<PAGE>
As filed with the Securities and Exchange Commission on November 1, 1999.
Registration No. 333-________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
SECURITIES ACT OF 1933
iGENISYS, INC,
----------------------
(Name of small business issuer in its Charter)
Colorado 8742 84-1485196
- ---------------------------- ---------------------------- --------------
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
incorporation or organiza- Classification Code Number) Identification
tion) Number)
654 North Belt East, Suite 310
Houston, Texas 77060
(281) 820-0200
(281) 447-8291 (fax)
------------------------------------------
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
Carylyn K. Bell
Registered Agent
3200 Cherry Creek Drive South, Suite 430
Denver, Colorado 80209
(303) 282-4800
(303) 282-5800 (fax)
------------------------------------------
(Name, address, including zip code, and telephone number of
agent for service of process)
Copies to:
Clifford L. Neuman, Esq.
Neuman & Drennen, LLC
1507 Pine Street
Boulder, Colorado 80302
(303) 449-2100
(303) 449-1045 (fax)
Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of the Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ x ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Proposed Proposed
Each Class of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price per Offering Registration
Registered Registered Share Price (1) Fee
- ------------- ---------- --------- ---------- ------------
<S> <C> <C> <C> <C>
Common Stock,
$.001 par value
to be sold by
the Company 1,500,000 $3.00 $ 4,500,000 $1,251.00
Common Stock,
$.001 par value
to be sold by
the Selling
Shareholders 1,990,611 $3.00 $ 5,971,833 $1,660.17
Total 3,490,611 $3.00 $10,471,833 $2,911.17
</TABLE>
- --------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
<PAGE>
iGENISYS, INC.
Cross-Reference Index
Item No. and Heading Location
In Form SB-2 Location
Registration Statement in Prospectus
---------------------- -------------
1. Forepart of the Registration Forepart of Registration
Statement and Outside Front Statement and Outside Front
Cover Page of Prospectus Cover Page of Prospectus
2. Inside Front and Outside Back Inside Front and Outside Back
Cover Pages of Prospectus Cover Pages of Prospectus
3. Summary and Risk Factors Prospectus Summary; Risk
Factors
4. Use of Proceeds Use of Proceeds; Risk Factors
5. Determination of Offering Price Front Cover Page
6. Dilution Dilution; Risk Factors
7. Selling Securityholders Selling Shareholders and Plan
of Distribution
8. Plan of Distribution Terms of Offering
9. Legal Proceedings Legal Proceedings
10. Directors, Executive Officers, Management
Promoters and Controlling Persons
11. Security Ownership of Certain Security Ownership of
Beneficial Owners and Management Management and Principal
Stockholders
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel Legal Matters; Experts
14. Disclosure of SEC Position on Management - Indemnification
Indemnification for Securities Act and Limitation on Liability of
Liabilities Directors
15. Organization Within Last Five Years The Company; Business -
Overview
16. Description of Business Prospectus Summary; Risk
Factors; Business
17. Management's Discussion and Analysis Management's Discussion and
of Plan of Operation Analysis of Financial
Condition and Results of
Operations; Financial
Statements; Business
18. Description of Property Business
19. Certain Relationships and Related Certain Transactions
Transactions
20. Market for Common Equity and Related Certain Market Information
Stockholder Matters
21. Executive Compensation Management - Executive
Compensation
22. Financial Statements Financial Statements
23. Changes in and Disagreements with *
Accountants on Accounting and
Financial Disclosure
- --------------------
* Omitted from Prospectus because Item is inapplicable or answer is in the
negative
<PAGE>
<PAGE> SUBJECT TO COMPLETION, DATED _____________, 1999
PROSPECTUS
iGENISYS, INC.
3,490,611 Shares of Common Stock
The Company-
* iGeniSys, Inc.
654 North Belt East, Suite 310
Houston, Texas 77060
* Through our subsidiary, we design and develop Internet business
management software and provide ancillary services in the business
systems arena, with an emphasis on project and program management, cost
and risk analysis, budget and database analysis, consulting, systems
integration and training.
* To date, there has been no public market for our common stock, and
despite the anticipated listing of our common stock on the over-the-
counter market, we can give no assurance that an active market will
develop in the future.
The Company Offering-
* We are offering up to 1,500,000 shares of common stock at an offering
price of $3.00 per share.
