ------------
COSTS AND EXPENSES:
General and Administrative 794,977 276,958 1,220,770
Research and Development 232,799 104,647 480,936
------------ ------------ ------------
Total Operating Expenses 1,027,776 381,605 1,701,706
------------ ------------
Interest Income ( Net of Expense of $350) 16,654 -- 16,654
------------ ------------ -------------
NET LOSS $ (952,276) $ (315,319) $ (1,559,920)
============ ============ =============
PER SHARE INFORMATION:
Net Loss Per Share:
Basic $ (0.03) $ (0.01)
============ ============
Diluted $ (0.03) $ (0.01)
============ ============
Shares Used to Compute Net Loss Per Share
Basic 29,374,150 26,743,278
============ ============
Diluted 29,678,400 26,743,278
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE>
<TABLE>
<CAPTION>
JACOBSON RESONANCE ENTERPRISES, INC.
A DEVELOPMENT STAGE ENTERPRISE
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period from Inception to December 31, 1998
DEFICIT
ACCUMULATED
COMMON STOCK PREFERRED STOCK ADDITIONAL DURING
---------------------------------------------------------- PAID-IN DEVELOPMENT
ISSUED AMOUNT ISSUED AMOUNT CAPITAL STAGE
------------ ----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of Founders Stock at Par $.001 57,220,000 $ 57,220 -- $ -- $ (57,220) $ --
Recapitalization - June 4, 1996 4,905,000 4,905 -- -- (4,905) --
Issuance of Common Stock at $.10 Per Share 10,000,000 10,000 -- -- 990,000 --
Issuance of Common Stock at $1.75 Per Share 18,857 19 -- -- 32,981 --
Purchase of Treasury Stock at Cost -- -- -- -- -- --
Conversion of Common Stock to Preferred Stock (45,000,000) (45,000) 45,000 45 44,955 --
Net Loss -- -- -- -- -- (292,325
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 27,143,857 $ 27,144 45,000 $ 45 $ 1,005,811 $ (292,325)
Issuance of Common Stock for Services
Rendered at Prices Between $.15 and
$1.75 Per Share 40,114 40 -- -- 12,744 --
Issuances of Common Stock from Private
Placement at Prices Between $.15 and
$.25 Per Share 760,000 760 -- -- 139,240 --
Collection of Subscription Receivable -- -- -- -- -- --
Net Loss -- -- -- -- -- (315,319)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1997 27,943,971 $ 27,944 45,000 $ 45 $ 1,157,795 $ (607,644)
Reacquisition of Common Shares and (3,000,000) (3,000) -- -- (450,000) --
Collection of Subscription Receivable
Cash Collection of Subscription Receivable -- -- -- -- -- --
Issuance of Common Stock from Private
Placement at a Price of $.15 per Share 4,675,850 4,676 -- -- 659,294 --
Issuance of Common Stock from Private
Placement at a Price of $.35 per Share 2,017,999 2,018 -- -- 690,156 --
Issuance of Common Stock for Services
Rendered at Prices between $.15 and $.35
per Share 663,223 663 -- -- 176,415 --
Fair Value of Options Issued to Consultants -- -- -- -- 2,063 --
Net Loss -- -- -- -- -- (952,276)
----------- ----------- ----------- ----------- ----------- -----------
Balance December 31, 1998 32,301,043 $ 32,301 45,000 $ 45 $ 2,235,723 $(1,559,920)
----------- ----------- ----------- ----------- ----------- -----------
(CONTINUED TABLE)
SUBSCRIPTION TREASURY STOCKHOLDERS'
RECEIVABLE STOCK EQUITY
----------- ------------ ------------
Issuance of Founders Stock at Par $.001 $ -- $ -- $ --
Recapitalization - June 4, 1996 -- -- --
Issuance of Common Stock at $.10 Per Share (526,550) -- 473,450
Issuance of Common Stock at $1.75 Per Share -- -- 33,000
Purchase of Treasury Stock at Cost -- (600) (600)
Conversion of Common Stock to Preferred Stock -- -- --
Net Loss -- -- (292,325)
----------- ---- -----------
Balance, December 31, 1996 $ (526,550) $ (600) $ 213,525
Issuance of Common Stock for Services
Rendered at Prices Between $.15 and
$1.75 Per Share -- -- 12,784
Issuances of Common Stock from Private
Placement at Prices Between $.15 and
$.25 Per Share -- -- 140,000
Collection of Subscription Receivable 5,000 -- 5,000
Net Loss -- -- (315,319)
----------- ----------- -----------
Balance, December 31, 1997 $ (521,550) $ (600) $ 55,990
Reacquisition of Common Shares and 450,000 -- (3,000)
Collection of Subscription Receivable
Cash Collection of Subscription Receivable 27,476 -- 27,476
Issuance of Common Stock from Private
Placement at a Price of $.15 per Share -- -- 663,970
Issuance of Common Stock from Private
Placement at a Price of $.35 per Share -- -- 692,174
Issuance of Common Stock for Services
Rendered at Prices between $.15 and $.35
per Share -- -- 177,078
Fair Value of Options Issued to Consultants -- -- 2,063
Net Loss -- -- (952,276)
----------- ----------- -----------
Balance December 31, 1998 $ (44,074) $ (600) $ 663,475
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE>
<TABLE>
<CAPTION>
JACOBSON RESONANCE ENTERPRISES, INC.
A DEVELOPMENT STAGE ENTERPRISE
STATEMENTS OF CASH FLOWS
For the Year Ended For the Period
December 31, from Inception
------------------------------------ to December 31,
1998 1997 1998
----------------- ---------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
Net Loss $ (952,276) $ (315,319) $ (1,559,920)
Adjustments to Reconcile Net Loss to Net Cash Flows
From (Used in) Operating Activities:
Depreciation 4,843 1,932 7,741
Stock Issued for Services Rendered 177,078 12,784 189,862
Fair Value of Options Issued 2,063 -- 2,063
Changes is Operating Assets and Liabilities:
Prepaid Insurance (13,959) (2,750) (20,634)
Interest Payable 350 -- 350
Deposits (320) (2,675) (3,995)
Accounts Payable 31,734 869 43,776
----------- ----------- --------------
Net Cash Flows Used in Operating Activities (750,487) (305,159) (1,340,757)
----------- ----------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Purchase of Fixed Assets (9,647) -- (16,235)
Patent Costs (41,608) (29,628) (91,798)
----------- ----------- --------------
Net Cash Flows Used in Investing Activities (51,255) (29,628) (108,033)
----------- ----------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Proceeds From Note Payable 60,000 -- 60,000
Purchase of Treasury Stock -- -- (600)
Proceeds from Issuance of Common Stock 903,144 140,000 1,378,094
Proceeds from Issuance of Common Stock from Subscription Receivable 477,476 176,500 653,976
----------- ----------- --------------
Net Cash Flows Provided by Financing Activities 1,440,620 316,500 2,091,470
----------- ----------- --------------
Net Increase (Decrease) in Cash and Cash Equivalents 638,878 (18,287) 642,680
Cash - Beginning of Period 3,802 22,089 --
----------- ----------- --------------
Cash - End of Period $ 642,680 $ 3,802 642,680
=========== =========== ==============
SUPPLEMENTAL CASH FLOW INFORMATION:
- -----------------------------------
Cash paid for:
Income Taxes $ -- $ -- $ --
=========== =========== ==============
Interest $ -- $ -- $ --
=========== =========== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE>
JACOBSON RESONANCE ENTERPRISES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company was incorporated on March 6, 1988, in the State of Nevada. The
Company is in the development stage and its intent was to locate suitable
business ventures to acquire. On June 4, 1996, the Board of Directors of Pioneer
Services International, Ltd. voted to acquire 100% of the outstanding shares of
Jacobson Resonance Machines, Inc. in exchange for the issuance of 57,220,000
shares of its common stock. The Company and Jacobson Resonance Machines, Inc.
had no activity prior to the acquisition. In 1998 the Company changed its name
to Jacobson Resonance Enterprises, Inc.
As a result of the exchange of stock, the former stockholders of Jacobson
Resonance Machines, Inc. owned 57,220,000 restricted common shares or 92% after
the recapitalization of the Company. Accordingly, this transaction has been
treated, for financial reporting purposes, as a reverse acquisition in which
Jacobson Resonance Machines, Inc. was recapitalized by providing 4,905,000
shares of Pioneer Services International, Ltd. Common stock to its existing
stockholders. The 1996 shareholders' equity section reflects the change in the
capital structure due to the reverse acquisition. As a result, $4,905 was
transferred to common stock from additional paid-in capital (see Note 7).
The Company is a bio-tech and bio-medical company involved in the development of
resonance and electro-magnetic equipment, process and applications. Applications
for the use of resonance technology in the medical, food, agricultural,
recreational, pharmaceutical, and environmental industries are currently being
pursued.
Basis of Presentation
The Company is in the development stage and the Company's operations are subject
to all of the risks inherent of an emerging business enterprise. The Company has
incurred an operating loss of $952,276 and $315,319 for the years ended December
31, 1998 and 1997, respectively. No assurance exists that the Company will not
encounter substantial delays and expenses related to financing its successful
completion of its product development and marketing efforts and/or other
unforeseen difficulties. The Company will be required to expand its management
and administrative capabilities in order to manage the aforementioned items as
well as respond to competitive conditions. These and other factors may require
additional funds and the Company may seek such funds through additional equity
financings, debt financings, collaborative arrangements or from other sources.
Such funds may not be available on terms acceptable to the Company. Based on the
Company's current plans and assumptions, the Company believes its cash on-hand
and subsequent financing will be sufficient to fund its anticipated operations
through fiscal 1999 (see Notes 2 and 7).
Per Share Data
The Company has adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (FAS 128), which establishes new standards for computing
and presenting earnings per share ("EPS") effective for periods ending after
December 15, 1997. FAS 128 requires a dual presentation of basic and diluted
EPS. Because of losses from continuing operations, the effect of stock options
and warrants is antidilutive. Accordingly, the Company's presentation of diluted
earnings per share is the same as that of basic earnings per share in all
periods presented.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and other highly liquid debt
instruments with an original maturity of less than three months.
F-12
<PAGE>
JACOBSON RESONANCE ENTERPRISES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (Continued)
Year Ended December 31, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Property and Equipment
Computers and equipment are stated at cost. Depreciation is charged to
operations over the estimated useful lives of 3-5 years.
Depreciation expense for the years ended December 31, 1998 and 1997 amounted to
$4,843 and $1,932, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Income Taxes
The Company accounts for income taxes under the liability method in accordance
with Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes". Deferred income taxes are determined based upon the difference between
the financial statement carrying amount and the tax basis of assets and
liabilities using tax rates expected to be in effect in the years in which the
differences are expected to reverse.
As of December 31, 1998, the Company has net operating losses amounting to
approximately $952,276 which the Company has elected to carry forward for tax
purposes and accordingly, the loss may be carried forward and used to offset
taxable earnings of future years. The net operating loss carryover will expire
in the year 2013 if not used in any intervening years. The operating losses may
be limited to the extent an "ownership" change occurs. As the utilization of
such operating loss for tax purposes is not assured, the deferred tax asset has
been fully reserved through the recording of a 100% valuation allowance.
Research and Development
Research and development costs are charged to operations when incurred and are
included in operating expenses.
Stock Based Compensation
The Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation" in
1996. SFAS 123 allows either the adoption of a fair value method of accounting
for stock-based compensation plans or continuation of accounting under
Accounting Principles Board ("APB") Opinion No. 25 Accounting For Stock Issued
To Employees, and related interpretations with supplemental disclosures. The
Company has chosen to account for all stock based arrangements under which
employees receive shares of the Company's stock under APB 25 and make the
related disclosures under SFAS 123.
F-13
<PAGE>
JACOBSON RESONANCE ENTERPRISES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (Continued)
Year Ended December 31, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Financial Instruments and Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentrations of
credit risk are primarily cash and accounts receivable. The Company invests its
excess cash in high quality short-term liquid money market instruments with
major financial institutions and the carrying value approximates market value.
The Company does not have significant trade receivables.
The Company believes it is not exposed to any significant credit risk on cash
and/or notes receivable.
NOTE 2 - SUBSCRIPTION RECEIVABLE
During the year the Subscription Receivable was reduced by $450,000, which
represented the remarketing of 3,000,000 common shares. The Company received a
note receivable as security for the outstanding balance. The balance on the note
receivable at December 31, 1998 was $44,074.
NOTE 3 - PATENT COSTS
Patent costs represent legal expenses associated with the application to obtain
certain patents. Upon obtaining these patents, they will be amortized and
charged to operations over their estimated useful lives.
NOTE 4 - NOTE PAYABLE
On November 30, 1998, the Company received a short-term loan in the amount of
$60,000 from a related party. This loan is due and payable on November 30, 1999,
together with interest which accrues at 7% per annum. The holder of the note has
been given an option to convert the note and any accrued interest at any time
prior to maturity into fully-paid shares of the Company's common stock, par
value $.001 per share equal to $.21 per share.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
(A) Operating Lease
The Company is currently renting office space in Boca Raton, Florida and Juno
Beach, Florida, pursuant to operating leases which expire July 31, 2003 and
August 31, 1999, respectively. Rent expense for the years ended December 31,
1998 and 1997 amounted to $81,676 and $44,689, respectively.
F-14
<PAGE>
JACOBSON RESONANCE ENTERPRISES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (Continued)
Year Ended December 31, 1998
NOTE 5 - COMMITMENTS AND CONTINGENCIES (continued)
Future minimum lease payments for the non-cancelable operating lease are:
Year Ended December 31,
1999 $ 53,227
2000 44,959
2001 44,959
2002 44,959
2003 26,226
Thereafter -
-----------
$ 214,330
===========
NOTE 6 - 1998 STOCK OPTION PLAN
In November, 1998, the Company's board of directors approved the 1998 Stock
Option Plan (the Plan). The Plan authorizes the granting of both incentive stock
options and non-statutory stock options up to a total of 10,000,000 shares. The
Plan authorizes the granting of both incentive stock options and non-statutory
stock options. The option price for non-statutory stock options may be less
than, equal to, or greater than the fair market value on the date the option is
granted, whereas for incentive stock options, the price will be at least 100% of
the fair market value. Compensation expense, representing the difference between
the exercise price and the fair market value at date of grant, is recognized
over the vesting or service period. For all the periods presented substantially
all of the options were granted at an exercise price equal to the fair market
value of the Company's common stock at the date of grant. The board of directors
granted 608,500 options to eligible persons. The right to exercise the options
shall vest annually as follows:
(1) The right to exercise the options and to acquire 50% of the shares of
stock underlying the option vests as the date granted.
(2) The right to exercise the option and acquire 30% of the shares of stock
one year after the date it is granted.
(3) The right to exercise the option and acquire 10% of the shares of
stock two years after the date it is granted.
(4) The right to exercise the option and acquire 10% of the shares of stock
three years after the date it is granted.
F-15
<PAGE>
JACOBSON RESONANCE ENTERPRISES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (Continued)
Year Ended December 31, 1998
NOTE 6 - 1998 STOCK OPTION PLAN (continued)
Had compensation expense for the Company's stock option plans been determined
based on the fair value of the underlying common stock at the grant dates,
consistent with Statement of Financial Accounting Standards No. 123, Accounting
for Stock Based Compensation, the Company's net loss and net loss per share
would have been as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Net loss:
As reported ($ 952,276) ($ 315,319)
Pro forma ($ 1,043,551) ($ 315,319)
Basic and diluted
Loss per share:
As reported ($.03) ($.01)
Pro forma ($.04) ($.01)
</TABLE>
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for the year ended December 31, 1998 risk-free interest rate of
5.5%, dividend yield of 0%, volatility factor of the expected market price of
the Company's common stock of 131.09%, and an expected life of the option of 5
years.
The Black-Scholes option pricing model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option pricing models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion the existing models do not necessarily provide a reliable single measure
of the fair value of its employee stock options.
NOTE 7- STOCKHOLDERS' EQUITY
During May 1997, the Company's Board of Directors authorized the conversion of
45,000,000 shares of its common stock into 45,000 shares of its Preferred Stock,
these shares belong to The Company's President. The shares were converted at a
conversion rate of 1 share of Series A Preferred stock for 1,000 Shares of
Common Stock. Each share of Preferred Stock is convertible into 1,000 shares of
Common Stock as follows: 1/3 at the option of the holder beginning three years
from issuance, 1/3 at the option of the holder, beginning four years from
issuance, and the final 1/3 beginning five years from issuance. The May 1997
conversion has been accounted for as if it had occurred as of December 31, 1996.
In 1997, the Company issued 40,114 shares of common stock for services with a
fair value of $12,784. The Company completed a private placement of 760,000
shares of common stock for net proceeds of $140,000.
F-16
<PAGE>
JACOBSON RESONANCE ENTERPRISES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (Continued)
Year Ended December 31, 1998
NOTE 7- STOCKHOLDERS' EQUITY (continued)
The Company completed two private placements during 1998. In March, 1998, the
Company issued 4,075,850 shares of common stock pursuant to a private placement
for a price of $.15 per share. In connection with this private placement, the
Company issued 271,187 shares for commissions.
In June, 1998, there was a second private placement whereby the Company issued
2,017,999 shares for a price of $.35 per share. Each share includes a warrant to
purchase additional common shares at a price of $.45 per share for a four-year
period ended December, 2002. Fees paid relating to this private placement were
$14,126 and have been charged to additional paid in capital. In addition, 40,360
warrants were issued to purchase 40,360 common shares at $.35 per share. The
warrants expire December, 2002, and were issued for services relating to the
private placement.
The Company reacquired 3,000,000 common shares issued in 1996 and cancelled a
subscription receivable in the amount of $450,000 for the purchase of such
shares and received a note receivable in the amount of $71,550. During the year
$27,476 was collected from the note receivable which will be recorded at a value
of $.35 when earned.
During the year the Company issued 663,223 common shares for services. The
services were charged to operations and have been recorded at the quoted market
value at the date of issuance. Included in the shares are 94,888 shares
pursuant to a continuing agreement at a quoted market value of $.35 per share.
The continuing agreement requiring personality endorsements provides for the
issuance of shares at future dates of the following shares:
1999 195,000 shares
2000 205,000 shares
In addition, the Company issued and aggregated 142,857 options to purchase
common shares at $.35 per share (the quoted market value) for a three-year
period ended October 15, 2001. The value of the options using the Black-Scholes
formula amounted to $37,142 and is being amortized over a three-year period
commencing in November, 1998. Amortization during 1998 amounted to $2,063 and
has been charged to operations.
NOTE 8- SUBSEQUENT EVENT
Patent litigation involving Dr. Jerry I. Jacobson, Chief Executive Officer of
Jacobson Resonance Enterprises, Inc., and other parties were settled. The
settlement was approved by all parties and the court. As part of the settlement,
the Company agreed to issue warrants to the other parties and/or Dr. Jacobson to
purchase common shares of the Company. The Company will receive an exclusive
license to certain patents of Dr. Jacobson, and an employment and
non-competition agreement from Dr. Jacobson.
F-17
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
Exhibit Number Exhibit Description
- -------------- -------------------
2.1 Articles of Incorporation, as amended
2.2 Bylaws, as amended
3.1 Specimen Common Stock Certificate
3.2 Specimen Series A Convertible Preferred Stock Certificate
3.3 Specimen 1998 Warrant Agreement
3.4 Specimen 1998 Placement Agent Warrant Agreement
3.5 Specimen 2% Convertible Debenture
6.1 Patent License Agreement Dated October 6, 1999,
Between Dr. Jerry I. Jacobson and the Company
6.2 License Agreement Dated February 23, 1999, Between
the Company and Serrato Enterprises L.L.C.
6.3 1998 Stock Option Plan
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
JACOBSON RESONANCE ENTERPRISES, INC.
Date: October 12, 1999 By: /s/ Jerry I. Jacobson
------------------------------------------
Jerry I. Jacobson, Chief Executive Officer
and President
ARTICLES OF INCORPORATION
OF
PIONEER SERVICES, LTD
*****
We, the undersigned, have voluntarily associated ourselves together for
the purpose of forming a corporation under the laws of the State of Nevada
relating to private corporations, and to that end do hereby adopt articles of
incorporation as follows:
ARTICLE ONE. (NAME). The name of the corporation is:
PIONEER SERVICES, LTD
ARTICLE TWO. (LOCATION). The address of the corporation's principal
office is 1701 West Charleston Boulevard, Suite 425, in the City of Las Vegas,
County of Clark, State of Nevada. The initial agent for service of process at
that address is Jody Scott.
ARTICLE THREE. (PURPOSES). The purposes for which the corporation is
organized are to engage in any activity or business not in conflict with the
laws of the State of Nevada or of the United States of America, and without
limiting the generality of the foregoing, specifically:
I. (OMNIBUS). To have and to exercise all the powers now or
hereafter conferred by the laws of the State of Nevada upon
corporations organized pursuant to the laws under which the corporation
is organized and any and all acts amendatory thereof and supplemental
thereto.
II. (MINING). To carry on the business of mining, milling,
concentrating, converting, smelting, exchanging and otherwise producing
and dealing in uranium, zinc, lead, gold, silver, copper, brass, iron,
steel, coal, and in all kinds of ores, metals, and minerals, oils,
petroleum, natural gas, hydrocarbons, acids and chemicals, and in the
products and byproducts of every kind and description and by whatsoever
process, the same can be or may be produced; to purchase, lease,
option, locate, or otherwise dispose of, pledge, mortgage, deed in
trust, hypothecate, and deal in mines, mining claims, mineral lands,
coal lands, water and water rights, and other property, both real and
personal; and to carry on as principals, agents, commission merchants
or cosignees the business of mining, milling, concentrating,
converting, smelting, treating, refining, buying, selling, exchanging,
manufacturing, and dealing, in the above specified products or any of
them and of
<PAGE>
materials used in the manufacture of each, and any and all of such
articles and to carry on as such principals, agents, commission
merchants or cosignees any other business which in the judgment of the
Board of Directors of the corporation may be conveniently conducted in
conjunction with any of the matters aforesaid.
III. (SMELTING AND REFINING). To engage in the erection and
operation of a smelting and refining works, and to carry on the
business of concentrating, converting, smelting, refining, treating,
preparing for market, and otherwise producing lead, zinc, and all other
kinds of metals and minerals, and generally to engage in the business
of refining, buying selling, exchanging, and otherwise dealing in and
with, at wholesale or retail, all metals and mineral products and
byproducts of every kind and description and by whatsoever process the
same can be or may hereafter be produced.
IV. (MINING CLAIMS). To acquire by purchase or exchange, or in
any other manner, in the United States or in a foreign countries,
mining claims, grounds, or lodes, mining and mineral rights,
concessions or grants, or any interest therein, and to sell, exchange,
lease, or in any other manner to dispose of the whole or any part
thereof or any interest therein when desirable.
V. (OIL WELLS). To engage in the leasing of lands believed to
contain petroleum, oils, and gas; the improving, mortgaging, leasing,
assigning, and otherwise disposing of the same; the prospecting,
drilling, pumping, piping, storing, refining, and selling, both at
wholesale and retail, of oils and gas; the buying, otherwise acquiring,
selling, and otherwise disposing of any and all real estate and
personal property for use in the business of the company; the
construction of any and all buildings, pipe lines, pumping stations,
and storage tanks, and any and all other buildings required in carrying
on the business of the company; the acting as trustee for holders of
oil lands in the receiving and disbursement of funds to be used in
drilling for the common benefit of the land holders; and the doing of
any and every act or thing, proper, necessary, and incidental to the
general purpose of this company.
<PAGE>
VI. (CARRYING ON BUSINESS OUTSIDE STATE). To conduct and carry
on its business or any branch thereof in any state or territory of the
United States or in a foreign country in conformity with the laws of
each state, territory, or foreign country, and to have and maintain in
any state, territory, or foreign country a business office, plant,
store or other facility.
VII. (PURPOSE TO BE CONSTRUED AS POWERS). The purpose
specified herein shall be construed both as purposes and powers and
shall be in no wise limited or restricted by reference to, or
inference from, the terms of any other clause in this or any other
article, but the purposes and powers specified in each of the clauses
herein shall be regarded as independent purposes and powers, and the
enumeration of specific purposes and powers shall not be construed to
limit or restrict in any manner the meaning of general terms or of the
general powers of the corporation; nor shall the expression of one
thing be deemed to exclude another, although it be of like nature not
expressed.
ARTICLE FOUR. (CAPITAL STOCK). The corporation shall have authority to
issue an aggregate of ONE HUNDRED MILLION (100,000,000) shares, par value ONE
CENT ($0.001) per share, for a total capitalization of $100,000.
The holders of shares of capital stock of the corporation shall not be
entitled to pre-emptive or preferential rights to subscribe to any unissued
stock or any other securities which the corporation may now or hereafter be
authorized to issue.
The corporation's capital stock may be issued and sold from time to
time for such consideration as may be fixed by the Board of Directors, provided
that the consideration so fixed is not less than par value.
The stockholders shall not possess cumulative voting rights at all
shareholders meetings called for the purpose of electing a Board of Directors.
