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
RHINO ECOSYSTEMS, INC.
(Name of Small Business Issuer in its charter)
Florida 65-0939751
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
40 Trowers Road, Woodbridge, Ontario, Canada L4L 7K6
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(Address of principal executive offices) (zip code)
Issuer's telephone number: (905) 264-0198
Securities to be registered under Section 12(g) of the Act:
Title of each class Name of each exchange on which each class
is to be registered
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Common OTC Bulletin Board
Securities to be registered pursuant to Section 12(g) of the Act.
Common Stock, $.0001 par value
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TABLE OF CONTENTS
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INTRODUCTORY STATEMENT............................................................................................1
ITEM 1. DESCRIPTION OF BUSINESS...............................................................................1
A. Business Development and Summary................................................................1
B. Principal Products..............................................................................3
C. Manufacturing...................................................................................5
D. The Market and Product Distribution ............................................................6
E. Marketing Strategy..............................................................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND PLAN OF OPERATION.................................................................................8
A. General Discussion of the Company...............................................................8
B. Segment Data....................................................................................9
C. Governmental Approval, Regulation and Environmental Compliance .................................9
D. Risks Associated with Operations................................................................9
E. Competition....................................................................................10
F. Developing and Changing Market.................................................................11
G. Employees......................................................................................11
H. Risks Associated with Year 2000................................................................11
I. Additional Information.........................................................................11
ITEM 3. DESCRIPTION OF PROPERTY..............................................................................12
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT...........................................................................................12
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS..............................................................................................12
ITEM 6. EXECUTIVE COMPENSATION...............................................................................14
Key Officer Employment Agreements..............................................................14
Compensation of Directors......................................................................14
Stock Option Plan and Non-Employee Directors' Plan.............................................15
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................................................15
ITEM 8. DESCRIPTION OF SECURITIES............................................................................15
Transfer Agent.................................................................................16
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PART II ........................................................................................................16
ITEM 1. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS..............................................................................................16
ITEM 2. LEGAL PROCEEDINGS....................................................................................16
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS........................................................16
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES..............................................................16
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS............................................................17
FINANCIAL STATEMENTS.............................................................................................17
EXHIBITS ........................................................................................................18
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INTRODUCTORY STATEMENT
Rhino Ecosystems, Inc. (the "Company" or "Rhino") has elected to file this
Form 10-SB registration statement on a voluntary basis in order to become a
reporting company under the Securities Act of 1934. The primary purpose for this
is that the Company intends to be listed for trading on the OTC Electronic
Bulletin Board. Under the current NASD rules, in order to become listed on the
OTC Electronic Bulletin Board, a company now must be a reporting company under
the Securities Act of 1934.
This registration statement, including the information that may be
incorporated herein by reference, contains forward-looking statements including
statements regarding, among other items, the Company's business and growth
strategies, and anticipated trends in the Company's business and demographics.
These forward-looking statements are subject to a number of risks and
uncertainties, certain of which are beyond the Company's control. Actual results
could differ materially from these forward-looking statements as a result of
factors described in this section "Risk Factors," including among others,
regulatory or economic influences.
ITEM 1. DESCRIPTION OF BUSINESS
A. Business Development and Summary
Rhino Ecosystems, Inc., hereinafter referred to as the "Company" or
"Rhino", was organized by the filing of Articles of Incorporation with the
Secretary of State of the State of Florida on April 7, 1999. The articles of the
Company authorized the issuance of twenty five million (25,000,000) shares of
Common Stock at a par value of $0.0001 per share. Rhino shall also include all
references to its majority owned subsidiary, Rhino Ecosystems, Inc., a company
subject to the provisions of the Business Corporations Act of Ontario.
Rhino has invented and tested a patented technology known as the RINO(TM)
System which stands for "Refuse In Nothing Out." Rhino has applied for a
trademark on the corporate logo and name "RINO" and has a Canadian patent
pending, Patent # 2,178,270, as well as an international PCT application No.
PCT/CA97/00377 on this innovative technology. The RINO system provides a simple,
inexpensive solution for all restaurants and food-related industries with
regards to compliance with existing and future environmental legislation. The
RINO(TM) System is design to work in conjunction with existing grease trap
filtration systems. The RINO(TM) System will serve as a pre-grease trap
filtration system which captures a large portion of greases and food solids,
that are typically sent down the drains of kitchen sinks, in a disposable
filtration bag.
Water is heavily used in industrial, commercial and residential settings
during the preparation of food including the cleaning of containers, cookware
and utensils used in cooking. This produces a consequent amount of waste water
which typically contains a substantial amount of organic matter, including
grease. Grease which enters the public sewage system may be treated at sewage
treatment plants at a substantial cost. In industrial and commercial settings,
some local
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governments mandate the use of grease trap collection units to minimize the
volume of grease entering the public sewage system.
Standard grease trap collection units consist of settling tanks for the
collection of grease and other waste solids. These tanks may form part of the
waste water flow path and accordingly may not separate grease and other organic
matter efficiently. Furthermore, standard grease trap collection units may
require the services of a grease removal specialist to empty the trap and
dispose of the grease. Grease traps also generally require regular maintenance
to prevent the build up of excessive grease in the trap and the pipes. Excessive
grease in waste water systems may result in excessive bacteria, which may
attract vermin or insects, may cause blocked pipes and reduced flow rates in
sinks, and may allow noxious odors to enter the kitchen and restaurant seating
areas through waste water drains.
The patent pending RINO(TM) System is in compliance with Canadian Federal
and Provincial Regulatory requirements. In fact, current studies and literature
are leaning towards mandatory implementation of pre-grease trap interceptors of
grease and waste solids (i.e. RINO(TM) System). Current Canadian study groups
such as the OPIA (Ontario Plumbing Inspectors Association) are also trying to
legislate mandatory implementation of grease interceptors in all industrial and
commercial locations where food is cooked, processed or prepared.
American study groups such as the PDI (Plumbing and Drainage Institute) and
the ASPE (American Society of Plumbing Engineers) also have identified the
problem with grease and waste solids entering the public sewage system.
Test data captured from RINO(TM) Systems installed in various locations has
been recently tested and audited by an independent engineering and consulting
company. Tests performed have proven the RINO(TM) System to be highly cost
effective. Preliminary observations based on the testing have identified the
following benefits:
1. reduces the amount of grease and waste solids which flow down the drain;
2. reduces the risk of the clogging or backing up of grease traps and
sinks;
3. reduces the number of grease trap cleanings required (which will reduce
down time associated with costly specialists required to clear the
drains);
4. reduces the odors associated with the grease trap (especially during
cleaning);
5. reduces the costs to the municipality for treating the sewage in the
public sewage system;
6. increase in overall management and environmental awareness;
7. reduces closure of restaurant and loss of revenue due to the backing up
of the grease trap, clogged sinks and plumbing.
During its initial phase of development, the Company intends to formulate
profitability budgets, and marketing plans with the intention to make
presentations to overseas manufacturing firms to become its marketing company in
the United States. To date, no manufacturing companies have signed a contract
with Rhino. A manufacturer/client needs to be identified and
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contracted with in order for Rhino to begin to receive revenues. The Company
intends to focus on achieving and maintaining profitability also ensuring tight
financial and systems control by 1) being fully prepared for cyclical sales
performance while still providing top quality customer service, 2) focusing on
quality, not quantity, of new staff, 3) instituting financial/accounting
software systems to enable much tighter cash flow and inventory control, and
minimizing long-term contractual arrangements with suppliers and keeping minimum
order quantities as low as possible.
B. Principal Products
The Product
The RINO(TM) System is the registered trademark name for the pre-grease
trap interceptor filtration system. An initial installation provides a collector
body and contains one removable filter. Refills of the removable filters are
then supplied to the customer as required.
Once the RINO(TM) unit is installed, the discharge water from the
establishments' sinks will be gravity fed into the cap (i.e. waterfeed OTM CAP)
of the RINO(TM) unit. The discharge water will pass through a collection bag
(i.e. filter bag) that will trap the waste materials while letting the water
pass through the discharge hole into a waste water collection area, which will
be emptied as follows:
1. Gravity Model - waste water will flow through the discharge outlet and
reenter the resident plumbing drainage lines prior to the resident grease trap
interceptor.
2. Pump Model -in height restricted areas, an electrical waste water pump
is used to pump the water out of the RINO(TM) prior to the resident grease trap
interceptor.
The filtration bag can be easily emptied and replaced via a front access
cover on the RINO(TM) unit by any staff member of the respective establishment.
Upon removal of the filtration bag, it can be disposed of through the normal
waste removal collection system. Numerous tests performed to date have proven
the existing filter bag to be the most efficient in terms of its filtering
capabilities. The existing filter bag specifications are as follows:
Needle count: 401
Cylinder size: 3-1/2
Start up yarn: 30/2 stretch nylon
Body yarn: 40/l/S stretch nylon 40/1/Z stretch nylon
Run out yarn: 60/1 cotton
Knit length: 16 inches
Finish length: 12 inches
These specifications have been determined as a result of numerous tests
performed.
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Problems with Existing Grease Traps
The prevailing method of intercepting and removing fats, oil and grease
from waste water is through the use of grease traps. Grease traps are intended
to provide some retention time to cool the warm liquefied grease for separation
in the form of a surface scum or oil layer. Unfortunately, most grease traps are
undersized and provide only minimal grease separation prior to discharge to
sewers. Additionally, emulsified oil, unless the emulsion breaks, will normally
not separate in grease traps. To make things worse, many facilities do not
adequately maintain or service the existing grease traps.
Grease and waste solids which are not removed in grease traps will cool
down in sewers, both private and municipal, and in this way result in gradual
grease build-up within the sewers, leading to flow restrictions or complete
blockages. These blockages lead to bad odors scented in the respective
facilities, increased number of grease trap cleanings, potential down-time (i.e.
shut downs) as a result of costly work required to hire specialists to clean any
blockages, and an overall negative effect on the facilities' operations.
Additional expenses may be incurred due to municipal cost recovery on
prosecutions (i.e. fines) for municipal blockages.
Rhino is committed to reduce and eventually eliminate the above noted
problems efficiently and most importantly cost-effectively. Efforts are being
made to create a low cost and highly effective biodegradable bag. This bag will
reduce any concerns raised by the currently used nylon bag to eliminate any
waste control issues.
Installation of the RINO(TM) System can be accomplished with a minimum of
disruptions to existing plumbing systems. Any local plumber will be able to
easily install a RINO(TM) relatively short period of time.
Rhino is experiencing growth in the demand for the RINO(TM) System that has
pushed the Company well beyond its current operating capabilities. A new
facility, the hiring and training of information technicians and engineers, and
the hiring of marketing and management staff are required immediately to allow
Rhino to fill product orders in an efficient manner.
Physical Requirements
To provide adequate office and storage space for growth, the company
requires a five to seven thousand square foot facility. The location of the
facility will be located in the central Greater Toronto Area near one of the 400
series highways to accommodate the anticipated high volume of traffic.
Staffing/Training
In addition to existing personnel, the Company intends to hire a full-time
marketing/sales manager who will work with Gordan Novak, the Vice President of
Sales and Marketing. Mr.
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Novak has previous experience in the area of pollution control. The Sales
Manager will be responsible for the training of a strong sales team, as well as
ensuring the maintenance of a client database.
The Company intends to hire two full-time administrative personnel. The
first staff member as a general bookkeeper, and the second as a secretarial
assistant/receptionist to provide general secretarial services to management.
Additional office personnel will be hired as needed to meet the needs of the
company as it grows.
Laboratory technicians/engineering firms will be contracted as required to
maintain the Company's commitment to research and development in the area of
eliminating waste water grease and solids and to develop new technology and/or
new product lines.
C. Manufacturing
The Company is dedicated to quality products. As such, the Company will be
seeking IS09000 accreditation and using IS09000 approved suppliers.
The Company does not intend to manufacture any of the products it sells.
All manufacturing is subcontracted with manufacturing companies who work towards
the Company's patented and registered designs. Blow Mold Engineering has been
contracted to perform the tooling. Cousins Currie Limited will be responsible
for the production of the plastic shells which in turn will be equipped with
Beckett Pumps. Therefore, the Company will not manufacture its own products but
will only perform sales and distribution, installations, redesigning, testing
and servicing.
Benefits of not manufacturing are as follows:
1. Decrease in working capital required to conduct business;
2. Increase focus on sales and marketing;
3. Able to increase capacity quickly with a reduction in capital costs;
4. Increase in overall flexibility.
The RINO(TM) System is a pre-grease trap interceptor filtration system.
Once the RINO(TM) System is sold and installed, RINO(TM) filter bags will be
sold to RINO(TM) users on a continual basis.
Product Positioning and Pricing
The use of the RINO(TM) System reduces the amount of grease and waste
solids entering into the public sewage system. The savings in reducing grease
and waste solids have been proven through a significant number of studies
performed. Studies have proven that existing grease traps normally require
cleaning frequency of once every two weeks without RINO(TM), and one cleaning
every six weeks with RINO(TM) This results in cleanings required approximately
three
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times less frequently. Since the cost per cleaning is $80 in the test market of
Metropolitan Toronto, an approximate annual saving of using the RINO(TM) System,
taking into consideration the cost of bags at $0.95 per bag, is expected to be
approximately $1,018 per year after installation.
Such a saving equates to a payback of approximately one year for the pump
unit and approximately eight months for the gravity unit based on the projected
installed sale price of a RINO(TM) System. Savings will also be in the form of
reduced down time, no loss of customers due to odors and no requirement to hire
a plumber to clean drains, and reduced risk of fines as a result of violations
of sewer use by-laws, which could cost up to $50,000 per violation.
The publication "Best Management Practices" from the Canadian Ministry of
Environment and Energy directed to the restaurant sector are recommending that
restaurants reduce the amount of solids that are flushed down the drain. Various
government regulations exist to prevent solids and grease from entering into the
sewage system.
D. The Market and Product Distribution
The potential markets are restaurants, and food producing and processing
facilities. The primary initial markets in Canada are Toronto, Montreal and
Vancouver. Upon successful entrance into the Canadian market, the Company
intends to focus its marketing efforts in American states such as California,
Florida and New York. Current test units, installed in various large food retail
chains are expected to decrease the time required to enter the large American
market.
E. Marketing Strategy
The RINO(TM) System will be marketed through an information campaign
directed at all public health and water pollution control officials, restaurants
and other food preparation or processing facilities, and to all plumbing
materials distribution outlets.
The Company's sales and technical representatives will also attend all
seminars and conferences held by the Federal, Provincial and Municipal
Ministries of Health and Environment in Canada to talk to decision makers in
each community. Representatives will also attend trade shows held by plumbing
associations to increase the overall awareness of the product. Contacts made and
requests developed through these sources will be followed up by the marketing
department.
Promotional material, such as brochures, CD ROM, documentation videos and
an Internet web page is currently being prepared and will be available for
distribution by all Rhino sales staff. As well, there is a telephone marketing
program being implemented that will generate leads for all sales staff.
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A professional exhibit will be designed and built for use at various
conferences and trade shows. This information exhibit will focus on the
mechanics of the RINO(TM) System, the problems the system resolves, and the
spin-off benefits and savings that result from the use of the system. Research
papers supporting these benefits will be made available.
Sales
The Company has entered into an exclusive sales and distribution agreement
with Hamlet and Gameau Inc. ("H&G"). H&G is one of North America's leading
distributors of plumbing related products with a large and experienced sales
force.
Direct Sales
The Company expects that a portion of its sales will come from direct sales
to owner managed restaurants across Canada and the United States. These sales
will be achieved by commission only sales personnel who will be affiliated with
but not directly working for the Company. These sales people will acquire
RINO(TM) Units through the H&G product distribution channels at standard company
wide pre-set pricing.