* We plan to offer the shares of common stock through our officers and
directors. (We do not plan to use underwriters or pay any commissions.)
The Selling Shareholders Offering-
* This prospectus also relates to the offer and sale of 1,990,611 shares of
common stock by certain of our shareholders.
* We will not receive any of the proceeds from the sales of our common
stock by these selling shareholders.
Investing in our common stock involves a high
degree of risk. You should read the "Risk
Factors" beginning on Page 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is __________, 1999
<PAGE>
PROSPECTUS SUMMARY
This summary highlights important information about our business and about the
offerings. Because it is a summary, it does not contain all the information
you should consider before investing in our common stock. Please read the
entire prospectus.
About Our Company
Please note that throughout this Prospectus the words "we", "our" or "us"
refers to iGeniSys, Inc. and not to any of the selling shareholders.
We conduct our operations through our subsidiary, GeniSys Information
Systems, Inc. We are a business software development and consulting company
specializing in providing customers with state-of-the-art internet solutions
in the project and program management arena. We recently developed the first
integrated internet-based schedule and cost-control reporting system on the
market and, as a result of our internally developed software and human
resources, we have developed business alliances with Microsoft Corporation and
Arthur Andersen, LLP.
We provide customized solutions to complex problems for a wide range of
commercial entities including Boeing North America, Allied Signal, Wal-Mart,
and Enron. In addition we have provided software and services to many
governmental entities such as the US Army, US Department of Energy, and the
City of San Antonio. These entities, as well as others, have utilized our
products and services to enhance their own productivity and efficiency.
Internet-based Project/Program management and cost control is the primary
business area that we emphasize. Large commercial and governmental entities
have projects of all sizes and descriptions, and each of these represent
significant opportunities for performance enhancement. Whether it is the
development of a new aircraft, the construction of a major office building, a
time-sensitive overhaul to a petrochemical plant, or a major software
development project, managers at all levels (including Congressional
oversight) need to monitor the progress of these projects, control their
respective costs, and be alerted when problems arise. The critical need to
provide early warning to senior management of variances in project schedules
and potential cost overruns is the justification for using our project
management practices and software solutions.
Our principal executive offices are currently located in Houston, Texas
at 654 North Belt East, Suite 310, Houston, Texas 77060. Our telephone number
at that address is (281) 820-0200 and our facsimile number is (281) 447-8291.
Our Internet Website address is http://www.genisystems.com. In addition to
our corporate office, we maintain offices in Denver, Colorado, Torrance (Los
Angeles), California and Washington, D.C.
<PAGE>
About The Offering
There are two offerings covered by this Prospectus: one offering is being
made by us and is referred to as the "Company Offering", and the other
offering is being made by certain selling shareholders and is referred to as
the "Selling Shareholders' Offering."
In our offering, we are offering for sale up to 1,500,000 shares of our
common stock at a price of $3.00 per share. We are offering the shares
through our officers and directors and will not be using the services of an
underwriter. We will not be paying any commissions on any sales of common
stock in our Offering.
The Selling Shareholders' Offering is an offering of shares of our common
stock by persons who were issued shares of our common stock in prior
transactions. We refer to these persons as "Selling Shareholders" in this
Prospectus. We are registering the common stock covered by this Prospectus in
order to fulfill the obligations we have under agreements with the Selling
Shareholders.
<PAGE>
<PAGE>
Summary Financial Data
The following financial information summarizes the more complete
historical financial information enclosed in this prospectus. You should read
the information below along with all other financial information and analysis
in this prospectus. Please do not assume that the results below indicate
results we will achieve in the future.