ARTICLE FIVE. (DIRECTORS). The affairs of the corporation shall be
governed by a Board of Directors of not less than three (3) persons. The name
and addresses of members of the first Board of Directors are:
NAME AND ADDRESS TITLE
Robert Alvarez President and Director
850 E. Desert Inn, #1007
Las Vegas, NV 89109
T. Karen Alvarez Vice President and Director
850 E. Desert Inn, #1007
Las Vegas, NV 89109
E. Daniel Johnston Secretary Treasurer and
1445 Boonville Ave. Director
Springfield, MO 85800
<PAGE>
ARTICLE SIX. (OFFICERS AND DIRECTORS PERSONAL LIABILITY). Included, a
provision eliminating the personal liability of a director or officer of the
corporation or its stockholders for damages for breach of a fiduciary duty as a
director or officer; but such a provision cannot eliminate the liability of a
director or officer for any acts of omissions which involve internal misconduct,
fraud or a known violation of the law; or the payment of a dividend in violation
of the Nevada revised statues section 78.300.
ARTICLE SEVEN. (INCORPORATORS). The name and address of each
incorporator of the corporation is as follows:
NAME ADDRESS
Jody Scott 2037 Ballard Drive
Las Vegas, Nevada 89014
ARTICLE EIGHT. (PERIOD OF EXISTENCE). The period of existence of the
corporation shall be perpetual.
ARTICLE NINE. (ASSESSMENT OF STOCK). The capital stock of the
corporation, after the amount of the subscription price or par value has been
paid in, shall not be subject to pay debts of the corporation, and no paid up
stock issued as fully paid up shall ever be assessable or assessed.
ARTICLE TEN. (BY-LAWS). The initial By-Laws of the corporation shall be
adopted by its Board of Directors. The power to alter, amend, or repeal the
By-Laws, or to adopt new By-Laws, shall be vested in the Board of Directors,
except as otherwise may be specifically provided in the By-Laws.
ARTICLE ELEVEN. (STOCKHOLDERS' MEETING). Meetings of stockholders shall
be held at such place within or without the State of Nevada as may be provided
by the By-Laws of the corporation. Special meetings of the stockholders may be
called by the President or any other executive officer of the corporation, the
Board of Directors, or any member thereof, or by the record holder or holders of
at least ten per cent (10%) of all shares entitled to vote at the meeting. Any
action otherwise required to be taken at a meeting of stockholders, except
election of directors, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by stockholders having at
least a majority of the voting power.
<PAGE>
ARTICLE TWELVE. (CONTRACTS OF CORPORATION). No contract or other
transaction between the corporation and any other corporation stock of such
other corporation is owned by this corporation, and no act of this corporation
shall in any way be affected or invalidated by the fact that any of the
directors of this corporation are pecuniarily or otherwise interested in, or are
directors or officers of such other corporation. Any director of this
corporation, individually, or any firm of which such director may be a member,
may be a party to, or may be pecuniarily or otherwise interested in any contract
or transaction of the corporation; or a majority thereof; and any director of
this corporation, who is also a director or officer of such other corporation
who is so interested, may be counted in determining the existence of a quorum at
any meeting of the Board of Directors of this corporation that shall authorize
such contract or transaction, and may vote threat to authorize such contract or
transaction, with like force and effect as if he were not such director or
officer of such other corporation or not so interested.
I the undersigned, being the original incorporator for the purpose of
forming a corporation to do business both within and without the State of
Nevada, and in pursuance of the General Corporation Law of the State of Nevada,
effective March 31, 1925 and as subsequently amended do make and file this
certificate, hereby declaring and certifying that the facts herein above stated
are true.
This 5th day of March, 1988.
/s/ Jody Scott
------------------------------
Jody Scott
STATE OF NEVADA )
) SS.
COUNTY OF CLARK )
On the 5th day of March, 1988, before me, the undersigned a Notary
Public, personally appeared JODY SCOTT known to me to be the person described in
and who executed the foregoing instrument, and who acknowledged to me that she
executed the same freely and voluntarily and for the uses and purposes therein
mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal this 5th day of March, 1988.
/s/ R.F. McGuire, Sr.
-------------------------------
Notary Public
Residing in Las Vegas, Nevada
R.F. McGuire, Sr.
Notary Public-State of Nevada
Clark County
My Appointment Expires Nov. 21, 1999
<PAGE>
Telephone (762) 687-6283
Fax (762) 687-3471
STATE OF NEVADA
OFFICE OF THE SECRETARY OF STATE
State Capital Complex
Carson City, Nevada 89710
Certificate of Revival Pursuant to NRS 78.730
For office use only above this line.
PER NRS 78.185 the New Name is Pioneer Services International, Ltd.
1. The name of the corporation: Pioneer Services, Ltd. 1841-88
2. The name and address of the corporation's resident agent:
W. Dale McGhie
---------------------------- -------------------------------------------
(Physical address) Mailing address if different from physical)
1539 Vassar Street
---------------------------- -------------------------------------------
Reno, Nevada 89502
---------------------------- -------------------------------------------
3. The date when the revival of the charter is to commence: February 12, 1996
4. Indicate whether or not the revival is to be perpetual, and, if not
perpetual, the time for which the revival is to continue. The corporation's
existence shall be PERPETUAL or ____________________________________________.
(Time for which the revival is to continue)
5. We/I declare that the corporation desires to revive its corporate charter and
is or has been, organized and carrying on the business authorized by its
existing or original charter and amendments thereto, and desires to continue
through revival its existence pursuant to and subject to the provisions of
this chapter.
6. The name and addresses of the president, secretary and treasurer and all of
the corporation's directors are as follows:
Robert Alvarez 2618 SW 23 Terrace, Ft. Lauderdale, FL 33312
- --------------------------------------------------------------------------------
(president) (address)
Robert Alvarez 2618 SW 23 Terrace, Ft. Lauderdale, FL 33312
- --------------------------------------------------------------------------------
(Secretary) (address)
Robert Alvarez 2618 SW 23 Terrace, Ft. Lauderdale, FL 33312
- --------------------------------------------------------------------------------
(treasurer) (address)
Robert Alvarez 2618 SW 23 Terrace, Ft. Lauderdale, FL 33312
- --------------------------------------------------------------------------------
(director) (address)
- --------------------------------------------------------------------------------
(director) You may attach additional pages, if necessary.
The undersigned declare that they have obtained written consent of all the
stockholders of the corporation and that unanimous consent was secured and that
they are the person(s) designated or appointed by the stockholders to the
corporation to revive the corporation.
/s/ Robert Alvarez /s/ Robert Alvarez
- ------------------------- -------------------------------------------------
(signature) (signature)
Robert Alvarez, President
Robert Alvarez, Secretary
Signed and sworn to (or affirmed) before me on
02-07-96 by Robert Alvarez
-------------------------------------------------
(date) (name(s) of person(s) making statement)
/s/ Don A. Paradiso
-------------------------------------------------
Attach additional page(s), if necessary
DON A. PARADISO
COMMISSION #CC 334690
EXPIRES JAN 1, 1998
Atlantic Bonding Co., Inc.
800-732-2245
NOTARY PUBLIC STATE OF FLORIDA
(NOTARY STAMP OR SEAL)
<PAGE>
CERTIFICATE AMENDING ARTICLES OF INCORPORATION
OF
PIONEER SERVICES, LTD
AS PER NRS 78.185, THE NEW NAME OF THE CORPORATION IS "PIONEER SERVICES
INTERNATIONAL, LTD."
The undersigned, being the President and Secretary of Pioneer Services,
Ltd., a Nevada Corporation, hereby certifies that by unanimous vote of the Board
of Directors and majority vote of the stockholders at a meeting held on February
19, 1996, it was agreed that this CERTIFICATE AMENDING ARTICLES OF INCORPORATION
be filed.
The undersigned further certifies that the original Articles of
Incorporation of Pioneer Services, Ltd were filed with the Secretary of State of
Nevada on the 8th day of March, 1988. The undersigned further certifies that the
original Articles of Incorporation filed on the 8th day of March, 1888, herein
is amended to read as follows:
ARTICLE FOUR (CAPITAL STOCK). The amount of authorized capital stock of the
Corporation is one hundred million (100,000,000) shares of common stock and
twenty million (20,000,000) shares of preferred stock.
The aggregate number of shares of common stock which the corporation shall
have authority to issue is one hundred million (100,000,000) thereas at par
value of one-tenth of one cent ($.001) per share. The common stock of the
Corporation that is issued and outstanding shall be entitled to vote fifty
percent (50%) of the shareholder voting rights. Each shareholder of the
common stock shall be entitled to one vote for each share of common stock
held.
The aggregate number of shares of preferred stock which this corporation
shall have authority to issue shall be twenty million (20,000,000) shares
at par value of one-tenth of one cent ($0.001) per share. The preferred
stock shall be divided into Series "A", Series "B", and Series "C"
preferred stock, which shall have all the same rights and privileges except
voting rights as expressly set forth below:
(a) Series A preferred shares, which shall consist of ten million
(10,000,000) shares, shall have no voting rights.
(b) Series B preferred shares, which shall consist of nine million nine
hundred and ninety thousand (9,990,000) shares, shall have no voting
rights.
(c) Series C preferred shares, which shall consist of ten thousand (10,000)
shares, shall be entitled to vote fifty (50%) percent of the stockholders
voting rights. Each holder of preferred stock, Series C, shall be entitled
to one vote for each share of preferred stock, Series C held.
<PAGE>
Authorized stock may be issued from time to time without action by the
stockholders for such consideration as may be fixed from time to time by
the Board of Directors, and shares so issued, the consideration for which
have been paid or delivered, shall be deemed fully paid stock and the
holder of such shares shall not be liable for any further payment thereon.
The capital stock of this Corporation, after the amount of the subscription
price or par value has been paid in, shall not be subject to assessment to
pay debts of the Corporation and no paid up stock and no stock issued as
fully paid shall ever be assessable or assessed and the Articles of
Incorporation shall not be amended in this particular.
The holders of shares of capital stock of the Corporation shall not be
entitled to pre-emptive or preferential rights to subscribe to any unissued
stock or any other securities which the corporation may now or hereafter
be authorized to issue.
The stockholders shall not possess cumulative voting rights at all
shareholders meetings called for the purpose of electing a Board of
Directors.
The undersigned hereby certifies that he has on this 19th day of February,
1996, executed this certificate Amending the original Articles of Incorporation
heretofore filed with the Secretary of State of Nevada.
/s/ Robert Alvarez
--------------------------
Robert Alvarez, President
/s/ Robert Alvarez
--------------------------
Robert Alvarez, Secretary
STATE OF FLORIDA
COUNTY OF BROWARD:
On this 19th day of February, 1996, before me, the undersigned Notary Public in
and for the State of Florida, personally appeared Robert Alvarez, personally
known to me to be the person and officer whose name is subscribed to the
foregoing Certificate Amending Articles of Incorporation and acknowledged to me
that he executed the same.
/s/ Don A. Paradiso
--------------------------
Notary Public
DON A. PARADISO
COMMISSION #CC 334690
EXPIRES JAN 1, 1998
Atlantic Bonding Co., Inc.
800-732-2245
<PAGE>
STATE OF NEVADA
CERTIFICATE OF AMENDMENT OF THE ARTICLES OF INCORPORATION
OF
PIONEER SERVICES INTERNATIONAL, LTD.
A Nevada Corporation
PIONEER SERVICES INTERNATIONAL, LTD., a Nevada corporation, by its
President and Secretary, does hereby certify:
That pursuant to the unanimous written consent of the Directors of Pioneer
Services International, Ltd. ("PSI"), a Nevada corporation, dated May 7, 1997,
and the majority written consent of the Shareholders of PSI dated May 7, 1997, a
copy of which is attached hereto, the Shareholders of this corporation have
adopted and approved the following amendment to the Articles of Incorporation:
That the Articles of Incorporation of the Corporation be amended to replace
Article Four which shall read in its entirety as follows:
ARTICLE FOUR. (CAPITAL STOCK). The amount of authorized capital stock of
the Corporation is one hundred million (100,000,000) shares of the common
stock and five million (5,000,000) shares of preferred stock.
The aggregate number of shares of common stock which the corporation shall
have authority to issue is one hundred million ( 100,000,000) shares at a
par value of one tenth of one cent ($.001) per share. Each shareholder of
the common stock shall be entitled to one vote for each share of common
stock held.
The aggregate number of shares of preferred stock which this corporation
shall have authority to issue shall be five million (5,000,000) shares at
par value of one tenth of one cent ($.001) per share. Series of the
preferred stock may be created and issued from time to time, with such
designations, preferences, conversion rights, cumulative, relative,
participating, optional or other rights, including voting rights,
qualifications, limitations or restrictions thereof as shall be stated and
expressed in the resolution or resolutions providing for the creation and
issuance of such series or preferred stock as adopted by the Board of
Directors pursuant to the authority in this paragraph given.
The Board of Directors of the Corporation desires, pursuant to its
authority as aforesaid, to determine and fix the rights, preferences,
privileges and restrictions relating to a class of said Preferred Stock to
be designated "Series A Convertible Preferred Stock" totalling up to 45,000
shares (the "Series A Preferred Stock")
<PAGE>
1. Designation and Number of Shares. The Preferred Stock shall be
designated "Series A Convertible Preferred Stock" of a par value of $0.001
per share, and the number of shares constituting the Series A Preferred
Stock shall be 45,000 shares.
2. Conversion Rights. Holders of the Series A Preferred Stock will have the
right to convert each share of Series A Preferred Stock into the
Corporation's Common Stock (calculated as to each conversion to the nearest
share) at a conversion rate of 1,000 shares of Common Stock for each share
of Series A Preferred Stock as follows: (i) 1/3, at the option of the
holder, beginning three(3) years from issuance; (ii) 1/3, at the option of
the holder, beginning four (4) years from issuance and (iii) the final 1/3
beginning five (5) years from issuance. No fractional share or scrip
representing a fractional share will be issued upon conversion of the
Series A Preferred Stock. In the event of any classification, merger,
consolidation or change of shares of the Series A Preferred Stock and/or
the Common Stock of the Corporation, the Corporation shall make adjustments
to the conversion ratio which shall be as nearly equivalent to that stated
above as may be practical.
The conversion price will be subject to adjustments in certain events
including (i) the issuance of capital stock as a dividend or distribution
on Common Stock. (ii) subdivision, combinations, reverse stock splits and
reclassification of the Common Stock, (iii) the fixing of a record date for
the issuance to all holders of Common Stock of rights or warrants entitling
them (for a period expiring within 45 days or such record date) to
subscribe for Common Stock and (iv) the fixing of a record date for the
distribution to all holders of Common Stock of evidence of indebtedness or
assets (other that cash dividends) of the Corporation or subscription
rights or warrants (other than those referred to above).
The Corporation agrees to use its best efforts at all times to reserve
or hold available a sufficient number of shares of Common Stock to cover
the number of shares issuable on conversion of the Series A Preferred
Stock.
3. Redemption. The Series A Preferred Stock shall not be subject to a right
of redemption on the part of the Corporation at any time, and nor shall the
holders of the Series A Preferred Stock have the right to have the
Corporation redeem their shares of Series A Preferred Stock.
4. Dividends. The holders of shares of Series A Preferred Stock shall
receive no dividend.
<PAGE>
5. Voting Rights. The Series A Preferred Stock shall be entitled to vote on
all matters submitted to a vote of the shareholders of the Corporation.
Each share of the Series A Preferred Stock is entitled to 1,000 votes.
Unless the vote or consent of the holders of a greater number of shares is
required by law, the consent of the holders of at least a majority of all
of the Series A Preferred Stock at the time outstanding shall be necessary
to change, alter or revoke the rights and preferences conferred on the
Series A Preferred Stock by the Articles of Incorporation or to adopt any
amendment to the Articles of Incorporation materially adversely affecting
the rights of the holders of the Series A Preferred Stock.
6. Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the Corporation, holders of the Series A Preferred Stock
shall be entitled to receive, after due payment or provision for payment
for the debts and other liabilities of the Corporation, a liquidating
distribution up to the par value of the Series A Preferred Stock before any
distribution may be made to holders of Common Stock of the Corporation.
However, holders of the Series A Preferred Stock shall subordinate to any
holders of any other Series of Preferred Stock with respect to the
liquidation rights.
7. Preemptive Rights. The Series A Preferred Stock has no preemptive
rights. The Corporation reserves the right to issue up to an additional
4,955,000 shares of Preferred Stock, representing the balance of the
authorized Preferred Stock, with designations and preferences as the Board
of Directors shall determine. The Series A Preferred Stock and the Common
Stock into which such Series a Preferred Stock is convertible, when issued
will be legally issued, fully paid and non-assessable.
IN WITNESS WHEREOF, this Certificate of Amendment of the Articles of
Incorporation of Pioneer Services International, Ltd., a Nevada corporation, has
been executed this 7 day of May, 1997.
/s/ Dr. Jerry Jacobson
------------------------------
Dr. Jerry Jacobson, President
/s/ Debra Jacobson
------------------------------
Debra Jacobson, Secretary
STATE OF FLORIDA
COUNTY OF PALM BEACH
On this 7th day of May, 1997, before me, the undersigned notary in and for the
State of Florida, personally appeared Dr. Jerry Jacobson and Debra Jacobson,
both personally known to me to be the individuals and officers whose name is
subscribed to the foregoing Certificate Amending Articles of Incorporation and
acknowledged to me that they executed the same.
/s/ Stephen E. Broosky
--------------------------
Notary Public
<PAGE>
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
PIONEER SERVICES INTERNATIONAL, LTD.
------------------------------------
PIONEER SERVICES INTERNATIONAL, LTD., a corporation organized under the
laws of the State of Nevada, by its President and Secretary, does hereby
certify:
1. That the Board of Directors of said corporation adopted by unanimous
written consent on June 16, 1998, pursuant to Nevada Revised Statutes,
Section 78.315.2, a resolution declaring that the following amendment to
the Articles of Incorporation is advisable:
ARTICLE ONE is amended as follows:
The name of the corporation is Jacobson Resonance Enterprises, Inc.
2. That the foregoing amendment to the Articles of Incorporation has been
consented to and authorized by the written consent of stockholders holding
more than a majority of all classes of stock outstanding and entitled to
vote thereon.
IN WITNESS WHEREOF, the said corporation has caused these Articles of
Amendment to be signed by its President and its Secretary this 28th day of July
1998.
<PAGE>
PIONEER SERVICES INTERNATIONAL LTD.
By : /s/ Dr. Jerry I. Jacobson
----------------------------
Its President
By : /s/ Debra Jacobson
----------------------------
Its Secretary
STATE OF FLORIDA )
)ss.:
COUNTY OF PALM BEACH)
On this 28 day of July 1998, before me, a Notary Public, personally
appeared JERRY JACOBSON and DEBRA JACOBSON, being the President and Secretary,
respectively, of PIONEER SERVICES INTERNATIONAL LTD., who acknowledged that they
executed the above instrument.
/s/ Ana L. Pila
------------------------
Notary Public
PIONEER SERVICES, LTD.
(A Nevada Corporation)
BYLAWS
(As Ratified and Amended on October 12, 1999)
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
ARTICLE I: NAME AND OFFICES...............................................................................1
1.1 Name...........................................................................................1
1.2 Registered Office and Agent....................................................................1
1.3 Change of Registered Office or Agent...........................................................1
1.4 Other Offices..................................................................................1
ARTICLE II: SHAREHOLDERS...................................................................................1
2.1 Place of Meetings..............................................................................1
2.2 Annual Meeting.................................................................................1
2.3 Special Meeting................................................................................1
2.4 Notice.........................................................................................1
2.5 Voting List....................................................................................2
2.6 Quorum.........................................................................................2
2.7 Majority Vote: Withdrawal of Quorum...........................................................2
2.8 Method of Voting...............................................................................2
2.9 Record Date: Closing Transfer Books...........................................................3
2.10 Action Without Meeting.........................................................................3
2.11 Order of Business at Meetings..................................................................3
ARTICLE III: DIRECTORS......................................................................................4
3.1 Management.....................................................................................4
3.2 Number; Qualification; Election; Term..........................................................4
3.3 Change in Number...............................................................................4
3.4 Removal........................................................................................4
3.5 Vacancies......................................................................................5
3.6 Election of Directors..........................................................................5
3.7 Place of Meeting...............................................................................5
3.8 First Meeting..................................................................................5
3.9 Regular Meetings...............................................................................5
3.10 Special Meetings...............................................................................5
3.11 Majority Vote..................................................................................5
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
3.12 Compensation...................................................................................5
3.13 Procedure......................................................................................6
3.14 Interested Directors, Officers and Shareholders................................................6
3.15 Certain Officers...............................................................................6
3.16 Action Without Meeting.........................................................................6
ARTICLE IV: EXECUTIVE COMMITTEE............................................................................7
4.1 Designation....................................................................................7
4.2 Number; Qualification; Term....................................................................7
4.3 Authority......................................................................................7
4.4 Change in Number...............................................................................7
4.5 Removal........................................................................................7
4.6 Vacancies......................................................................................7
4.7 Meetings.......................................................................................7
4.8 Quorum: Majority Vote.........................................................................7
4.9 Compensation...................................................................................8
4.10 Procedure......................................................................................8
4.11 Action Without Meeting.........................................................................8
4.12 Responsibility.................................................................................8
ARTICLE V: NOTICE.........................................................................................8
5.1 Method.........................................................................................8
5.2 Waiver.........................................................................................8
5.3 Telephone Meetings.............................................................................9
ARTICLE VI: OFFICERS AND AGENTS............................................................................9
6.1 Number: Qualification; Election; Term.........................................................9
6.2 Removal and Resignation........................................................................9
6.3 Vacancies.....................................................................................10
6.4 Authority.....................................................................................10
6.5 Compensation..................................................................................10
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
6.6 Chairman of the Board.........................................................................10
6.7 Executive Powers..............................................................................10
6.8 Vice-Presidents...............................................................................11
6.9 Secretary.....................................................................................11
6.10 Assistant Secretaries.........................................................................11
6.11 Treasurer.....................................................................................11
6.12 Assistant Treasurers..........................................................................12
ARTICLE VII: CERTIFICATE AND TRANSFER REGULATIONS..........................................................12
7.1 Certificates..................................................................................12
7.2 Issuance of Certificates......................................................................12
7.3 Legends on Certificates.......................................................................13
7.4 Payment of Shares.............................................................................14
7.5 Subscriptions.................................................................................14
7.6 Lien..........................................................................................14
7.7 Lost, Stolen or Destroyed Certificates........................................................14
7.8 Registration of Transfer......................................................................15
7.9 Registered Owner..............................................................................15
7.10 Preemptive Rights.............................................................................15
ARTICLE VIII: GENERAL PROVISIONS............................................................................16
8.1 Dividends and Reserves........................................................................16
8.2 Books and Records.............................................................................16
8.3 Annual Reports................................................................................16
8.4 Checks and Notes..............................................................................16
8.5 Fiscal Year...................................................................................16
8.6 Seal..........................................................................................16
8.7 Indemnification...............................................................................17
8.8 Amendment of Bylaws...........................................................................17
8.9 Construction..................................................................................17
8.10 Table of Contents; Headings...................................................................18
</TABLE>
-iii-
<PAGE>
PIONEER SERVICES, LTD.
(A Nevada Corporation)
BYLAWS
ARTICLE I: NAME AND OFFICES
1.1 Name. The name of the Corporation is Pioneer Services, Ltd.,
hereinafter referred to as the "Corporation."
1.2 Registered Office and Agent. The Corporation shall establish,
designate and maintain a registered office and agent in the State of Nevada. The
registered office of the Corporation shall be at 1701 West Charleston Blvd.,
Suite 425, Las Vegas, Nevada 89102. The name of the registered agent at such
address is Jody Scott.
1.3 Change of Registered Office or Agent. The Corporation may change
its registered office or change its registered agent, or both, by following the
procedure set forth in Nevada Revised Statutes 78.095 and/or 78.110. Any such
change shall constitute an amendment to these Bylaws.
1.4 Other Offices. The Corporation may have offices at such places both
within and without the State of Nevada as the Board of Directors may from time
to time determine or the business of the Corporation may require.
ARTICLE II: SHAREHOLDERS
2.1 Place of Meetings. All meetings of the Shareholders for the
election of Directors and for any other purpose may be held at such time and
place, within or without the State of Nevada, as stated in the notice of the
meeting or in a duly executed waiver of notice thereof
2.2 Annual Meeting. An annual meeting of the Shareholders for the
election of Directors and for the transaction of such other business as may
properly come before the meeting shall be held each year on the first Monday in
January, beginning in 1989, or such other date as may be selected by the Board
of Directors from time to time. At the meeting, the Shareholders shall elect
Directors and transact such other business as may properly be brought before the
meeting.
2.3 Special Meeting. Special meetings of the Shareholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the Articles
of Incorporation, or by these Bylaws, may be called by the President, the
Secretary, the Board of Directors, or the holders of not less than one tenth of
all the shares entitled to vote at the meeting. Business transacted at a special
meeting shall be confined to the subjects stated in the notice of the meeting.