Restaurant Chains
The large number of franchise restaurants chains in North America will
require a combined effort from all of the Company's senior management team as
well as H&G's sales agents to adequately service this potential sales market.
Most of the fast food chains have central purchasing and distribution for most
of their standard equipment and supply requirements. Selling to the head office
the need and benefits to the total organization will result in large quantity
orders to a customer.
Wholesale Plumbing Distributors
The Company anticipates the majority of its sales will be made through the
wholesale plumbing distribution chains in North America. H&G's current sales
force and sales agents currently serve the North American plumbing market place.
Through H&G's established distribution network, the Company's product line will
be shown, demonstrated and displayed in over 250 locations across North America.
These outlets are where plumbers go to purchase their supplies and equipment.
The Company's plan for sales and marketing literature, including print
advertisement in appropriate restaurant magazine and plumbing distribution
circulars will help create a demand for the product.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND PLAN OF OPERATION
The following discussion and analysis of the Company's consolidated
financial condition and results of operation for the fiscal year ended July 31,
1999, 1998 and 1997, should be read in conjunction with the Company's
consolidated financial statements included elsewhere herein. When used in the
following discussions, the words "believes," "anticipates," "intends,"
"expects," and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties,
which could cause results to differ materially from those projected.
A. General Discussion of the Company
The Company is primarily engaged in the design, development, assembly,
marketing and sale of a unique patent-pending wet waste interceptor plumbing
product called the RINO(TM) System. During the fiscal years July 31, 1999
("fiscal 1999"), July 31, 1998 ("fiscal 1998"), and July 31, 1997 ("fiscal
1997"), the Company's management has concentrated its time and efforts on
ensuring that the Rhino wet waste interceptor product line be designed and
developed into a product line that can be manufactured efficiently and
consistently to meet a wide variety of end users needs.
During the above three fiscal year time periods, a sales and marketing
strategy has been developed and it is currently being introduced to the
world-wide market via the Company's attendance at various industry related trade
shows, trade print advertisements, and via the Company's Internet web site
"rhinoeco.com".
The Company intends to continue this sales and marketing approach to raise
the general public's awareness of the Rhino wet waste interceptor product line
and to obtain a distribution network of exclusive and non-exclusive dealers. The
Company intends to supply quality, manufactured product line to a professionally
trained and dedicated dealer network.
As of the end of fiscal 1999, the Company has had no significant revenue
derived from operations. The Company's cumulative net loss to the end of fiscal
1999 totals $1,0896,760. The Company expects to report positive results from
operations during its next fiscal year ending July 31, 2000 ("fiscal 2000").
Such results are intended to be derived from sales of the Company's products
through the establishment of exclusive and non-exclusive dealerships throughout
North America and the Caribbean. Establishment of such dealerships are intended
to commence during the first quarter of operations in fiscal 2000. The Company
intends to enlarge the dealership base and resulting sales throughout the
remainder of fiscal 2000.
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Liquidity and Capital Resources
During the past three fiscal years, the Company has financed its operations
primarily through cash provided through various short and long term credit
facilities and through the private sale of its securities. The Company intends
to complete its first public offering of shares during the second quarter of
fiscal 2000. The Company's management believes that sufficient funds will be
raised from future operations so as to minimize the need for future equity
capitalization.
In addition, management of the Company believes the needs for additional
capital going forward will be derived somewhat from internal revenues and
earnings generated from the sale of its products and services. If the Company is
unable to begin to generate revenues from its anticipated products, management
believes the Company will need to raise additional funds to meet its cash
requirements.
B. Segment Data
The Company has received only limited revenues from sales of its product
since its inception. Because of this limited revenue, no table showing
percentage breakdown of revenue by business segment or product line is included.
C. Governmental Approval, Regulation and Environmental Compliance
The operations of the Company are subject to regulations normally incident
to business operations. In addition, existing publications in the form of "Best
Management Practices" from the Ministry of Environment and Energy directed to
the restaurant sector are recommending to restaurants to reduce the amount of
solids that are flushed down the drain. Various government regulations exist to
prevent solids and grease from entering into the sewage system.
Proposed changes to the Ontario Buildings Code illustrate changes favorable
to mandating the use of RINO(TM) (i.e. a food scrap interceptor). Proposed
changes to the Ontario Building Code are mandating the use of grease
interceptors.
Joint Provincial Ministry of Environment and Energy and Municipal Metro
Works efforts, based on various studies, have concluded that a solids
accumulator and grease interceptor shall be required anywhere that food is
cooked, processed or prepared. Similar regulations exist or are proposed in the
United States. Although the Company will make every effort to comply with
applicable regulations, it can provide no assurance of its ability to do so, nor
can it predict the effect of such regulations on its proposed operations.
D. Risks Associated with Operations
The Company's long-term success is partially predicated on the strength of
developing a comprehensive sales and marketing program.
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Since Rhino does not intend to manufacture its product(s), it will rely on
the use of outside manufacturers. As such, there can be no assurance that the
product will be manufactured and delivered in a timely manner which would
adversely affect the Company's proposed operations.
While the Company's plan of operations is being developed thoroughly, there
is no assurance the plan will be accepted in or by the marketplace, nor, that if
it is accepted, that demand will be sufficient to make the Company profitable.
The Company cannot project with certainty the outcome of its operations, and
there are no assurances that the Company will operate profitably in either the
near or long term.
Local, national, and international economic conditions may have a
substantial adverse affect on the efforts of the Company. The Company cannot
guarantee against the possible eventuality of any potential adverse economic
conditions.
E. Competition
As the RINO(TM) System is patent pending, Rhino believes that the RINO(TM)
process is very difficult if not impossible to duplicate in the foreseeable
future.
Currently, there are no existing pre-grease trap interceptor filtration
systems comparable to the patented RINO(TM) System in place anywhere in North
America and as a result the lead time create by Rhino should protect the Company
from any future external developments. Other competitors, however, could develop
with greater financial and technical resources. Should such competition develop,
the Company's operations could be impaired.
Competitive Advantage
The Company's competitive advantages are numerous. The main advantage is
the technological lead the Company has taken in the study of the pre-grease trap
interceptor system problem which creates the opportunity for the RINO(TM)
System. The technology has also been granted pioneer status, meaning "first use
of scientific concept to solve a commercially valuable problem".
The advantages of the RINO(TM) System over existing grease traps are:
1. reduces the amount of grease and waste solids which flow into the public
sewage system
2. expensive costs associated with hiring a specialist to pump out backed
up material from the drain and resulting in potential down-time
3. reduces the number of grease trap cleanings
4. reduces odors associated with the grease trap, particularly during
cleaning
5. reduction in costs to the municipality for treating the sewage in the
public sewage system. The Company is quite hopeful that the RINO(TM)
System will be endorsed by all water pollution control governmental
bodies
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6. ncrease in overall environmental awareness.
F. Developing and Changing Market
The market conditions for the Company's product is evolving and changing
with respect to current and expected future legislative changes. The Company
believes the current conditions will continue favorably for this type of
venture. There can be no assurance that the Company's assessment of the
situation is correct, nor that the products it selects will be accepted by the
consumer.
G. Employees
As of the current date, the Company has seven full time employees. As the
Company increases its operations, additional employees will be required. The
Company's future success depends on its ability to attract and retain other
qualified personnel, for which competition is intense. The loss of Mr. Wiertzema
or Mr. Novak or the Company's inability to attract and retain other qualified
employees could have a material adverse affect on the Company.
H. Risks Associated with Year 2000
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, and, if not addressed the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue affecting the
Company, including those related to the efforts of customers, suppliers, or
other third parties, will be fully resolved.
I. Additional Information
The Company intends to provide an annual report to its security holders,
and to make quarterly reports available for inspection by its security holders.
The annual report will include audited financial statements.
The Company will, as a result of this filing, become subject to the
informational requirements of the Securities Exchange Act of 1934 (the "Act")
and, in accordance the Commission, such reports, proxy statements and other
information may be inspected at public reference facilities of the Commission at
Judiciary Plaza, 450 Fifth Street N.W., Washington D.C. 20549; Northwest Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; 7 World
Trade Center, New York, New York, 10048; and 5670 Wilshire Boulevard, Los
Angeles, California
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90036. Copies of such material can be obtained from the Public Reference Section
of the Commission at Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C.
20549, at prescribed rates. For further information, the SEC maintains a website
that contains reports, proxy and information statements, and other information
regarding reporting companies at http://www.sec.gov.
ITEM 3. DESCRIPTION OF PROPERTY
The Company maintains its principal business operations at 40 Trowers Road,
Woodbridge, Ontario, Canada L4L 7K6. The Company's toll free telephone number is
(877) 746-6224 and the web site address is www.rhinoeco.com.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information as of November 19, 1999,
with respect to the beneficial ownership of Common Stock by (i) each person who,
to the knowledge of the Company, beneficially owned or had the right to acquire
more than 5% of the outstanding Common Stock, (ii) each Director of the Company,
and (iii) all executive Officers and Directors of the Company as a group:
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Name of Beneficial Owner(1) Number of Shares Percent of Class(2)
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Mark Wiertzema 894,885 16%
Gordan Novak 53,333 1%
Jan Walsh 12,000 0%
Harjit Singh 0 0%
ABT International SA 350,000 5%
All Directors and Officers
as a group 960,218 17%
</TABLE>
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(1) As used in this table "beneficial ownership" means the sole or shared power
to vote, or to direct the voting of a security or the sole or shared
investment power with respect to a security (i.e., the power to dispose of,
or to direct the disposition of, a security).
(2) Figures are rounded to the nearest percentage.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
The following table sets forth the names and positions with the Company and
ages of the executive Officers and Directors of the Company. Directors will be
elected at the Company's annual meeting of shareholders and serve for one year
or until their successors are elected and
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qualify. Officers are elected by the Board and their terms of office are, except
to the extent governed by employment contract, at the discretion of the Board.
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Name Age Title
---- --- -----
<S> <C> <C>
Mark Wiertzema 49 President and Chief Financial Officer
Gordan Novak 50 Vice President
Jan Walsh 43 Secretary/Treasurer
Harjit Singh 39 Director
</TABLE>
Duties, Responsibilities and Experience
Mark Wiertzema, President and Chief Financial Officer
Mark Wiertzema currently serves as President and Chief Financial Officer of
the Company. Mr. Wiertzema graduated from the University of Iowa, where he
received both his graduate (B.B.A.) and post-graduate (MBA) degrees. Mr.
Wiertzema has over 25 years of experience in financial and strategic management
of regional, national and international corporations. During the last 10 years,
Mr. Wiertzema has had a managerial position in an independent company that
collects, transports, re-directs, re-deploys, re-uses and recycles non-hazardous
solid and liquid waste products from large municipalities.
Gordan Novak, Vice President
Since February, 1999, serves as Vice President of the Company. Mr. Novak is
Vice President of Light Steel Technologies, Inc., which licenses proprietary
light steel building technology and has established a number of joint ventures
in Czech Republic, Croatia, Germany, Russia and Ukraine. Mr. Novak was an
advisor to Queen of Diamonds Resources, Inc., where he negotiated the purchase
of mineral rights in Guyana. He also negotiated exclusive first right of refusal
for all mineral resources (excluding oil) in Somalia, and signed exclusive
contract for export of that country's scrap metal. In 1996, he acted as advisor
to Alba Resources, Inc., negotiating 50% joint venture agreements for two base
metal properties in Newfoundland. Mr. Novak has had over 28 years of business
experience.
Jan Walsh, Secretary/Treasurer
Jan Walsh, since March, 1999, has served as Secretary/Treasurer of the
Company. Ms. Walsh works extensively on the development and maintenance of
corporate images through imaginative corporate logo design, print literature and
corporate informational videos. Ms. Walsh is a graduate of the Ontario College
of Art & Design and is an accomplished professional caricature artist. Her
professional objective is to create a better future in the world's ecology
through waste management efficiencies, practices and industrial pollution
prevention.
13
<PAGE>
Harjit Singh
Harjit Singh currently serves as Director of the Company. Mr. Singh
received his Bachelor of Arts degree in 1980. From 1981 to 1988, Mr. Singh was
Assistant Manager for Perwira Harib Bank where he was responsible for overseeing
daily banking operations and investors portfolios. From 1988 to 1991, he served
as a personal banking representative for the Canadian Imperial Bank of Commerce.
Mr. Singh specialized in recovery of non-performing loans. From 1991 to present,
Mr. Singh works for Toronto Police Services as a Police Constable. Mr. Singh
intends to utilize his acquired skills and experience while serving as a
Director of the Company.
ITEM 6. EXECUTIVE COMPENSATION
Mark Wiertzema has received total compensation and benefits of $92,502 for
serving in the capacity of President and Chief Financial Officer. In addition,
Mr. Wiertzema is the beneficial owner of 894,885 shares of the Company's common
stock.
Should the Company become profitable and produce commensurate cash flows
from operations, compensation may be paid to key additional personnel, however,
this will be subject to approval by the Company's Board of Directors. It is the
responsibility of the Company's Officers and its Board of Directors to determine
the timing of any remuneration for key personnel. Such determination and timing
thereof will be based upon such factors as positive cash flow to include equity
sales, operating cash flows, capital requirements, and a positive cash flow
balance. At the time cash flow reaches this point, and appears to be
sustainable, the Officers and Board of Directors will again readdress the
compensation of its key personnel and set forth a more formal and complete plan
for remuneration in line with operations of the Company. At present, the
Company's management cannot accurately estimate the point when revenues and
operating cash flows will be sufficient enough to implement this compensation
plan, nor are they able to estimate the exact amount of compensation at this
time.
There are no annuity, pension, or retirement benefits proposed to be paid
to Officers, Directors, or employees of the Company in the event of retirement
at normal date pursuant to any presently existing plan provided or contributed
to by the Company, or any of its subsidiaries, if any.
Key Officer Employment Agreements
No employment contracts have been negotiated or signed as yet. However, the
Company plans on having all key employees and officers sign a detailed
employment contract as appropriate.
Compensation of Directors
All directors will be reimbursed for expenses incurred in attending Board
or committee meetings.
14
<PAGE>
Stock Option Plan and Non-Employee Directors' Plan
No stock option plan has been set forth, and no non-employee directors'
plan has been instituted. The Company may decided, at a later date, and reserves
the right to, initiate these plans as deemed necessary by the Board.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain family members of the Company's President and the
Secretary/Treasurer own shares of the Company's common stock as set forth below:
Mark Wiertzema, President and CFO, is related to the following
shareholders:
<TABLE>
<CAPTION>
Name # of Shares Relationship Acquired
---- ----------- ------------ --------
<S> <C> <C> <C>
Nathan & Amber Wiertzema 10,000 Nephew & wife 01/99
Nicole Wiertzema 5,000 Niece 01/99
Jonathan Wiertzema 5,000 Son 01/99
Ollie Wiertzema 10,000 Father 03/99
</TABLE>
Jan Walsh, Secretary/Treasurer, is related to the following shareholders:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Marie Walsh 5,000 Sister 01/98
Douglas Koch 14,000 Brother-in-law 01/98
Zuanna Koch 10,000 Sister-in-law 03/99
</TABLE>
ITEM 8. DESCRIPTION OF SECURITIES
The Company's Articles of Incorporation authorizes the issuance of
25,000,000 shares of common stock, $.0001 par value per share, of which
6,524,539 shares were outstanding as of the date of this filing. The Company is
not authorized to issue shares of preferred 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 the Common Stock. All of
the outstanding shares of Common Stock are validly issued, fully paid and
non-assessable. The Company has not authorized any Preferred Stock, Convertible
Stock, or Warrants as of the date of this filing.