<TABLE>
<CAPTION>
March 31, September 30,
------------------------ -------------
1999 1998 1999
------------ --------- -------------
<S> <C> <C> <C>
Current assets $ 1,107,489 $1,016,316 $ 716,528
Current liabilities $(1,467,455) $(1,047,773) $ (1,425,615)
Net working capital deficit $ (359,966) $ (31,457) $ (709,087)
Development costs, net $ 549,819 $ 46,521 $ 700,527
Equipment, net $ 147,359 $ 94,078 $ 160,416
Convertible note payable,
shareholder $ -0- $ (75,000) $ -0-
Shareholders' equity $ 404,056 $ 5,024 $ 253,282
Total assets $ 1,894,821 $1,171,699 $ 1,686,890
</TABLE>
<TABLE>
<CAPTION>
For the Periods For the Six Months
Ended March 31, Ended September 30,
-------------------------------------------------
1999 1998 1999 1998
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues $3,049,128 $1,882,445 $1,542,924 $ 1,193,301
Operating (loss)
income $ (216,934) $ 5,821 $ (345,240) $ (66,661)
Net loss $ (299,243) $ (20,076) $ (397,575) $ (107,182)
Weighted average
number of shares 6,165,715 4,602,510 10,099,640 4,602,510
Basic and diluted
loss per share $ (.049) $ (.004) $ (.039) $ (.023)
</TABLE>
<PAGE>
<PAGE>
RISK FACTORS
An investment in our common stock is speculative and involves a high degree of
risk. Please carefully consider the following risk factors, as well as the
possibility of the loss of your entire investment in our securities, before
deciding to invest in our common stock.
We Have a History of Operating Losses; Our Future Profitability is Uncertain
We have incurred operating losses since our inception amounting to a net
accumulated deficit of $716,894 as of September 30, 1999. Such losses are
attributed to initial costs of starting the business, expenditures made in
developing corporate relationships with Microsoft and Arthur Andersen, LLP,
and expenses incurred implementing initial releases of our software. We
continue to incur expenses relating to expansion of our markets and related
costs and future losses could be incurred and there can be no assurances that
our products will be accepted in the marketplace nor that we will generate
profitable operations.
We Will Need Additional Financing
We will require substantial funds to fulfill the initial stages of our
business plan. These funds will be used to recruit and train the additional
staff needed to complete development and introduction of our new web-based
software products which will sustain our growth, to develop a network of
regional offices needed to provide nationwide customer support and to enhance
marketing and sales, to fund further software development, and for our general
working capital requirements and other general corporate purposes. Our
specific capital requirements depend upon numerous factors, including:
* The progress of our product development and commercialization
* The requirements for and the cost of filing, prosecuting, defending
and enforcing patent claims, copyrights and other intellectual
property rights
* Competing technological and market developments
* The acceptance of our products by the marketplace
We believe that our capital resources, including the estimated net
proceeds of this offering, and internally generated working capital, will be
sufficient to satisfy our current and projected funding requirements for at
least 12 months from the date of this prospectus. Unless we are able to
achieve profits from operations within that time or, if we experience
unanticipated cash requirements during the next 12 months, we may require
substantial additional capital. We may seek additional funding through public
or private financings or collaborative or other arrangements with third
parties. There can be no assurance that additional funds will be available on
acceptable terms, if at all. If additional funds are raised by issuing equity
securities, our existing stockholders, including those who invest in the
offerings described in this prospectus, may experience substantial dilution.
If adequate funds are not available, we may be required to delay, scale back
or eliminate one or more of our development programs or to obtain funds by
entering into arrangements with collaborative partners or others that may
require us to relinquish rights to certain of our products or technologies
that we would not otherwise relinquish. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
There Are Certain Risks Relating to Our Business
Our business is subject to certain risks and uncertainties, including the
need to anticipate changes in technology to provide software development and
consulting services on a timely basis, competition from other companies with
substantially greater financial, technical and other resources, relatively low
barriers to entry, the growth in software development and IT services offered
by others, and the need to protect our proprietary rights.
Our Business Must Keep Pace with Rapid Technological Changes
The software development, project and program consulting and strategic
business consulting market has experienced rapid technological advances and
developments in recent years. Our failure to stay abreast of these advances
and developments could materially adversely affect our business.
Additionally, we use a number of different technologies in developing and
providing software and computer solutions for our customers. These
technologies are developing rapidly and are characterized by evolving industry
standards in a wide variety of areas. While we evaluate technologies on an
ongoing basis and endeavor to utilize those that are most effective in
developing software and computer solutions for our customers, there can be no
assurance that the technologies we utilize, and the expertise we have gained
in those technologies, will continue to be applicable in the future. There
can be no assurance that new technologies will be made available to us or that
we can economically apply these technologies. The inability to apply existing
technologies and our expertise to subsequent projects could have a material
adverse effect on our business, operating results and financial condition.