2.4 Notice. 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 nor more than
sixty days before the date of the meeting, either personally or by mail, by or
at the direction of the person calling the meeting, to each Shareholder of
record entitled to vote at the 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 stock transfer books of the
Corporation, with postage thereon prepaid.
1
<PAGE>
2.5 Voting List. At least ten days before each meeting of Shareholders
a complete list of the Shareholders entitled to vote at such meeting, arranged
in alphabetical order and setting forth the address of each and the number of
voting shares held by each, shall be prepared by the Officer or agent having
charge of the stock transfer books. Such list, for a period of ten days prior to
such meeting, shall be kept on file at the registered office of the Corporation
whether within or without the State of Nevada and shall be subject to inspection
by any Shareholder at any time during usual business hours. Such list shall also
be produced and kept open at the time and place of the meeting during the whole
time thereof, and shall be subject to the inspection of any Shareholder during
the whole time of the meeting.
2.6 Quorum. The holders of a majority of the shares issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall be requisite and shall constitute a quorum at all meetings of the
Shareholders for the transaction of business except as otherwise provided by
statute, by the Articles of Incorporation or by these Bylaws. If a quorum is not
present or represented at a meeting of the Shareholders, the Shareholders
entitled to vote thereat, present in person or by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum is present or represented. At such adjourned meeting
at which a quorum is present or represented, any business may be transacted
which might have been transacted at the meeting as originally notified.
2.7 Majority Vote: Withdrawal of Quorum. When a quorum is present at
any meeting, the vote of the holders of a majority of the shares having voting
power, present in person or represented by proxy, shall decide any question
brought before such meeting, unless the question is one upon which, by express
provision of the statutes or of the Articles of Incorporation or of these
Bylaws, a different vote is required, in which case such express provision shall
govern and control the decision of such question. The Shareholders present at a
duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough Shareholders to leave less than a
quorum.
2.8 Method of Voting. Each outstanding share, regardless of class,
shall be entitled to one vote on each matter subject 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 limited or denied by the Articles of Incorporation. The
Board of Directors may, in the future, at their discretion, direct that voting
be cumulative, according to any plan adopted by the Board. At any meeting of the
Shareholders, every Shareholder having the right to vote 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 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 or unless
otherwise made irrevocable by law. Each proxy shall be filed with the Secretary
of the Corporation prior to, or at the time of, the meeting. Voting for
Directors shall be in accordance with Section 3.6 of these Bylaws. Any vote may
be taken viva voce or by show of hands unless someone entitled to vote objects,
in which case written ballots shall be used. Cumulative voting is not
prohibited.
2
<PAGE>
2.9 Record Date: Closing Transfer Books. The Board of Directors may fix
in advance a record date for the purpose of determining Shareholders entitled to
notice of, or to vote at, a meeting of Shareholders, such record date to be not
less than ten nor more than sixty days prior to such meeting; or the Board of
Directors may close the stock transfer books for such purpose for a period of
not less than ten nor more than sixty days prior to such meeting. In the absence
of any action by the Board of Directors, the date upon which the notice of the
meeting is mailed shall be the record date.
2.10 Action Without Meeting. Any action required to be taken at any
annual or special meeting of Shareholders or any action which may be taken at
any annual or special meeting of Shareholders, may be taken without a meeting,
without prior notice, and without a vote, if a consent or consents in writing,
setting forth the action so taken, is signed by the holder or holders of shares
having not less than the minimum number of votes that would be necessary to take
such action at a meeting at which the holders of all shares entitled to vote on
the action were present and voted.
Such consent or consents shall have the same force and effect
as the requisite vote of the Shareholders at a meeting. The signed consent or
consents, or a copy or copies thereof, shall be placed in the minute book of the
Corporation. Such consents may be signed in multiple counterparts, each of which
shall constitute an original for all purposes, and all of which together shall
constitute the requisite written consent or consents of the Shareholders, if
applicable. A telegram, telex, cablegram, or similar transaction by a
Shareholder, or a photographic, photostatic, facsimile or similar reproduction
of a writing signed by a Shareholder, shall be regarded as signed by the
Shareholder for purposes of this Section 2.10.
2.11 Order of Business at Meetings. The order of business at annual
meetings, and so far as practicable at other meetings of Shareholders, shall be
as follows unless changed by the Board of Directors:
(a) Call to order
(b) Proof of due notice of meeting
(c) Determination of quorum and examination of proxies
(d) Announcement of availability of voting list (See Bylaw 2.5)
(e) Announcement of distribution of annual reports (See Bylaw 8.3)
(f) Reading and disposing of minutes of last meeting of Shareholders
(g) Reports of Officers and committees
(h) Appointment of voting inspectors
3
<PAGE>
(i) Unfinished business
(j) New business
(k) Nomination of Directors
(l) Opening of polls for voting
(m) Recess
(n) Reconvening; closing of polls
(o) Report of voting inspectors
(p) Other business
(q) Adjournment
ARTICLE III: DIRECTORS
3.1 Management. The business and affairs of the Corporation shall be
managed by the Board of Directors, which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not, by statute or by
the Articles of Incorporation or by these Bylaws, directed or required to be
exercised or done by the Shareholders.
3.2 Number; Qualification; Election; Term. The Board of Directors shall
consist of not less than three members nor more than five members. A Director
need not be a Shareholder or resident of any particular state or country. The
Directors shall be elected at the annual meeting of the Shareholders, except as
provided in Bylaw 3.3 and 3.5. Each Director elected shall hold office until his
successor is elected and qualified. Each person elected as a Director shall be
deemed to have qualified unless he states his refusal to serve shortly after
being notified of his election.
3.3 Change in Number. The number of Directors may be increased or
decreased from time to time by amendment to the Bylaws, but no decrease shall
have the effect of shortening the term of any incumbent Director. Any
directorship to be filled by reason of an increase in the number of Directors
shall be filled by the Board of Directors for a term of office continuing only
until the next election of one or more Directors by the Shareholders; provided
that the Board of Directors may not fill more than two such directorships during
the period between any two successive annual meetings of Shareholders.
3.4 Removal. Any Director may be removed either for or without cause at
any special or annual meeting of Shareholders by the affirmative vote of a
majority, in number of shares, of the Shareholders present in person or by proxy
at such meeting and entitled to vote for the election of such Director if notice
of intention to act upon such matter is given in the notice calling such
meeting.
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3.5 Vacancies. Any unfilled directorship position, or any vacancy
occurring in the Board of Directors (by death, resignation, removal or
otherwise), shall be filled by an affirmative vote of a majority of the
remaining Directors though less than a quorum of the Board of Directors.
A Director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office, except that a vacancy occurring due
to an increase in the number of Directors shall be filled in accordance with
Section 3.3 of these Bylaws.
3.6 Election of Directors. Directors shall be elected by majority vote.
3.7 Place of Meeting. Meetings of the Board of Directors, regular or
special, may be held either within or without the State of Nevada.
3.8 First Meeting. The first meeting of each newly elected Board of
Directors shall be held without further notice immediately following the annual
meeting of Shareholders, and at the same place, unless the Directors change such
time or place by unanimous vote.
3.9 Regular Meetings. Regular meetings of the Board of Directors may be
held without notice at such time and place as determined by the Board of
Directors.
3.10 Special Meetings. Special meetings of the Board of Directors may
be called by the President or by any Director on three days notice to each
Director, given either personally or by mail or by telegram. Except as otherwise
expressly provided by statute, or by the Articles of Incorporation, or by these
Bylaws, neither the business to be transacted at, nor the purpose of, any
special meeting of the Board of Directors need be specified in a notice or
waiver of notice.
3.11 Majority Vote. At all meetings of the Board of Directors, a
majority of the number of Directors then elected and qualified shall constitute
a quorum for the transaction of business. The act of a majority of the Directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors, except as otherwise specifically provided by statute or by
the Articles of Incorporation or by these Bylaws.
If a quorum is not present at a meeting of the Board of
Directors, the Directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present.
Each Director who is present at a meeting will be deemed to
have assented to any action taken at such meeting unless his dissent to the
action is entered in the minutes of the meeting, or unless he files his written
dissent thereto with the Secretary of the meeting or forwards such dissent by
registered mail to the Secretary of the Corporation immediately after such
meeting.
3.12 Compensation. By resolution of the Board of Directors, the
Directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and may be paid a fixed sum for attendance of each
meeting of the Board of Directors, or a stated salary as Director. No such
payment shall preclude any Director from serving the Corporation in any other
capacity and receiving compensation therefor. Members of any executive, special
or standing committees established by the Board of Directors, may, by resolution
of the Board of Directors, be allowed like compensation and expenses for
attending committee meetings.
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3.13 Procedure. The Board of Directors shall keep regular minutes of
its proceedings. The minutes shall be placed in the minute book of the
Corporation.
3.14 Interested Directors, Officers and Shareholders.
(a) If Paragraph (b) is satisfied, no contract or other transaction
between the Corporation and any of its Directors, Officers or Shareholders (or
any corporation or firm in which any of them are directly or indirectly
interested) shall be invalid solely because of such relationship or because of
the presence of such Director, Officer or Shareholder at the meeting authorizing
such contract or transaction, or his participation in such meeting or
authorization.
(b) Paragraph (a) shall apply only if
(1) The material facts of the relationship or interest of each
such Director, Officer or Shareholder are known or disclosed:
(A) To the Board of Directors and it nevertheless
authorizes or ratifies the contract or transaction by a majority of the
Directors present, each such interested Director to be counted in determining
whether a quorum is present but not in calculating the majority necessary to
carry the vote; or
(B) To the Shareholders and they nevertheless
authorize or ratify the contract or transaction by a majority of the shares
present, each such interested person to be counted for a quorum and voting
purposes; or
(2) The contract or transaction is fair to the Corporation as
of the time it is or ratified by the Board of Directors, a committee of the
Board or the Shareholders.
(c) This provision shall not be construed to invalidate a contract or
transaction which would be valid in the absence of this provision.
3.15 Certain Officers. The President shall be elected from among the
members of the Board of Directors.
3.16 Action Without Meeting. Any action required or permitted to be
taken at a meeting of the Board of Directors may be taken without a meeting if a
consent in writing, setting forth the action so taken, is signed by all members
of the Board of Directors. Such consent shall have the same force and effect as
unanimous vote of the Board of Directors at a meeting. The signed consent, or a
signed copy thereof, shall be placed in the minute book of the Corporation. Such
consents may be signed in multiple counterparts, each of which shall constitute
an original for all purposes, and all of which together shall constitute the
unanimous written consent of the Directors.
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ARTICLE IV: EXECUTIVE COMMITTEE
4.1 Designation. The Board of Directors may, by resolution adopted by a
majority of the whole Board, designate an Executive Committee from among its
members.
4.2 Number; Qualification; Term. The Executive Committee shall consist
of one or more Directors. The Executive Committee shall serve at the pleasure of
the Board of Directors.
4.3 Authority. The Executive Committee shall have and may exercise the
authority of the Board of Directors in the management of the business and
affairs of the Corporation except where action of the full Board of Directors is
required by statute or by the Articles of Incorporation, and shall have power to
authorize the seal of the Corporation to be affixed to all papers which may
require it; except that the Executive Committee shall not have authority to:
amend the Articles of Incorporation; approve a plan of merger or consolidation;
recommend to the Shareholders the sale, lease, or exchange of all or
substantially all of the property and assets of the Corporation other than in
the usual and regular course of its business; recommend to the Shareholders the
voluntary dissolution of the Corporation; amend, alter, or repeal the Bylaws of
the Corporation or adopt new Bylaws for the Corporation; fill any vacancy in the
Board of Directors or any other corporate committee; fix the compensation of any
member of any corporate committee; alter or repeal any resolution of the Board
of Directors; declare a dividend; or authorize the issuance of shares of the
Corporation. Each Director shall be deemed to have assented to any action of the
Executive Committee unless, within seven days after receiving actual or
constructive notice of such action, he delivers his written dissent thereto to
the Secretary of the Corporation.
4.4 Change in Number. The number of Executive Committee members may be
increased or decreased (but not below one) from time to time by resolution
adopted by a majority of the Board of Directors.
4.5 Removal. Any member of the Executive Committee may be removed by
the Board of Directors by the affirmative vote of a majority of the Board of
Directors whenever in its judgment the best interests of the Corporation will be
served thereby.
4.6 Vacancies. A vacancy occurring in the Executive Committee (by
death, resignation, removal or otherwise) shall be filled by the Board of
Directors in the manner provided for original designation in Section 4.1 above.
4.7 Meetings. Time, place and notice, if any, of Executive Committee
meetings shall be as determined by the Executive Committee.
4.8 Quorum: Majority Vote. At meetings of the Executive Committee, a
majority of the members shall constitute a quorum for the transaction of
business. The act of a majority of the members present at any meeting at which a
quorum is present shall be the act of the Executive Committee, except as
otherwise specifically provided by statute or by the Articles of Incorporation
or by these Bylaws. If a quorum is not present at a meeting of the Executive
Committee, the members present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present.
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4.9 Compensation. By resolution of the Board of Directors, the members
of the Executive Committee may be paid their expenses, if any, of attendance at
each meeting of the Executive Committee and may be paid a fixed sum for
attendance at each meeting of the Executive Committee or a stated salary as a
member thereof. No such payment shall preclude any member from serving the
Corporation in any other capacity and receiving compensation therefor.
4.10 Procedure. The Executive Committee shall keep regular minutes of
its proceedings and report the same to the Board of Directors when required. The
minutes of the proceedings of the Executive Committee shall be placed in the
minute book of the Corporation.
4.11 Action Without Meeting. Any action required or permitted to be
taken at a meeting of the Executive Committee may be taken without a meeting if
a consent in writing, setting forth the action so taken, is signed by all the
members of the Executive Committee. Such consent shall have the same force and
effect as a unanimous vote at a meeting. The signed consent, or a signed copy
thereof, shall be placed in the minute book. Such consents may be signed in
multiple counterparts, each of which shall constitute an original for all
purposes, and all of which together shall constitute the unanimous written
consent of the Directors.
4.12 Responsibility. The designation of an Executive Committee and the
delegation of authority to it shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed by law.
ARTICLE V: NOTICE
5.1 Method. Whenever by statute or the Articles of Incorporation or
these Bylaws notice is required to be given to any Director or Shareholder and
no provision is made as to how such notice shall be given, it shall not be
construed to mean personal notice, but any such notice may be given:
(a) in writing, by mail, postage prepaid, addressed to such Director or
Shareholder at such address as appears on the books of the Corporation; or
(b) by any other method permitted by law.
Any notice required or permitted to be given by mail shall be
deemed to be given at the time it is deposited in the United States mail.
5.2 Waiver. Whenever, by statute or the Articles of Incorporation or
these Bylaws, notice is required to be given to a Shareholder or Director, a
waiver thereof in writing signed by the person or persons entitled to such
notice, whether before or after the time stated in such notice, shall be
equivalent to the giving of such notice. Attendance of a Director at a meeting
shall constitute a waiver of notice of such meeting except where a Director
attends for the express purpose of objecting to the transaction of any business
on the grounds that the meeting is not lawfully called or convened.
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5.3 Telephone Meetings. Shareholders, Directors, or members of any
committee, may hold any meeting of such Shareholders, Directors, or committee by
means of conference telephone or similar communications equipment which permits
all persons participating in the meeting to hear each other. Actions taken at
such meeting shall have the same force and effect as a vote at a meeting in
person. The Secretary shall prepare a memorandum of the actions taken at
conference telephone meetings.
ARTICLE VI: OFFICERS AND AGENTS
6.1 Number: Qualification; Election; Term.
(a) The Corporation shall have:
(1) A Chairman of the Board (should the Board of Directors so
choose to select), a President, a Vice-President, a Secretary and a Treasurer,
and
(2) Such other Officers (including one or more
Vice-Presidents, and assistant Officers and agents) as the Board of Directors
authorizes from time to time.
(b) No Officer or agent need be a Shareholder, a Director or a resident
of Nevada except as provided in Sections 3.15 and 4.2 of these Bylaws.
(c) Officers named in Section 6.1(a)(1) above shall be elected by the
Board of Directors on the expiration of an Officer's term or whenever a vacancy
exists. Officers and agents named in Section 6.1(a)(2) may be elected by the
Board of Directors at any meeting.
(d) Unless otherwise specified by the Board at the time of election or
appointment, or in an employment contract approved by the Board, each Officer's
and agent's term shall end at the first meeting of Directors after the next
annual meeting of Shareholders. He shall serve until the end of his term or, if
earlier, his death, resignation or removal.
(e) Any two or more offices may be held by the same person.
6.2 Removal and Resignation. Any Officer or agent elected or appointed
by the Board of Directors may be removed with or without cause by a majority of
the Directors at any regular or special meeting of the Board of Directors. Any
Officer may resign at any time by giving written notice to the Board of
Directors or to the President or Secretary.
Any such resignation shall take effect upon receipt of such
notice if no date is specified in the notice, or, if a later date is specified
in the notice, upon such later date; and unless otherwise specified in the
notice, the acceptance of such resignation shall not be necessary to make it
effective. The removal of any Officer or agent shall be without prejudice to the
contract rights, if any, of the person so removed. Election or appointment of an
Officer or agent shall not of itself create contract rights.
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6.3 Vacancies. Any vacancy occurring in any office of the Corporation
(by death, resignation, removal or otherwise) may be filled by the Board of
Directors.
6.4 Authority. Officers shall have full authority to perform all duties
in the management of the Corporation as are provided in these Bylaws or as may
be determined by resolution of the Board of Directors from time to time not
inconsistent with these Bylaws.
6.5 Compensation. The compensation of Officers and agents shall be
fixed from time to time by the Board of Directors.
6.6 Chairman of the Board. The Chairman of the Board, if any, shall
preside at all meetings of the Board of Directors and shall exercise and perform
such other powers and duties as may be assigned to him by the Board of Directors
or prescribed by the Bylaws.
6.7 Executive Powers. The Chairman of the Board, if any, and the
President of the Corporation respectively, shall, in the order of their
seniority, unless otherwise determined by the Board of Directors or otherwise
are positions held by the same person, have general and active management of the
business and affairs of the Corporation and shall see that all orders and
resolutions of the Board are carried into effect.
They shall perform such other duties and have such other
authority and powers as the Board of Directors may from time to time prescribe.
Within this authority and in the course of their respective duties the Chairman
of the Board, if any, and the President of the Corporation, respectively, shall
have the general authority to:
(a) Conduct Meetings. Preside at all meetings of the Shareholders and
at all meetings of the Board of Directors, and shall be ex officio members of
all the standing committees, including the Executive Committee, if any.
(b) Sign Share Certificates. Sign all certificates of stock of the
Corporation, in conjunction with the Secretary or Assistant Secretary, unless
otherwise ordered by the Board of Directors.
(c) Execute Instruments. When authorized by the Board of Directors or
required by law, execute, in the name of the Corporation, deeds, conveyances,
notices, leases, checks, drafts, bills of exchange, warrants, promissory notes,
bonds, debentures, contracts, and other papers and instruments in writing, and
unless the Board of Directors orders otherwise by resolution, make such
contracts as the ordinary conduct of the Corporation's business requires.
(d) Hire and Discharge Employees. Subject to the approval of the Board
of Directors, appoint and remove, employ and discharge, and prescribe the duties
and fix the compensation of all agents, employees and clerks of the Corporation
other than the duly appointed Officers, and, subject to the direction of the
Board of Directors, control all of the Officers, agents and employees of the
Corporation.
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6.8 Vice-Presidents. The Vice-Presidents, if any, in the order of their
seniority, unless otherwise determined by the Board of Directors, shall, in the
absence or disability of the President, perform the duties and have the
authority and exercise the powers of the President. They shall perform such
other duties and have such other authority and powers as the Board of Directors
may from time to time prescribe or as the senior Officers of the Corporation may
from time to time delegate.
6.9 Secretary. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the Shareholders and record all votes and minutes
of all proceedings in a book to be kept for that purpose, and shall perform like
duties for the Executive Committee when required. He shall:
(a) give, or cause to be given, notice of all meetings of the
Shareholders and special meetings of the Board of Directors;
(b) keep in safe custody the Seal of the Corporation and, when
authorized by the Board of Directors or the Executive Committee, affix the same
to any instrument requiring it, and when so affixed, it shall be attested by his
signature or by the signature of the Treasurer or an Assistant Secretary. He
shall be under the supervision of the senior Officers of the Corporation;
(c) perform such other duties and have such other authority and powers
as the Board of Directors may from time to time prescribe or as the senior
Officers of the Corporation may from time to time delegate.
6.10 Assistant Secretaries. The Assistant Secretaries, if any, in the
order of their seniority, unless otherwise determined by the Board of Directors,
shall, in the absence or disability of the Secretary, perform the duties and
have the authority and exercise the powers of the Secretary. They shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe or as the senior Officers of the Corporation may from
time to time delegate.
6.11 Treasurer. The Treasurer shall:
(a) have the custody of the corporate funds and securities and shall
keep full and accurate accounts of all income, expense, receipts and
disbursement of 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.
(b) disburse the funds of the Corporation as may be ordered by the
Board of Directors, taking proper vouchers for such disbursements, and
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render to the senior Officers of the Corporation and Directors, at the regular
meeting of the Board, or whenever they may request it, accounts of all his
transactions as Treasurer and of the financial condition of the Corporation.
If required by the Board of Directors, he shall:
(a) give the Corporation a bond in such form, in such sum, and with
such surety or sureties as 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, paper, vouchers, money and other property of whatever kind
in his possession or under his control belonging to the Corporation.
(b) perform such other duties and have such other authority and powers
as the Board of Directors may from time to time prescribe or as the senior
Officers of the Corporation may from time to time delegate.
6.12 Assistant Treasurers. The Assistant Treasurers, if any, in the
order of their seniority, unless otherwise determined by the Board of Directors,
shall, in the absence or disability of the Treasurer, perform the duties and
exercise the powers of the Treasurer. They shall perform such other duties and
have such other powers as the Board of Directors may from time to time prescribe
or as the senior Officers of the Corporation may from time to time delegate.
ARTICLE VII: CERTIFICATE AND TRANSFER REGULATIONS
7.1 Certificates. Certificates in such form as may be determined by the
Board of Directors shall be delivered, representing all shares to which
Shareholders are entitled. Certificates shall be consecutively numbered and
shall be entered in the books of the Corporation as they are issued. Each
certificate shall state on the face thereof that the Corporation is organized
under the laws of the State of Nevada, the holder's name, the number and class
of shares, the par value of such shares or a statement that such shares are
without par value, and such other matters as may be required by law. They shall
be signed by the President or a vice-president and either the Secretary or
Assistant Secretary or such other Officer or Officers as the Board of Directors
designates, and may be sealed with the Seal of the Corporation or a facsimile
thereof. If any certificate is countersigned by a transfer agent, or an
assistant transfer agent, or registered by a registrar (either of which is other
than the Corporation or an employee of the Corporation), the signature of any
such Officer may be a facsimile thereof.
7.2 Issuance of Certificates. Shares (both treasury and authorized but
unissued) may be issued for such consideration (not less than par value) and to
such persons as the Board of Directors determines from time to time. Shares may
not be issued until the full amount of the consideration, fixed as provided by
law, has been paid. In addition, Shares shall not be issued or transferred until
such additional conditions and documentation as the Corporation (or its transfer
agent, as the case may be) shall reasonably require, including, without
limitation, the delivery with the surrender of such stock certificate or
certificates of proper evidence of succession, assignment or other authority to
obtain transfer thereof, as the circumstances may require, and such legal
opinions with reference to the requested transfer as shall be required by the
Corporation (or its transfer agent) pursuant to the provisions of these Bylaws
and applicable law, shall have been satisfied.
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7.3 Legends on Certificates.
(a) Shares in Classes or Series. If the Corporation is authorized to
issue shares of more than one class, the certificates shall set forth, either on
the face or back of the certificate, a full or summary statement of all of the
designations, preferences, limitations and relative rights of the shares of such
class and, if the Corporation is authorized to issue any preferred or special
class in series, the variations in the relative rights and preferences of the
shares of each such series so far as the same have been fixed and determined,
and the authority of the Board of Directors to fix and determine the relative
rights and preferences of subsequent series. In lieu of providing such a
statement in full on the certificate, a statement on the face or back of the
certificate may provide that the Corporation will furnish such information to
any shareholder without charge upon written request to the Corporation at its
principal place of business or registered office and that copies of the
information are on file in the office of the Secretary of State.
(b) Restriction on Transfer. Any restrictions imposed by the
Corporation on the sale or other disposition of its shares and on the transfer
thereof may be copied at length or in summary form on the face, or so copied on
the back and referred to on the face, of each certificate representing shares to
which the restriction applies. The certificate may, however, state on the face
or back that such a restriction exists pursuant to a specified document and that
the Corporation will furnish a copy of the document to the holder of the
certificate without charge upon written request to the Corporation at its
principal place of business, or refer to such restriction in any other manner
permitted by law.