15
<PAGE>
Transfer Agent
The transfer agent for the common stock is Florida Atlantic Stock Transfer,
Inc., 7130 Nob Hill Road, Tamarac, Florida 33321.
PART II
ITEM 1. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's shares of Common Stock are not registered with the U.S.
Securities and Exchange Commission under the Securities Act of 1933, as amended
(hereinafter referred to as the "Act") and are restricted securities with the
exception of 1,000,000 shares issued pursuant to Rule 504, Regulation D. The
Company intends to file a Form 15c2-11 with the NASD so that it can be listed on
the OTC Electronic Bulletin Board for trading.
Since its inception April 7, 1999, the Company has not paid cash dividends
on its Common Stock. It is the present policy of the Company not to pay cash
dividends and to retain future earnings to support the Company's growth. Any
payments of cash dividends in the future will be dependent upon, among other
things, the amount of fund available therefor, the Company's earnings, financial
condition, capital requirements, and other factors which the Board of Directors
deem relevant.
As of November 19, 1999, there were approximately 113 common shareholders
of record.
ITEM 2. LEGAL PROCEEDINGS
The Company is not presently a party to any litigation nor to the knowledge
of management is any litigation threatened against the Company which would
materially affect the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
Private Placements
In April, 1999, the Company received subscriptions for the purchase of
shares of common stock in a private placement pursuant to Rule 504 of Regulation
D of the Securities Act of 1933, as amended, at a price of $1.00 per share for a
total of $1,000,000. There are 113 shareholders. Only the Company's President
and Chief Financial Officer owns greater than 5% of the shares.
16
<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Chapter 607 of the Florida Statutes provides for the indemnification of
officers and directors under certain circumstances against expenses incurred in
successfully defending against a claim and authorizes Florida corporations to
indemnify their officers and directors under certain circumstances against
expenses and liabilities incurred in legal proceedings involving such persons
because of their being or having been an officer or director.
Section 607.0850 of the Florida Statutes permits a corporation, by so
providing in its certificate of incorporation, to eliminate or limit director's
liability to the corporation and its stockholders for monetary damages arising
out of certain alleged breaches of their fiduciary duty. Section 607.0850
provides that no such limitation of liability may affect a director's liability
with respect to any of the following: (i) breaches of the director's duty of
loyalty to the corporation or its stockholders; (ii) acts or omissions not made
in good faith or which involve intentional misconduct of knowing violations of
law; (iii) liability for dividends paid or stock repurchased or redeemed in
violation of the Florida General Corporation Law; or (iv) any transaction from
which the director derived an improper personal benefit. Section 607 does not
authorize any limitation on the ability of the corporation or its stockholders
to obtain injunctive relief, specific performance or other equitable relief
against directors.
Article IX of the Company's Articles of Incorporation and the Company's
By-laws provide that all persons who the Company is empowered to indemnify
pursuant to the provisions of Section 607 of the Corporation laws of the State
of Florida (or any similar provision or provisions of applicable law at the time
in effect), shall be indemnified by the Company to the fullest extent permitted
thereby. The foregoing right of indemnification is not deemed to be exclusive of
any other rights to which those seeking indemnification may be entitled under
any by-law, agreement, vote of stockholders or disinterested directors, or
otherwise.
Article IX of the Company's Articles of Incorporation provides that no
director of the Company will be personally liable to the Company or its
stockholders; (i) for any monetary damages for breaches of fiduciary duty of
loyalty to the Company or its stockholders; (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) under Section 607 of the Florida Statutes, or (iv) for any
transaction from which the director derived an improper personal benefit.
PART F/S
FINANCIAL STATEMENTS
The Audited Financial Statement of the Company, prepared by KPMG, LLP,
Chartered Accountants, Commerce Court West, P.O. Box 31 Stn Commerce Court,
Suite 3300, Toronto, Ontario M5L 1B2, required by Regulation S-X commence on
page F/S 1 hereof in response to
17
<PAGE>
this Item of this Registration Statement on Form 10-SB and are incorporated
herein by this reference.
EXHIBITS
2 Reorganization Agreement
3 (i) Articles of Incorporation
3 (ii) By-Laws
4 Instruments defining the rights of holders (refer to exhibit 3)
9 Voting Trust agreement (not applicable)
10 Material contracts (not applicable)
11 Statement re: Computation of per share earnings (not applicable)
21 Subsidiary of the Registrant
24 Power of Attorney (not applicable)
27 Financial Data Schedule (not applicable)
99 Additional Exhibits (not applicable)
18
<PAGE>
SIGNATURE PAGE
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.
Date: November 22, 1999 Rhino Ecosystems, Inc.
By: /s/ Mark Wiertzema
-------------------------------
Mark Wiertzema, President & CFO
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange act of 1934, this
registration statement has been signed below by the followings persons on behalf
of the registrant and in the capacities and on the dates indicated.
Date: November 20, 1999 By: /s/ Gordon Novak
------------------------------
Gordon Novak, Vice President
Date: November 20, 1999 By: /s/ Jan Walsh
------------------------------
Jan Walsh, Secretary/Treasurer
Date: November 20, 1999 By: /s/ Harjit Singh
------------------------------
Harjit Singh, Director
19
<PAGE>
Financial Statements of
(Stated in United States dollars)
RHINO ECOSYSTEMS INC.
A Development Stage Company
Years ended July 31, 1999, 1998 and 1997
<PAGE>
kpmg
KPMG LLP
Chartered Accountants Telephone (416) 777-8500
Commerce Court West Telefax (416) 777-8818
PO Box 31 Stn Commerce Court www.kpmg.ca
Suite 3300
Toronto ON M5L 1B2
AUDITORS' REPORT
To the Directors of Rhino Ecosystems Inc.
We have audited the balance sheets of Rhino Ecosystems Inc. as at July 31, 1999,
1998 and 1997 and the statements of earnings, shareholders' equity (deficiency)
and cash flows for the years then ended. 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 Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at July 31, 1999, 1998 and
1997 and the results of its operations and its cash flows for the years then
ended in accordance with United States generally accepted accounting principles.
On September 7, 1999 and September 16, 1998, we reported separately to the
shareholders of Rhino Ecosystems Inc. on the financial statements for the same
periods, prepared in accordance with Canadian generally accepted accounting
principles.
[LOGO]
Chartered Accountants
Toronto, Canada
September 7, 1999
COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA - U.S. REPORTING DIFFERENCE
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph when the financial statements are affected by
conditions and events that cast substantial doubt on the Company's ability to
continue as a going concern, such as those described in note 1 to the financial
statements. Our report to the directors dated September 7, 1999 is expressed in
accordance with Canadian reporting standards which does not permit a reference
to such events and conditions in the auditors' report when these are adequately
disclosed in the financial statements.
[LOGO]
Chartered Accountants
Toronto, Canada
September 7, 1999
<PAGE>
RHINO ECOSYSTEMS INC.
Balance Sheets
(Stated in United States dollars)
July 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
1999 1998 1997
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Current assets:
Cash $ - $ 24,827 $ 173
Goods and services tax recoverable 6,298 45,135 5,431
Investment tax credits 26,675 26,576 27,071
Inventory (note 3) 37,917 20,483 -
Prepaid expenses and deposits 11,402 35,343 -
Due from related parties (note 8) - 38,233 23,267
--------------------------------------------------------------------------------------------------------------
82,292 190,597 55,942
Fixed assets (note 4) 277,647 342,604 -
Patent 77,691 29,305 -
Due from Le Group De Recuperation O'Energie
P.H. Inc. (note 5) - 99,213 22,713
--------------------------------------------------------------------------------------------------------------
$ 437,630 $ 661,719 $ 78,655
--------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity (Deficiency)
Current liabilities:
Bank indebtedness $ 34,532 $ - $ -
Accounts payable and accrued liabilities 181,376 219,962 56,281
Loans payable (note 6) - - 72,553
Current portion of long-term debt (note 7) 20,746 17,225 -
Due to related parties (note 8) 111,468 2,023 31,533
--------------------------------------------------------------------------------------------------------------
348,122 239,210 160,367
Long-term debt (note 7) 127,935 148,130 -
Other obligation (note 9) 311,946 - -
Shareholders' equity (deficiency):
Share capital (note 10) 736,387 736,387 73
Deficit accumulated during development stage (1,081,316) (448,618) (82,467)
Accumulated other comprehensive income (loss) (5,444) (13,390) 682
--------------------------------------------------------------------------------------------------------------
(350,373) 274,379 (81,712)
Commitments and contingencies (note 11)
Future operations (note 1)
--------------------------------------------------------------------------------------------------------------
$ 437,630 $ 661,719 $ 78,655
--------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
1
<PAGE>
RHINO ECOSYSTEMS INC.
Statements of Earnings
(Stated in United States dollars)
Years ended July 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
Cumulative
total during
development
1999 1998 1997 stage
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales and other income $ 28,998 $ - $ - $ 28,998
Expenses:
Cost of goods sold 13,384 - - 13,384
Marketing 156,788 113,750 - 270,538
Professional and consulting fees 115,454 77,530 21,500 214,484
Amortization of fixed assets 115,253 8,616 - 123,869
Office salaries, benefits and
services 92,502 55,374 - 147,876
Research and product
development (note 14) 45,087 2,183 21,004 68,274
Rent 37,505 38,593 8,369 84,467
Travel and promotion 25,925 21,576 18,397 65,898
Interest on long-term debt 15,679 5,012 - 20,691
Bank charges and interest 14,104 11,428 75 25,607
Office and general 13,667 25,252 9,989 48,908
Telephone 10,475 5,167 3,080 18,722
Utilities 3,563 1,124 53 4,740
Insurance 2,310 546 - 2,856
--------------------------------------------------------------------------------------------------------------
661,696 366,151 82,467 1,110,314
--------------------------------------------------------------------------------------------------------------
Loss for the year $ 632,698 $ 366,151 $ 82,467 $ 1,081,316
--------------------------------------------------------------------------------------------------------------
Loss per common share $ 0.11 $ 0.11 $ 824.67 $ 0.74
--------------------------------------------------------------------------------------------------------------
Weighted average number of common
shares outstanding 5,525,539 3,327,005 100 1,450,905
--------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
RHINO ECOSYSTEMS INC.
Statements of Shareholders' Equity (Deficiency)
(Stated in United States dollars)
Years ended July 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
Deficit
accumulated Accumulated
during other
Common development comprehensive
shares stage income (loss) Total
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued on incorporation $ 73 $ - $ - $ 73
Loss for the year - (82,467) - (82,467)
Foreign currency translation
adjustment - - 682 682
-----------------------------------------------------------------------------------------------------
Balance, July 31, 1997 73 (82,467) 682 (81,712)
Shares issued:
Issued for cash 609,117 - - 609,117
Issued for services 14,015 - - 14,015
Issued for cash and
conversion of loan 157,871 - - 157,871
-----------------------------------------------------------------------------------------------------
781,003 - - 781,003
Less share issue costs (44,689) - - (44,689)
-----------------------------------------------------------------------------------------------------
736,314 - - 736,314
-----------------------------------------------------------------------------------------------------
Loss for the year - (366,151) - (366,151)
Foreign currency translation
adjustment - - (14,072) (14,072)
-----------------------------------------------------------------------------------------------------
Balance, July 31, 1998 736,387 (448,618) (13,390) 274,379
Loss for the year - (632,698) - (632,698)
Foreign currency translation
adjustment - - 7,946 7,946
-----------------------------------------------------------------------------------------------------
Balance, July 31, 1999 $ 736,387 $ (1,081,316) $ (5,444) $ (350,373)
-----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
RHINO ECOSYSTEMS INC.
Statements of Cash Flows
(Stated in United States dollars)
Years ended July 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Cumulative
total during
development
1999 1998 1997 stage
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows provided by (used in):
Operations:
Loss for the year $ (632,698) $ (366,151) $ (82,467) $ (1,081,316)
Adjustments to reconcile
loss for the year to net cash:
Amortization of fixed assets 115,253 8,616 - 123,869
Goods and services tax
recoverable 38,837 (39,704) (5,431) (6,298)
Investment tax credits (99) 495 (27,071) (26,675)
Inventory (17,434) (20,483) - (37,917)
Prepaid expenses and deposits 23,941 (35,343) - (11,402)
Due from related parties 38,233 (14,966) (23,267) -
Accounts payable and accrued
liabilities 59,231 65,864 56,281 181,376
Due to related parties 109,445 (29,510) 31,533 111,468
-----------------------------------------------------------------------------------------------------
(265,291) (431,182) (50,422) (746,895)
Financing:
Bank indebtedness 34,532 - - 34,532
Loans payable (note 6) - (2,471) 72,553 70,082
Proceeds from long-term loan - 165,355 - 165,355
Principal payments on long-term
debt (16,674) - - (16,674)
Other obligation (note 9) 311,946 - - 311,946
Issuance of share capital - 710,921 - 710,994
Share issue costs - (44,689) - (44,689)
-----------------------------------------------------------------------------------------------------
329,804 829,116 72,553 1,231,546
Investments:
Due from Le Group De Recuperation
O'Energie P.H. Inc. (note 5) 99,213 (99,213) - -
Expenditures on fixed assets (50,296) (351,220) - (401,516)
Accounts payable for fixed assets (97,817) 97,817 - -
Expenditures on patent (48,386) (6,592) (22,713) (77,691)
-----------------------------------------------------------------------------------------------------
(97,286) (359,208) (22,713) (479,207)
-----------------------------------------------------------------------------------------------------
Other:
Foreign currency translation
adjustment 7,946 (14,072) 682 (5,444)
-----------------------------------------------------------------------------------------------------
Increase (decrease) in cash (24,827) 24,654 100 -
Cash, beginning of year 24,827 173 73 -
-----------------------------------------------------------------------------------------------------
Cash, end of year $ - $ 24,827 $ 173 $ -
-----------------------------------------------------------------------------------------------------
Interest paid $ 18,165 $ 11,859 $ - $ 30,024
-----------------------------------------------------------------------------------------------------
Income taxes paid $ - $ - $ - $ -
-----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
RHINO ECOSYSTEMS INC.
Notes to Financial Statements
(Stated in United States dollars)
Years ended July 31, 1999, 1998 and 1997
--------------------------------------------------------------------------------
Rhino Ecosystems Inc. (the "Company") is incorporated under the provisions of
the Business Corporations Act (Ontario). The Company is considered to be a
development stage company, as from inception, it has been primarily engaged in
developing the manufacturing process for a food scrap interceptor and has had no
significant revenue derived from operations.
The Company's cumulative net loss and comprehensive loss for the period from
incorporation on June 7, 1996 to July 31, 1999 totalled $1,086,760.
1. FUTURE OPERATIONS:
These financial statements have been prepared on the going concern basis
notwithstanding the effect of significant losses since incorporation;
negative working capital and deficiency in shareholders' equity at July
31, 1999. The application of the going concern concept which assumes the
realization of assets and liquidation of liabilities in the normal course
of business, is dependent on the Company's ability to attain profitable
operations and obtain sufficient cash from external financing to meet the
Company's liabilities and commitments as they become payable. Management
is of the opinion that sufficient working capital will be obtained from
operations and external financing to meet the Company's liabilities and
commitments as they become payable.
A failure to continue as a going concern would then require that stated
amounts of assets and liabilities be reflected on a liquidation basis
which could differ from the going concern basis.
2. SIGNIFICANT ACCOUNTING POLICIES:
These financial statements have been prepared in accordance with
accounting principles generally accepted in the United States, the more
significant of which are outlined below:
(a) Inventory:
Inventory is valued at the lower of cost, determined on a first-in,
first-out basis and market. For materials, market is defined as
replacement cost; for work-in-process and finished goods, market is
defined as net realizable value.