We may not be able to Manage our Growth if we are Successful
If we are successful and are able to grow profitably, that growth could
create certain additional risks. Growth can place additional burden on our
management resources and financial controls. In addition, it will require us
to continue to implement and refine our operating, financial and information
management systems and to train, motivate and manage our employees. Our
ability to attract and retain qualified people will have a significant effect
on our ability to establish and maintain our position in the market, and our
failure to do so could have a material adverse effect on our results of
operations.
We Must be Able to Attract and Retain Employees
While the software applications and programs that we have developed are
important to our success, our future success depends in large part upon our
ability to attract, retain and motivate highly skilled employees, particularly
software development, senior project managers, and other senior personnel with
experience in a wide variety of businesses and industries. Qualified senior
project managers and development professionals are in particularly great
demand and are likely to remain a limited resource for the foreseeable future.
Several attributes of our work environment pose challenges to our ability to
attract and retain employees, including:
* extensive travel requirements
* our intense work environment and culture
* our standards for employee technical skills and job performance
* our practice of adjusting the number of technical personnel to
reflect active project levels
Although we expect to continue to attract sufficient numbers of highly
skilled employees and to retain our existing senior project managers and other
senior personnel for the foreseeable future, there can be no assurance that we
will be able to do so. Our failure to attract and retain key personnel could
have a material adverse effect upon our business, operating results and
financial condition.
We are Dependent upon Certain Key Employees
Although we do not believe that the loss of any particular individual
would have a material adverse impact on us, the loss of some or all of our
senior managers could have a material adverse impact on our operations,
including our ability to secure and complete engagements. We have committed
to Craig Crawford and Jeff Spencer that we would enter into written employment
agreements with them as our executive officers, but to date have not done so.
These commitments are oral and, as a result, it is possible that one or more
of our employees may elect to terminate his employment with little or no
advance notice. The loss of certain key employees without sufficient time to
locate and train suitable replacement personnel could have a material adverse
effect on our business operations and financial condition.
We Sometimes Have Employees with No Specific Assignment
Our unassigned labor costs, which represent salaries of, and other
expenses allocated to, systems professionals not assigned to a specific
project, have gradually increased as a percentage of revenues over time. We
attempt to reassign employees who meet our performance requirements to other
active projects when they are no longer needed on a particular project.
However, since we generally recruit personnel in advance of the commencement
of certain projects in order to meet the needs of these projects, any
cancellation or delays in the anticipated projects would increase the
unassigned labor costs and might cause a material adverse effect upon our
business, operating results and financial condition. We attempt to use
contract personnel where appropriate to reduce fixed costs; however, there is
a limited number of qualified personnel willing to work on a contract basis.
We are Subject to Risks Associated with Our Projects
Because of the project based nature of our work and the fact that many of
the projects we undertake are large projects, there is a risk of a material
impact on operating results because of the unanticipated suspension or
cancellation of a large project or the financial difficulties of a client.
The suspension or cancellation of a project or the financial difficulties of a
client could result in a drop in revenues, the need to reassign staff, a
potential dispute with a client regarding moneys owed for consulting work and
expenses, and a lessening of our reputation.
In addition, because many of our projects are high profile, mission
critical projects for major clients, a failure or inability to meet a client's
expectations with respect to a major project undertaken by us could damage our
reputation and affect our ability to attract new business. Third party
products and services have been incorporated into a number of the proprietary
products and services we currently offer. These third party products and
services are integral to the success of many of our projects. To the extent
that third parties do not deliver effective products and services on a timely
basis, our project results could be negatively impacted. Although we attempt
to limit this risk in our engagement arrangements with clients, the failure of
a project could harm our reputation and also result in significant financial
exposure to us.
We Face Significant Competition
The software development, project and program consulting and strategic
business consulting industries are comprised of a large number of
participants, are subject to rapid changes and are highly competitive. We
compete with, and face potential competition from, a number of companies that
have significantly greater financial, technical and marketing resources and
greater name recognition than we have. We also compete with smaller service
providers whose specific, more narrowly focused service offerings may be more
attractive to potential clients than our multi-dimensional approach. Our
clients primarily consist of government entities and agencies, Fortune 500
companies, and other large corporations. There are an increasing number of
companies in the software development, IT consulting and strategic business
consulting industries targeting this client base. We believe that our ability
to compete in these markets depends in part on a number of factors outside our
control, including the ability of our competitors to hire, retain and motivate
a significant number of skilled project managers, our competitors ownership
of, or ability to develop, software applications that are competitive with our
products and services, and the price at which others offer comparable
services.