(c) Preemptive Rights. Any preemptive rights of a Shareholder to
acquire unissued or treasury shares of the Corporation which are or may at any
time be limited or denied by the Articles of Incorporation may be set forth at
length on the face or back of the certificate representing shares subject
thereto. In lieu of providing such a statement in full on the certificate, a
statement on the face or back of the certificate may provide that the
Corporation will furnish such information to any Shareholder without charge upon
written request to the Corporation at its principal place of business and that a
copy of such information is on file in the office of the Secretary of State, or
refer to such denial of preemptive rights in any other manner permitted by law.
(d) Unregistered Securities. Any security of the Corporation,
including, among others, any certificate evidencing shares of the Common Stock
or warrants to purchase Common Stock of the Corporation, which is issued to any
person without registration under the Securities Act of 1933, as amended, or the
securities laws of any state, shall not be transferable until the Corporation
has been furnished with a legal opinion of counsel with reference thereto,
satisfactory in form and content to the Corporation and its counsel, if required
by the Corporation, to the effect that such sale, transfer or pledge does not
involve a violation of the Securities Act of 1933, as amended, or the securities
laws of any state having jurisdiction. The certificate representing the security
shall bear substantially the following legend:
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"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE
AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED UNLESS
SUCH OFFER, SALE OR TRANSFER WILL NOT BE IN VIOLATION
OF THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE BLUE SKY LAWS. ANY OFFER, SALE OR TRANSFER
OF THESE SECURITIES MAY NOT BE MADE WITHOUT THE PRIOR
WRITTEN APPROVAL OF THE CORPORATION".
7.4 Payment of Shares.
(a) Kind. The consideration for the issuance of shares shall consist of
money paid, labor done (including services actually performed for the
Corporation) or property (tangible or intangible) actually received. Neither
promissory notes nor the promise of future services shall constitute payment for
shares.
(b) Valuation. In the absence of fraud in the transaction, the judgment
of the Board of Directors as to the value of consideration received shall be
conclusive.
(c) Effect. When consideration, fixed as provided by law, has been
paid, the shares shall be deemed to have been issued and shall be considered
fully paid and nonassessable.
(d) Allocation of Consideration. The consideration received for shares
shall be allocated by the Board of Directors, in accordance with law, between
Stated Capital and Capital Surplus accounts.
7.5 Subscriptions. Unless otherwise provided in the subscription
agreement, subscriptions for shares shall be paid in full at such time or in
such installments and at such times as determined by the Board of Directors. Any
call made by the Board of Directors for payment on subscriptions shall be
uniform as to all shares of the same series. In case of default in the payment
on any installment or call when payment is due, the Corporation may proceed to
collect the amount due in the same manner as any debt due to the Corporation.
7.6 Lien. For any indebtedness of a Shareholder to the Corporation, the
Corporation shall have a first and prior lien on all shares of its stock owned
by him and on all dividends or other distributions declared thereon.
7.7 Lost, Stolen or Destroyed Certificates. The Corporation shall issue
a new certificate in place of any certificate for shares previously issued if
the registered owner of the certificate:
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(a) Claim. Submits proof in affidavit form that it has been lost,
destroyed or wrongfully taken; and
(b) Timely Request. Requests the issuance of a new certificate before
the Corporation has notice that the certificate has been acquired by a purchaser
for value in good faith and without notice of an adverse claim; and
(c) Bond. Gives a bond in such form, and with such surety or sureties,
with fixed or open penalty, if the Corporation so requires, to indemnify the
Corporation (and its transfer agent and registrar, if any) against any claim
that may be made on account of the alleged loss, destruction, or theft of the
certificate; and
(d) Other Requirements. Satisfies any other reasonable requirements
imposed by the Corporation.
When a certificate has been lost, apparently destroyed or
wrongfully taken, and the holder of record fails to notify the Corporation
within a reasonable time after he has notice of it, and the Corporation
registers a transfer of the shares represented by the certificate before
receiving such notification, the holder of record shall be precluded from making
any claim against the Corporation for the transfer or for a new certificate.
7.8 Registration of Transfer. The Corporation shall register the
transfer of a certificate for shares presented to it for transfer if:
(a) Endorsement. The certificate is properly endorsed by the registered
owner or duly authorized attorney; and
(b) Guaranty and Effectiveness of Signature. If required by the
Corporation, the signature of such person has been guaranteed by a national
banking association or member of the New York Stock Exchange, and reasonable
assurance is given that such endorsements are effective; and
(c) Adverse Claims. The Corporation has no notice of an adverse claim
or has discharged any duty to inquire into such a claim; and
(d) Collection of Taxes. Any applicable law relating to the collection
of taxes has been complied with.
7.9 Registered Owner. Prior to due presentment for registration of
transfer of a certificate for shares, the Corporation may treat the registered
owner or holder of a written proxy from such registered owner as the person
exclusively entitled to vote, to receive notices and otherwise exercise all the
rights and powers of a Shareholder.
7.10 Preemptive Rights. No Shareholder or other person shall have any
preemptive rights of any kind to acquire additional, unissued or treasury shares
of the Corporation, or securities of the Corporation convertible into, or
carrying rights to subscribe to or acquire, shares of any class or series of the
Corporation's capital stock, unless, and to the extent that, such rights may be
expressly granted by appropriate action.
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ARTICLE VIII: GENERAL PROVISIONS
8.1 Dividends and Reserves.
(a) Declaration and Payment. Subject to statute and the Articles of
Incorporation, dividends may be declared by the Board of Directors at any
regular or special meeting and may be paid in cash, in property or in shares of
the Corporation. The declaration and payment shall be at the discretion of the
Board of Directors.
(b) Record Date. The Board of Directors may fix in advance a record
date for the purpose of determining Shareholders entitled to receive payment of
any dividend, such record date to be not more than sixty days prior to the
payment date of such dividend, or the Board of Directors may close the stock
transfer books for such purpose for a period of not more than sixty days prior
to the payment date of such dividend. In the absence of any action by the Board
of Directors, the date upon which the Board of Directors adopts the resolution
declaring such dividend shall be the record date.
(c) Reserves. By resolution, the Board of Directors may create such
reserve or reserves out of the Earned Surplus of the Corporation as the
Directors from time to time, in their discretion, think proper to provide for
contingencies, or to equalize dividends, or to repair or maintain any property
of the Corporation, or for any other purpose they think beneficial to the
Corporation. The Directors may modify or abolish any such reserve in the manner
in which it was created.
8.2 Books and Records. The Corporation shall keep correct and complete
books and records of account and shall keep minutes of the proceedings of its
Shareholders and Board of Directors, and shall keep at its registered office or
principal place of business, or at the office of its transfer agent or
registrar, a record of its Shareholders, giving the names and addresses of all
Shareholders and the number and class of the shares held by each.
8.3 Annual Reports. The Board of Directors shall cause such reports to
be mailed to Shareholders as the Board of Directors deems to be necessary or
desirable from time to time.
8.4 Checks and Notes. 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 designates from time to time.
8.5 Fiscal Year. The fiscal year of the Corporation shall be the
calendar year.
8.6 Seal. The Corporation Seal (of which there may be one or more
examples) may contain the name of the Corporation and the name of the state of
incorporation. The Seal may be used by impressing it or reproducing a facsimile
of it, or otherwise. Absence of the Corporation Seal shall not affect the
validity or enforceability or any document or instrument.
16
<PAGE>
8.7 Indemnification.
(a) The Corporation shall have the right to indemnify, to purchase
indemnity insurance for, and to pay and advance expenses to, Directors, Officers
and other persons who are eligible for, or entitled to, such indemnification,
payments or advances, in accordance with and subject to the provisions of Nevada
Revised Statutes 78.751, to the extent such indemnification, payments or
advances are either expressly required by such provisions or are expressly
authorized by the Board of Directors within the scope of such provisions. The
right of the Corporation to indemnify such persons shall include, but not be
limited to, the authority of the Corporation to enter into written agreements
for indemnification with such persons.
(b) Subject to the provisions of Nevada Revised Statutes 78.751, a
Director of the Corporation shall not be liable to the Corporation or its
shareholders for monetary damages for an act or omission in the Director's
capacity as a Director, except that this provision does not eliminate or limit
the liability of a Director to the extent the Director is found liable for:
(1) a breach of the Director's duty of loyalty to the
Corporation or its shareholders;
(2) an act or omission not in good faith that constitutes a
breach of duty of the Director to the Corporation or an act or omission that
involves intentional misconduct or a knowing violation of the law;
(3) a transaction from which the Director received an improper
benefit, whether or not the benefit resulted from an action taken within the
scope of the Director's office; or
(4) an act or omission for which the liability of a Director
is expressly provided by an applicable statute.
8.8 Amendment of Bylaws. These Bylaws may be altered, amended or
repealed at any meeting of the Board of Directors at which a quorum is present,
by the affirmative vote of a majority of the Directors present thereat, provided
notice of the proposed alteration, amendment, or repeal is contained in the
notice of such meeting.
8.9 Construction. Whenever the context so requires, the masculine shall
include the feminine and neuter, and the singular shall include the plural, and
conversely. If any portion of these Bylaws are ever finally determined to be
invalid or inoperative, then, so far as is reasonable and possible:
(a) The remainder of these Bylaws shall be valid and operative; and
17
<PAGE>
(b) Effect shall be given to the intent manifested by the portion held
invalid or inoperative.
8.10 Table of Contents; Headings. The table of contents and headings
are for organization, convenience and clarity. These Bylaws are subject to and
governed by the Articles of Incorporation.
18
NUMBER PAR VALUE $.001 SHARES
JACOBSON RESONANCE ENTERPRISES, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
COMMON STOCK CUSIP 469830 10 3
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
Is the owner of
Fully Paid and Non-Assessable Shares of Common Stock of Jacobson
Resonance Enterprises, Inc. transferable only on the books of the Corporation by
the holder hereof in person or by duly authorized attorney upon surrender of
this Certificate properly endorsed.
This Certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
Dr. Jerry Jacobson Debra M. Jacobson
President Secretary
Countersigned:
Florida Atlantic Stock Transfer, Inc.
7130 Nob Hill Road
Tamarac, FL 33321 Transfer agent
JACOBSON RESONANCE ENTERPRISES, INC.
CORPORATE SEAL
NEVADA
<PAGE>
The following abbreviation, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
<TABLE>
<CAPTION>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ..............Custodian.................
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
Act ....................................
JT TEN - as joint tenants with right (State)
of survivorship and not as
tenants in common
Additional abbreviations may also be used though not in the above
list.
</TABLE>
For value received,...................hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE..................................................
................................................................................
Please print or typewrite name and address including postal zip code of assignee
................................................................................
................................................................................
................................................................................
Shares of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
................................................................................
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated......................
........................................
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the Certificate, in
every particular, without alteration
or enlargement, or any change whatever.
NUMBER RESTRICTED SHARES - Rule 144 SHARES
The shares represented by this certificate
have not been registered under the Securities
Act of 1933 (the "Act"), and are Restricted
Securities as that term is defined in Rule 144
under the Act
PIONEER SERVICES INTERNATIONAL, LTD.
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
PREFERRED STOCK CLASS A
PAR VALUE $0.001
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF PREFERRED STOCK CLASS A PAR VALUE OF
$0.001 EACH OF
PIONEER SERVICES INTERNATIONAL, LTD.
transferable only on the books of the Corporation in person or by duly
authorized attorney upon surrender of this Certificate properly endorsed. This
Certificate is not valid until countersigned by the Transfer Agent and
registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
COUNTERSIGNED AND REGISTERED BY:
Debra M. Jacobson Signature Stock Transfer, Inc.
Secretary DALLAS, TEXAS - TRANSFER AGENT
JMDJ
CORPORATE SEAL
<PAGE>
The following abbreviation, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
<TABLE>
<CAPTION>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ..............Custodian.................
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
Act ....................................
JT TEN - as joint tenants with right (State)
of survivorship and not as
tenants in common
Additional abbreviations may also be used though not in the above
list.
</TABLE>
For value received,...................hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE..................................................
................................................................................
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
................................................................................
................................................................................
................................................................................
Shares of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint..............................................
................. Attorney to transfer the said stock on the books of the
within-named Corporation with full power of substitution in the premises.
Dated......................
........................................
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the Certificate, in
__________________________ every particular, without alteration
SIGNATURE GUARANTEE or enlargement, or any change whatever.
(BY: BANK, BROKER, CORPORATE OFFICER)
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED OR DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER ANY
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL
SATISFACTORY TO COUNSEL TO THE COMPANY THAT AN EXEMPTION FROM
REGISTRATION UNDER ANY APPLICABLE STATE SECURITIES LAWS IS AVAILABLE.
W-_________
WARRANT TO PURCHASE
COMMON STOCK
OF
JACOBSON RESONANCE ENTERPRISES, INC.
(formerly known as Pioneer Services International, Ltd.)
This is to certify that_____________________(the "Holder") is entitled,
subject to the terms and conditions hereinafter set forth, to purchase _________
_____________________ (_______) shares (the "Common Shares") of Common Stock,
$.001 par value per share (the "Common Stock"), of JACOBSON RESONANCE
ENTERPRISES, INC. (formerly known as Pioneer Services international, Ltd.), a
Nevada corporation (the "Company"), from the Company at the price per share and
on the terms set forth herein and to receive a certificate for the Common Shares
so purchased on presentation and surrender to the Company with the subscription
form attached, duly executed and accompanied by payment of the exercise price of
each share purchased, either in cash or by certified or bank cashier's check or
other check payable to the order of the Company. This Warrant is issued in
connection with the Company's private placement of Units, pursuant to its
Confidential Private Placement Memorandum dated June 8, 1998 (the "Private
Offering").
Exercise
- --------
The purchase rights represented by this Warrant are exercisable at a
price per Common Share of Forty Five Cents ($0.45), beginning ________, 1998 and
terminating at 5:00 p.m., on the date which is five (5) years thereafter,
subject to adjustment as hereinafter provided.
The purchase rights represented by this Warrant are exercisable at the
option of the registered owner hereof in whole or in part, from time to time,
within the period specified; provided, however, that such purchase rights shall
not be exercisable with respect to a fraction of a Common Share. In case of the
purchase of less than all the Common Shares purchasable under this Warrant, the
Company shall cancel this Warrant on surrender hereof and shall
<PAGE>
execute and deliver a new Warrant of like tenor and date for the balance of the
shares purchasable hereunder.
The Company agrees at all times to take appropriate action to reserve
or hold available a sufficient number of Common Shares to cover the number of
shares issuable on exercise of this and all other Warrants of like tenor then
outstanding. The Company agrees to obtain any authorization required from its
shareholders in order to amend its Articles of Incorporation to increase the
authorized capitalization to permit the exercise of this Warrant and other
Warrants of like tenor.
No Shareholder Rights
- ---------------------
This Warrant shall not entitle the holder hereof to any voting rights
or other rights as a shareholder of the Company, or to any other rights whatever
except the rights herein expressed, and no dividends shall be payable or accrue
in respect of this Warrant or the interest represented hereby or the Common
Shares purchasable hereunder until or unless, and except to the extent that,
this Warrant shall be exercised.
Adjustments
- -----------
The number of shares of Common Stock purchasable upon exercise of this
Warrant and the Purchase Price shall be subject to adjustments from time to time
as follows:
If the Company shall at any time prior to the expiration of this
Warrant subdivide or combine its Common Stock, by forward or reverse stock split
or otherwise, or issue additional shares of its Common Stock as a dividend with
respect to any shares of its Common Stock, the number of Common Shares issuable
upon exercise of this Warrant shall forthwith be proportionately increased or
decreased. Appropriate adjustments shall also be made to the per share purchase
price, but the aggregate purchase price payable for the total number of Common
Shares purchasable under this Warrant (as adjusted) shall remain the same. Any
adjustment under this paragraph shall become effective at the close of business
on the date the subdivision or combination becomes effective, or as of the
record date of such dividend, or in the event that no record date is fixed, upon
the making of such dividend. The good faith determination of the Company's Board
of Directors in connection with any adjustment required under this paragraph.
In the event of any reclassification, capital reorganization or other
change in the Common Stock of the Company or in the event of any sale of all or
substantially all of the Company's assets or any merger, consolidation or
restructuring to which the Company is a party in which the Company's
stockholders before the transaction or series of transactions hold 50% or more
of the voting power of the surviving entity immediately after the transaction or
series of transactions (other than as a result of a subdivision, combination or
stock dividend provided for above), lawful provision shall be made, and duly
executed documents evidencing the same shall be made and shall be delivered to
the Holder in substitution for the Holder's rights under this Warrant, so that
the Holder shall have the right at any time and from time to time prior to the
expiration of this Warrant to purchase at a total price equal to that payable
upon exercise of this Warrant immediately prior to such event, the kind and
amount of shares of stock or other securities or property receivable in
connection with such reclassification, reorganization or
2
<PAGE>
change by a Holder of same number of shares of Common Stock as were purchasable
by the Holder immediately prior to such reclassification, reorganization or
change. In any such case, appropriate provisions shall be made with respect to
the rights and interest of the Holder so that the provisions hereof shall
hereafter be applicable with respect to any shares of stock or other securities
or property deliverable upon exercise hereof, and appropriate adjustment shall
be made to the purchase price per Common Share payable hereunder, provided the
aggregate purchase price shall remain the same. The good faith determination of
the Company's Board of Directors in connection with any adjustment required
under this paragraph.
In the event of dissolution, liquidation, merger or combination of the
Company in which the Company is not a surviving corporation, this Warrant shall
terminate, but the registered owner of this Warrant shall have the right, until
5:00 p.m., Company time, on the day prior to the effective date of such
dissolution, liquidation, merger or combination, to exercise this Warrant in
whole or in part, to the extent that it shall not have theretofore been
exercised.
Upon any adjustments of the number of Common Shares issuable upon
exercise of this Warrant or the purchase price pursuant to this paragraph, the
Company within thirty (30) days thereafter shall cause to be prepared a
certificate of the Chief Financial or Accounting Officer of the Company setting
forth the number of Common Shares issuable upon exercise of this Warrant and the
purchase price after such adjustments, and setting forth in reasonable detail
the method of calculation used and cause a copy of such certificate to be mailed
to the Holder of the Warrant.
The foregoing adjustments and the manner of application of the
foregoing provisions may provide for the elimination of fractional share
interests.
Registration of Common Shares
- -----------------------------
The Company has agreed to use its "best efforts" to file a registration
statement (the "Registration Statement") under the Act within six months
following completion or termination of the Private Offering. Such Registration
Statement shall cover the shares of Common Stock issuable upon exercise of this
Warrant. The Company has agreed to pay the costs and expenses incident to the
issuance, offer, sale and delivery of the Common Shares, including, but not
limited to, all expenses and fees of preparing, filing and printing the
Registration Statement and prospectus and related exhibits, amendments and
supplements thereto. However, the Company will not pay selling commissions and
expenses associated with the Holder's sale of Common Shares, nor shall the
Company pay transfer taxes in connection with such sale of the Common Shares or
fees and expenses of the Holder's counsel. In connection with the Company's
registration of the Common Shares issuable upon exercise of this Warrant, the
Company has agreed to indemnify the Holder against civil liabilities including
liabilities under the Securities Act of 1933.
The foregoing notwithstanding, the Holder hereby agrees to abide by any
"lock-up" period restricting the sale or other disposition of the Shares,
including restrictions imposed by (i) the National Association of Securities
Dealers ("NASD"), or (ii) any national exchange including the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") as a
condition of listing.
3
<PAGE>
As a condition to the Company's registration of the Common Shares
issuable upon exercise of this Warrant, the Holder will be required to furnish
certain information to the Company and to indemnify the Company against certain
civil liabilities, including liabilities arising under the Act with respect to
such information. There can be no assurance that the Registration Statement will
become effective under the Act.
Miscellaneous
- -------------
The Company shall not be required to issue or deliver any certificate
for Common Shares purchased on exercise of this Warrant or any portion thereof
prior to fulfillment of all the following conditions:
(a) the completion of any registration or other qualification
of such Common Shares under any federal or state law or under the rulings or
regulations of the Securities and Exchange Commission or any other government
regulatory body which is necessary;
(b) the obtaining of any approval or other clearance from any
federal or state government agency which is necessary;
(c) the obtaining from the registered owner of the Warrant a
representation in writing that the owner is acquiring such Common Shares for the
owner's own account for investment and not with a view to, or for sale in
connection with, the distribution of any part thereof, if the Warrants and the
related shares have not been registered under the Act; and
(d) the placing on the certificate of an appropriate legend
and the issuance of stop transfer instructions in connection therewith if this
Warrant and the related, Common Shares have not been registered under the Act to
the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE LAWS
OF ANY STATE AND HAVE BEEN ISSUED PURSUANT TO AN EXEMPTION
FROM REGISTRATION. THESE SECURITIES MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
The Company may make any changes or corrections in this
Warrant (i) that it shall deem appropriate to cure any ambiguity or to correct
any defective or inconsistent provision or manifest mistake or error herein
contained: or (ii) that it may deem necessary or desirable and which shall not
adversely affect the interests of the Holder; provided, however, that this
Warrant shall not otherwise be modified, supplemented or altered in any respect
except with the consent in writing of the Holder of not less than 50% of the
aggregate number of warrants issued in connection with the Private Offering that
are then outstanding; and provided, further, that no change in the number or
nature of the securities purchasable upon the exercise of any Warrant, or any
increase in the purchase price therefor, or any shortening of the Warrant
exercise period shall be made without the consent in writing of the Holders
representing such Warrant, other than such changes as are specifically
prescribed by this Warrant.
4
<PAGE>
The terms and provisions of this Warrant shall inure to the benefit of,
and be binding upon, the Company and its successors and assigns.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by the signature of its duly authorized officer.
JACOBSON RESONANCE
ENTERPRISES, INC.
BY:/s/ Dr.Jerry I. Jacobson
---------------------------------
Dr. Jerry I. Jacobson, President
Dated: Dec.23,1998
-----------
5
<PAGE>
SUBSCRIPTION FORM
(To be executed by the registered holder to exercise the rights to
purchase Common Shares evidenced by the within Warrant.)
Jacobson Resonance Enterprises, Inc.
9960 Central Park Boulevard, Suite 302
Boca Raton, FL 33428
Gentlemen:
The undersigned hereby irrevocably subscribes for __________ Common
Shares pursuant to and in accordance with the terms and conditions of this
Warrant, and herewith makes payment of $___________ therefor, and requests that
a certificate for such Common Shares be issued in the name of the undersigned
and be delivered to the undersigned at the address stated below, and if such
number of shares shall not be all of the shares purchasable hereunder, that a
new Warrant of like tenor for the balance of the remaining Common Shares
purchasable hereunder shall be delivered to the undersigned at the address
stated below.
Dated:____________ Signed:___________________________
Address:__________________________
__________________________________
__________________________________
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED OR DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER ANY
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL SATISFACTORY
TO COUNSEL TO THE COMPANY THAT AN EXEMPTION FROM REGISTRATION UNDER
ANY APPLICABLE STATE SECURITIES LAWS IS AVAILABLE.
PAW-1
PLACEMENT AGENT
WARRANT TO PURCHASE
COMMON STOCK
OF
JACOBSON RESONANCE ENTERPRISES, INC.
(formerly known as Pioneer Services International, Ltd.)
This is to certify that __________________________________, (the
"Holder") is entitled, subject to the terms and conditions hereinafter set
forth, to purchase ___________________________________________ shares (the
"Common Shares") of Common Stock, $.001 par value per share (the "Common
Stock"), of JACOBSON RESONANCE ENTERPRISES, INC. (formerly known as Pioneer
Services International, Ltd.), a Nevada corporation (the "Company"), from the
Company at the price per share and on the terms set forth herein and to receive
a certificate for the Common Shares so purchased on presentation and surrender
to the Company with the subscription form attached, duly executed and
accompanied by payment of the exercise price of each share purchased, either in
cash or by certified or bank cashier's check or other check payable to the order
of the Company. This Warrant is issued in connection with Holder's services
rendered relating to the Company's private placement of Units, pursuant to its
Confidential Private Placement Memorandum dated June 8, 1998 (the "Private
Offering").
Exercise
- --------
The purchase rights represented by this Warrant are exercisable at a
price per Common Share of Thirty Five Cents ($0.35), beginning September 30,
1998 and terminating at 5:00 p.m., on the date which is four (4) years
thereafter, subject to adjustment as hereinafter provided.
The purchase rights represented by this Warrant are exercisable at the
option of the
<PAGE>
registered owner hereof in whole or in part, from time to time, within the
period specified; provided, however, that such purchase rights shall not be
exercisable with respect to a fraction of a Common Share. In case of the
purchase of less than all the Common Shares purchasable under this Warrant, the
Company shall cancel this Warrant on surrender hereof and shall execute and
deliver a new Warrant of like tenor and date for the balance of the shares
purchasable hereunder.
The Company agrees at all times to take appropriate action to reserve
or hold available a sufficient number of Common Shares to cover the number of
shares issuable on exercise of this and all other Warrants of like tenor then
outstanding. The Company agrees to obtain any authorization required from its
shareholders in order to amend its Articles of Incorporation to increase the
authorized capitalization to permit the exercise of this Warrant and other
Warrants of like tenor.