5
<PAGE>
RHINO ECOSYSTEMS INC.
Notes to Financial Statements
(Stated in United States dollars)
Years ended July 31, 1999, 1998 and 1997
--------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(b) Fixed assets:
Fixed assets are stated at cost less related investment tax credits.
Amortization is provided on a straight-line basis from the date the
asset is put in use using the following annual rates:
---------------------------------------------------------------------------
Asset Rate
---------------------------------------------------------------------------
Moulds and dies 3 years
Manufacturing equipment 3 years
Furniture and fixtures 3 years
Office equipment 3 years
Computer equipment 3 years
Vehicle 2 years
---------------------------------------------------------------------------
(c) Patent:
Patent is stated at the cost incurred to date with respect to a
Patent Cooperation Treaty International Application to apply for
letters of patent. It is anticipated that amortization will be
provided by the straight-line basis over seventeen years when the
Company attains a commercial level of production and sales.
(d) Income taxes:
Income taxes are accounted for under the asset and liability method.
Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the year that includes the enactment date.
(e) Investment tax credits:
Investment tax credits relating to fixed asset purchases and
research and development expenses are accounted for as a reduction
of the cost of such assets and expenses respectively.
6
<PAGE>
RHINO ECOSYSTEMS INC.
Notes to Financial Statements
(Stated in United States dollars)
Years ended July 31, 1999, 1998 and 1997
--------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(f) Research and product development:
Research and product development costs are expensed as incurred.
(g) Foreign currency translation:
The Canadian dollar is the functional currency of the Company's
business. The financial statements are translated into United States
dollars using the average rates for the year for items included in
the statements of earnings and the current rate for items included
in the balance sheets. The translation gains or losses are included
in the statements of shareholders' equity (deficiency) as other
comprehensive income or loss.
(h) Use of estimates:
The presentation 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 revenues and expenses
for the year reported. Actual results could differ from those
estimates.
3. INVENTORY:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
1999 1998 1997
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Materials $ 28,291 $ 20,483 $ -
Work-in-process and finished goods 9,626 - -
--------------------------------------------------------------------------------------------------------------
$ 37,917 $ 20,483 $ -
--------------------------------------------------------------------------------------------------------------
4. FIXED ASSETS:
--------------------------------------------------------------------------------------------------------------
1999 1998 1997
--------------------------------------------------------------------------------------------------------------
Accumulated Net book Net book Net book
Cost amortization value value value
--------------------------------------------------------------------------------------------------------------
Moulds and dies $ 324,447 $ 98,553 $ 225,894 $ 287,097 $ -
Manufacturing equipment 35,273 5,609 29,664 23,991 -
Furniture and fixtures 19,388 6,464 12,924 18,412 -
Office equipment 6,721 2,241 4,480 5,525 -
Computer equipment 6,140 2,078 4,062 6,415 -
Vehicle 1,247 624 623 1,164 -
--------------------------------------------------------------------------------------------------------------
$ 393,216 $ 115,569 $ 277,647 $ 342,604 $ -
--------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
RHINO ECOSYSTEMS INC.
Notes to Financial Statements
(Stated in United States dollars)
Years ended July 31, 1999, 1998 and 1997
--------------------------------------------------------------------------------
5. DUE FROM LE GROUP DE RECUPERATION O'ENERGIE P.H. INC.:
During March 1998, in the course of negotiations to acquire all of the
outstanding and issued shares of Le Group De Recuperation O'Energie P.H.
Inc., the Company advanced to Le Group De Recuperation O'Energie P.H.
Inc. $99,213. The advance was non-interest bearing and was to be
recovered upon either the favourable or unfavourable conclusion of the
negotiations. On August 26, 1999, the negotiations were concluded with
the transaction not proceeding. The recovery of the $99,213 was recorded
in the financial statements as an offset to amounts payable to affiliated
companies of Le Group De Recuperation O'Energie P.H. Inc., as at July 31,
1999.
Imputed interest computed at comparable market rates on the interest free
advance is considered not to be material to the financial statements.
Consequently, the financial statements do not include any income for
imputed interest on the interest free advance.
6. LOANS PAYABLE:
In the fiscal year ended July 31, 1997, the Company received interest
free loans in the aggregate amount of $72,553. In the fiscal year ended
July 31, 1998, the lenders acquired in aggregate 758,710 common shares of
the Company for consideration consisting of cash $87,789 and conversion
of the loans of $70,082 to share capital.
Imputed interest computed at comparable market rates on the interest free
loans prior to conversion to share capital is considered not to be
material to the financial statements. Consequently, the financial
statements do not include a charge for imputed interest on the interest
free loans.
7. LONG-TERM DEBT:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
1999 1998 1997
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Term loan bearing interest at the bank's
prime rate plus 2.5%, repayable in principal
monthly instalments of $2,604 plus
interest, due October 2008 $148,681 $ 165,355 $ -
Current portion of long-term debt (20,746) (17,225) -
----------------------------------------------------------------------------------------------------
$127,935 $ 148,130 $ -
----------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
RHINO ECOSYSTEMS INC.
Notes to Financial Statements
(Stated in United States dollars)
Years ended July 31, 1999, 1998 and 1997
--------------------------------------------------------------------------------
7. LONG-TERM DEBT (CONTINUED):
The term loan is secured by a security agreement on specific equipment
and by a shareholder's guarantee in the amount of $41,339.
The aggregate maturities on long-term debt for each of the five years
subsequent to July 31, 1999 are as follows: 2000 - $20,746; 2001 -
$20,746; 2002 - $20,746; 2003 - $20,746 and 2004 - $20,746.
8. RELATED PARTY TRANSACTIONS:
The Company purchases products, administrative, consulting and marketing
services from its officers, shareholders, individuals and companies
related to the shareholders ("related parties"). The cost of these
products and services, aggregating 1999 - $136,498; 1998 - $81,964 and
1997 - $18,472 was charged as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
1999 1998 1997
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cost of goods sold $ 14,842 $ - $ -
Professional and consulting fees 51,642 44,061 -
Office salaries, benefits and services 47,008 30,521 -
Travel and promotion 15,724 7,382 -
Research and product development - - 18,472
Expenditures on fixed assets 7,282 - -
--------------------------------------------------------------------------------------------------
$ 136,498 $ 81,964 $ 18,472
--------------------------------------------------------------------------------------------------
</TABLE>
These transactions are in the normal course of business and are measured
at the exchange amount, which is the amount of consideration established
and agreed to by the related parties.
The Company also transfers and receives funds from the related parties.
During the year, the Company incurred interest of nil (1998 - $6,847;
1997 - nil) on amounts due to related parties.
The amounts due from and to related parties that have arisen from these
transactions are as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
1999 1998 1997
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Due from related parties:
Flow Clean Environmental Systems Inc. $ - $ 10,120 $ 8,885
Due from shareholders - 28,113 14,382
----------------------------------------------------------------------------------------------
$ - $ 38,233 $ 23,267
----------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
RHINO ECOSYSTEMS INC.
Notes to Financial Statements
(Stated in United States dollars)
Years ended July 31, 1999, 1998 and 1997
--------------------------------------------------------------------------------
8. RELATED PARTY TRANSACTIONS (CONTINUED):
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
1999 1998 1997
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Due to related parties:
Due to shareholders $ 111,468 $ 2,023 $ -
865331 Ontario Limited - - 31,533
---------------------------------------------------------------------------------------------------
$ 111,468 $ 2,023 $ 31,533
---------------------------------------------------------------------------------------------------
</TABLE>
The amounts due from and to related parties are unsecured with no fixed
terms of payment.
Imputed interest computed at comparable market rates on the amounts due
to related parties is considered not to be material to the financial
statements. Consequently, the financial statements do not include a
charge for imputed interest on the amounts due to related parties.
9. OTHER OBLIGATION:
During the year, the Company engaged Hermitage House Investment Company
("Hermitage") a United States merchant bank to prepare and file a Rule
504, Regulation D offering under the United States Securities Act of 1933
(the "Offering"). Pursuant to the Offering, an unrelated United States
Corporation was incorporated under the laws of the State of Florida,
United States ("U.S. Company") and one million common shares of the U.S.
Company were offered at a price of (USD) $1.00 each. As at July 31, 1999,
share subscription agreements for 700,000 common shares of the U.S.
Company had been executed. The remaining 300,000 common shares of the
Offering were provided to Hermitage as compensation for their services.
As at July 31, 1999, there were subscription agreements receivable in the
aggregate amount of $318,737.
The Company intends to enter into an agreement, subject to the
satisfaction of certain conditions including shareholders' approval, for
the shareholders of the Company to convert each common share of the
Company into one common share of the U.S. Company. Upon completion of
this arrangement, management anticipates that the shareholders of the
Company will own approximately 84% of the issued common shares of the
U.S. Company. Consequently, on the completion of this transaction, the
Company will become a subsidiary of the U.S. Company.
10
<PAGE>
RHINO ECOSYSTEMS INC.
Notes to Financial Statements
(Stated in United States dollars)
Years ended July 31, 1999, 1998 and 1997
--------------------------------------------------------------------------------
9. OTHER OBLIGATION (CONTINUED):
In fiscal 1999, the funds received for the share subscriptions were
transferred to the Company and the Company incurred legal costs related
to the Offering. These transactions are summarized as follows and the net
amount thereon is classified as a non-current other obligation in the
financial statements as it is anticipated no payment will be required
within the next fiscal year.
------------------------------------------------------------------------------
Proceeds received from Offering $ 323,517
Less legal costs paid by the Company 11,571
------------------------------------------------------------------------------
$ 311,946
------------------------------------------------------------------------------
Imputed interest computed at comparable market rates on the interest free
obligation is considered not to be material to the financial statements.
Consequently, the financial statements do not include a charge for
imputed interest on the other obligation.
10. SHARE CAPITAL:
(a) Authorized:
Unlimited common shares.
(b) Issued and outstanding share capital:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
1999 1998 1997
--------------------------------------------------------------------------------------------------------------
Number of Number of Number of
shares Stated value shares Stated value shares Stated value
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
5,525,539 $ 736,387 5,525,539 $ 736,387 100 $ 73
--------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
RHINO ECOSYSTEMS INC.
Notes to Financial Statements
(Stated in United States dollars)
Years ended July 31, 1999, 1998 and 1997
--------------------------------------------------------------------------------
11. COMMITMENTS AND CONTINGENCIES:
(a) Lease commitments:
The Company rents premises and equipment under operating leases with
minimum aggregate payments as follows:
-----------------------------------------------------------
2000 $ 27,316
2001 18,571
2002 1,077
2003 987
-----------------------------------------------------------
$ 47,951
-----------------------------------------------------------
(b) Supply agreement:
The Company has in place an exclusive supply agreement with Filterco
Inc. which expires April 30, 2003. Pursuant to the agreement,
Filterco Inc. is the exclusive supplier to the Company of the
disposable filtration bags utilized in its food scrap interceptor.
(c) Royalties:
Sales of the Company's food scrap interceptor are subject to
royalties at a rate of 3% of the sales price. The royalties are
payable to the inventor of the food scrap interceptor who is also a
shareholder, as consideration for the inventor's assignment of all
rights, title and interest in the invention.
(d) Uncertainty due to the Year 2000 Issue:
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems
may recognize the year 2000 as 1900 or some other date, resulting in
errors when information using year 2000 dates is processed. In
addition, similar problems may arise in some systems which use
certain dates in 1999 to represent something other than a date. The
effects of the Year 2000 Issue may be experienced before, on, or
after January 1, 2000, and, if not addressed, the impact on
operations and financial reporting may range from minor errors to
significant systems failure which could affect an entity's ability
to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the
Company, including those related to the efforts of customers,
suppliers, or other third parties, will be fully resolved.
12
<PAGE>
RHINO ECOSYSTEMS INC.
Notes to Financial Statements
(Stated in United States dollars)
Years ended July 31, 1999, 1998 and 1997
--------------------------------------------------------------------------------
12. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES:
The fair value of a financial asset and financial liability is the amount
at which the asset or liability could be exchanged in a current
transaction between willing parties. Fair value estimates are made as at
a specific point in time, using available information about the financial
instrument.
The fair values of goods and services tax recoverable, investment tax
credits and accounts payable and accrued liabilities approximate their
carrying amounts due to the relatively short periods to maturity or
because they are receivable or payable on demand.
The fair value of long-term debt approximates its carrying amount as the
terms and conditions are similar to the market conditions and similar
types of borrowings.
The fair values of the amounts due to related parties and the other
obligation are not determinable as comparable financial instruments are
not readily available.
13. INCOME TAXES:
The tax effects of temporary differences and loss carryforwards that give
rise to deferred tax assets at July 31, 1999, 1998 and 1997 are presented
below:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
1999 1998 1997
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets:
Deductible temporary differences $ 31,000 $ 7,000 $ -
Loss carryforwards 175,000 91,000 18,000
-------------------------------------------------------------------------------------------------------
206,000 98,000 18,000
Less valuation allowance 206,000 98,000 18,000
-------------------------------------------------------------------------------------------------------
$ - $ - $ -
-------------------------------------------------------------------------------------------------------
</TABLE>
The valuation allowance for deferred tax assets as at July 31, 1999, 1998
and 1997 was $206,000, $98,000 and $18,000 respectively. The net change
in the total valuation allowance for the years ended July 31, 1999, 1998
and 1997 was an increase of $108,000, $80,000 and $18,000 respectively.
The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which these
temporary differences and loss carryforwards become deductible.
13
<PAGE>
RHINO ECOSYSTEMS INC.
Notes to Financial Statements
(Stated in United States dollars)
Years ended July 31, 1999, 1998 and 1997
--------------------------------------------------------------------------------
13. INCOME TAXES (CONTINUED):
In order to fully realize the deferred tax assets, the Company will need
to generate future taxable income of approximately $460,000, $1,500,000
and $2,200,000 prior to 2005, 2006 and 2007 respectively. Based upon the
level of historical taxable income and that the Company is considered a
development stage company, it cannot be reasonably estimated at this time
if its more likely than not the Company will realize the benefits of the
deferred tax assets. Consequently, the deferred tax assets have been
reduced by an equivalent valuation allowance. The valuation allowance
will be adjusted in the period that is determined with reasonable
certainty that it is more likely than not that some portion or all of the
deferred tax assets will be realized.
At July 31, 1999, 1998 and 1997, the Company has the following amounts
available to reduce future years' income for tax purposes.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
1999 1998 1997
------------------------------------------------------------------------------------------------------
Non-capital losses carried for tax purposes expiring:
<S> <C> <C> <C>
2004 $ 75,925 $ 75,645 $ 82,976
2005 339,705 338,448 -
2006 378,395 - -
------------------------------------------------------------------------------------------------------
794,025 414,093 82,976
Excess of undepreciated capital cost over net book
value of fixed assets 115,569 8,616 -
Unamortized share issue costs 25,400 33,740 -
------------------------------------------------------------------------------------------------------
$ 934,994 $ 456,449 $ 82,976
------------------------------------------------------------------------------------------------------
14. RESEARCH AND PRODUCT DEVELOPMENT:
------------------------------------------------------------------------------------------------------
1999 1998 1997
------------------------------------------------------------------------------------------------------
Research and product development $ 45,087 $ 3,913 $ 48,593
Less investment tax credits - 1,730 27,589
------------------------------------------------------------------------------------------------------
$ 45,087 $ 2,183 $ 21,004
------------------------------------------------------------------------------------------------------
</TABLE>
14
EXHIBIT 2
SHARE EXCHANGE AGREEMENT
B E T W E E N:
THE PERSON OR CORPORATION IDENTIFIED AS
"TRANSFEROR" IN SCHEDULE "A" ATTACHED
HERETO
(hereinafter referred to as "Transferor")
- and -
RHINO ECOSYSTEMS, INC., a Florida corporation
(hereinafter referred to as "Transferee")
IN CONSIDERATION of the agreements herein contained, the
parties hereto hereby covenant and agree as follows:
1. Share Exchange - Subject to the terms and conditions hereof, the Transferor
agrees to transfer to the Transferee, and the Transferee agrees to acquire
from the Transferor, those number of common shares in the capital of Rhino
Ecosystems Inc. ("Rhino Canada") identified in Schedule "A", which are
currently owned by the Transferor (the "Rhino Canada Shares").