In addition, our clients could develop or acquire in-house expertise
and/or proprietary software applications similar to those which we provide,
which would significantly reduce demand for our services. No assurance can be
given that we will be able to maintain our existing client base, maintain or
increase the level of revenue generated by our existing clients or be able to
attract new clients.
We are Vulnerable to General Economic Conditions
Our revenues and results of operations will be subject to fluctuations
based on the general economic conditions of the United States. If there were
to be a general economic downturn or a recession in the United States, then we
expect that business enterprises, including our clients and potential clients,
would cut back on their spending on, or reduce their budget for, software
development and other IT services. In the event of an economic downturn,
there can be no assurance that our business, operating results and financial
condition would not be materially and adversely affected.
We may be Unable to Protect Our Intellectual Property Rights
We have developed certain foundation and application software tools,
programs and products that we own and license to our clients. We regard this
software as proprietary and protect our rights in it where appropriate with
copyrights, trademarks, trade secret laws and contractual restrictions on
disclosure and transferring title. We cannot assure you that any steps we
take in this regard will be adequate to deter misappropriation of our
proprietary rights or independent third party development of functionally
equivalent products.
We have developed and rely on the trademarks that we use with our
products, including GeniSys Enterprise Manager(-TM-) or GEM(-TM-), Visual
Project Manager(-TM-) or VPM(-TM-) , Gatekeeper(-TM-) and Tracer(-TM-).
Wherever possible, we have either applied for, intend to apply for, or have
obtained federal registrations with respect to the use of our trademarks, and
where registrations of particular marks have not been issued, we continue to
claim common law trademark rights to those names. However, we cannot assure
you that we will obtain registrations for all of our trademarks or that we
will not be subject to opposition, cancellation or infringement proceedings
based upon the use of a particular trademark. The loss of the use of any one
or more of our trademarks could have a material adverse effect upon our
ability to profitably market the associated product or service.
In addition, our success is dependent upon our specialized expertise and
methodologies. To protect this proprietary information, we rely upon a
combination of trade secret and common laws, employee nondisclosure policies
and third party confidentiality agreements. However, there can be no
assurance that any of the steps we take will be adequate to deter
misappropriation of our specialized expertise and methodologies.
Specifically, there can be no assurance that others will not independently
develop substantially equivalent proprietary information and techniques or
otherwise gain access to our trade secrets, that our trade secrets will not be
disclosed or that we can effectively protect our rights to unpatented and/or
uncopyrighted trade secrets. Despite precautions we may take, unauthorized
parties may attempt to engineer, reverse engineer, copy or obtain and use our
products and other information we consider proprietary. We pursue a policy of
having our employees and consultants execute non-disclosure agreements upon
commencement of employment or consulting relationships with us. These
agreements provide that all confidential information developed or made known
to the individual during the course of the relationship with us shall be kept
confidential except in specified circumstances. There can be no assurance,
however, that these agreements will provide meaningful protection for our
trade secrets or other proprietary information in the event they are used or
disclosed in an unauthorized manner.
Although we believe that our services and products do not infringe on the
intellectual property rights of others, there can be no assurance that an
infringement claim will not be asserted against us in the future.
We Face Special Risks from Conducting International Operations
Some of our clients have locations outside the United States. Because the
cost of doing business abroad is higher for U.S. businesses than the cost of
doing business domestically, we could experience a decline in our operating
margins if the significance of our international operations increases.
International operations and the provision of services in foreign markets are
subject to a number of special risks, including:
* Currency exchange rate fluctuations
* Trade barriers
* Exchange controls
* National and regional labor strikes
* Political risks
* Additional security concerns
* Risks of increases in duties, taxes and governmental royalties
* Changes in laws and policies governing operations of foreign-based
companies
In addition, our continued success and future growth internationally will
depend upon our ability to attract, develop and retain a sufficient number of
highly skilled and motivated local professional employees in each of those
foreign countries where we conduct operations. Competition for local
personnel qualified to deliver most of our services is intense, and there can
be no assurance that we will be able to recruit, develop and retain a
sufficient number of highly skilled, motivated local professionals to compete
successfully internationally.