No Shareholder Rights
- ---------------------
This Warrant shall not entitle the holder hereof to any voting rights
or other rights as a shareholder of the Company, or to any other rights whatever
except the rights herein expressed, and no dividends shall be payable or accrue
in respect of this Warrant or the interest represented hereby or the Common
Shares purchasable hereunder until or unless, and except to the extent that,
this Warrant shall be exercised.
Adjustments
- -----------
The number of shares of Common Stock purchasable upon exercise of this
Warrant and the Purchase Price shall be subject to adjustments from time to time
as follows:
If the Company shall at any time prior to the expiration of this
Warrant subdivide or combine its Common Stock, by forward or reverse stock split
or otherwise, or issue additional shares of its Common Stock as a dividend with
respect to any shares of its Common Stock, the number of Common Shares issuable
upon exercise of this Warrant shall forthwith be proportionately increased or
decreased. Appropriate adjustments shall also be made to the per share purchase
price, but the aggregate purchase price payable for the total number of Common
Shares purchasable under this Warrant (as adjusted) shall remain the same. Any
adjustment under this paragraph shall become effective at the close of business
on the date the subdivision or combination becomes effective, or as of the
record date of such dividend, or in the event that no record date is fixed, upon
the making of such dividend. The good faith determination of the Company's Board
of Directors in connection with any adjustment required under this paragraph.
In the event of any reclassification, capital reorganization or other
change in the Common Stock of the Company or in the event of any sale of all or
substantially all of the Company's assets or any merger, consolidation or
restructuring to which the Company is a party in which the Company's
stockholders before the transaction or series of transactions hold 50% or more
of the voting power of the surviving entity immediately after the transaction or
series of transactions (other than as a result of a subdivision, combination or
stock dividend provided for above), lawful provision shall be made, and duly
executed documents evidencing
2
<PAGE>
the same shall be made and shall be delivered to the Holder in substitution for
the Holder's rights under this Warrant, so that the Holder shall have the right
at any time and from time to time prior to the expiration of this Warrant to
purchase at a total price equal to that payable upon exercise of this Warrant
immediately prior to such event, the kind and amount of shares of stock or other
securities or property receivable in connection with such reclassification,
reorganization or change by a Holder of same number of shares of Common Stock as
were purchasable by the Holder immediately prior to such reclassification,
reorganization or change. In any such case, appropriate provisions shall be made
with respect to the rights and interest of the Holder so that the provisions
hereof shall hereafter be applicable with respect to any shares of stock or
other securities or property deliverable upon exercise hereof, and appropriate
adjustment shall be made to the purchase price per Common Share payable
hereunder, provided the aggregate purchase price shall remain the same. The good
faith determination of the Company's Board of Directors in connection with any
adjustment required under this paragraph.
In the event of dissolution, liquidation, merger or combination of the
Company in which the Company is not a surviving corporation, this Warrant shall
terminate, but the registered owner of this Warrant shall have the right, until
5:00 p.m. Company time, on the day prior to the effective date of such
dissolution, liquidation, merger or combination, to exercise this Warrant in
whole or in part, to the extent that it shall not have theretofore been
exercised.
Upon any adjustments of the number of Common Shares issuable upon
exercise of this Warrant or the purchase price pursuant to this paragraph, the
Company within thirty (30) days thereafter shall cause to be prepared a
certificate of the Chief Financial or Accounting Officer of the Company setting
forth the number of Common Shares issuable upon exercise of this Warrant and the
purchase price after such adjustments, and setting forth in reasonable detail
the method of calculation used and cause a copy of such certificate to be mailed
to the Holder of the Warrant.
The foregoing adjustments and the manner of application of the
foregoing provisions may provide for the elimination of fractional share
interests.
Registration of Common Shares
- -----------------------------
The Company has agreed to use its "best efforts" to file a registration
statement (the "Registration Statement") under the Act within six months
following completion or termination of the Private Offering. Such Registration
Statement shall cover the shares of Common Stock issuable upon exercise of this
Warrant. The Company has agreed to pay the costs and expenses incident to the
issuance, offer, sale and delivery of the Common Shares, including, but not
limited to, all expenses and fees of preparing, filing and printing the
Registration Statement and prospectus and related exhibits, amendments and
supplements thereto. However, the Company will not pay selling commissions and
expenses associated with the Holder's sale of Common Shares, nor shall the
Company pay transfer taxes in connection with such sale of the Common Shares or
fees and expenses of the Holder's counsel. In connection with the Company's
registration of the Common Shares issuable upon exercise of this Warrant, the
Company has agreed to indemnify the Holder against civil liabilities including
liabilities under the Securities Act of 1933.
3
<PAGE>
The foregoing notwithstanding, the Holder hereby agrees to abide by any
"lock-up" period restricting the sale or other disposition of the Shares,
including restrictions imposed by (i) the National Association of Securities
Dealers ("NASD"), or (ii) any national exchange including the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") as a
condition of listing.
As a condition to the Company's registration of the Common Shares
issuable upon exercise of this Warrant, the Holder will be required to furnish
certain information to the Company and to indemnify the Company against certain
civil liabilities, including liabilities arising under the Act with respect to
such information. There can be no assurance that the Registration Statement will
become effective under the Act.
Redemption of Warrants
- ----------------------
Commencing one year from the date hereof, the Company may, at its
option, call this Warrant for redemption, at a price of $.01 per Warrant
evidenced hereby; provided, that the Company's right of redemption may be
exercised only if the closing bid price for the Company's Common Stock is $1.125
per share or more for 20 successive trading days. The Company will notify the
Holder, in writing, of the Company's intent to redeem this Warrant, specifying
the date fixed for redemption. The Holder of this Warrant shall be entitled to
exercise this Warrant until 5:00 p.m., Company time, on the date prior to the
date fixed for redemption. After the day prior to the date fixed for redemption,
this Warrant may no longer be exercised and the Holder's sole entitlement shall
be to receive the redemption price set forth above.
Miscellaneous
- -------------
The Company shall not be required to issue or deliver any certificate
for Common Shares purchased on exercise of this Warrant or any portion thereof
prior to fulfillment of all the following conditions:
(a) the completion of any registration or other qualification
of such Common Shares under any federal or state law or under the rulings or
regulations of the Securities and Exchange Commission or any other government
regulatory body which is necessary;
(b) the obtaining of any approval or other clearance from any
federal or state government agency which is necessary;
(c) the obtaining from the registered owner of the Warrant a
representation in writing that the owner is acquiring such Common Shares for the
owner's own account for investment and not with a view to, or for sale in
connection with, the distribution of any part thereof, if the Warrants and the
related shares have not been registered under the Act; and
(d) the placing on the certificate of an appropriate legend
and the issuance of stop transfer instructions in connection therewith if this
Warrant and the related, Common Shares have not been registered under the Act to
the following effect:
4
<PAGE>
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE
LAWS OF ANY STATE AND HAVE BEEN ISSUED PURSUANT TO AN
EXEMPTION FROM REGISTRATION. THESE SECURITIES MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF REGISTRATION OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
The Company may make any changes or corrections in this Warrant (i)
that it shall deem appropriate to cure any ambiguity or to correct any defective
or inconsistent provision or manifest mistake or error herein contained; or (ii)
that it may deem necessary or desirable and which shall not adversely affect the
interests of the Holder; provided, however, that this Warrant shall not
otherwise be modified, supplemented or altered in any respect except with the
consent in writing of the Holder of not less than 50% of the aggregate number of
warrants issued in connection with the Private Offering that are then
outstanding; and provided, further, that no change in the number or nature of
the securities purchasable upon the exercise of any Warrant, or any increase in
the purchase price therefor, or any shortening of the Warrant exercise period
shall be made without the consent in writing of the Holders representing such
Warrant, other than such changes as are specifically prescribed by this Warrant.
The terms and provisions of this Warrant shall inure to the benefit of,
and be binding upon, the Company and its successors and assigns.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by the signature of its duly authorized officer.
JACOBSON RESONANCE
ENTERPRISES, INC.
BY:/s/
---------------------------------
Dr. Jerry I. Jacobson, President
Dated:
-------
5
No. 001
US$990,100
2% CONVERTIBLE DEBENTURE DUE June __, 2004
THIS DEBENTURE is one of a duly authorized issue of Debentures of
Jacobson Resonance Enterprises, Inc., a Nevada corporation (the "Company"),
designated as its 2% Convertible Debentures, due June ______, 2004 (the
"Debentures"), in an aggregate principal amount of up to US$990,100.
FOR VALUE RECEIVED, the Company promises to pay to _________________,
or its registered assigns (the "Holder"), the principal sum of ________________,
on or prior to June _____, 2004 (the "Maturity Date") and to pay interest to the
Holder on the principal sum, at the rate of 2% per annum. Interest shall accrue
daily commencing on the Original Issue Date (as defined in Section 1) until
payment in full of the principal sum, together with all accrued and unpaid
interest, has been made or duly provided for. All accrued and unpaid interest
shall bear interest at the rate of 2% per annum from the Maturity Date or
earlier date on which this Debenture is accelerated as set forth below, through
and including the date of payment. Interest due and payable hereunder shall be
paid to the person in whose name this Debenture (or one or more successor
Debentures) is registered on the records of the Company regarding registration
and transfers of the Debentures (the "Debenture Register"); provided, however,
that the Company's obligation to a transferee of this Debenture arises only if
such transfer, sale or other disposition is made in accordance with the terms
and conditions hereof and of the Convertible Debenture Purchase Agreement, dated
as of June ___, 1999, as amended from time to time (the "Purchase Agreement"),
executed by the original Holder. The principal of this Debenture is payable in
shares of common stock of the Company, at the time of conversion of part or all
of the Debenture in accordance with Section 4 hereof, at the address of the
Holder last appearing on the Debenture Register, and if there is an Event of
Default or redemption pursuant to the terms hereof, accrued and unpaid interest
shall become due and payable as provided herein. Interest on this Debenture
shall be paid, at the option of the Company, in cash or in shares of common
stock, at the time of conversion by the Holder. A transfer of the right to
receive principal and interest under this Debenture shall be transferable only
through an appropriate entry in the Debenture Register as provided herein.
This Debenture is subject to the following additional provisions:
Section 1. Definitions. For the purposes hereof, the following terms
shall have the following meanings:
<PAGE>
"Adjusted Conversion Price" means the lesser of the Fixed Conversion
Price or the Floating Conversion Price one day prior to the record date set for
the determination of stockholders entitled to receive dividends, distributions,
rights or warrants as provided for in Sections 4(c)(ii), (iii) and (iv).
"Attorney-in-Fact" shall have the same meaning as used in the Purchase
Agreement.
"Business Day" means any day of the year on which commercial banks are
not required or authorized to be closed in New York City, and between the hours
of 9:30 am and 6:00 pm New York Time.
"Common Stock" means shares now or hereafter authorized of the class of
Common Stock, $.00l par value, of the Company and stock of any other class into
which such shares may hereafter have been reclassified or changed.
"Conversion Date" means the date on which a Notice of Conversion is
dated.
"Conversion Ratio" means, at any time, a fraction, of which the
numerator is the principal amount represented by any Debenture plus accrued but
unpaid interest, and of which the denominator is the Conversion Price at such
time.
"Escrow Agent" means the Escrow Agent as defined in the Purchase
Agreement.
"Junior Securities" means the Common Stock, all other equity securities
of the Company and all other debt that is subordinated to the Debentures by its
terms.
"Original Issue Date" shall mean the date of the first issuance of this
Debenture regardless of the number of transfers hereof.
"Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on The Over-The-Counter
Bulletin Board, the OTC Bulletin Board(Register) ("OTCBB") or other stock
exchange on which the Common Stock has been listed or if there is no such price
on such date, then the last bid price on such exchange on the date nearest
preceding such date, or (b) if the Common Stock is not listed on OTCBB or any
stock exchange, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the NASD at the close of business on
such date, or (c) if the Common Stock is not quoted by the NASD, the closing bid
price for a share of Common Stock in the over-the-counter market as reported by
the National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), or (d) if the Common Stock is
no longer publicly traded the fair market value of a share of Common Stock as
determined by an Appraiser (as defined in Section 4(c)(iv) selected in good
faith by the holders of a majority of principal amount of outstanding
2
<PAGE>
Debentures; provided, however, that the Company, after receipt of the
determination by such Appraiser, shall have the right to select an additional
Appraiser, in which case, the fair market value shall be equal to the average of
the determinations by each such Appraiser.
"Person" means a corporation, an association, a partnership, an
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Trading Day" means (a) a day on which the Common Stock is quoted on
the OTCBB or principal stock exchange on which the Common Stock has been listed,
or (b) if the Common Stock is not quoted on the OTCBB or any stock exchange, a
day on which the Common Stock is quoted in the over-the-counter market, as
reported by the NASD, or (c) if the Common Stock is not quoted on the NASD, a
day on which the Common Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices).
Section 2. Denominations of Debentures.
---------------------------------------
The Debentures are issuable in denominations of One Thousand Dollars
(US$1,000.00) and integral multiples of One Thousand Dollars (US$1,000.00) in
excess thereof. The Debentures are exchangeable for an equal aggregate principal
amount of Debentures of different authorized denominations, as requested by the
Holder surrendering the same, but shall not be issuable in denominations of less
than integral multiplies of One Thousand Dollars (US$1,000.00). No service
charge to the Holder will be made for such registration of transfer or exchange.
Section 3. Events of Default and Remedies.
------------------------------------------
I. "Event of Default", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
(a) any default in the payment of the principal of or interest on
this Debenture as and when the same shall become due and payable
either at the Maturity Date, by acceleration, conversion, or
otherwise;
(b) the Company shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit any
breach of, this Debenture, and such failure or breach shall not have
been remedied within thirty (30) days after the date on which written
notice of such failure or breach shall have been given;
3
<PAGE>
(c) the occurrence of any event or breach or default by the
Company under the Purchase Agreement and such failure or breach shall
not have been remedied within ten (10) days after the date on which
written notice of such failure or breach shall have been given by the
Purchaser;
(d) the Company or any of its subsidiaries shall commence a
voluntary case under the United States Bankruptcy Code as now or
hereafter in effect or any successor thereto (the "Bankruptcy Code");
or an involuntary case is commenced against the Company under the
Bankruptcy Code and the petition is not controverted within thirty
(30) days, or is not dismissed within sixty (60) days, after
commencement of the case; or a "custodian" (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or any
substantial part of the property of the Company or the Company
commences any other proceeding under any reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to the Company or there is commenced
against the Company any such proceeding which remains undismissed for
a period of sixty (60) days; or the Company is adjudicated insolvent
or bankrupt; or any order of relief or other order approving any such
case or proceeding is entered; or the Company suffers any appointment
of any custodian or the like for it or any substantial part of its
property which continues undischarged or unstayed for a period of
sixty (60) days; or the Company makes a general assignment for the
benefit of creditors; or the Company shall fail to pay, or shall state
that it is unable to pay, or shall be unable to pay, its debts
generally as they become due; or the Company shall call a meeting of
its creditors with a view to arranging a composition or adjustment of
its debts; or the Company shall by any act or failure to act indicate
its consent to, approval of or acquiescence in any of the foregoing;
or any corporate or other action is taken by the Company for the
purpose of effecting any of the foregoing;
(e) the Company shall default in any of its obligations under any
mortgage, indenture or instrument under which there may be issued, or
by which there may be secured or evidenced, any indebtedness of the
Company in an amount exceeding One Hundred Thousand Dollars
($100,000.00), whether such indebtedness now exists or shall hereafter
be created and such default shall result in such indebtedness becoming
or being declared due and payable prior to the date on which it would
otherwise become due and payable;
(f) the Company shall have its Common Stock (as defined in
Section 1) delisted from the OTCBB or other national securities
exchange or market on which such Common Stock is listed for trading or
suspended from trading thereon, and shall not have its Common Stock
relisted or have such suspension lifted, as the case may be, within
five (5) days;
(g) the Company shall fail to deliver to the Holder or to the
Escrow Agent share certificates representing the Common Shares to be
issued upon conversion of the Debentures
4
<PAGE>
within seven (7) calendar days of the Conversion Date pursuant to
written notice by the Purchaser to the Company that additional Shares
are required in escrow pursuant to Section 2(g) of the Escrow
Agreement;
(h) the Company shall issue a press release, or otherwise make
publicly known, that it is not honoring properly executed Holder
Notice of Conversions for any reason whatsoever.
II. (a) If any Event of Default occurs and continues, beyond any cure
period, if any, then so long as such Event of Default shall then be continuing
the Holder may, by notice to the Company, accelerate all of the payments due
under this Debenture by declaring all amounts of this Debenture, to be,
whereupon the same shall become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
waived by the Company, notwithstanding anything herein contained to the
contrary, and the Holder may immediately and without expiration of any grace
period enforce any and all of its rights and remedies hereunder and all other
remedies available to it under applicable law. Such declaration may be rescinded
and annulled by Holder at any time prior to payment hereunder. No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon. This shall include, but not limited to the right
to temporary, preliminary and permanent injunctive relief without the
requirement of posting any bond or undertaking.
(b) Holder may thereupon proceed to protect and enforce its
rights either by suit in equity, or by action at law, or by other appropriate
proceedings whether for the specific performance (to the extent permitted by
law) of any covenant or agreement contained in this Debenture or in aid of the
exercise of any power granted in this Debenture, and proceed to enforce the
payment of any of the Debentures held by it, and to enforce any other legal or
equitable right of such holder.
(c) Except as expressly provided for herein, the Company
specifically waives all rights it may have (i) to notice of nonpayment, demand,
presentment, protest and notice of protest with respect to any of the
obligations hereunder or the shares; (ii) notice of acceptance hereof or of any
other action taken in reliance hereon, notice and opportunity to be heard before
the exercise by Holder of the remedies of self-help, set-off, or other summary
procedures and all other demands and notices of any description except for cure
periods; and (iii) releases Holder, its officers, directors, agents, employees
and attorneys from all claims for loss or damage caused by any act or failure to
act on the part of Holder, its officers, attorneys, agents, directors and
employees except for gross negligence or willful misconduct.
III. To effectuate the terms and provision of this Debenture, the
Holder may send notice of any default to the Company's attorney-in-fact (the
"Attorney-in-Fact") as set forth herein and send a copy of such notice to the
Company and its counsel, simultaneously, and request the Attorney-in-
5
<PAGE>
Fact, to comply with the terms of this Debenture and Purchase Agreement and all
agreements entered into pursuant to the Purchase Agreement on behalf of the
Company.
Section 4. Conversion
---------------------
(a) This Debenture shall be convertible into shares of Common Stock at
the Conversion Ratio as defined below, as defined below at the option of the
Holder in whole or in part, at any time, commencing on the Original Issue Date.
Any conversion under this Section 4(a) shall be for a minimum principal amount
of $lO,000.00 of Debentures and the interest accrued and due on such amount. The
Holder shall effect conversions by surrendering the Debentures (or such portions
thereof) to be converted to the Company, together with the form of conversion
notice attached hereto as Exhibit A (the "Holder Notice of Conversion") in the
manner set forth in Section 4(j). Each Holder Notice of Conversion shall specify
the principal amount of Debentures and related interest to be converted, and the
date on which such conversion is to be effected (the "Holder Conversion Date").
Subject to Section 4, each Holder Notice of Conversion, once given, shall be
irrevocable. If the Holder is converting less than all of the principal amount
represented by the Debenture(s) tendered by the Holder in the Holder Notice of
Conversion, the Company shall deliver to the Holder a new Debenture for such
principal amount as has not been converted within two (2) Business Days of the
Holder Conversion Date.
(b) Not later than two (2) Business Days after the Conversion Date, the
Escrow Agent will deliver to the Holder (i) a certificate or certificates which
shall be free of restrictive legends and trading restrictions (other than those
then required by law), representing the number of shares of Common Stock being
acquired upon the conversion of Debentures and (ii) once received from the
Company, Debentures in principal amount equal to the principal amount of
Debentures not converted; provided, however that the Company shall not be
obligated to issue certificates evidencing the shares of Common Stock issuable
upon conversion of any Debentures, until Debentures are either delivered for
conversion to the Company or any transfer agent for the Debentures or Common
Stock, or the Holder notifies the Company that such Debentures have been lost,
stolen or destroyed and provides an agreement reasonably acceptable to the
Company to indemnify the Company from any loss incurred by it in connection
therewith. In the case of a conversion pursuant to a Holder Notice of
Conversion, if such certificate or certificates are not delivered by the date
required under this Section 4(b), the Holder shall be entitled by providing
written notice to the Company at any time on or before its receipt of such
certificate or certificates thereafter, to rescind such conversion, in which
event the Company shall immediately return the Debentures tendered for
conversion.
(c) (i) The Conversion Price for each Debenture in effect on any
Conversion Date shall be the lesser of (X) $3.00 ("Fixed Conversion Price") or
(Y) 75% (seventy-five) of the average closing bid price for the shares of the
Company's Common Stock for the five (5) Trading Days ("Five Day Average Closing
Bid Price") immediately preceding the Conversion Date
6
<PAGE>
("Floating Conversion Price"), but shall never be less than fifty cents (.50
cents) per share. The Average Closing Bid Prices shall be obtained from
Bloomberg Information Service or a similar nationally recognized stock quotation
service.
(ii) If the Company, at any time while any Debentures are
outstanding, (a) shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Junior Securities payable in shares of its
capital stock (whether payable in shares of its Common Stock or of capital stock
of any class), (b) subdivide outstanding shares of Common Stock into a larger
number of shares, (c) combine outstanding shares of Common Stock into a smaller
number of shares, or (d) issue by reclassification of shares of Common Stock any
shares of capital stock of the Company, the Adjusted Conversion Price designated
in Section 4(c)(i) shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock of the Company outstanding before
such event and of which the denominator shall be the number of shares of Common
Stock outstanding after such event. Any adjustment made pursuant to this Section
4(c)(ii) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
(iii) If the Company, at any time while any Debentures are
outstanding, shall issue rights or warrants to all holders of Common Stock
entitling them to subscribe for or purchase shares of Common Stock at a price
per share less than the Per Share Market Value of Common Stock at the record
date mentioned below, the Adjusted Conversion Price designated in Section
4(c)(i) shall be multiplied by a fraction, of which the denominator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
on the date of issuance of such rights or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase, and of which the
numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding on the date of issuance of such rights or warrants
plus the number of shares which the aggregate offering price of the total number
of shares so offered would purchase at such Per Share Market Value. Such
adjustment shall be made whenever such rights or warrants are issued, and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such rights or warrants. However, upon the
expiration of any right or warrant to purchase Common Stock the issuance of
which resulted in an adjustment in the Conversion Price designated in Section
4(c)(i) pursuant to this Section 4(c)(iii), if any such right or warrant shall
expire and shall not have been exercised, the Adjusted Conversion Price
designated in Section 4(c)(i) shall immediately upon such expiration be
recomputed and effective immediately upon such expiration be increased to the
price which it would have been (but reflecting any other adjustments in the
Conversion Price made pursuant to the provisions of this Section 4 after the
issuance of such rights or warrants) had the adjustment of the Conversion Price
made upon the issuance of such rights or warrants been made on the basis of
offering for
7
<PAGE>
subscription or purchase only that number of shares of Common Stock
actually purchased upon the exercise of such rights or warrants actually
exercised.
(iv) If the Company, at any time while Debentures are
outstanding, shall distribute to all holders of Common Stock (and not to holders
of Debentures) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in Section
4(c)(iii) above) then in each such case the Conversion Price at which each
Debenture shall thereafter be convertible shall be determined by multiplying the
Adjusted Conversion Price in effect immediately prior to the record date fixed
for determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Per Share Market Value of Common
Stock determined as of the record date mentioned above, and of which the
numerator shall be such Per Share Market Value of the Common Stock on such
record date less the then fair market value at such record date of the portion
of such assets or evidence of indebtedness so distributed applicable to one
outstanding share of Common Stock as determined by the Board of Directors in
good faith; provided, however that in the event of a distribution exceeding ten
percent (10%) of the net assets of the Company, such fair market value shall be
determined by a nationally recognized or major regional investment banking firm
or firm of independent certified public accountants of recognized standing
(which may be the firm that regularly examines the financial statements of the
Company) (an "Appraiser") selected in good faith by the holders of a majority of
the principal amount of the Debentures then outstanding; and provided, further
that the Company, after receipt of the determination by such Appraiser shall
have the right to select an additional Appraiser, in which case the fair market
value shall be equal to the average of the determinations by each such
Appraiser. In either case the adjustments shall be described in a statement
provided to the Holder and all other holders of Debentures of the portion of
assets or evidences of indebtedness so distributed or such subscription rights
applicable to one share of Common Stock. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after the
record date mentioned above.
(v) All calculations under this Section 4 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(vi) In the event the Conversion Price is not adjusted
pursuant to Section 4(c)(ii), (iii), (iv), or (v), the Company shall immediately
redeem the Debentures at 135% of the Purchase Price of the Debentures and
simultaneously pay such amount and all accrued interest and dividends to the
Holder pursuant to the written instructions provided by the Holder.