2. Rhino (U.S.) Shares to be Received - The exchange price (as hereinafter
designated) for the Rhino Canada Shares shall be satisfied by the
Transferee to the Transferor by the allotment and issuance to the
Transferor of those number of fully paid and non-assessable common shares
in the capital of the Transferee identified in Schedule "A" (the "Rhino
U.S. Shares").
3. Consideration - The exchange price for the Rhino Canada Shares is
designated and agreed by the parties to be the fair market value thereof,
being the Transferor's cost of the Rhino Canada Shares.
4. Representation and Warranties -
(i) The Transferor represents and warrants that he/she is the owner of the
Rhino Canada Shares free and clear of all liens, encumbrances and
rights of others and such shares represent all of the Transferor's
holdings in Rhino Canada; and
(ii) the Transferee represents and warrants to the Transferor that the
Rhino U.S. Shares will be issued as fully paid and non-assessable
shares in the capital of the Transferee.
5. Acknowledgment - The Transferee consents to the placement of legends on any
certificates or documents representing any of the Rhino U.S. Shares stating
that they have not been registered under the U.S. Securities Act or any
applicable securities laws of other jurisdictions and setting forth or
referring to such holding period and offering restrictions. The Transferor
agrees that the Transferee will make a notation in its appropriate records,
and notify its transfer agent, with respect to the restrictions on the
transferability of the Rhino U.S. Shares. The Transferor agrees that the
Transferor will not attempt to pledge, transfer, convey or otherwise
dispose of the Rhino U.S. Shares prior to the expiration of a one-year
period immediately following the date of issuance or such other period as
is prescribed by applicable securities laws.
<PAGE>
6. Binding Agreement - This Agreement shall enure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrators, successors and permitted assigns.
7. Governing Law - This Agreement shall be governed and construed in
accordance with the laws of the Province of Ontario, Canada.
IN WITNESS WHEREOF the parties hereto have executed this Agreement with the
intention that it be effective as of the 3rd day of November, 1999.
--------------------------
Transferor
--------------------------
(2nd signature if applicable)
RHINO ECOSYSTEMS, INC., a Florida
Corporation
Per: ______________________ c/s
EXHIBIT 3 (i)
FILED - SECRETARY OF STATE
DIVISION OF CORPORATIONS
99 APR - 7 PM 12:40
ARTICLES OF INCORPORATION
OF
RHINO ECOSYSTEMS, INC.
THE UNDERSIGNED, for the purpose of forming a corporation for profit
pursuant to Chapter 607, Florida Statutes, does hereby adopt the following
Articles of Incorporation:
WITNESSETH:
ARTICLES I
NAME AND ADDRESS
The name and address of the principal office and/or mailing address of the
Corporation is as follows:
RHINO ECOSYSTEMS, INC.
4641 N. OCEAN BLVD., SUITE 6
LAUDERDALE BY THE SEA, FL 33308
ARTICLE II
DURATION
This Corporation shall have perpetual existence commencing on the date of
the filing of these Articles of Incorporation with the Department of State of
Florida.
ARTICLE III
PURPOSES
This Corporation is organized for the purpose of transacting any and all
lawful business.
ARTICLES IV
CAPITAL STOCK
This Corporation is authorized to issue 25,000,000 shares of $.0001 par
value common stock.
Prepared by:
Richard P. Greene, P.A.
Richard P. Greene, Esquire
2455 East Sunrise Boulevard, Suite 905
Fort Lauderdale, Florida 33304
(954) 564-6616
Florida Bar Number: 504378
<PAGE>
ARTICLE V
QUORUM FOR STOCKHOLDERS MEETINGS
Unless otherwise provided for in the Corporation's Bylaws, a majority of
the shares entitled to vote, represented in person or by proxy, shall be
required to constitute a quorum at a meeting of shareholders.
ARTICLE VI
INITIAL REGISTERED OFFICE AND REGISTERED AGENT
The street address of the initial registered office of this Corporation is
2455 East Sunrise Boulevard, Suite 905, Fort Lauderdale, Florida 33304 and the
name of the initial registered agent of this Corporation at such address is
Richard P. Greene, P.A.
ARTICLES VII
INITIAL BOARD OF DIRECTORS
This Corporation shall have three directors initially. The number of
directors may be either increased or diminished from time to time in the manner
provided in the Bylaws, but shall never be less than one. The name and address
of the initial Directors of the Corporation are as follows:
Mark Wiertzema
40 Trowers Road
Woodbridge, Ontario L4L 7K6, Canada
Gordan Novak
40 Trowers Road
Woodbridge, Ontario L4L 7K6, Canada
Jan Walsh
40 Trowers Road
Woodbridge, Ontario L4L 7K6, Canada
ARTICLE VIII
INCORPORATORS
The name and address of the Corporation's incorporator is:
Richard P. Greene
2455 East Sunrise Boulevard, Suite 905
Fort Lauderdale, Florida 33304
<PAGE>
ARTICLE IX
INDEMNIFICATION
The Corporation shall indemnify its officers, directors and authorized
agents for all liabilities incurred directly, indirectly or incidentally to
services performed for the Corporation, to the fullest extent permitted under
Florida law existing now or hereinafter enacted.
ARTICLE X
LIMITATION ON SHAREHOLDER SUITS
Shareholders shall not have a cause of action against the Company's
officers, directors or agents as a result of any action taken, or as a result of
their failure to take any action, unless deprivation of such right is deemed a
nullity because, in the specific case, deprivation of a right of action would be
impermissibly in conflict with the public policy of the State of Florida. The
fact that this Article shall be inapplicable in certain circumstances shall not
render it inapplicable in any other circumstances and the Courts of the State of
Florida are hereby granted the specific authority to restructure this Article,
on a case by case basis or generally, as required to most fully give legal
effect to its intent.
IN WITNESS WHEREOF, we have subscribed our names this 31st day of March,
1999.
/s/ Richard P. Greene
---------------------------
Richard P. Greene, Incorporator
2455 East Sunrise Boulevard, Suite 905
Ft. Lauderdale, Florida 33304
I hereby am familiar with and accept the duties and responsibilities as
registered agent for said corporation.
RICHARD P. GREENE, P.A.
By: /s/ Richard P. Greene
----------------------------
Richard P. Greene, Esq., President
EXHIBIT 3 (ii)
BYLAWS
OF
RHINO ECOSYSTEMS, INC.
ARTICLE I
SHAREHOLDERS
SECTION 1. ANNUAL MEETINGS
(a) The annual meeting of the shareholders of the Corporation, shall be
held at the principal office of the Corporation in the State of Florida or at
such other place within or without the State of Florida as may be determined by
the Board of Directors and as may be designated in the notice of such meeting.
The meeting shall be held on the third Tuesday of February of each year or on
such other day as the Board of Directors may specify. If said day is a legal
holiday, the meeting shall be held on the next succeeding business day not a
legal holiday.
(b) Business to be transacted at such meeting shall be the election of
directors to succeed those whose terms are expiring and such other business as
may be properly brought before the meeting.
(c) In the event that the annual meeting, by mistake or otherwise, shall
not be called and held as herein provided, a special meeting may be called as
provided for in Section 2 of this Article I in lieu of and for the purposes of
and with the same effect as the annual meeting.
SECTION 2. SPECIAL MEETINGS
(a) A special meeting of the shareholders of the Corporation may be called
for any purpose or purposes at any time by the President of the Corporation, by
the Board of Directors or by the holders of not less than 10% of the outstanding
capital stock of the Corporation entitled to vote at such meeting.
(b) At any time, upon the written direction of any person or persons
entitled to call a special meeting of the shareholders, it shall be the duty of
the Secretary to send notice of such meeting pursuant to Section 4 of this
Article I. It shall be the responsibility of the person or persons directing the
Secretary to send notice of any special meeting of shareholders to deliver such
direction and a proposed form of notice to the Secretary not less than 15 days
prior to the proposed date of said meeting.
(c) Special meetings of the shareholders of the Corporation shall be held
at such place, within or without the State of Florida, on such date, and at such
time as shall be specified in the notice of such special meeting.
<PAGE>
SECTION 3. ADJOURNMENT
(a) When the annual meeting is convened, or when any special meeting is
convened, the presiding officer may adjourn it for such period of time as may be
reasonably necessary to reconvene the meeting at another place and time.
(b) The presiding officer shall have the power to adjourn any meeting of
the Shareholders for any proper purpose, including, but not limited to, lack of
a quorum, securing a more adequate meeting place, electing officials to count
and tabulate votes, reviewing any shareholder proposals or passing upon any
challenge which may properly come before the meetings.
(c) When a meeting is adjourned to another time or place, it shall not be
necessary to give any notice of the adjourned meeting if the time and place to
which the meeting is adjourned are announced at the meeting at which the
adjournment is taken, and any business may be transacted at the adjourned
meeting that might have been transacted on the original date of the meeting. If,
however, after the adjournment the Board fixes a new record date for the
adjourned meeting, a notice of the adjourned meeting shall be given in
compliance with Section 4(a) of this Article I to each shareholder of record on
the new record date entitled to vote at such meeting.
SECTION 4. NOTICE OF MEETINGS, PURPOSE OF MEETING, WAIVER
(a) Each shareholder of record entitled to vote at any meeting shall be
given in person, or by first class mail, postage prepaid, written notice of such
meeting which, in the case of a special meeting, shall set forth the purpose(s)
for which the meeting is called, not less than 10 or more than 60 days before
the date of such meeting. If mailed, such notice is to be sent to the
shareholder's address as it appears on the stock transfer books of the
Corporation, unless the shareholder shall be requested of the Secretary in
writing at least 15 days prior to the distribution of any required notice that
any notice intended for him or her be sent to some other address, in which case
the notice may be sent to the address so designated. Notwithstanding any such
request by a shareholder, notice sent to a shareholder's address as it appears
on the stock transfer books of this Corporation as of the record date shall be
deemed properly given. Any notice of a meeting sent by United States mail shall
be deemed delivered when deposited with proper postage thereon with the United
States Postal Service or in any mail receptacle under its control.
(b) A shareholder waives notice of any meeting by attendance, either in
person or by proxy, at such meeting or by waiving notice in writing either
before, during or after such meeting. Attendance at a meeting for the express
purpose of objecting that the meeting was not lawfully called or convened,
however, will not constitute a waiver of notice by a shareholder who states at
the beginning of the meeting, his or her objection that the meeting is not
lawfully called or convened.
(c) A waiver of notice signed by all shareholders entitled to vote at a
meeting of shareholders may also be used for any other proper purpose including,
but not limited to, designating any place within or without the State of Florida
as the place for holding such a meeting.
2
<PAGE>
(d) Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of shareholders need be specified in any written
waiver of notice.
SECTION 5. CLOSING OF TRANSFER BOOKS, RECORD DATE, SHAREHOLDERS' LIST
(a) In order to determine the holders of record of the capital stock of the
Corporation who are entitled to notice of meetings, to vote a meeting or
adjournment thereof, or to receive payment of any dividend, or for any other
purpose, the Board of Directors may fix a date not more than 60 days prior to
the date set for any of the above-mentioned activities for such determination of
shareholders.
(b) If the stock transfer books shall be closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least 10 days immediately
preceding such meeting.
(c) In lieu of closing the stock transfer books, the Board of Directors may
fix in advance a date as the date for any such determination of shareholders,
such date in any case to be not more than 60 days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken.
(d) If the stock transfer books are not closed and no record date is fixed
for the determination of shareholders entitled to notice or to vote at a meeting
of shareholders, or to receive payment of a dividend, the date on which notice
of the meeting is mailed or the date on which the resolution of the Board of
Directors declaring such dividend is adopted, as the case may be, shall be the
record date for such determination of shareholders.
(e) When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this Section, such determination shall
apply to any adjournment thereof, unless the Board of Directors fixes a new
record date under this Section for the adjourned meeting.
(f) The officer or agent having charge of the stock transfer books of the
Corporation shall make, as of a date at least 10 days before each meeting of
shareholders, a complete list of the shareholders entitled to vote at such
meeting or any adjournment thereof, with the address of each shareholder and the
number and class and series, if any, of shares held by each shareholder. Such
list shall be kept on file at the registered office of the Corporation, at the
principal place of business of the Corporation or at the office of the transfer
agent or registrar of the Corporation for a period of 10 days prior to such
meeting and shall be available for 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 any meeting of shareholders and shall be subject to
inspection by any shareholder at any time during the meeting.
3
<PAGE>
(g) The original stock transfer books shall be prima facie evidence as to
the shareholders entitled to examine such list or stock transfer books or to
vote any meeting of shareholders.
(h) If the requirements of Section 5(f) of this Article I have not been
substantially complied with, then, on the demand of any shareholder in person or
by proxy, the meeting shall be adjourned until such requirements are complied
with.
(i) If no demand pursuant to Section 5(h) of this Article I is made,
failure to comply with the requirements of this Section shall not affect the
validity of any action taken at such meeting.
(j) Section 5(g) of this Article I shall be operative only at such time(s)
as the Corporation shall have 6 or more shareholders.
SECTION 6. QUORUM
At any meeting of the shareholders of the Corporation, the presence, in
person or by proxy, of shareholders owning a majority of the issued and
outstanding shares of the capital stock of the Corporation entitled to vote
thereat shall be necessary to constitute a quorum for the transaction of any
business. If a quorum is present, the vote of a majority of the shares
represented at such meeting and entitled to vote on the subject matter shall be
the act of the shareholders. If there shall not be quorum at any meeting of the
shareholders of the Corporation, then the holders of a majority of the shares of
the capital stock of the Corporation who shall be present at such meeting, in
person or by proxy, may adjourn such meeting from time to time until holders of
all of the shares of the capital stock shall attend. At any such adjourned
meeting at which a quorum shall be present, any business may be transacted which
might have been transacted at the meeting as originally scheduled.
SECTION 7. PRESIDING OFFICER, ORDER OF BUSINESS
(a) Meetings of the shareholders shall be presided over by the Chairman of
the Board, or, if he or she is not present or there is no Chairman of the Board,
by the President or, if he or she is not present, by the senior Vice President
present or, if neither the Chairman of the Board, the President, nor a Vice
President is present, the meeting shall be presided over by a chairman to be
chosen by a plurality of the shareholders entitled to vote at the meeting who
are present, in person or by proxy. The presiding officer of any meeting of the
shareholders may delegate his or her duties and obligations as the presiding
officer as he or she sees fit.
(b) The Secretary of the Corporation, or, in his or her absence, an
Assistant Secretary shall act as Secretary of every meeting of shareholders, but
if neither the Secretary nor an Assistant Secretary is present, the presiding
officer of the meeting shall choose any person present to act as secretary of
the meeting.
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(c) The order of business shall be as follows:
1. Call of meeting to order.
2. Proof of notice of meeting.
3. Reading of minutes of last previous shareholders'
meeting or a waiver thereof.