We have Broad Discretion in Using the Proceeds of the Offering
Our Board of Directors will have broad discretion to allocate the
proceeds of this offering and to determine the timing of expenditures. We
expect that the proceeds of this offering will be used to recruit and train
additional staff needed to complete development and introduction of our new
web-based products and to sustain our planned growth, to add regional offices
needed to provide nationwide marketing and sales, and to fund further software
development, with approximately 20% to be reserved for use as working capital
and for other general corporate purposes. Currently, we are unable to
estimate precisely the allocation of the proceeds among these uses, and the
time and amount of expenditures will vary depending upon numerous factors.
Investors will be Immediately Diluted
Investors acquiring shares of our common stock in the offerings described
in this prospectus will incur immediate and substantial dilution of their
investment of approximately $2.66 per share, or 89% of the offering price,
based upon our adjusted net tangible book value as of September 30, 1999. To
the extent that currently outstanding options to purchase our common stock are
exercised, there will be further dilution to investors acquiring shares of
common stock. See "Dilution."
We have been Arbitrary in Setting the Offering Price
The offering price of the shares of common stock we are offering was
arbitrarily determined by us and is not necessarily related to our assets,
book value or financial condition, and may not be indicative of our actual
value.
Future Issuances of our Common Stock Could Dilute Current Shareholders and
Adversely Affect the Market if it Develops
We have the authority to issue up to 100,010,000 shares of common stock
and to issue options and warrants to purchase shares of our common stock
without stockholder approval. These future issuances could be at values
substantially below the price paid for our common stock by our current
shareholders. In addition, we could issue large blocks of our common stock to
fend off unwanted tender offers or hostile takeovers without further
stockholder approval.
Future Sales of our Common Stock Could Adversely Affect the Market
Future sales of our common stock into the market may also depress the
market price of our common stock if one develops in the future. We have
issued common stock, options and warrants to purchase our common stock. Sales
of these shares of our common stock or the market's perception that these
sales could occur may cause the market price of our common stock to fall.
These sales also might make it more difficult for us to sell equity or equity
related securities in the future at a time and price that we deem appropriate
or to use equity as consideration for future acquisitions.
Future Sales of Preferred Stock Could also Adversely Affect the Market for our
Common Stock
We have the authority to issue up to 50,000,000 shares of preferred stock
without shareholder approval. The issuance of preferred stock by our Board of
Directors could adversely affect the rights of the holders of our common
stock. An issuance of preferred stock could result in a class of outstanding
securities that would have preferences with respect to voting rights and
dividends and in liquidation over the common stock and could, upon conversion
or otherwise, have all of the rights of our common stock. Our Board of
Directors' authority to issue preferred stock could discourage potential
takeover attempts or could delay or prevent a change in control through
merger, tender offer, proxy contest or otherwise by making these attempts more
difficult or costly to achieve.
We may Incur Expenses as a Result of the Year 2000 Problem
The Year 2000 problem exists because many computer programs, embedded
systems and components were designed to refer to a year by the last two digits
of the year, such as "99" for "1999." Any of our computer programs that have
date sensitive software may recognize a date using "00" as the year "1900"
rather than the year "2000." This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, our temporary inability to process transactions, send invoices or
engage in similar normal business activities. We have implemented a program
to identify and address potential Year 2000 problems which is scheduled to be
completed by October, 1999. As a result of this program, we have upgraded
some of our existing hardware and software and in some cases converted to new
software. We believe these activities have mitigated potential Year 2000
problems that might affect our computer networks and other systems; however,
we have not completed our Year 2000 assessment and therefore have not fully
determined the extent to which Year 2000 problems may affect our network and
systems. We have not contacted our suppliers, vendors and customers regarding
Year 2000 issues and therefore have not yet fully determined the extent to
which we are vulnerable to the failure of these third parties to remediate
their own Year 2000 problems. In view of the foregoing, there can be no
assurance that the Year 2000 problems will not have a material adverse effect
upon our business, financial condition or results of operations.
There is No Public Trading Market for Our Common Stock
There currently exists no public trading market for our common stock, and
there can be no assurance that a public trading market will develop or be
sustained in the future. Without an active public trading market, you may not
be able to liquidate your investment without considerable delay, if at all.