(vii) Whenever the Conversion Price is adjusted pursuant to
Section 4(c)(ii),(iii), (iv) or (v), or redeemed pursuant to Section 4(c)(vi),
the Company shall within two (2) days after determination of the new Conversion
Price mail and fax to the Holder and to each other holder of Debentures, a
notice ("Company Notice of Conversion") setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment.
8
<PAGE>
(viii) In case of any reclassification of the Common
Stock, any consolidation or merger of the Company with or into another person,
the sale or transfer of all or substantially all of the assets of the Company or
any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, then each holder of Debentures then
outstanding shall have the right thereafter to convert such Debentures only into
the shares of stock and other securities and property receivable upon or deemed
to be held by holders of Common Stock following such reclassification,
consolidation, merger, sale, transfer or share exchange, and the Holder shall be
entitled upon such event to receive such amount of securities or property as the
shares of the Common Stock into which such Debentures could have been converted
immediately prior to such reclassification, consolidation, merger, sale,
transfer or share exchange would have been entitled. The terms of any such
consolidation, merger, sale, transfer or share exchange shall include such terms
so as to continue to give to the Holder the right to receive the securities or
property set forth in this Section 4(c)(viii) upon any conversion following such
consolidation, merger, sale, transfer or share exchange. This provision shall
similarly apply to successive reclassifications, consolidations, mergers, sales,
transfers or share exchanges.
(ix) If:
(A) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(B) the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
(C) the Company shall authorize the granting to all holders of
the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any
rights; or
(D) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the
Common Stock of the Company (other than a subdivision or
combination of the outstanding shares of Common Stock), any
consolidation or merger to which the Company is a party, any
sale or transfer of all or substantially all of the assets
of the Company, or any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or
property; or
(E) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding-up of the affairs of the
Company;
9
<PAGE>
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Debentures, and shall cause to be mailed and faxed
to the Holder and each other holder of Debentures at their last addresses as it
shall appear upon the Debenture Register, at least thirty (30) calendar days
prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined, or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation or winding-up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding-up; provided, however, that the failure to
mail such notice or any defect therein or in the mailing thereof shall not
affect the validity of the corporate action required to be specified in such
notice.
(x) Nothing in this agreement shall preclude the Company from
issuing employee/director/officer stock options, and any such issuance shall not
cause a recalculation of the Conversion Price.
(d) If at any time conditions shall arise by reason of action taken by
the Company which in the opinion of the Board of Directors are not adequately
covered by the other provisions hereof and which might materially and adversely
affect the rights of the Holder and all other holders of Debentures (different
than or distinguished from the effect generally on rights of holders of any
class of the Company's capital stock) or if at any time any such conditions are
expected to arise by reason of any action contemplated by the Company, the
Company shall, at least thirty (30) calendar days prior to the effective date of
such action, mail and fax a written notice to each holder of Debentures briefly
describing the action contemplated and the material adverse effects of such
action on the rights of such holders and an Appraiser selected by the holders of
majority in principal amount of the outstanding Debentures shall give its
opinion as to the adjustment, if any (not inconsistent with the standards
established in this Section 4), of the Conversion Price (including, if
necessary, any adjustment as to the securities into which Debentures may
thereafter be convertible) and any distribution which is or would be required to
preserve without diluting the rights of the holders of Debentures; provided,
however, that the Company, after receipt of the determination by such Appraiser,
shall have the right to select an additional Appraiser, in which case the
adjustment shall be equal to the average of the adjustments recommended by each
such Appraiser. The Board of Directors shall make the adjustment recommended
forthwith upon the receipt of such opinion or opinions or the taking of any such
action contemplated, as the case may be; provided, however, that no such
adjustment of the Conversion Price shall be made which in the opinion of the
Appraiser(s) giving the aforesaid opinion or opinions would result in an
increase of the Conversion Price to more than the Conversion Price then in
effect.
10
<PAGE>
(e) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock solely for the purpose
of issuance upon conversion of Debentures as herein provided, free from
preemptive rights or any other actual contingent purchase rights of persons
other than the holders of Debentures, such number of shares of Common Stock as
shall be issuable (taking into account the adjustments and restrictions of
Section 4(c) and Section 4(d) hereof) upon the conversion of the aggregate
principal amount of all outstanding Debentures. The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon issue, be duly and
validly authorized, issued and fully paid and nonassessable.
(f) No fractional shares of Common Stock shall be issuable upon a
conversion hereunder and the number of shares to be issued shall be rounded up
to the nearest whole share. If a fractional share interest arises upon any
conversion hereunder, the Company shall eliminate such fractional share interest
by issuing Holder an additional full share of Common Stock.
(g) The issuance of certificates for shares of Common Stock on
conversion of Debentures shall be made without charge to the Holder for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided that the Company shall not be required
to pay any tax that may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate upon conversion in a name other
than that of the Holder and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
(h) Debentures converted into Common Stock shall be canceled upon
conversion.
(i) On the Maturity Date, the Debentures and all interest due thereon
shall convert automatically into shares of Common Stock at the lesser of the
Fixed Conversion Price or the Floating Conversion Price set forth in Section 4
(c)(i), provided however, that the Floating Conversion Price shall not be less
than fifty cents (.50 cents).
(j) Each Holder Notice of Conversion shall be given by facsimile to the
Escrow Agent no later than 4:00 pm New York Time. Upon receipt of such Notice of
Conversion, the Escrow Agent shall forward such Notice of Conversion to the
Company by facsimile by the end of the Business Day, on which received, assuming
received by 6:00 pm New York Time and if thereafter on the next Business Day, at
the facsimile telephone number and address of the principal place of business of
the Company. Each Company Notice of Conversion shall be given by facsimile
addressed to each holder of Debentures at the facsimile telephone number and
address of such holder appearing on the books of the Company as provided to the
Company by such holder for the purpose of such Company Notice of Conversion,
with a copy to the Escrow Agent. Any such notice shall be deemed given and
effective upon the transmission of such facsimile at the facsimile telephone
number specified in this Section 4(j) (with printed confirmation of
transmission). In the event that
11
<PAGE>
the Escrow Agent receives the Notice of Conversion after 4:00 p.m. New York
Time, the Conversion Date shall be deemed to be the next Business Day. In the
event that the Notice of Conversion is sent after the end of the Business Day,
notice will be deemed to have been given the next Business Day.
Section 5. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, and interest on, this Debenture at
the time, place, and rate, and in the coin or currency, herein prescribed. This
Debenture is a direct obligation of the Company. This Debenture ranks pari passu
with all other Debentures now or hereafter issued under the terms set forth
herein. The Company may not prepay any portion of the outstanding principal
amount on the Debentures.
Section 6. This Debenture shall not entitle the Holder to any of the
rights of a stockholder of the Company, including without limitation, the right
to vote, to receive dividends and other distributions, or to receive any notice
of, or to attend, meetings of stockholders or any other proceedings of the
Company, unless and to the extent converted into shares of Common Stock in
accordance with the terms hereof.
Section 7. If this Debenture shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Debenture, or in lieu of or in
substitution for a lost, stolen or destroyed debenture, a new Debenture for the
principal amount of this Debenture so mutilated, lost, stolen or destroyed but
only upon receipt of an affidavit of such loss, theft or destruction of such
Debenture, and reasonably acceptable indemnity, if requested, by the Company.
Section 8. This Debenture shall be governed by, enforced and construed
in accordance with the laws of the State of New York, County of New York,
without giving effect to conflicts of laws thereof.
Section 9. All notices or other communications hereunder shall be
given, and shall be deemed duly given and received, if given, in the manner set
forth in Section 4(j).
Section 10. Any waiver by the Company or the Holder a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture. Any waiver
must be in writing.
Section 11. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any
12
<PAGE>
person or circumstance, it shall nevertheless remain applicable to all other
persons and circumstances.
Section 12. Whenever any payment or other obligation hereunder shall be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.
Section 13. This Debenture may not be transferred or assigned, in whole
or in part, at any time, except in compliance with applicable federal and state
securities laws by the transferor and the transferee (including, without
limitation, the delivery of an investment representation letter and a legal
opinion reasonably satisfactory to the Company) and subject to the terms of
Section 4.18 of the Purchase Agreement.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized as of the date first above
indicated.
JACOBSON RESONANCE ENTERPRISES, INC.
Attest:
------------------------------ ------------------------------
Name: Jerry I. Jacobson
Title: President
13
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert the Debenture)
Except as provided by Section 4(b) of the Debenture, the undersigned hereby
irrevocably elects to convert the above Debenture No. ___________ into shares of
Common Stock, par value U.S.$.001 per share (the "Common Stock"), of Jacobson
Resonance Enterprises, Inc. (the "Company") according to the conditions hereof,
as of the date written below. If shares are to be issued in the name of a person
other than undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. A fee of $350 will
be charged to the Holder for any conversion by the Escrow Agent. No other fees
will be charged to the Holder, except for such transfer taxes, if any.
------------------------------------------------------
Conversion calculations: Date to Effect Conversion
------------------------------------------------------
Principal Amount of Debentures to be Converted
------------------------------------------------------
Interest to be Converted or Paid
------------------------------------------------------
Applicable Conversion Price (to the nearest hundredth)
------------------------------------------------------
Number of Shares to be Issued Upon Conversion
------------------------------------------------------
Signature
------------------------------------------------------
Name
------------------------------------------------------
Address
14
PATENT LICENSE AGREEMENT
THIS AGREEMENT ENTERED INTO AND EFFECTIVE THIS 6th day of October, 1999
by and between Jerry I. Jacobson, of 2006 Mainsail Circle, Jupiter, Florida
33477-1418 ("Jacobson"), and Jacobson Resonance Enterprises, Inc., a Florida
corporation, having an address at 9960 Central Park Blvd., #302, Boca Raton,
Florida 33428 ("Enterprises").
Jerry I. Jacobson is the owner of United States Applications Serial Nos.
08/440,896, 09/148,435, and 09/386,696, concerning certain treatments and
devices employing magnetic field therapy, and other country counterparts thereof
(the "Patents"). The invention concerns a variety of related devices and methods
of treatment using magnetic fields (the "Products" and "Methods").
Enterprises is a corporation formed by Jacobson to manufacture, market,
sell, and distribute Products and to practice and have practiced Methods, and to
sublicense all the foregoing. As part of the consideration to be received by
Jacobson from Enterprises, Jacobson has agreed to license Enterprises to
manufacture, use and sell various Products and to practice or have practiced
Methods covered by the Patents.
NOW, THEREFORE, the parties do hereby agree as follows:
ARTICLE I
Grant of Rights
Section 1.01 Subject to the conditions of this Agreement, Jacobson
hereby grants to Enterprises the exclusive worldwide right and license to
manufacture, use and sell the Products and to practice or have practiced the
Methods, including right to sublicense all of the foregoing.
Section 1.02 Jacobson acknowledges that Enterprises may arrange for
manufacture and distribution of the Products or practice of Methods by other
companies.
ARTICLE II
Payment and Records
Section 2.01 Enterprises agrees to pay royalties under this Agreement to
Jacobson upon issuance of patents in the various countries as follows:
1. U.S. Application Serial No. 08/440,896 and other country
counterparts: A royalty of three (3%) percent of gross
revenues, including sales for Products or Methods sold, used
or practiced, which are covered by patents issuing thereon in
each country.
1
<PAGE>
2. U.S. Application Serial No. 09/148,435 and other country
counterparts: A royalty of four (4%) percent of gross
revenues, including sales for Products or Methods sold, used
or practiced, which are covered by patents issuing thereon in
each country.
3. U.S. Application Serial No. 09/386,696 and other country
counterparts: A royalty of four (4%) percent of gross
revenues, including sales for Products or Methods sold, used
or practiced, which are covered by patents issuing thereon in
each country.
Section 2.02 For any revenues obtained by any sublicense, the above
royalty payments shall apply and be due and payable by Enterprises based on the
gross revenues (as set forth for Enterprises) received by each sublicensee.
Enterprises agrees to include adequate terms and conditions in such sublicense
agreements to ensure compliance with the terms and conditions of this Agreement.
Section 2.03 Enterprises shall maintain business records of all sales
and receipts and shall require sublicensees to do the same, and Jacobson shall
have the right, on reasonable notice, to audit such records, together with
accountants of his choice. Enterprises shall impose the same requirements on any
sublicensee, and shall audit sublicensee records upon Jacobson's request. In the
event that any audit of Enterprises or a sublicensee reveals an underpayment of
more than five percents of royalties due, Enterprises shall pay the costs of the
audit, the amounts due and unpaid, and an additional ten percent of the amounts
due and unpaid.
ARTICLE III
Representations and Warranties
Section 3.01 Jacobson warrants that he is the owner of all rights,
title, and interest to the United States Applications Nos. 08/440,896,
09/148,435, and 09/386,696, including other country counterparts and that he has
the right to enter into this Agreement and to convey the rights herein.
Section 3.02 Enterprises represents and warrants that it is authorized
to enter into this Agreement.
ARTICLE IV
Assignment of Rights
Section 4.01 Enterprises' rights under this Agreement shall not be
assigned to any person or corporation succeeding to its business as a result of
sale, consolidation, reorganization or otherwise without the expressed consent
and acceptance in writing by Jacobson.
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<PAGE>
ARTICLE V
Patent Marking
Section 5.01 Enterprises agrees to mark or require marking of all
Products sold or literature, brochures or other written materials used with the
Methods practiced by it or any sublicensee under this Agreement with the words
"US Patent (applicable numbers upon issuance").
ARTICLE VI
Term and Termination
Section 6.01 Unless otherwise terminated, the term of this Agreement
shall be for five (5) years from the date of execution of this agreement and may
be renewed with the consent of both parties.
Section 6.02 This Agreement may also be terminated at any time by the
written consent of both Jacobson and Enterprises.
Section 6.03 Jacobson shall have the right to terminate this Agreement
upon the occurrence of any material breach of this Agreement by Enterprises.
Jacobson shall give Enterprises written notice of its intention to terminate
this Agreement specifying the grounds for termination. The termination shall be
effective sixty (60) days after the receipt of such notice by Enterprises unless
the breach is cured before the expiration of the sixty (60) day period.
Section 6.04 If for any reason Enterprises during the term of this
Agreement shall cease to exist as a business entity, the Agreement shall
automatically be terminated, and all rights licensed revert to Jacobson.
ARTICLE VII
Controlling Law
Section 7.01 This Agreement and all conditions of this Agreement shall
be construed in accordance with the laws of the United States and the State of
Florida.
ARTICLE VIII
Notice
Section 8.01 Any notice or report required to be given by this Agreement
shall be in writing and delivered by hand, by commercial courier, or by
facsimile (confirmed by registered or certified mail, postage prepaid),
addressed to:
Jacobson: Jerry I. Jacobson, 2006 Mainsail Circle, Jupiter, Florida
33477-1418, fax: .(561) 477-6101.
Enterprises: Jacobson Resonance Enterprises, Inc., 9960 Central Park
Blvd., #302, Boca Raton, FL 33428, fax: (561) 477-6101.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
/s/ Jerry I. Jacobson
---------------------
Jerry I. Jacobson
JACOBSON RESONANCE ENTERPRISES, INC.
By: /s/ Jerry I. Jacobson
---------------------
Jerry I. Jacobson
Chairman of the Board & CEO
4
LICENSE AGREEMENT
BETWEEN
JACOBSON RESONANCE ENTERPRISES, INC.
AND
SERRATO ENTERPRISES L.L.C.
<PAGE>
LICENSE AGREEMENT
AGREEMENT ("Agreement"), made and entered into as of the 23 day of
February, 1999, in duplicate originals by and between JACOBSON RESONANCE
ENTERPRISES, INC., a Nevada corporation authorized to do business in the State
of Florida, having an office and place of business at 9960 Central Park
Boulevard, Suite 302, Boca Raton, Florida 33428 ("Licensor"); and SERRATO
ENTERPRISES L.L.C., a Florida L.L.C. having an office and place of business at
4605 South Ocean Boulevard, Boca Raton, Florida 33487 ("Licensee").
WHEREAS, Licensor has expended considerable resources to researching,
developing, testing and treating pain by means of a device known as the
"Jacobson Resonator" (the "Licensed Property"); and,
WHEREAS, Licensee possesses the experience, contacts and expertise to
market, distribute and sell the Licensed Property; and,
WHEREAS, Licensee desires to market, distribute and sell the Licensed
Property in the Territory (hereinafter defined); and,
WHEREAS, Licensee agrees to comply with all provisions of the United
States Foreign Corrupt Practices Act.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, Licensor and Licensee do hereby respectively grant, covenant and
agree as follows:
1. DEFINITIONS.
1.1 Territory: The territories specified are Europe Continent
(excluding the countries that made up the former U.S.S.R.), Africa, and the
Middle East (excluding Israel). In the event Licensee seeks to expand the
countries of the Territory, approval shall not be unreasonably withheld or
delayed and if given, Licensor will attempt to register the Licensed Property in
such additional territories.
1.2 Licensed Property: The Jacobson Resonator and such other
products and services as the parties may agree in writing.
1.3 License Year: A twelve (12) month period beginning on January 1
and ending on December 31, except that the first License Year begins on the date
hereof and ends on December 31, 1999.
2. GRANT OF LICENSE.
2.1 Grant of License and Product Designations: Subject to the terms
of this Agreement, Licensor hereby grants to Licensee, during the term of this
Agreement, and upon the terms and conditions hereinafter set forth, the
exclusive and nonassignable right and license to market, distribute and sell the
Licensed Property within the Territory. Licensee shall have the right, upon
receipt of written approval of Licensor; to sublicense any of the rights and
licenses granted herein to third parties. Licensee shall have no rights with
respect to the Licensed Property outside the Territory.
All other rights specifically not granted to Licensee herein are
reserved for Licensor.
2.2 Licensee's Efforts: Licensee agrees to use its best efforts to
distribute, promote and sell the Licensed Property throughout the Territory.
<PAGE>
2.3 Supply and/or Manufacture of Licensed Property: Licensor shall
execute a separate supply and/or manufacturing agreement with Licensee detailing
how the Licensee shall obtain Licensed Property for distribution. Supply and
Manufacturing agreements shall be executed within six months of the term of this
Agreement.
3. TERM.
The term of this Agreement shall commence on the date of execution
hereof and shall continue for a period of ten (10) License Years, and shall
automatically renew for two (2) succeeding five (5) License Year terms unless
earlier terminated by either party upon not less than 90 days' prior written
notice to the other. No termination of this Agreement shall relieve Licensee
from paying any obligation owed by it to Licensor up to the date of termination.
Upon termination of this Agreement, Licensee shall cease to use and/or market
the Licensed Property, and effective on the date of termination, Licensee shall
have no further right to the Licensed Property.
4. QUALITY CONTROL, STANDARDS, AND OWNERSHIP.
4.1 Quality Control: Licensee shall acquire the Licensed Property
only from Licensor. However, in the event Licensor grants Licensee, in writing,
the right to manufacture the Licensed Property, any Licensed Property
manufactured by Licensee shall meet all of the product designs and
specifications imposed by Licensor. Licensee's failure to adhere to the
foregoing requirements shall be grounds for the immediate termination of this
Agreement by Licensor.
4.2 Use of Licensed Property: Licensee agrees not to market, sell,
distribute or otherwise use the Licensed Property in any manner whatsoever
without first obtaining all required permits, licenses and approvals required by
the laws of any jurisdiction in which the Licensed Property is sold, distributed
or marketed by Licensee or its Sublicensees.
4.3 Ownership of Licensed Property: Nothing in this Agreement shall
confer upon Licensee any ownership interest in the Licensed Property, all such
indicia of ownership in the Licensed Property being retained by Licensor.
4.4 Certificate of Conformance: Licensee shall apply for the
Certificate of Conformance (hereinafter referred to as "CE Mark") in the
European Common Market for the Licensor's proprietary bioelectromagnetic medical
equipment (Licensed Property) during the first six months of this Agreement. The
CE Mark shall be in the name of the Licensor or its designee. The Licensor shall
retain all ownership of the CE Mark.
4.4.1 Cost of CE Mark: Licensor shall pay Licensee fifty
thousand dollars ($50,000.) during the first four months of this Agreement to
off set expenses in procuring the CE Mark. Licensor shall also provide function
generators; attenuators and accessories as required by European authorities on
any devices submitted for approval for attainment of the CE Mark during the
first four months of this Agreement or as new devices are submitted.
2
<PAGE>
5. CONFIDENTIAL INFORMATION.
5.1 Confidential Information: Licensee acknowledges that Licensor's
trade secrets, private or secret processes, methods and ideas, as they exist
from time to time, contracts, customer lists and other information concerning
the Jacobson Resonator and Licensor's other products, services, business records
and plans, product design information, price structure, price methods, price
programs, pricing, product suppliers, discounts, costs, computer programs and
listings, copyright, trademark, proprietary information, formulae, protocols,
forms, procedures, training methods, development, technical information,
know-how, show-how, new product and service development, advertising budgets,
past, present and future marketing, activities and procedures, method for
operating its business, credit and financial data concerning Licensor and
Licensor's clients and client lists, sales presentations, research information,
revenues, acquisitions, practices and plans and information which is embodied in
written or otherwise recorded form, and other information of a confidential
nature not known publicly or by other companies selling to the same markets and
specifically including information which is mental, not physical (collectively,
the "Confidential Information") are proprietary, valuable, special and unique
assets of Licensor, access to and knowledge of which have been or will be
provided to Licensor by virtue of Licensor's association with Licensee.
5.2 Applicability: Licensee agrees and covenants that, during the
term of this Agreement and at all times thereafter, Licensee and each of its
officers, directors, managers, employees, agents and representatives shall (a)
hold in confidence and not disclose or make available to any third party any
Confidential Information obtained directly or constructively from Licensor;
unless such disclosure is authorized in writing by the Chairman of Licensor; (b)
exercise all reasonable efforts to prevent third parties from gaining access to
the Confidential Information; (c) not use, directly or indirectly, the
Confidential Information in any respect of its business, except as necessary to
evaluate the information as contemplated by this Agreement; (d) restrict the
disclosure or availability of the Confidential Information to those who have
read and understand this Agreement and who have a need to know the information
in order to achieve the purposes of this Agreement without the prior consent of
Licensor; (e) not modify any Confidential Information without the prior written
consent of Licensor; (f) take such other protective measures as may be
reasonably necessary to preserve the confidentiality of the Confidential
Information; and (g) relinquish and require all of its employees, officers, and
agents, to relinquish all rights it may have in any matter, such as drawings,
documents, models, samples, photographs, patterns, templates, molds, tools or
prototypes, which may contain, embody or make use of the Confidential
Information; promptly deliver to Licensor any such matter as Licensor may direct
at any time; and not retain any copies or other reproductions thereof.
5.3 Exclusions: Confidential Information does not include the
following: (a) information already known or independently developed by Licensee,
provided that the burden shall be upon Licensee to establish that this exclusion
is applicable; (b) information in the public domain through no wrongful act of
Licensee; or (c) information received by Licensee from a third party who was
free to disclose it, provided that the burden shall be upon Licensee to
establish that this exclusion is applicable.
3
<PAGE>
5.4 Remedies: Licensee acknowledges and agrees that Licensor's
remedy at law for a breach or threatened breach of any of the provisions of this
Section 5 would be inadequate and the breach shall be per se deemed as causing
irreparable harm to Licensor. In recognition of this fact, in the event of a
breach by Licensee of any of the provisions of this Section 5, Licensee agrees
that, in addition to any remedy at law available to Licensor, including, but not
limited to monetary damages, without posting any bond, shall be entitled to
obtain equitable relief in the form of specific performance, temporary
restraining order, temporary or permanent injunction or any other equitable
remedy which may then be available to Licensor.
In the event that, despite the express agreement of the parties, any
provision stated herein shall be determined by any court or other tribunal of
competent jurisdiction to be unenforceable for any reason whatsoever, the
parties agree that the provision shall be interpreted to extend only to the
maximum extent in any and all other respects as to which it may be enforceable,
all as determined by such court or tribunal.
Nothing herein contained shall be construed as prohibiting Licensor
from pursuing any other remedies available to it for such breach or threatened
breach.
5.5 Execution of Agreement By Licensee's Personnel: Licensee agrees
that Licensee's assigned personnel, including Sublicensees engaged by Licensee,
will, prior to commencement of their activities relating to the Licensed
Property, acknowledge, in writing, (a) that they agree to be bound by the
provisions of this Section 5, and (b) that their services constitute work made
for hire and ownership of the Custom Work made for hire and ownership of the
Custom Work Product belongs to Licensor. Licensee further agrees that Licensee's
assigned personnel, including Sublicensees engaged by Licensee, will prior to
commencement of their activities relating to the Licensed Property, acknowledge,
in writing, that they understand the provisions of the United States Foreign
Corrupt Practices Act, and agree to comply with its terms as well as any
provisions of local law or Licensor's corporate policy and procedure.