4. Reports of officers.
5. Reports of committees.
6. Election of directors.
7. Regular and miscellaneous business.
8. Special matters.
9. Adjournment.
(d) Notwithstanding the provisions of Section 7(c) of this Article I, the
order and topics of business to be transacted at any meeting shall be determined
by the presiding officer of the meeting in his or her sole discretion. In no
event shall any variation in the order of business or additions and deletions
from the order of business as specified in Section 7(c) of this Article I
invalidate any actions properly taken at any meeting.
SECTION 8. VOTING
(a) Unless otherwise provided for in the Articles of Incorporation, each
shareholder shall be entitled, at each meeting and upon each proposal to be
voted upon, to one vote for each share of voting stock recorded in his name on
the books of the Corporation on the record date fixed as provided for in Section
5 of this Article I.
(b) The presiding officer at any meeting of the shareholders shall have the
power to determine the method and means of voting when any matter is to be voted
upon. The method and means of voting may include, but shall not be limited to,
vote by ballot, vote by hand or vote by voice. No method of voting may be
adopted, however, which fails to take account of any shareholder`s right to vote
by proxy as provided for in Section 10 of this Article I. In no event may any
method of voting be adopted which would prejudice the outcome of the vote.
SECTION 9. ACTION WITHOUT MEETING
(a) Any action required to be taken at any annual or special meeting of
shareholders of the Corporation, or any action which may be taken at any annual
or special meeting of such shareholders, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of a majority of the
Corporation's outstanding stock.
(b) In the event that the action to which the shareholders consent is such
as would have required the filing of a certificate under the Florida General
Corporation Act is such action had been voted on by shareholders at a meeting
thereof, the certificate filed under such other section shall state that written
consent has been given in accordance with the provisions of Section 9 of this
Article I.
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(c) If shareholder action is taken by written consent in lieu of meeting
signed by less than all of the Corporation's shareholders, then all non
participating shareholders shall be provided with written notice of the action
taken within 10 days after the date of the written instrument taking such
action.
(d) No action by written consent in lieu of meeting shall be valid if it is
in contravention of applicable proxy or informational rules adopted pursuant to
the Securities Exchange Act of 1934, as amended, including, without limitation,
the requirements of Section 14 thereof.
SECTION 10. PROXIES
(a) Every shareholder entitled to vote at a meeting of shareholders or to
express consent or dissent without a meeting, or his or her duly authorized
attorney-in-fact, may authorize another person or persons to act for him or her
by proxy.
(b) Every proxy must be signed by the shareholder or his or her
attorney-in-fact. No proxy shall be valid after the expiration of 11 months from
the date thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the shareholder executing it, except as otherwise
provided in this Section 10.
(c) The authority of the holder of a proxy to act shall not be revoked by
the incompetence or death of the shareholder who executed the proxy unless,
before the authority is exercised, written notice of any adjudication of such
incompetence or of such death is received by the corporate officer responsible
for maintaining the list of shareholders.
(d) Except when other provisions shall have been made by written agreement
between the parties, the record holder of shares held as pledges or otherwise as
security or which belong to another, shall issue to the pledgor or to such owner
of such shares, upon demand therefor and payment of necessary expenses thereof,
a proxy to vote or take other action thereon.
(e) A proxy which states that it is irrevocable is irrevocable when it is
held by any of the following or a nominee of any of the following: (i) a
pledgee; (ii) a person who has purchased or agreed to purchase the shares: (iii)
a creditor or creditors of the Corporation who extend or continue to extend
credit to the Corporation in consideration of the proxy, if the proxy states
that it was given in consideration of such extension or continuation of credit,
the amount thereof, and the name of the person extending or continuing credit;
(iv) a person who has contracted to perform services as an officer of the
Corporation, if a proxy is required by the contract of employment, if the proxy
states that it was given in consideration of such contract of employment and
states the name of the employee and the period of employment contracted for; and
(v) a person designated by or under an agreement as provided in Article XI
hereof.
(f) Notwithstanding a provision in a proxy stating that it is irrevocable,
the proxy becomes revocable after the pledge is redeemed, the debt of the
Corporation is paid, the period of
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employment provided for in the contract of employment has terminated, or the
agreement under Article XI hereof has terminated and, in a case provided for in
Section 10(e) (iii) or Section 10(e) (iv) of this Article I, becomes revocable
three years after the date of the proxy or at the end of the period, if any,
specified therein, whichever period is less, unless the period of irrevocability
of the proxy as provided in this Section 10. This Section 10(f) does not affect
the duration of a proxy under Section 10(b) of this Article I.
(g) A proxy may be revoked, notwithstanding a provision making it
irrevocable, by a purchaser of shares without knowledge of the existence of the
provisions unless the existence of the proxy and its irrevocability is noted
conspicuously on the face or back of the certificate representing such shares.
(h) If a proxy for the same shares confers authority upon two or more
persons and does not otherwise provide, a majority of such persons present at
the meeting, or if only one is present then that one, may exercise all the
powers conferred by the proxy. if the proxy holders present at the meeting are
equally divided as to the right and manner of voting in any particular case, the
voting of such shares shall be prorated.
(i) If a proxy expressly so provides, any proxy holder may appoint in
writing a substitute to act in his or her place.
(j) Notwithstanding anything in the Bylaws to the contrary, no proxy shall
be valid if it was obtained in violation of any applicable requirements of
Section 14 of the Securities Exchange Act of 1934, as amended, or the Rules and
Regulations promulgated thereunder.
SECTION 11. VOTING OF SHARES BY SHAREHOLDERS
(a) Shares standing in the name of another corporation, domestic or
foreign, may be voted by the officer, agent, or proxy designated by the bylaws
of the corporate shareholder; or, in the absence of any applicable bylaw, by
such person as the board of directors of the corporate shareholder may
designate. Proof of such designation may be made by presentation of a certified
copy of the bylaws or other instrument of the corporate shareholder. In the
absence of any such designation, or in case of conflicting designation by the
corporate shareholder, the chairman of the board, president, any vice president,
secretary and treasurer of the corporate shareholder, in that order, shall be
presumed to possess authority to vote such shares.
(b) Shares held by an administrator, executor, guardian or conservator may
be voted by him or her, either in person or by proxy, without a transfer of such
shares into his or her name. Shares standing in the name of a trustee may be
voted as shares held by him or her without a transfer of such shares into his
name.
(c) Shares standing in the name of a receiver may be voted by such
receiver. Shares held by or under the control of a receiver but not standing in
the name of such receiver, may be voted by
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such receiver without the transfer thereof into his name if authority to do so
is contained in an appropriate order of the court by which such receiver was
appointed.
(d) A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee.
(e) Shares of the capital stock of the Corporation belonging to the
Corporation or held by it in a fiduciary capacity shall not be voted, directly
or indirectly, at any meeting, and shall not be counted in determining the total
number of outstanding shares.
ARTICLE II
DIRECTORS
SECTION 1. BOARD OF DIRECTORS, EXERCISE OF CORPORATE POWERS
(a) All corporate powers shall be exercised by or under the authority of,
and the business and affairs of the Corporation shall be managed under the
direction of, the Board of Directors except as may be otherwise provided in the
Articles of Incorporation or in Shareholder's Agreement. If any such provision
is made in the Articles of Incorporation or in Shareholder's Agreement, the
powers and duties conferred or imposed upon the Board of Directors shall be
exercised or performed to such extent and by such person or persons as shall be
provided in the Articles of Incorporation or Shareholders' Agreement.
(b) Directors need not be residents of this state or shareholders of the
Corporation unless the Articles of Incorporation so require.
(c) The Board of Directors shall have authority to fix the compensation of
directors unless otherwise provided in the Articles of Incorporation.
(d) A director shall perform his or her duties as a director, including his
or her duties as a member of any committee of the Board upon which he may serve,
in good faith, in a manner he or she reasonably believes to be in the best
interests of the Corporation, and with such care as an ordinarily prudent person
in a like position would use under similar circumstances.
(e) In performing his or her duties, a director shall be entitled to rely
on information, opinions, reports or statements, including financial statements
and other financial data, in each case prepared or presented by: (i) one or more
officers or employees of the Corporation whom the director reasonably believes
to be reliable and competent in the matters presented; (ii) legal counsel,
public accountants or other persons as to matters which the director reasonably
believes to be within such persons' professional or expert competence; or (iii)
a committee of the Board upon which he or she does not serve, duly designated in
accordance with a provision of the Articles of Incorporation or these By-Laws,
as to matters within its designated authority, which committee the director
reasonably believes to merit confidence.
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(f) A director shall not be considered to be acting in good faith if he or
she has knowledge concerning the matter in question that would cause such
reliance described in Section 1(e) of this Article II to be unwarranted.
(g) A person who performs his or her duties in compliance with Section 1 of
this Article II shall have no liability by reason of being or having been a
director of the Corporation.
(h) A director of the Corporation who is present at a meeting of the Board
of Directors at which action on any corporate matter is taken shall be presumed
to have assented to the action taken unless he or she votes against such action
or abstains from voting in respect thereto because of an asserted conflict of
interest.
SECTION 2. NUMBER, ELECTION, CLASSIFICATION OF DIRECTORS, VACANCIES
(a) The Board of Directors of this Corporation shall consist of not less
than one director. The Board shall have authority, from time to time, to
increase the number of directors or to decrease it to not less than one member,
provided that no decrease in the number of directors shall deprive a serving
director of the right to serve throughout the term of his or her election.
(b) Each person named in the Articles of Incorporation as a member of the
initial Board of Directors shall serve until his or her successor shall have
been elected and qualified or until his or her earlier resignation, removal from
office, or death.
(c) At the first annual meeting of shareholders and at each annual meeting
thereafter, the shareholders shall elect directors to hold office until the next
succeeding annual meeting, except in case of the classification of director as
permitted by the Florida General Corporation Act. Each Director shall hold
office for the term for which he or she is elected and until his or her
successor shall have been elected and qualified or until his or her earlier
resignation, removal from office, or death.
(d) The shareholders, by amendment to these Bylaws, may provide that the
directors be divided into not more than four classes, as nearly equal in number
as possible, whose terms of office shall respectively expire at different times,
but no such term shall continue longer than four years, and at least one fourth
of the directors shall be elected annually. If Directors are classified and the
number of directors is thereafter changed, any increase or decrease in
directorship shall be so apportioned among the classes as to make all classes as
nearly equal in number as possible.
(e) Any vacancy occurring in the Board of Directors, including any vacancy
created by reason of an increase in the number of directors, may be filled only
by the Board of Directors. A director elected to fill a vacancy shall hold
office only until the next election of directors by the shareholders.
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SECTION 3. REMOVAL OF DIRECTORS
At a meeting of shareholders called expressly for that purpose, directors
may be removed in the manner provided in this Section 3. Any director or the
entire Board of Directors may be removed, with or without cause, by the vote of
the holders of two-thirds of the shares then entitled to vote at an election of
directors.
SECTION 4. DIRECTOR QUORUM AND VOTING
(a) A majority of the directors fixed in the manner provided in these
Bylaws shall constitute a quorum for the transaction of business.
(b) A majority of the members of an Executive Committee or other committee
shall constitute a quorum for the transaction of business at any meeting of such
Executive Committee or other committee.
(c) The act of a majority of the directors present at a Board meeting at
which a quorum is present shall be the act of the Board of Directors.
(d) The act of a majority of the members of an Executive Committee present
at an Executive Committee meeting at which a quorum is present shall be the act
of the Executive Committee.
(e) The act of a majority of the members of any other committee present at
a committee meeting at which a quorum is present shall be the act of the
committee.
(f) Directors may, if not contrary to applicable law, vote either in person
or by proxy, provided that the proxy holder must be either another director, an
officer or a shareholder of the Corporation; however, any director who elects to
vote by proxy more than three times during any single fiscal year shall, unless
otherwise determined by the Board of Directors, be automatically removed as a
director.
SECTION 5. DIRECTOR CONFLICTS OF INTEREST
(a) No contract or other transaction between this Corporation and one or
more of its director or any other corporation, firm, association or entity in
which one or more of its directors are Directors or officers or are financially
interested shall be either void or voidable because of such relationship or
interest or because such director or directors are present at the meeting of the
Board of Directors or a committee thereof which authorizes, approves or ratifies
such contract or transaction or because their votes are counted for such
purpose, if:
(i) The fact of such relationship or interest is disclosed or known to
the Board of Directors or committee which authorizes, approves or ratifies
the contract or transaction by a vote
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or consent sufficient for the purpose without counting the votes or
consents of such interested directors; or
(ii) The fact of such relationship or interest is disclosed or known
to the shareholders entitled to vote and they authorize, approve or ratify
such contract or transaction by vote or written consent; or
(iii) The contract or transaction is fair and reasonable as to the
Corporation at the time it is authorized by the Board, a committee, or the
shareholders.
(b) Interested directors, whether or not voting, may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or a
committee thereof which authorizes, approves or ratifies such contract or
transaction.
SECTION 6. EXECUTIVE AND OTHER COMMITTEES, DESIGNATION, AUTHORITY
(a) The Board of Directors, by resolution adopted by the full Board of
Directors, may designate from among its directors an Executive Committee and one
or more other committees each of which, to the extent provided in such
resolution or in the Articles of Incorporation or these Bylaws, shall have and
may exercise all the authority of the Board of Directors, except that no such
committee shall have the authority to: (i) approve or recommend to shareholders
actions or proposals required by the Florida General Corporation Act to be
approved by shareholders; (ii) designate candidates for the office of director
for purposes of proxy solicitation or otherwise; (iii) fill vacancies on the
Board of Directors or any committee thereof; (iv) amend these Bylaws; (v)
authorize or approve the reacquisition of shares unless pursuant to a general
formula or method specified by the Board of Directors; or (vi) authorize or
approve the issuance or sale of, or any contract to issue or sell, shares or
designate the terms of a series of a class of shares, unless the Board of
Directors, having acted regarding general authorization for the issuance or sale
of shares, or any contract therefor, and, in the case of a series, the
designation thereof has specified a general formula or method by resolution or
by adoption of a stock option or other plan, authorized a committee to fix the
terms upon which such shares may be issued or sold, including, without
limitation, the price, the rate or manner of payment of dividends, provisions
for redemption, sinking fund, conversion, and voting or preferential rights, and
provisions for other features of a class of shares, or a series of a class of
shares, with full power in such committee to adopt any final resolution setting
forth all the terms of a series for filing with the Department of State under
the Florida General Corporation Act.
(b) The Board, by resolution adopted in accordance with Section 6(a) of
this Article II, may designate one or more directors as alternate members of any
such committee, who may act in the place and stead of any absent member or
members at any meeting of such committee.
(c) Neither the designation of any such committee, the delegation thereto
of authority, nor action by such committee pursuant to such authority shall
alone constitute compliance by a member of the Board of Directors, not a member
of the committee in question, with his
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responsibility to act in good faith, in manner he reasonably believes to be in
the best interests of the Corporation, and with such care as an ordinarily
prudent person in a like position would use under similar circumstances.
SECTION 7. PLACE, TIME, NOTICE AND CALL OF DIRECTORS' MEETING.
(a) Meetings of the Board of Directors, regular or special, may be held
either within or without the State of Florida.
(b) A regular meeting of the Board of Directors of the Corporation shall be
held for the election of officers of the Corporation and for the transaction of
such other business as may come before such meeting as promptly as practicable
after the annual meeting of the shareholders of this Corporation without the
necessity of notice other than this Bylaw. Other regular meetings of the Board
of Directors of the Corporation may be held at such places as the Board of
Directors of the Corporation may from time to time resolve without notice other
than such resolution. Special meetings of the Board of Directors may be held at
any time upon call of the Chairman of the Board of Directors or a majority of
the Directors of the Corporation, at such time and at such place as shall be
specified in the call thereof. Notice of any special meeting of the Board of
Directors must be given at least two days prior thereto, if by written notice
delivered personally; or at least five days prior thereto, if mailed; or at
least two days prior thereto, if by telegram; or at least two days prior
thereto, if by telephone. If such notice is given by mail, such notice shall be
deemed to have been delivered when deposited with the United States Postal
Service addressed to the business address of such Director with postage thereon
prepaid. If notice be given by telegram, such notice shall be deemed delivered
when the telegram is delivered to the telegraph company. If notice is given by
telephone, such notice shall be deemed delivered when the call is completed.
(c) Notice of a meeting of the Board of Directors need not be given to any
Director who signs a waiver of notice either before or after the meeting.
Attendance of a Director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all objections to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a Director states, at the beginning of the meeting, any objection to
the transaction of business because the meeting is not lawfully called or
convened.
(d) Neither the business to be transacted at, nor the purpose of, any
regular of special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
(e) A majority of the directors present, whether or not a quorum exists,
may adjourn any meeting of the Board of Directors to another time and place.
Notice of any such adjourned meeting shall be given to the Directors who were
not present at the time of the adjournment and, unless the time and place of the
adjourned meeting are announced at the time of the adjournment, to the other
Directors.
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(f) Members of the Board of Directors may participate in a meeting of such
Board by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation by such means shall constitute presence in person
at a meeting.
SECTION 8. ACTION BY DIRECTORS WITHOUT A MEETING
(a) Any action required by the Florida General Corporation Act to be taken
at a meeting of the Directors of the Corporation, or any action which may be
taken at a meeting of the Directors or a committee thereof, may be taken without
a meeting if a consent in writing, setting forth the action so to be taken,
signed by all of the Directors, or all of the members of the committee, as the
case may be, and is filed in the minutes of the proceedings of the Board or of
the committee. Such consent shall have the same effect as a unanimous vote.
(b) If not contrary to applicable law, directors may take action as the
Board of Directors or committees thereof through a written consent to action
signed by a number of directors sufficient to have carried a vote of the Board
of Directors or committee thereof with all members present and voting; provided,
that all directors not joining in such written instrument shall be deemed for
all purposes to have cast dissenting votes, and that all directors not parties
to such instrument shall receive written notice of all action taken through such
instrument within three days after such instrument shall have been subscribed by
the requisite number of directors required for such action.
SECTION 9. COMPENSATION
The Directors and members of the Executive and any other committee of the
Board of Directors shall be entitled to such reasonable compensation for their
services and on such basis as shall be fixed from time to time by resolution of
the Board of Directors. The Board of Directors and members of any committee of
that Board of Directors shall be entitled to reimbursement for any reasonable
expenses incurred in attending any Board or committee meeting. Any Director
receiving compensation under this Section shall not be prevented from serving
the Corporation in any other capacity and shall not be prohibited from receiving
reasonable compensation for such other services.
SECTION 10. RESIGNATION
Any Director of the Corporation may resign at any time by providing the
Board of Directors with written notice indicating the Director's intention to
resign and the effective date thereof.
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ARTICLE III
OFFICERS
SECTION 1. ELECTION, NUMBER, TERMS OF OFFICE
(a) The officers of the Corporation shall consist of a Chairman of the
Board, a Chief Executive officer, a President, a Chief Operating Officer, a
Chief Financial Officer, one or more Vice-Presidents, a Secretary and a
Treasurer, each of whom shall be elected by the Board of Directors at such time
and in such manner as may be prescribed by these Bylaws. Such other officers and
assistance officers and agents as may be deemed necessary may be elected or
appointed by the Board of Directors. The officers of the Corporation shall be
hereinafter collectively referred to as the "Officers."
(b) All officers and agents, as between themselves and the Corporation,
shall have such authority and perform such 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 not inconsistent with these Bylaws.
(c) Any two or more offices may be held by the same person, except for the
offices of President and Secretary.
(d) A failure to elect a Chairman of the Board, Chief Executive Officer,
President, Chief Operating Officer, Chief Financial Officer, a Vice President, a
Secretary or a Treasurer shall not affect the existence of the Corporation.
SECTION 2. REMOVAL
An officer of the Corporation shall hold office until the election and
qualification of his successor; however, any Officer of the Corporation may be
removed from office by the Board of Directors whenever in its judgment the best
interests of the Corporation will be served thereby. Such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer shall not of itself create any contract
right to employment or compensation.
SECTION 3. VACANCIES
Any vacancy in any office from any cause may be filled for the unexpired
portion of the term of such office by the Board of Directors.
SECTION 4. POWERS AND DUTIES
(a) The Chairman of the Board of Directors shall preside over meetings of
the Board of Directors and the Shareholders. Unless a separate Chief Executive
Officer is elected, the Chairman
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shall exercise the powers hereafter granted to that office. Unless a Chairman of
the Board is specifically elected, the President shall be deemed to be the
Chairman of the Board.
(b) The Chief Executive Officer shall be the principal officer of the
Corporation to whom all other officers shall be subordinate. In the event no
Chief Executive Officer is separately elected, such office shall be assumed by
the Chairman of the Board, and if no such office has been filled, by the
President. Except where by law the signature of the President is required or
unless the Board of Directors shall rule otherwise, the Chief Executive Officer
shall possess the same power as the President to sign all certificates,
contracts and other instruments of the Corporation which may be authorized by
the Board of Directors.
(c) The Chief Operating Officer of the Corporation shall be responsible for
management of the day to day affairs of the Corporation, subject to compliance
with the directions of the Board of Directors and of the Chief Executive
Officer. He shall be responsible for the general day-to-day supervision of the
business and affairs of the Corporation. He shall sign or countersign all
certificates, contracts or other instruments of the Corporation as authorized by
the Board of Directors. He may, but need not, be a member of the Board of
Directors.
(d) Unless otherwise provided by specific resolution of the Board of
Directors, the President shall be the Chief Operating Officer of the
Corporation. In the absence of a separately elected or available Chief Executive
Officer or Chairman of the Board, the President shall be the Chief Executive
Officer of the Corporation and shall preside at all meetings of the shareholders
and the Board of Directors. He shall make reports to the Board of Directors. The
Board of Directors will at all times retain the power to expressly delegate the
duties of the President to any other Officer of the Corporation.
(e) The Chief Financial Officer shall be responsible for coordinating all
financial aspects of the Corporation's operations, including strategic financial
planning, supervision of the Corporation's Treasurer, Comptroller and outside
auditors. In the event an Audit Committee of the Board of Directors is
designated and serving, he shall be responsible for keeping such committee fully
and timely informed of all matters under its jurisdiction. In addition, the
Chief Financial Officer shall be responsible for overseeing preparation and
filing of all reports of the Corporation's activities required to be filed,
either periodically or on a special basis with the United States Internal
revenue Service and Securities and Exchange Commission and other federal and
state governmental agencies.
(f) The Vice President(s), if any, in the order designated by the Board of
Directors, shall exercise the functions of the President in the event of the
absence, disability, death, or refusal to act of the President. During the time
that any Vice President is properly exercising the functions of the President,
such Vice President shall have all the powers of and be subject to all
restrictions upon the President. Each Vice President shall have such other
duties as are assigned to him from time to time by the Board of Directors or by
the President of the Corporation.
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(g) The Secretary of the Corporation shall keep the minutes of the meetings
of the shareholders of the Corporation, and, unless provided otherwise by the
Chairman at any meeting of the Board of Directors, the Secretary shall keep the
minutes of the meetings of the Board of Directors of the Corporation. The
Secretary shall be the custodian of the minute books of the Corporation and such
other books and records of the Corporation as the Board of Directors of the
Corporation may direct. The Secretary of the Corporation shall have the general
responsibility for maintaining the stock transfer books of the Corporation, or
of supervising the maintenance of the stock transfer books of the Corporation by
the transfer agent, if any, of the Corporation. The Secretary shall be the
custodian of the corporate seal of the Corporation and shall affix the corporate
seal of the Corporation on contracts and other instruments as the Board of
Directors may direct. The Secretary shall perform such other duties as are
assigned to him from time by the Board of Directors or the President of the
Corporation.
(h) The Treasurer of the Corporation shall be directly subordinate to the
Chief Financial Officer. In the absence of a Chief Financial Officer, such
office shall be filled by the Treasurer. The Treasurer shall have custody of all
funds and securities owned by the Corporation. The Treasurer shall cause to be
entered regularly in the proper books of account of the Corporation full and
accurate accounts of the receipts and disbursements of the Corporation. The
Treasurer of the Corporation shall render a statement of the cash, financial and
other accounts of the Corporation whenever he is directed to render such a
statement by the Board of Directors or by the President of the Corporation. The
Treasurer shall at all reasonable times make available the Corporation's books
and financial accounts to any Director of the Corporation during normal business
hours. The Treasurer shall perform all other acts incident to the Office of
Treasurer of the Corporation, and he shall have such other duties as are
assigned to him from time to time by the Board of Directors or the President of
the Corporation.
(i) Other subordinate or assistant officers appointed by the Board of
Directors or by the President, if such authority is delegated to him by the
Board of Directors, shall exercise such powers and perform such duties as may be
delegated to them by the Board of Directors, the Chief Executive Officer or by
the President, as the case may be.
(j) In case of the absence or disability of any Officer of the Corporation
and of any person authorized to act in his place during such period of absence
or disability, the Board of Directors may from time to time delegate the powers
and duties of such Officer or any Director or any other person whom it may
select.
SECTION 5. SALARIES
The salaries of all Officers of the Corporation shall, except as otherwise
determined or required by an agreement entered into among all the shareholders
of the Corporation, be fixed by the Board of Directors. No Officer shall be
ineligible to receive such salary by reason of the fact that he is also a
Director of the Corporation and receiving compensation therefor.
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ARTICLE IV
LOANS TO EMPLOYEES AND OFFICERS,
GUARANTEE OF OBLIGATIONS OF EMPLOYEES AND OFFICERS
This Corporation may lend money to, guarantee any obligation of, or
otherwise assist any Officer or other employee of the Corporation or of a
subsidiary, including any Officer or employee who is a Director of the
Corporation or of a subsidiary, whenever, in the judgment of the Directors, such
loan, guarantee or assistance may reasonably be expected to benefit the
Corporation. The loan, guarantee or other assistance may be with or without
interest, and may be unsecured, or secured in such manner as the Board of
Directors shall approve including, without limitation, a pledge of shares of
stock of the Corporation. Nothing in this Articles shall be deemed to deny,
limit or restrict the powers of guarantee or warranty of this Corporation at
common law or under any statute.
ARTICLE V
STOCK CERTIFICATES, VOTING TRUSTS, TRANSFERS
SECTION 1. CERTIFICATES REPRESENTING SHARES
(a) Every holder of shares of this Corporation shall be entitled to one or
more certificates, representing all shares to which he is entitled and such
certificates shall be signed by the Chairman, Chief Executive Officer, the
President or a Vice President and the Secretary or an Assistant Secretary of the
Corporation and may be sealed with the seal of the Corporation or a facsimile
thereof. The signatures of the Chairman, the Chief Executive Officer, the
President or Vice President and the Secretary or Assistant Secretary may be
facsimiles if the certificate is manually signed on behalf of a transfer agent
or a registrar, other than the Corporation itself or an employee of the
Corporation. In case any Officer who signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such Officer before
such certificate is issued, it may be issued by the Corporation with the same
effect as if it were executed by the appropriate Officer at the date of its
issuance.
(b) Every certificate representing shares issued by this Corporation shall,
if shares are divided into one or more classes or series with differing rights,
state that the Corporation will furnish to any shareholder upon request and
without charge a full statement of: (i) the designations, preferences,
limitations, and relative rights of the shares of each class or series
authorized to be issued, and (ii) the variations in the relative rights and
preferences between the shares of each such series, if the Corporation is
authorized to issue any preferred or special class in series and 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.
(c) Every certificate representing shares which are restricted as to sale,
disposition or other transfer (including restrictions based on federal or state
securities and other laws) shall state that such shares are restricted as to
transfer and shall set forth or fairly summarize upon the
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certificate, or shall state that the Corporation will furnish to any shareholder
upon request and without charge a full statement of, such restrictions.
(d) Each certificate representing shares shall state upon the face thereof:
(i) the name of the Corporation; (ii) that the Corporation is organized under
the laws of the State of Nevada; (iii) the name of the person or persons to whom
issued; (iv) the number and class of shares, and the designation of the series,
if any, which such certificate represents; and (v) the par value of each share
represented by such certificate, or a statement that the shares are without par
value.
(e) No certificate shall be issued for any shares until they are fully paid
for.
SECTION 2. TRANSFER BOOKS
The Corporation shall keep at its registered office or principal place of
business or in the office of its transfer agent or registrar, a book (or books
where more than one kind, class, or series of stock is outstanding) to be known
as the Stock Book, containing the names, alphabetically arranged, addresses and
Social Security numbers of every shareholder and the number of shares each kind,
class or series of stock held of record. Where the Stock Book is kept in the
office of the transfer agent, the Corporation shall keep at its office in the
State of Florida copies of the stock lists prepared from said Stock Book and
sent to it from time to time by said transfer agent. The Stock Book or stock
lists shall show the current status of the ownership of shares of the
Corporation provided that, if the transfer agent of the Corporation be located
elsewhere, a reasonable time shall be allowed for transit or mail.
SECTION 3. TRANSFER OF SHARES
(a) The name(s) and address(es) of the person(s) to whom shares of stock of
this Corporation are issued, shall be entered on the Stock Transfer Books of the
Corporation, with the number of shares and date of issue.
(b) Transfer of shares of the Corporation shall be made on the Stock
Transfer Books of the Corporation by the Secretary or the transfer agent,
subject to compliance with any restrictions specified on such certificate, only
when the holder of record thereof or the legal representative of such holder of
record or the attorney-in-fact of such holder of record, authorized by power of
attorney duly executed and filed with the Secretary or transfer agent of the
Corporation, shall surrender the Certificate representing such shares for
cancellation. Lost, destroyed or stolen Stock Certificates shall be replaced
pursuant to Section 5 of this Article V.
(c) The person or persons in whose names shares stand on the books of the
Corporation shall be deemed by the Corporation to be the owner of such shares
for all purposes, except as otherwise provided pursuant to Sections 10 and 11 of
Article I, or Section 4 of Article V.
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(d) Shares of the Corporation capital stock shall be freely transferable
without the required Board of Directors' consent, unless such consent
requirement has been imposed pursuant to a binding written contract subscribed
to by the holder or his or her predecessor in interest.
SECTION 4. VOTING TRUSTS
(a) Any number of shareholders of the Corporation may create a voting trust
for the purpose of conferring upon a trustee or trustees the right to vote or
otherwise represent their shares, for a period not to exceed ten years, by: (i)
entering into a written voting trust agreement specifying the terms and
conditions of the voting trust; (ii) depositing a counterpart of the agreement
with the Corporation at its registered office; and (iii) transferring their
shares to such trustee or trustees for the purposes of this Agreement. Prior to
the recording of the agreement, the shareholder concerned shall render the stock
certificate(s) described therein to the Corporate Secretary who shall note on
each certificate:
"This Certificate is subject to the provisions of a voting trust
agreement dated ..........................., recorded in Minute Book
.............................., of the Corporation.
................................................"
Secretary
(b) Upon the transfer of such shares, voting trust certificates shall be
issued by the trustee or trustees to the shareholders who transfer their shares
in trust. Such trustee or trustees shall keep a record of the holders of voting
trust certificates evidencing a beneficial interest in the voting trust, giving
the names and addresses of all such holders and the number and class or the
shares in respect of which the voting trust certificates held by each are
issued, and shall deposit a copy of such record with the Corporation at its
registered office.