6. NON-COMPETITION.
6.1 Restriction: During the term of this Agreement, and for a period
of one year following completion of all services rendered by Licensee pursuant
to this Agreement, Licensee agrees that it will not, directly or indirectly,
either for itself or on behalf of any third party, develop, engineer,
manufacture, produce or consult to do any of the foregoing, relating to any
device employing magnetic technology, whose purpose is the alleviation of pain.
6.2 Remedies: Licensee acknowledges and agrees that Licensor's
remedy at law for a breach or threatened breach of the provisions of this
Section 6 would be inadequate and the breach shall be per se deemed as causing
irreparable harm to Licensor. In recognition of this fact, in the event of a
breach by Licensee of any of the provisions of this Section 6, Licensee agrees
that, in addition to any remedy at law available to Licensor, including, but not
limited to monetary damages, without posting any bond, shall be entitled to
obtain equitable relief in the form of specific performance, temporary
restraining order, temporary or permanent injunction or any other equitable
remedy which may then be available to Licensor.
4
<PAGE>
In the event that, despite the express agreement of the parties, any
provision stated herein shall be determined by any court or other tribunal of
competent jurisdiction to be unenforceable for any reason whatsoever, the
parties agree that the provision shall be interpreted to extend only to the
maximum extent in any and all other respects as to which it may be enforceable,
all as determined by such court or tribunal.
Nothing herein contained shall be construed as prohibiting Licensor
from pursuing any other remedies available to it for such breach or threatened
breach.
7. ADVERTISING AND ADVERTISING MATERIALS.
7.1 Advertising Approval: A copy of all materials that Licensee
proposes to use in connection with its marketing of the Licensed Property shall
be provided to Licensor prior to use. No such advertisement may be utilized by
Licensee prior to Licensee's receipt of the prior written approval of Licensor.
8. ROYALTIES.
8.1 Sales Royalty:
8.1.1 Sales Royalty Requirement: In consideration for the
License granted hereunder, Licensee shall pay to Licensor a Sales Royalty equal
to sixteen percent (16%) of the gross business volume payable in US$ or agreed
individual currency.
8.1.2 Manufacturing License Override Fee: In addition to the
Sales Royalty provided for above, Licensee will pay Licensor one thousand
dollars ($1,000) US$ for each eighteen inch (18") and (22") resonator and one
thousand five hundred dollars ($1,500) US$ or equivalent for each seven foot
(7") resonator ordered by and delivered to Licensee. The Manufacturing License
Override Fee shall be fixed for two years (2), with annual inflation adjustments
based on the CPI European Inflation Index.
8.1.3 Payment of Sales Royalty: The Sales Royalty payments
hereunder shall be accounted for and paid quarterly within thirty (30) days
after the close of each three (3) month period during each License Year,
provided the first report will be due on or before December 31, 1999. Payment of
the Manufacturing License Override Fee for each resonator shall be due within
forty-five (45) days of initial shipment from the manufacturing facility. The
Royalty and Sales Royalty payable for each such accounting period during each
License Year shall be computed on the basis of gross business volume from the
beginning of each License Year through the last day of the most recent
accounting period during such year.
8.2 Statements:
8.2.1 Sales Statements: Licensee shall deliver to Licensor, at
the time each Sales Royalty payment is due, a statement signed by a duly
authorized officer of Licensee certifying (a) the amount of Gross Sales made
during the period covered by such Sales Royalty payment; and, (b) the basis for
computation of the amount of Sales Royalty included in such statement. Such
statement shall be furnished to Licensor whether or not any Licensed Property
has been sold during the period for which such statement is due. Upon Licensor's
request, Licensee shall also provide together with said statements, to assist in
verification thereof, copies of Licensee's price lists for Licensed Property.
8.2.2 Annual Statements: Licensee shall deliver to Licensor, not
later than ninety (90) days after the close of each fiscal year during the term
of this
5
<PAGE>
Agreement (or portion thereof in the event of prior termination for any reason),
a statement signed by a financial officer of Licensee relating to said entire
fiscal year, setting forth the same information required to be submitted by
Licensee in accordance with Section 8.2.1 above and also the information setting
forth the total amount expended by Licensee during such fiscal year (including
and stating separately shipping, custom, duty and importation costs), as well as
a letter from the certified public accountants then regularly engaged by
Licensee certifying the accuracy of those amounts of sales.
9. BOOKS AND RECORDS; AUDITS.
9.1 Books and Records; Right to Audit: Licensee shall prepare and
maintain complete and accurate books of account and records (specifically
including without limitation the originals or copies of documents supporting
entries in the books of account) covering all transactions required to be
reported to Licensor under this Agreement. Subject to the provisions of Section
9.2 herein, at Licensor's sole cost, Licensor and its duly authorized
representatives have the right, upon reasonable notice, during regular business
hours at Licensee's principal offices in Florida, for the duration of this
Agreement and for five (5) years thereafter, to audit said books of account and
records of Licensee and examine all other documents and material in the
possession or under the control of Licensee with respect to matters which are
required to be reported to Licensor under this Agreement within three (3) years
after the end of each License Year, and to make extracts and copies thereof.
Licensee's accounting records of sales and shall be maintained separately from
Licensee's accounting records relating to other items manufactured or sold by
Licensee. All such books of account, records and documents shall be kept
available by Licensee for at least five (5) years after the end of each year to
which they relate. In connection with any audit or examination pursuant to this
paragraph, Licensor and its duly authorized representatives shall have the right
to examine and inspect Licensee's physical inventory of Licensed Property,
wherever same is kept. Licensor shall have a period of time of six months
following the close of any audit to assert any claims for discrepancies. Any
claims not asserted within the six-month period following the close of any audit
will be barred.
10. OWNERSHIP AND PROTECTION OF THE LICENSED PROPERTY.
10.1 Restrictions on Use as Name: Licensee shall NOT have the right
to use the Licensor's name in the name of its corporation its or as an assumed
name and the trademarks, logos, etc. of its corporation without Licensors prior
permission.
10.2 Ownership of Licensed Property: Licensee acknowledges that
Licensor is the owner of all rights, title and interest in and to the Licensed
Property and is also the owner of the goodwill attached or which shall become
attached to the Licensed Property in connection with the business and goods in
relation to which the same has been, is or shall be used. Sales by Licensee
shall be deemed to have been made by Licensor for purposes of trademark
registration and, subject to this Agreement, all uses of the Licensed Property
by Licensee shall inure to the benefit of Licensor. Licensee shall not, at any
time, do or suffer to be done any act or thing which may in any way adversely
affect any rights of Licensor in and to the Licensed Property or any
registrations thereof or which, directly or
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indirectly, may reduce the value of the Licensed Property or detract from its
reputation. To the extent that any use of the Licensed Property by Licensee
confers rights to the Licensed Property on Licensee, Licensee hereby assigns its
entire right, title and interest in and to such rights to the Licensed Property
to Licensor subject to all of the terms hereof.
10.3 Licensee's Cooperation: At Licensor's request, Licensee shall
execute any documents reasonably required by Licensor to confirm Licensor's
ownership of all rights in and to the Licensed Property in the Territory and the
respective rights of Licensor and Licensee pursuant to this Agreement. Licensee
shall cooperate with Licensor in connection with the filing and prosecution of
applications to register the Licensed Property in the Territory and the
maintenance and renewal of such registrations as may issue at no cost to
Licensee.
10.4 Legal Requirements: Licensee shall use the Licensed Property
in the Territory strictly in compliance with the legal requirements pertaining
thereto in connection therewith as may be required by applicable legal
provisions. Licensee shall cause to appear on all Licensed Property and on all
materials on or in connection with which the Licensed Property is used, such
legends, markings and notices as may be reasonably necessary in order to give
appropriate notice of any trademark, trade name or other rights therein or
pertaining thereto.
10.5 Prohibition Against Challenges by Licensee: Licensee never
shall challenge Licensor's ownership of or the validity of the Licensed Property
or any application for registration thereof, or any trademark registration
thereof, or any rights of Licensor therein.
10.6 Infringement Actions: In the event that either Licensor or
Licensee learns of any infringement or imitation of the Licensed Property or of
any use by any person of a Patent similar to the Licensed Property, they
promptly shall notify the other party. Licensor thereupon shall take such action
as it deems advisable for the protection of its rights in and to the Licensed
Property and, if requested to do so by Licensor, Licensee shall cooperate with
Licensor in all reasonable respects, at Licensor's sole expense. In no event,
however, shall Licensor be required to take any action if it deems it
inadvisable to do so. If Licensor deems it inadvisable to take any action,
Licensee may then take such action at its own expense provided it first obtains
the written approval of Licensor which shall not be unreasonably withheld.
Licensor recognizes that in regard to any counterfeiting of the Licensed
Property, Licensee may take immediate legal action, at its own expense, upon
prior notification and approval by Licensor. Such approval shall be deemed to
have been granted unless within four (4) business days after the receipt of such
a request Licensor notifies Licensee in writing of its disapproval. Licensor
shall cooperate with Licensee in taking such legal action, at no cost to
Licensor. Any award or recovery obtained by Licensor commenced by Licensor shall
be solely retained by Licensor. Any award or recovery obtained by Licensee in a
permitted action commenced by Licensee may be solely retained by Licensee.
Licensee shall not defend any action brought against it challenging its right to
use the Licensed Property unless it shall first make written demand upon
Licensor to do so and Licensor fails to defend such action on behalf of
Licensee.
11. INDEMNITY: INSURANCE.
11.1 Indemnity: Excepting in regard to trademark infringement
actions
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(which is governed by Section 16 hereof), Licensee does hereby save and hold
Licensor harmless (except where Licensor's equipment or inventions are
determined to be at fault) of and from and indemnity them against any and all
losses, liability, damages and expenses (including reasonable attorneys' fees,
costs and expenses through appeal) which they may incur or may be obligated to
pay, or for which they may become liable or be compelled to pay in any action,
claim or proceeding against them, for or by reason of any acts, whether of
omission or commission, that may be claimed to be or are actually committed or
suffered by Licensee or any of its contractors, servants, agents or employees in
connection with Licensee's performance of this Agreement. Licensor shall give
prompt notice to Licensee of any claim, action or suit that may give rise to
liability hereunder. Licensee shall defend any such claim, action or suit and
shall have the right to select counsel, control the defense, assert
counterclaims and crossclaims, bond any lien or judgment, take any appeal and to
settle on such terms as Licensee deems advisable. Licensee will take no such
action without first consulting with Licensor (and where a settlement of such
claim, action or suit relates to Licensor's ownership of or the validity or
value of the Licensed Property without first obtaining Licensor's approval), and
will keep Licensor apprised of all ongoing actions as they occur and, where
practicable, in advance of any action to be taken by Licensee.
The provisions of these paragraph and Licensee's obligations
hereunder shall survive the expiration or termination of this Agreement.
11.2 Licensed Property Liability Insurance: Licensee shall procure
and maintain at its own expense in full force and effect at all times during
which Licensed Property is being sold and for so long as Licensee remains in
business, with a responsible insurance carrier reasonably acceptable to
Licensor, a products liability insurance policy with respect to Licensed
Property with a limit of liability of not less than (to be determined by
country). Such insurance policy shall name Licensor as additional insured and
shall provide for at least thirty (30) days prior written notice to said parties
of the cancellation or substantial modification thereof. Such insurance may be
obtained by Licensee in conjunction with a policy of products liability
insurance which covers products other than Licensed Property. Licensee shall
deliver a certificate of such insurance to Licensor promptly upon issuance of
said insurance policy and, from time to time upon reasonable request by Licensor
promptly shall furnish to Licensor evidence of the maintenance of said insurance
policy. Nothing contained in this Section 11.2 shall be deemed to limit in any
way the indemnification provisions of Section 11.1 above. The provisions of
these paragraph and Licensee's obligations hereunder shall survive the
expiration or termination of this Agreement.
11.3 Relationship of the Parties. The Licensee is not granted any
right or authority to assume or create any obligation or responsibility, express
or implied, on behalf of or in the name of the Licensor or to bind the Licensor
in any manner or thing whatsoever. The Licensee shall obtain all required
workers' compensation and employer's liability insurance covering all sales
persons and other employees. The Licensee accepts full and exclusive liability
for the payment of any and all taxes, contributions or other sums payable for
unemployment compensation insurance and retirement benefits, as well as all of
the payroll taxes payable by reason of employment of sales persons or other
employees. The Licensee shall be responsible for and hold the Licensor harmless
for all claims, demands
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and suits resulting from any misconduct or negligence of the Licensee's sales
persons and other employees.
12. PAYMENT DEFAULTS.
12.1 Right to Terminate Agreement: If Licensee fails to make any
payment due hereunder, (a) Licensee shall pay interest thereon from and
including the date such payment becomes due until the date the entire amount is
paid in full at a rate equal to one (1%) per annum over the prime rate being
charged by CitiBank, NA. in New York as of the close of the business on the date
the payment first becomes due, but in no event greater than the highest rate
permitted by law, and (b) if such default shall continue uncured for a period of
sixty (60) days after written notice is received by Licensee, Licensor shall
have the right, subject to the compliance with Section 18.3 to terminate this
Agreement thirty (30) days (or as determined by Country law) after a further
written notice is received by Licensee. Licensee shall have the option of
preventing the termination of this Agreement by taking corrective action that
cures the default, if such corrective action is taken prior to the end of the
time period stated in the previous sentence and if there are no other defaults
during such time period. Licensor shall not, however, be required to comply with
the provisions of Section 18.3 in the event of a default in the Minimum Royalty
Payment and may, following the cure period provided above, immediately terminate
this agreement for such default by providing the required notice in this Section
12.1.
12.2 Breach of Material Condition: If Licensee or Licensor
otherwise fails to perform any of the material terms, conditions, agreements or
covenants in this Agreement on its part to be performed (hereinafter referred to
as "Other Default") and such Other Default is not curable, or if such default is
curable but continues uncured for a period of thirty (30) days after notice
thereof has been given to the defaulting party in writing by the other party or
all reasonable steps necessary to cure such Other Default have not been taken by
the defaulting party within said thirty (30) day period, the other party, at its
sole election, may, subject to the compliance with the provisions of Section
19.3, terminate this Agreement forthwith by written notice.
12.3 Bankruptcy, Insolvency, and Related Occurrences:
12.3.1 Automatic Termination: In the event that Licensee,
files a petition in bankruptcy, is adjudicated as bankrupt or files a petition
or otherwise seeks relief under or pursuant to any bankruptcy, insolvency or
reorganization statute or proceeding, or if a petition in bankruptcy is filed
against it, which is not vacated within sixty (60) days, or it becomes insolvent
or makes an assignment for the benefit of its creditors or a custodian, receiver
or trustee is appointed for it or a substantial portion of its business or
assets, which custodian, receiver or trustee is not discharged within ninety
(90) days, this Agreement shall terminate automatically and forthwith.
12.3.2 No Right of Licensee Representatives to Continue
Agreement: The rights granted herein are personal to Licensee and no assignee
for the benefit of creditors, custodian, receiver, trustee in bankruptcy,
sheriff or any other officer of the court or official charged with taking over
custody of Licensee's assets or business shall have any right to continue this
Agreement or to exploit or in any way use the Licensed Property if this
Agreement terminates pursuant to Section 13.31 above.
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12.3.3 Licensor Right of First Refusal: Notwithstanding the
provisions of Section 13.3.2 above, in the event that, pursuant to local
bankruptcy law, a trustee in bankruptcy of Licensee or Licensee, as debtor, is
permitted to assume this Agreement and does so and, thereafter, desires to
assign this Agreement to a third party, which assignment satisfies the
requirements of that bankruptcy law, the trustee or Licensee, as the case may
be, shall notify Licensor of same in writing. Said notice shall set forth the
name and address of the proposed assignee, the proposed consideration of the
assignment and all other relevant details thereof. The giving of such notice
shall be deemed to constitute an offer to Licensor to have this Agreement
assigned to it or to its designee for such consideration, or its equivalent in
money, and upon such terms as are specified in the notice. The aforesaid offer
may be accepted only by written notice given to the trustee or Licensee, as the
case may be, by Licensor within fifteen (15) days after Licensor's receipt of
the notice from such party. If Licensor fails to give its notice to such party
within the said fifteen (15) days, such party may complete the assignment
referred to in its notice, but only if such assignment is to the entity named in
said notice and for the consideration and upon the terms specified herein.
Nothing contained herein shall be deemed to preclude or impair any rights which
Licensor may have as a creditor in any bankruptcy proceeding.
13. RIGHTS ON EXPIRATION OR TERMINATION.
13.1 Licensor Claims for Damages: In the event of termination in
accordance with Section 12 above, as the result of a breach by Licensee,
Licensor shall have the option of, subject to the compliance with Section 18.3,
(a) demanding, in writing, that Licensee pay to it, in addition to any Sales
Royalty then owed to it pursuant to Section 8 above or otherwise, and any monies
owed it for additional services provided to Licensee, as liquidated damages and
not as a penalty, a sum equal to the total annual Minimum Royalty payments
remaining unpaid for the balance of the then current term of this Agreement if
Licensor does not collect such amount from a new licensee in an arms length
transaction for the same period of time such Minimum Royalty covers, upon
reasonable efforts by Licensor to obtain a new licensee or unless Licensor
retains the license for itself or any affiliate, or (b) waiving its claim for
liquidated damages by asserting a claim for actual damages in a judicial or
other proceeding.
13.2 Injunctive Relief with Respect to Licensed Property: Licensee
hereby acknowledges the irreparable harm that Licensor will incur from any
unauthorized use of the Licensed Property. Notwithstanding any termination or
expiration of this Agreement, Licensor shall have and hereby reserves all rights
and remedies which it has, or which are granted to it by operation of law, or
equity to prohibit the unlawful or unauthorized use of the Licensed Property,
including but not limited to seeking a temporary restraining order, preliminary
and/or permanent injunction. The provisions of 19.3 requiring a cooling off
period and compulsory arbitration shall not apply to this section.
13.3 Inventory: Upon the expiration or termination of this
Agreement, Licensee immediately shall deliver to Licensor a complete and
accurate schedule of Licensee's inventory of Licensed Property and of related
work in process then on hand ("Inventory").
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13.4 Sale of Inventory by Licensee: If this Agreement expires or is
terminated other than by Licensor pursuant to Section 12.1 above, Licensee shall
be entitled, for an additional period of six (6) months only on a non-exclusive
basis to sell and dispose of its Inventory. Such sales shall be made subject to
all of the provisions of this Agreement and to an accounting for and the payment
of Sales Royalty thereon. Such accounting and payment shall be due within thirty
(30) days after the close of the said six (6) month period. Licensor shall have
the right for a period of fifteen (15) days following such expiration or
termination to purchase all of Licensee's Inventory at Licensee's cost plus
twenty percent (20%).
13.5 Reversion of Rights to Licensor; Appointment of
Attorney-in-Fact; Return of Materials: Except as specifically provided in
Section 10.1 above, on the expiration or termination of this Agreement, all of
the rights of Licensee under this Agreement shall terminate forthwith and shall
revert immediately to Licensor, all royalties on sales theretofore made shall
become immediately due and payable and Licensee shall discontinue forthwith all
use of the Licensed Property, no longer shall have the right to use the Licensed
Property or any variation or simulation thereof, and shall promptly transfer to
Licensor, free of charge, all registrations, filings, and rights with regard to
the Licensed Property which It may have possessed at any time.
Licensee hereby irrevocably appoints Licensor as Licensee's
attorney-in-fact, effective upon the termination or expiration of this
Agreement, to take any necessary steps on Licensee's behalf in the Territory to
cancel any recordation of the license granted hereunder and to execute any
instruments necessary or desirable to confirm termination of Licensee's rights
under this Agreement.
14. BROKERAGE INDEMNITY.
Each of the parties represents that a broker was not used in
connection with the introduction of the parties and the consummation of this
Agreement. Each of the Licensor and Licensee hereby indemnifies the other and
holds it harmless from any and all liabilities (including, without limitation,
reasonable attorneys' fees and disbursements paid or incurred in connection with
any such liabilities) for any brokerage commissions or finders' fees in
connection with this Agreement or the transactions contemplated hereby insofar
as such liabilities shall be based on arrangements or agreements made by it or
on its behalf.
15. REPRESENTATION AND WARRANTIES; INDEMNITY.
Licensor represents and warrants that Licensor has full right,
power and authority to enter into this Agreement and to perform all of its
obligations hereunder. Licensor further represents and warrants that it has
granted no other license to use the Licensed Property for the sale at wholesale
or distribution at wholesale of Licensed Property in the Territory, and will not
grant such a license prior to the termination hereof. Licensor shall defend and
hereby indemnifies and otherwise holds Licensee harmless from and against any
and all losses, liability, claims, damages, and expenses (including reasonable
attorneys' fees and expenses) which Licensee may sustain by reason of a third
party action or claim arising out of or resulting from a breach by Licensor of
Licensor's representations and warranties hereunder. Licensee must give Licensor
prompt written notice of any such action, claim or proceeding and Licensor, in
its sole discretion, then may
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take such action as it deems advisable to defend such action, claim or
proceeding on behalf of Licensee. In the event appropriate action is not taken
by Licensor within thirty (30) days after its receipt of notice from Licensee,
Licensee shall have the right to defend such action, claim or proceeding, but no
settlement thereof may be made without the approval of Licensor, which approval
shall not be unreasonably withheld. In either case, Licensee and Licensor shall
keep each other fully advised of all developments, shall provide each other with
copies of all documents exchanged in court, and shall cooperate fully with each
other in all respects in connection with any such defense as is made. Such
indemnification shall be deemed to apply solely to (a) the amount of the
judgment, if any, against Licensee, (b) any sums paid by Licensee in settlement,
and (c) the expenses incurred by Licensee in connection with its defense. Such
indemnification by Licensor shall not apply to any damages sustained by Licensee
by reason of such infringement other than those specified above, and in no event
shall apply to consequential damages, unless those consequential damages are
included in the amount of the judgment against Licensee. The provisions of this
paragraph and Licensor's obligations hereunder shall survive the expiration or
termination of this Agreement.
The current registrations of the Licensed Property throughout the
Territory are shown in the annexed Exhibit B.
15.1 United States Foreign Corrupt Practices Act: Licensee warrants
and represents that Licensee understands the provisions of the Foreign Corrupt
Practices Act (hereinafter referred to as "FCPA") and shall comply with its
terms as well as any provisions of local law or corporate policy and procedure.
Licensee further warrants and represents that none of Licensee's principals,
staff officers or key employees are government officials, candidates of
political parties, or other persons who might assert influence on the Licensor's
behalf. Licensee further warrants and represents that Licensee will make annual
certifications of its compliance with the FCPA, local law and the Licensor's
corporate policies and procedures.
15.1 Automatic Termination: This agreement will automatically
terminate in the event of an improper payment in violation of the FCPA or local
law.
16. NOTICE AND PAYMENT.
16.1 Notice Requirements: All reports, approvals, requests,
demands, and notices (collectively, "notices") required or permitted by this
Agreement to be given to a party shall be in writing and shall be deemed to be
duly given if personally delivered or if sent (by facsimile or overnight
courier) to the party concerned at its address set forth on page 1 above (or at
such other address as a party may specify by notice to the other). Copies of all
notices to Licensor and all payments required to be made to Licensor, shall be
sent to:
Jacobson Resonance Enterprises, Inc.
9960 Central Park Blvd., #302
Boca Raton, FL 33428
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Copies of all notices to Licensee shall be sent to:
Serrato Enterprises L.L.C.
4605 South Ocean Blvd.
Boca Raton, FL 33487
17. ASSIGNABILITY; BINDING EFFECT.
17.1 Assignability; Binding Effect: The performance of Licensee
hereunder is of a personal nature and, therefore, neither this Agreement nor the
license or other rights granted hereunder may be assigned, sublicensed or
transferred by Licensee unless Licensee receives prior written approval from
Licensor, which approval shall not be unreasonably withheld or delayed. Such
proposed sub-licensee shall agree in writing to be bound by the substantive
terms hereof. Except as otherwise provided herein, this Agreement shall inure to
the benefit of and shall be binding upon the parties, their respective
successors, Licensor's transferee and assigns and Licensee's permitted
transferee and assigns.
17.2 Sale or Transfer of Shares in Licensee's Corporation: No
transfer of any shares of Licensee's corporation shall be allowed unless
approved by Licensor, which approval shall not be unreasonably withheld. The
approval of any proposed private transfer shall take into account the proposed
transferee's: (i) financial security, (ii) market experience or access to market
experience for couture products; and, (iii) business character; and, (iv) the
type of products being sold by the proposed transferee and whether the proposed
transferee's products are competitive to products sold by Licensor.
Licensor, or its assignee, shall have the right of first refusal to
accept the bona fide terms of purchase being offered by the proposed transferee
of shares and if Licensor refuses to accept the offer to purchase such shares,
then Licensee may sell these shares to the proposed transferee on the same terms
and conditions such shares were offered to Licensor.