(c) The counterpart of the voting trust agreement and the copy of such
record so deposited with the Corporation shall be subject to the same right of
examination by a shareholder of the Corporation, in person or by agent or
attorney, as are the books and records of the Corporation, and such counterpart
and such copy of such record shall be subject to examination by any holder of
record of voting trust certificates either in person or by agent or attorney, at
any reasonable time for any proper purpose.
(d) At any time before the expiration of a voting trust agreement as
originally fixed or as extended one or more times under this Section 4(d), one
or more holders of voting trust certificates may, by agreement in writing,
extend the duration of such voting trust agreement, nominating the same or
substitute trustees, for an additional period not exceeding 10 years. Such
extension agreement shall not affect the rights or obligations or persons not
parties to the agreement, and such persons shall be entitled to remove their
shares from the trust and promptly to have their stock certificates reissued
upon the expiration of the original term of the voting trust agreement. The
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extension agreement shall in every respect comply with and be subject to all the
provisions of this Section 4, applicable to the original voting trust agreement
except that the 10 year maximum period of duration shall commence on the date of
adoption of the extension agreement.
(e) The trustees under the terms of the agreements entered into under the
provisions of this Section 4, shall not acquire the legal title to the shares
but shall be vested only with the legal right and title to the voting power
which is incident to the ownership of the shares.
(f) Notwithstanding generally applicable prohibitions against a
corporation's voting of treasury stock, if the Corporation is the trustee under
a voting trust, it shall have full authority to vote such shares in accordance
with the terms of the voting trust agreement, even if such agreement vests
absolute and unfettered voting discretion in the trustee and notwithstanding
that the voting trust was created at the prompting or direction of the
Corporation, its officers or directors.
SECTION 5. LOST, DESTROYED, OR STOLEN CERTIFICATES
No Certificate representing shares of stock in the Corporation shall be
issued in place of any Certificate alleged to have been lost, destroyed, or
stolen except on production of evidence, satisfactory to the Board of Directors,
of such loss, destruction or theft, and, if the Board of Directors so requires,
upon the furnishing of an indemnity bond in such amount (but not to exceed twice
the fair market value of the shares represented by the Certificate) and with
such terms and with such surety as the Board of Directors may, in its
discretion, require.
ARTICLE VI
BOOKS AND RECORDS
(a) The Corporation shall keep correct and complete books and records of
account and shall keep minutes of the proceedings of its shareholders, Board of
Directors and committees of Directors.
(b) Any books, records and minutes may be in written form or in any other
form capable of being converted into written form within a reasonable time.
(c) Any person who shall have been a holder of record of shares, or the
holder of record of voting trust certificates for, at least five percent of the
outstanding shares of any class or series of the Corporation, upon written
demand stating the purpose thereof, shall; subject to the qualifications
contained in subsection (d) hereof, have the right to examine, in person or by
agent or attorney, at any reasonable time or times, for any purpose, its
relevant books and records of account, minutes and records of shareholders and
to make extracts therefrom.
(d) No shareholder who within two years has sold or offered for sale any
list of shareholders or of holders of voting trust certificates for shares of
this Corporation or any other corporation; has aided or abetted any person in
procuring any list of shareholders or of holders of
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voting trust certificates for any such purpose; or has improperly used any
information secured through any prior examination of the books and records of
account, minutes, or record of shareholders or of holders of voting trust
certificates for shares of the Corporation of any other corporation; shall be
entitled to examine the documents and records of the Corporation as provided in
Section (c) of this Article VI. No shareholder who does not act in good faith or
for a proper purpose in making his demand shall be entitled to examine the
documents and records of the Corporation as provided in Section (c) of this
Article VI.
(e) Unless modified by resolution of the Shareholders, this Corporation
shall prepare not later than four months after the close of each fiscal year:
(i) A balance sheet showing in reasonable detail the financial
conditions of the Corporation as of the date of the close of its fiscal
year.
(ii) A Profit and Loss statement showing the results of its operation
during its fiscal year.
(f) Upon the written request of any shareholder or holder of voting trust
certificates for shares of the Corporation, the Corporation shall mail to such
shareholder or holder of voting trust certificates a copy of its most recent
balance sheet and profit and loss statement.
(g) Such balance sheets and profit and loss statements shall be filed and
kept for at least five years in the registered office of the Corporation in the
State of Florida and shall be subject to inspection during business hours by any
shareholder or holder of voting trust certificates, in person or by agent.
ARTICLE VII
DIVIDENDS
The Board of Directors of the Corporation may, from time to time, declare,
and the Corporation may pay dividends on its own shares, except when the
Corporation is insolvent or when the payment thereof would render the
Corporation insolvent, subject to the following provisions:
(a) Dividends in cash or property may be declared and paid, except as
otherwise provided in this Article VII, only out of the unreserved and
unrestricted earned surplus of the Corporation or out of capital surplus,
however arising, but each dividend paid out of capital surplus shall be
identified as a distribution of capital surplus, and the amount per share paid
from such capital surplus shall be disclosed to the shareholders receiving the
same concurrently with the distribution.
(b) If the Corporation shall engage in the business of exploiting natural
resources or other wasting assets and if the Articles of Incorporation so
provide, dividends may be declared and paid in cash out of depletion or similar
reserves, but each such dividend shall be identified as distribution
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of such reserves and the amount per share paid from such reserves shall be
disclosed to the shareholders receiving the same concurrently with the
distribution thereof.
(c) Dividends may be declared and paid in the Corporation's treasury
shares.
(d) Dividends may be declared and paid in the Corporation's authorized but
unissued shares, out of any unreserved and unrestricted surplus of the
Corporation, upon the following conditions:
(i) If a dividend is payable in the Corporations' own shares having a
par value, such shares shall be issued at not less than the par value
thereof and there shall be transferred to stated capital at the time such
dividend is paid an amount of surplus equal to the aggregate par value of
the shares to be issued as a dividend.
(ii) If a dividend is payable in the Corporations' own shares without
par value, such shares shall be issued at a stated value fixed by the Board
of Directors by resolution adopted at the time such dividend is declared,
and there shall be transferred to stated capital at the time such dividend
is paid an amount of surplus equal to the aggregate stated value so fixed
and the amount per share so transferred to stated capital shall be
disclosed to the shareholders receiving such dividend concurrently with the
payment thereof.
(e) No dividend payable in shares of any class shall be paid to the holders
of shares of any other class unless the Articles of Incorporation so provide or
such payment is authorized by the affirmative vote or the written consent of the
holders of at least a majority of the outstanding shares of the class which the
payment is to be made.
(f) A split or division of the issued shares of any class into a greater
number of shares of the same class without increasing the stated capital of the
Corporation shall not be construed to be a stock dividend within the meaning of
this Article VII.
ARTICLE VIII
SEAL
The Board of Directors shall adopt a Corporate Seal which shall be circular
in form and shall have inscribed thereon the name of the Corporation, the state
of incorporation and the year of incorporation.
ARTICLE IX
INDEMNIFICATION
This Corporation may, in its discretion, indemnify any director, officer,
employee, or agent in the following circumstances and in the following manner:
(a) The Corporation may indemnify any person who was or is a part, or is
threatened to be made a party to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
(other than an action by, or in the right of, the Corporation)
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by reason of the fact that he is or was a director, officer, employee, or agent
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys' fees
at all trial and appellate levels), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding, including any appeal thereof, if he acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the Corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonable believed to be in, or not opposed to, the best
interests of the Corporation or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The Corporation may indemnify any person who was or is a party, or is
threatened to be made a party to any threatened, pending, or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee, or agent of
the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, or agent of the Corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust, or
other enterprise against expenses (including attorneys' fees at all trial and
appellate levels), actually and reasonable incurred by him in connection with
the defense of settlement of such action or suit, including any appeal thereof,
if he acted in good faith and in a manner he reasonably believed to be in, or
not opposed to, the best interest of the Corporation, except that no
indemnification shall be made in respect of any claim, issue, or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless, and only to
the extent that, the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is rarely and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
(c) To the extent that a Director, Officer, employee, or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit, or proceeding referred to in Sections (a) or (b) of this Article
IX, or in defense of any claim, issue, or matter therein, shall be indemnified
against expenses (including attorneys' fees at trial and appellate levels)
actually and reasonably incurred by him in connection therewith.
(d) Any indemnification under Sections (a) or (b) of this Article IX,
unless pursuant to a determination by a court, shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee, or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Sections (a) or (b)
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or this Article IX. Such determination shall initially be made by the Board of
Directors by a majority vote of a quorum consisting of Directors who were not
parties to such action, suit, or proceeding. If the Board of Directors shall,
for any reason, decline to make such a determination, then such determination
shall be made by the shareholders by a majority vote of a quorum consisting of
shareholders who were not parties to such action, suit or proceeding; provided,
however, that a determination made by the Board of Directors pursuant to this
Section may be appealed to the shareholders by the party seeking indemnification
or any party entitled to call a special meeting of the shareholders pursuant to
Section 2 of Article I and, in such case, the determination made by the majority
vote of a quorum consisting of shareholders who were not parties to such action,
suit, or proceeding shall prevail over a contrary determination of the Board of
Directors pursuant to this Section.
(e) Expenses (including attorneys' fees at all trial and appellate levels)
incurred in defending a civil or criminal action, suit or proceeding may be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding upon a preliminary determination following one of the procedures set
forth in this Article IX, that a Director, Officer, employee or agent met the
applicable standard of conduct set forth in this Article IX, and upon receipt of
an undertaking by or on behalf of the director, officer, employee or agent to
repay such amount, unless it shall ultimately be determined that he is entitled
to be indemnified by the Corporation as authorized in this section.
(f) The Corporation may make any other or further indemnification, except
an indemnification against gross negligence or willful misconduct, under any
agreement, vote of shareholders or disinterested Directors or otherwise, both as
to action in the indemnified party's official capacity and as to action in
another capacity while holding such office.
(g) Indemnification as provided in this Article IX may continue as to a
person who has ceased to be a director, officer, employee or agent and may inure
to the benefit of the heirs, executors and administrators of such a person upon
a proper determination initially made by the Board of Directors by a majority
vote of a quorum consisting of Directors who were not parties to such action,
suit, or proceeding. If the Board of Directors shall, for any reason, decline to
make such a determination, then such determination may be made by the
shareholders by a majority vote of a quorum consisting of shareholders who were
not parties to such action, suit or proceeding; provided, however, that a
determination made by the Board of Directors pursuant to this Section may be
appealed to the shareholders by the party seeking indemnification or his
representative or by any party entitled to call a special meeting of the
shareholders pursuant to Section 2 or Article I and in such case, the
determination made by the majority vote of quorum consisting of shareholders who
were not parties to such action, suit, or proceeding shall prevail over a
contrary determination of the Board of Directors pursuant to this Section (g).
(h) The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against any liability asserted against him and incurred by him
in any such capacity or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article IX.
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(i) If any expenses or other amounts are paid by way of indemnification,
otherwise than by court order or action by the shareholders or by an insurance
carrier pursuant to insurance maintained by the Corporation, the Corporation
shall, not later than the time of delivery to shareholders or written notice of
the next annual meeting of shareholders unless such meeting is held within three
months from the date of such payment, and, in any event, within 15 months from
the date of such payment, deliver either personally or by mail to each
shareholder of record at the time entitled to vote for the election of Directors
a statement specifying the persons paid, the amount paid, and the nature and
status at the time of such payment of the litigation of threatened litigation.
(j) This Article IX shall be interpreted to permit indemnification to the
fullest extent permitted by law. If any part of this Article shall be found to
be invalid or ineffective in any action, suit of proceeding, the validity and
effect of the remaining part thereof shall not be affected. The provisions of
this Article IX shall be applicable to all actions, claims, suits, or
proceedings made or commenced after the adoption hereof, whether arising from
acts or omissions to act occurring before or after its adoption.
ARTICLE X
AMENDMENT OF BYLAWS
The Board of Directors shall have the power to amend, alter, or repeal
these Bylaws, and to adopt new Bylaws.
ARTICLE XI
FISCAL YEAR
The Fiscal Year of this Corporation shall be determined by the Board of
Directors.
ARTICLE XII
MEDICAL REIMBURSEMENT
SECTION 1. BENEFITS
The Corporation may, subject to approval of the Board of Directors
reimburse all employees for expenses incurred by themselves and their
dependents, as defined in Section 152 of the Internal Revenue Code of 1954, as
amended (the "IRC"), for medical care, as defined in IRC Section 213(e) or any
successor section thereto, subject to the conditions and limitations hereinafter
set forth.
It is the intention of the Corporation that the benefits payable to
employees hereunder will be excluded from their gross income pursuant IRC
Section 105 or any successor section thereto.
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SECTION 2. EMPLOYEES DEFINED
The term "employees" as used in this medical expense plan is hereby defined
to include all individuals employed by the corporation except the following:
(a) Employees who have not completed three months of service as is
provided in IRC Section 105(h)(3) (b)(i), or any successor section thereto;
(b) Employees who have not attained the age of 25 years;
(c) Employees who are part-time or seasonal as is defined in IRC
Section 105(h)(3)(B)(iii) or any successor section thereto;
(d) Employees who are included in a unit of employees covered by an
agreement between employee representatives and one or more employers found
to be a collective bargaining agreement; where accident and health benefits
were the subject of good faith bargaining between such employee
representatives and such employer(s) as is defined in IRC Section
105(h)(3)(B)(iv) or any successor section thereto;
(e) Employees who are nonresident aliens and who receive no earned
income from the employer which constitutes income from sources within the
United States as is further defined in IRC Section 105(h)(5)(B)(v) or any
successor section thereto.
SECTION 3. LIMITATIONS
(a) The Corporation will reimburse any employee no more than $5,000.00 in
any fiscal year for medical care expenses;
(b) Reimbursement or payment provided under this plan will be made by the
Corporation only in the event and to the extent that such reimbursement or
payment is not provided under any insurance policy(ies), whether owned by the
Corporation or the employee, or under any other health and accident or wage
continuation plan;
(c) In the event that there is such an insurance policy or plan in effect
providing for reimbursement in whole or in part, then to the extent of the
coverage under such policy or plan, the Corporation will be relieved of any and
all liability hereunder.
SECTION 4. SUBMISSION OF PROOF
Any employee applying for reimbursement under this plan will submit to the
Corporation, at least quarterly, all bills for medical care, including premium
notices for accident or health insurance, for verification by the Corporation
prior to payment. Failure to comply herewith, may at the discretion of the Board
of Directors, terminate such employee's right to said reimbursement.
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SECTION 5. DISCONTINUATION
This plan will be subject to termination at any time by vote of the Board
of Directors; provided, however, that medical care expenses incurred prior to
such termination will be reimbursed or paid in accordance with the terms of this
plan.
SECTION 6. DETERMINATION
The Chief Executive Officer will determine all questions arising from the
administration and interpretation of the Plan except where reimbursement is
claimed by the President. In such case determination will be made by the Board
of Directors.
* * *
The Undersigned, being the duly elected and acting secretary of the Corporation,
hereby certifies that the foregoing constitute the validly adopted and true
Bylaws of the Corporation, as of the date set forth below.
Dated: _________________
--------------------------
Secretary
(Corporate Seal)
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EXHIBIT 21
SUBSIDIARY OF THE REGISTRANT
SUBSIDIARY
(MAJORITY OWNED)
Name: Rhino Ecosystems, Inc.
Place of Incorporation: Ontario, Canada
Doing Business as: Rhino Ecosystems, Inc.
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