18. RESOLUTION OF DISPUTES.
18.1 Jurisdiction: Except as provided in paragraph 16.3 hereof, the
parties hereby irrevocably submit to the personal jurisdiction of the federal
and state courts of the State of Florida, in the venue of Palm Beach County (the
"Courts") in any action or proceeding arising out of or relating to this
Agreement. In any court proceeding, the Courts shall have exclusive jurisdiction
over the subject matter of this Agreement. Licensor agrees that service may be
made upon it by serving Atlas, Pearlman, Trop & Borkson, P.A. in the manner
provided for the giving of notice. Licensee agrees that it may be served process
in the manner provided for the giving of notice. The parties hereby irrevocably
waive, to the fullest extent they may effectively do so, the defense of an
inconvenient forum to the maintenance of such action or proceeding.
18.2 Waiver of Immunity: To the extent that the parties have or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process with respect to itself or its property, the parties hereby
irrevocably waive such immunity with respect to their obligations under this
Agreement.
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18.3 Sole Method of Dispute Resolution: In the event of a dispute
between the parties, including all events of default, except failure to pay the
Minimum Sales Royalty, neither party may commence formal legal action or
commence arbitration proceedings unless and until the senior level executives
(and their representatives, if they wish) of both parties meet face to face in
a meeting(s) in an attempt to settle the dispute (the "Cooling Off Period").
This Cooling Off Period shall last for fifteen (15) days from the first date one
of the parties identifies to the other party the existence of a dispute. In the
event that the senior executives of the parties are unable to work out a
mutually agreeable resolution during the Cooling Off Period, the parties hereby
agree to binding arbitration before a single arbitrator mutually agreeable to
both parties who shall follow the Rules of the American Arbitration Association.
The arbitrator shall be an attorney specializing in licensing at one or the
intellectual property firms in Florida and neither the attorney nor the firm
have any prior or current relationship with either party. The fees of the
arbitrator shall be evenly shared between the parties. If within thirty (30)
days, the parties cannot mutually agree upon a single arbitrator, either party
may file an arbitration in accordance with the Rules of the American Arbitration
Association in Florida. An arbitrator's decision that a breach has occurred
which would permit the Licensor to terminate this Agreement must provide that
the Licensee shall have a period of thirty (30) days from the date of the
decision to cure the breach before this Agreement may be terminated. If the
breach is one which is not curable, the arbitrator's decision must include a
provision that this Agreement may not be terminated if Licensee shall pay to
Licensor an amount which the arbitrator shall determine will compensate Licensor
for the breach. Notwithstanding the foregoing, Licensor shall have the right to
seek immediate relief in court, including but not limited to a temporary
restraining order, a preliminary injunction and/or a permanent injunction if
Licensee or any of its officers, agents and employees does anything to damage
the value of the Licensed Property. Licensee shall have the right to seek
equitable relief to enforce its rights hereunder in the event Licensee believes
it is being irreparably harmed. In the event either party is seeking equitable
relief from a court in accordance herewith, the party seeking such relief shall
provide the other party with prior written notice of the application for relief
and a copy thereof. The Cooling Off Period shall not apply in the event Licensor
or Licensee should decide to seek immediate relief in court in accordance
herewith.
19. MISCELLANEOUS.
19.1 Services: Unless otherwise provided, in the event Licensee
elects as evidenced by an agreement in writing to purchase any services from
Licensor, it shall pay for such services at Licensor's rates then currently in
effect for such services as set forth in such writing. Invoices for such
services shall be paid by Licensee within ten (10) business days after receipt
thereof.
19.2 Expenses: Licensee will be responsible for direct shipping
costs, customs, duties, and importation incidentals. Licensor will be
responsible for European Business Development Expenses. Licensee will be
responsible for Country Business Development Expenses. Shipments and payment
terms for the manufacture of resonators will be agreed to by individual order
terms as defined in a separate addendum to this Agreement. European development
expenses to be paid by Licensor to be defined and approved in writing by
Licensor in advance of any expenditure.
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19.3 Governing Law; Entire Agreement; Amendment; Termination: This
Agreement shall be construed and interpreted in accordance with the laws of the
State of Florida; contains the entire understanding and agreement between the
parties hereto with respect to the subject matter hereof, supersedes all prior
oral and written understandings and agreements relating thereto and may not be
amended, modified, discharged, or terminated orally except by a writing signed
by the party against whom the modification, discharge or termination is sought
to be enforced.
19.4 Warranties: Neither party makes any warranties with respect to
the use, sale of other transfer of the Licensed Property by the other party or
by any third party. In no event will Licensor be liable for direct, indirect,
special, incidental, or consequential damages, that are in any way related to
the Licensed Property.
19.5 Relationship Between Parties: Nothing herein contained shall
be construed to constitute the parties hereto as partners or as joint ventures,
or either as agent of the other, and no party shall have any power to obligate
or bind the other in any manner whatsoever.
19.6 Wavers: No waiver by either party, whether express or implied,
of any provision of this Agreement, or of any breach or default thereof, shall
constitute a continuing waiver of such provision or of any other provision of
this Agreement. Acceptance of payments by Licensor shall not be deemed a waiver
by Licensor of any violation of or default under any of the provisions of this
Agreement by Licensee.
19.7 Severability: If any provision or any portion of any provision
of this Agreement shall be held to be void or unenforceable, the remaining
provisions of this Agreement and the remaining portion of any provision held
void or unenforceable in part shall continue in full force and effect.
19.8 Descriptive Headings: The descriptive headings used and
inserted in this Agreement are for convenience only and shall not be deemed to
affect the meaning or construction of any provision of this Agreement.
IN WITNESS THEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
JACOBSON RESONANCE ENTERPRISES, INC.
By: /s/ Jerry I. Jacobson
----------------------------------
Name: Jerry I. Jacobson
Title: Chairman and C.E.O.
SERRATO ENTERPRISES, L.L.C.
By: /s/ Alfonso Serrato
----------------------------------
Name: Alfonso Serrato
Title: Chairman and C.E.O.
15
JACOBSON RESONANCE ENTERPRISES, INC.
1998 STOCK OPTION PLAN
1. Grant of Options; Generally. In accordance with the provisions
hereinafter set forth in this stock option plan, the name of which is the
JACOBSON RESONANCE ENTERPRISES, INC. 1998 STOCK OPTION PLAN (the "Plan"), the
Board of Directors (the "Board") or, the Compensation Committee (the "Stock
Option Committee") of Jacobson Resonance Enterprises, Inc. (the "Corporation")
is hereby authorized to issue from time to time on the Corporation's behalf to
any one or more Eligible Persons, as hereinafter defined, options to acquire
shares of the Corporation's no par value common stock (the "Stock").
2. Type of Options. The Board or the Stock Option Committee is
authorized to issue Incentive Stock Options ("ISOs") which meet the requirement
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
which options are hereinafter referred to collectively as ISOs, or singularly as
an ISO. The Board or the Stock Option Committee is also, in its discretion,
authorized to issue options which are not ISOs, which options are hereinafter
referred to collectively as Non Statutory Options ("NSOs"), or singularly as an
NSO. The Board or the Stock Option Committee is also authorized to issue "Reload
Options" in accordance with Paragraph 8 herein, which options are hereinafter
referred to collectively as Reload Options, or singularly as a Reload Option.
Except where the context indicates to the contrary, the term "Option" or
"Options" means ISOs. NSOs and Reload Options.
3. Amount of Stock. The aggregate number of shares of Stock which may
be purchased pursuant to the exercise of Options shall be 10,000,000 shares.
Of this amount, the Board or the Stock Option Committee shall have the power and
authority to designate whether any Options so issued shall be ISOs or NSOs,
subject to the restrictions on ISOs contained elsewhere herein. If an Option
ceases to be exercisable, in whole or in part, the shares of Stock underlying
such Option shall continue to be available under this Plan. Further, if shares
of Stock are delivered to the Corporation as payment for shares of Stock
purchased by the exercise of an Option granted under this Plan, such shares of
Stock shall also be available under this Plan. If there is any change in the
number of shares of Stock due to of the declaration of stock dividends,
recapitalization resulting in stock split-ups, or combinations or exchanges of
shares of Stock, or otherwise, the number of shares of Stock available for
purchase upon the exercise of Options, the shares of Stock subject to any Option
and the exercise price of any outstanding Option shall be appropriately adjusted
by the Board or the Stock Option Committee. The Board or the Stock Option
Committee shall give notice of any adjustments to each Eligible Person granted
an Option under this Plan, and such adjustments shall be effective and binding
on all Eligible Persons. If because of one or more recapitalizations,
reorganizations or other corporate events, the holders of outstanding Stock
receive something other than shares of Stock then, upon exercise of an Option,
the Eligible Person will receive what the holder would have owned if the holder
had exercised the Option immediately before the first such corporate event and
not disposed of anything the holder received as a result of the corporate event.
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4. Eligible Persons.
(a) With respect to ISOs, an Eligible Person means any individual who
has been employed by the Corporation or by any subsidiary of the Corporation,
for a continuous period of at least sixty (60) days.
(b) With respect to NSOs, an Eligible Person means (i) any individual
who has been employed by the Corporation or by any subsidiary of the
Corporation, for a continuous period of at least sixty (60) days, (ii) any
director of the Corporation or any subsidiary of the Corporation or (iii) any
consultant of the Corporation or any subsidiary of the Corporation.
5. Grant of Options. The Board or the Stock Option Committee has the
right to issue the Options established by this Plan to Eligible Persons. The
Board or the Stock Option Committee shall follow the procedures prescribed for
it elsewhere in this Plan. A grant of Options shall be set forth in a writing
signed on behalf of the Corporation or by a majority of the members of the Board
or the Stock Option Committee. The writing shall identify whether the Option
being granted is an ISO or an NSO and shall set forth the terms which govern the
Option. The terms shall be determined by the Board or the Stock Option
Committee, and may include, among other terms, the number of shares of Stock
that may be acquired pursuant to the exercise of the Options, when the Options
may be exercised, the period for which the Option is granted and including the
expiration date, the effect on the Options if the Eligible Person terminates
employment and whether the Eligible Person may deliver shares of Stock to pay
for the shares of Stock to be purchased by the exercise of the Option. However,
no term shall be set forth in the writing which is inconsistent with any of the
terms of this Plan. The terms of an Option granted to an Eligible Person may
differ from the terms of an Option granted to another Eligible Person, and may
differ from the terms of an earlier Option granted to the same Eligible Person.
6. Option Price. The option price per share shall be determined by the
Board or the Stock Option Committee at the time any Option is granted, and shall
be not less than (i) in the case of an ISO, the fair market value, (ii) in the
case of an ISO granted to a ten percent or greater stockholder, 110 percent of
the fair market value, or (iii) in the case of an NSO, not less than the par
value of one share of Stock. Fair market value as used herein shall be:
(a) If shares of Stock shall be traded on an exchange or
over-the-counter market, the mean between the high and low sales prices of Stock
on such exchange or over-the-counter market on which such shares shall be traded
on that date, or if such exchange or over-the-counter market is closed or if no
shares shall have traded on such date, on the last preceding date on which such
shares shall have traded.
(b) If shares of Stock shall not be traded on an exchange or
over-the-counter market, the value as determined by a recognized, appraiser as
selected by the Board or the Stock Option Committee.
7. Purchase of Shares. An Option shell be exercised by the tender to
the Corporation of the full purchase price of the Stock with respect to which
the Option is exercised and written notice of
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the exercise. The purchase price of the Stock shall be in United States dollars,
payable in cash, check, Promissory Note secured by the Shares issued through
exercise of the related Options, or in property or Corporation stock, if so
permitted by the Board or the Stock Option Committee in accordance with the
discretion granted in Paragraph 5 hereof, having a value equal to such purchase
price. The Corporation shall not be required to issue or deliver any
certificates for shares of Stock purchased upon the exercise of an Option prior
to (i) if requested by the Corporation, the filing with the Corporation by the
Eligible Person of a representation in writing that it is the Eligible Person's
then present intention to acquire the Stock being purchased for investment and
not for resale, and/or (ii) the completion of any registration or other
qualification of such shares under any government regulatory body, which the
Corporation shall determine to be necessary or advisable.
8. Grant of Reload Options. In granting an Option under this Plan, the
Board or the Stock Option Committee may include a Reload Option provision
therein, subject to the provisions set forth in Paragraphs 20 and 21 herein. A
Reload Option provision provides that if the Eligible Person pays the exercise
price of shares of Stock to be purchased by the exercise of an ISO, NSO or
another Reload Option (the "Original Option") by delivering to the Corporation
shares of Stock already owned by the Eligible Person (the "Tendered Shares"),
the Eligible Person shall receive a Reload Option which shall be a new Option to
purchase shares of Stock equal in number to the tendered shares. The terms of
any Reload Option shall be determined by the Board or the Stock Option Committee
consistent with the provisions of this Plan.
9. Stock Option Committee. The Stock Option Committee may be appointed
from time to time by the Corporation's Board of Directors. The Board may from
time to time by the members from or add members to the Stock Option Committee.
The Stock Option Committee shall be constituted so as to permit the Plan to
comply in all respects with the provisions set forth in Paragraph 20 herein. The
members of the Stock Option Committee may elect one of its members as its
chairman. The Stock Option Committee shall hold its meetings at such times and
places as its chairman shall determine. A majority of the Stock Option
Committee's members present in person shall constitute a quorum for the
transaction of business. All determinations of the Stock Option Committee will
be made by the majority vote of the members constituting the quorum. The members
may participate in a meeting of the Stock Option Committee by conference
telephone or similar communications equipment by means of which all members
participating in the meeting can hear each other. Participation in a meeting in
that manner will constitute presence in person at the meeting. Any decision or
determination reduced to writing and signed by all members of the Stock Option
Committee will be effective as if it had been made by a majority vote of all
members of the Stock Option Committee at a meeting which is duly called and
held.
10. Administration of Plan. In addition to granting Options and to
exercising the authority granted to it elsewhere in this Plan, the Board or the
Stock Option Committee is granted the full right and authority to interpret and
construe the provisions of this Plan, promulgate, amend and rescind rules and
procedures relating to the implementation of the Plan and to make all other
determinations necessary or advisable for the administration of the Plan,
consistent, however, with the intent of the Corporation that Options granted or
awarded pursuant to the Plan comply with the provisions of Paragraphs 20 and 21
herein. All determinations made by the Board or the Stock Option Committee
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shall be final, binding and conclusive on all persons including the Eligible
Person, the Corporation and its stockholders, employees, officers and. directors
and consultants. No member of the Board or the Stock Option Committee will be
liable for any act or omission in connection with the administration of this
Plan unless it is attributable to that member's willful misconduct.
11. Provisions Applicable to ISOs. The following provisions shall apply
to all ISOs granted by the Board or the Stock Option Committee and are
incorporated by reference into any writing granting an ISO:
(a) An ISO may only be granted within ten (10) years from the date that
this Plan is originally adopted by the Corporation's Board of Directors.
(b) An ISO may not be exercised after the expiration of ten (10) years
from the date the ISO is granted.
(c) The option price may not be less than the fair market value of the
Stock at the time the ISO is granted.
(d) An ISO is not transferrable by the Eligible Person to whom it is
granted except by will, or the laws of descent and distribution, and is
exercisable during his or her lifetime only by the Eligible Person.
(e) If the Eligible Person receiving the ISO owns at the time of the
grant stock possessing more than ten (10%) percent of the total combined voting
power of all classes of stock of the employer corporation or of its parent or
subsidiary corporation (as those terms are defined in the Code), then the option
price shall be at least 110% of the fair market value of the Stock, and the ISO
shall not be exercisable after the expiration of five (5) years from the date
the ISO is granted.
(f) The aggregate fair market value (determined at the time the ISO is
granted) of the Stock with respect to which the ISO is first exercisable by the
Eligible Person during any calendar year (under this Plan and any other
incentive stock option plan of the Corporation) shall not exceed $100,000.
(g) Even if the shares of Stock which are issued upon exercise of an
ISO are sold within one year following the exercise of such ISO so that the sale
constitutes a disqualifying disposition for ISO treatment under the Code, no
provision of this Plan shall be construed as prohibiting such a sale.
(h) This Plan shall be adopted by holders of 50% or more of the
outstanding capital stock of the Company within twelve months from the date set
forth in Section 27 hereof.
12. Determination of Fair Market Value. In granting ISOs under this
Plan, the Board or the Stock Option Committee shall make a good faith
determination as to the fair market value of the Stock at the time of granting
the ISO.
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13. Restrictions on Issuance of Stock. The Corporation shall not be
obligated to sell or issue any shares of Stock pursuant to the exercise of an
Option unless the Stock with respect to which the Option is being exercised is
at that time effectively registered or exempt from registration under the
Securities Act of 1933, as amended, and any other applicable laws, rules and
regulations. The Corporation may condition the exercise of an Option granted in
accordance herewith upon receipt from the Eligible Person, or any other
purchaser thereof, of a written representation that at the time of such exercise
it is his or her then present intention to acquire the shares of Stock for
investment and not with a view to, or for sale in connection with, any
distribution thereof; except that, in the case of a legal representative of an
Eligible Person, "distribution" shall be declined to exclude distribution by
will or under the laws of descent and distribution. Prior to issuing any shares.
of Stock pursuant to the exercise of an Option, the Corporation shall take such
steps as it deems necessary to satisfy any withholding tax obligations imposed
upon it by any level of government.
14. Exercise in the Event of Death of Termination or Employment.
(a) If an optionee shall die (i) while an employee of the Corporation
or a Subsidiary or (ii) within three months after termination of his employment
with the Corporation or a Subsidiary because of his disability, or retirement or
otherwise, his Options may be exercised, to the extent that the optionee shall
have been entitled to do so on the date of his death or such termination of
employment, by the person or persons to whom the optionee's right under the
Option pass by will or applicable law, or if no such person has such right, by
his executors or administrators, at any time, or from time to time. In the event
of termination of employment because of his death while an employee or because
of disability, his Options may be exercised not later than the expiration date
specified in Paragraph 5 or one year after the optionee's death, whichever date
is earlier, or in the event of termination of employment because of retirement
or otherwise, not later than the expiration date specified in Paragraph 5 hereof
or one year after the optionee's death, whichever date is earlier.
(b) If an optionee's employment by the Corporation or a Subsidiary
shall terminate because of his disability and such optionee has not died within
the following three months, he may exercise his Options, to the extent that he
shall have been entitled to do so at the date of the termination of his
employment, at any time, or from time to time, but not later than the expiration
date specified in Paragraph 5 hereof or one year after termination of
employment, whichever date is earlier.
(c) If an optionee's employment shall terminate by reason of his
retirement in accordance with the terms of the Corporation's tax-qualified
retirement plans if any, or with the consent of the Board or the Stock Option
Committee or involuntarily other than by termination for cause, and such
optionee has not died within the following three months, he may exercise his
Option to the extent he shall have been entitled to do so at the date of the
termination of his employment, at any time and from to time, but not later than
the expiration date specified in Paragraph 5 hereof or thirty (30) days after
termination of employment, whichever date is earlier. For purposes of this
Paragraph 14, termination for cause shall mean; (i) termination of employment
for cause as defined in the optionee's Employment Agreement or (ii) in the
absence of an Employment Agreement for the optionee, termination of employment
by reason of the optionee's commission of a felony, fraud or willful misconduct
which has resulted, or is likely to result, in substantial and material damage
to the Corporation or a Subsidiary, all as the Board or the Stock Option
Committee in its sole discretion may determine.
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(d) If an optionee's employment shall terminate for any reason other
than death, disability, retirement or otherwise, all right to exercise his
Option shall terminate at the date of such termination of employment absent
specific provisions in the optionee's Option Agreement.
15. Corporate Events. In the event of the proposed dissolution or
liquidation of the Corporation, a proposed sale of all or substantially all of
the assets of the Corporation, a merger or tender for the Corporation's shares
of Common Stock the Board of Directors may declare that each Option granted
under this Plan shall terminate as of a date to be fixed by the Board of
Directors; provided that not less than thirty (30) days written notice of the
date so fixed shall be given to each Eligible Person holding an Option, and each
such Eligible Person shall have the right, during the period of thirty (30) days
preceding such termination, to exercise his Option as to all or any part of the
shares of Stock covered thereby, including shares of Stock as to which such
Option would not otherwise be exercisable. Nothing set forth herein shall extend
the term set for purchasing the shares of Stock set forth in the Option.
16. No Guarantee of Employment. Nothing in this Plan or in any willing
granting an Option will confer upon any Eligible Person the right to continue in
the employ of the Eligible Person's employer, or will interfere with or restrict
in any way the right of the Eligible Person's employer to discharge such
Eligible Person at any time for any reason whatsoever, with or without cause.
17. Non-transferability. Unless specifically authorized under the terms
of the Option grant, no Option granted under the Plan shall be transferab1e
other than by will or by the laws of descent and distribution. During the
lifetime of the optionee, an Option shall be exercisable only by him unless the
terms of the Option permits the assignment of the Option.
18. No Rights as Stockholder. No optionee shall have any rights as a
stockholder with respect to any shares subject to his Option prior to the date
of issuance to him of a certificate or certificates for such shares.
19. Amendment and Discontinuance of Plan. The Corporation's Board of
Directors may amend, suspend or discontinue this Plan at any time. However, no
such action may prejudice the rights of any Eligible Person who has prior
thereto been granted Options under this Plan. Further, no amendment to this Plan
which has the effect of (a) increasing the aggregate number of shares of Stock
subject to this Plan (except for adjustments pursuant to Paragraph 3 herein), or
(b) changing the definition of Eligible Person under this Plan, may be effective
unless and until approval of the stockholders of the Corporation is obtained in
the same manner as approval of this Plan is required. The Corporation's Board of
Directors is authorized to seek the approval of the Corporation's stockholders
for any other changes it proposes to make to this Plan which require such
approval, however, the Board of Directors may modify the Plan, as necessary, to
effectuate the intent of the Plan as a result of any changes in the tax,
accounting or securities laws treatment of Eligible Persons and the Plan,
subject to the provisions set forth in this Paragraph 19, and Paragraphs 19 and
20.
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20. Compliance with Rule 16b-3. This Plan is intended to comply in all
respects with Rule 16b-3 ("Rule 16b-3") promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), with respect to participants who are subject to Section 16 of
the Exchange Act, and any provision(s) herein that is/are contrary to Rule 16b-3
shall be deemed null and void to the extent appropriate by either the Stock
Option Committee or the Corporation's Board of Directors.
21. Compliance with Code. The aspects of this Plan on ISOs is intended
to comply in every respect with Section 422 of the Code and the regulations
promulgated thereunder. In the event any future statute or regulation shall
modify the existing statute, the aspects of this Plan on ISOs shall be deemed
to incorporate by reference such modification. Any stock option agreement
relating to any Option granted pursuant to this Plan outstanding and unexercised
at the time any modifying statute or regulation becomes effective shall also be
deemed to incorporate by reference such modification and no notice of such
modification need be given to optionee.
If any provision of the aspects of this Plan on ISOs is determined to
disqualify the shares purchasable pursuant to the Options granted under this
Plan from the special tax treatment provided by Code Section 422, such provision
shall be deemed null and void and to incorporate by reference the modification
required to qualify the shares for said tax treatment.
22. Compliance With Other Laws and Regulations. The Plan, the grant
and exercise of Options thereunder, and the obligation of the Corporation to
sell and deliver Stock under such options, shall be subject to all applicable
federal and state laws, rules, and regulations and to such approvals by any
government or regulatory agency as may be required. The Corporation shall not be
required to issue or deliver any certificates for shares of Stock prior to (a)
the listing of such shares on any stock exchange or over-the-counter market on
which the Stock may then be listed and (b) the completion of any registration or
qualification of such shares under any federal or state law, or any ruling or
regulation of any government body which the Corporation shall, in its sole
discretion, determine to be necessary or advisable. Moreover, no Option may be
exercised if its exercise or the receipt of Stock pursuant thereto would be
contrary to applicable laws.
23. Disposition of Shares. In the event any share of Stock acquired by
an exercise of an Option granted under the Plan shall be transferable other than
by will or by the laws of descent and distribution within two years of the date
such Option was granted or within one year after the transfer of such Stock
pursuant to such exercise, the optionee shall give prompt written notice thereof
to the Corporation or the Stock Option Committee.
24. Name. The Plan shall be known as the "Jacobson Resonance
Enterprises, Inc. 1998 Stock Option Plan."
25. Notices. Any notice hereunder shall be in writing and sent by
certified mail, return receipt requested or by facsimile transmission (with
electronic or written confirmation of receipt) and when addressed to the
Corporation shall be sent to it at its office, 9960 Central Park Boulevard, Boca
Raton, Florida 33428, and when addressed to the Committee shall be sent to it at
the same address,
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subject to the right of either party to designate at any time hereafter in
writing some other address, facsimile number or person to whose attention such
notice shall be sent.
26. Headings. The headings preceding the text of Sections and
subparagraphs hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Plan nor shall they affect its meaning,
construction or effect.
27. Effective Date. This Plan, the Jacobson Resonance Enterprises, Inc.
1998 Stock Option Plan, was adopted by the Board of Directors of the Corporation
on August 31, 1998. The effective date of the Plan shall be the same date.
JACOBSON RESONANCE ENTERPRISES, INC.
By:
---------------------------------
Name:
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Its: President