If a market does develop, the price for our securities may be highly volatile
and may bear no relationship to our actual financial condition or results of
operations. Factors we discuss in this prospectus, including the many risks
associated with an investment in us, may have a significant impact on the
market price of our common stock.
Over-the-Counter Stocks are Very Risky
The over-the-counter markets for securities such as our common stock
historically have experienced extreme price and volume fluctuations during
certain periods. These broad market fluctuations and other factors, such as
new product developments and trends in our industry and the investment markets
generally, as well as economic conditions and quarterly variations in our
results of operations, may adversely affect the market price of the common
stock. See "Certain Market Information."
We are not Listed on Nasdaq
We have not applied to have our shares listed on Nasdaq, and do not plan
to do so in the foreseeable future. As a result, trading, if any, in our
securities will be conducted in the over-the-counter market on an electronic
bulletin board established for securities that do not meet Nasdaq listing
requirements, or in what are commonly referred to as the "pink sheets." As a
result, you will find it substantially more difficult to dispose of our
securities. You will also find it difficult to obtain accurate information
about, and/or quotations as to the price of, our common stock. Finally,
depending upon several factors, including the future market price of our
common stock, our securities are and may remain subject to the "penny stock"
rules.
No One has Agreed to Maintain a Market in Our Stock
Our securities may be quoted in the "pink-sheets" maintained by the
National Quotations Bureau, Inc., which reports quotations by brokers or
dealers making a market in particular securities. We have no agreement with
any broker or dealer to act as a marketmaker for our securities and there is
no assurance that we will be successful in obtaining any marketmakers. The
lack of a marketmaker for our securities could adversely influence the market
for and price of our securities, as well as your ability to dispose of, or to
obtain accurate information about, and/or quotations as to the price of, our
securities.
<PAGE>
<PAGE>
FORWARD-LOOKING STATEMENTS
In General
This prospectus contains statements that plan for or anticipate the
future. Forward-looking statements include statements about the future of the
software development, IT consulting and strategic business consulting
industries, statements about our future business plans and strategies, and
most other statements that are not historical in nature. In this prospectus,
forward-looking statements are generally identified by the words "anticipate,"
"plan," "believe," "expect," "estimate," and the like. Although we believe
that any forward-looking statements we make in this prospectus are reasonable,
because forward-looking statements involve future risks and uncertainties,
there are factors that could cause actual results to differ materially from
those expressed or implied. For example, a few of the uncertainties that
could affect the accuracy of forward-looking statements, besides the specific
factors identified above in the Risk Factors section of this prospectus,
include:
* changes in general economic and business conditions affecting the
software development, IT consulting and strategic business
consulting industries;
* technical developments that make our products or services obsolete;
* changes in our business strategies;
* the level of demand for our products and services; and
* our ability to develop or maintain strategic relationships within
the software development, IT consulting and/or strategic business
consulting industries.
In light of the significant uncertainties inherent in the forward-looking
statements made in this prospectus, particularly in view of our early stage of
operations, the inclusion of this information should not be regarded as a
representation by us or any other person that our objectives and plans will be
achieved.
No "Safe Harbor"
The Private Securities Litigation Reform Act of 1995, which provides a
"safe harbor" for similar statements by existing public companies, does not
apply to our offerings.
<PAGE>
<PAGE>
USE OF PROCEEDS
The net proceeds we will receive from the sale of the shares of common
stock we are offering in our Offering, assuming an offering price of $3.00 per
share, are estimated to be approximately $4,400,000, after deducting estimated
offering expenses of approximately $100,000.
<TABLE>
<CAPTION>
Use Amount Percent
--- ------------ -----------
<S> <C> <C>
Software development $1,200,000 27.2%
Expansion of marketing 1,100,000 25.0%
Addition of new regional offices 420,000 9.5%
Recruit and train staff 390,000 8.9%
Computer equipment for development
and testing 410,000 9.4%
Working capital and general
corporate purposes 880,000 20.0%
------------ -----------
$4,400,000 100.0%
</TABLE>
The amounts set forth above represent our best estimate for the use of
the net proceeds of this offering in light of current circumstances. However,
actual expenditures could vary considerably depending upon many factors,
including, without limitation, changes in the economic conditions,
unanticipated complications, delays and expenses, or problems relating to the
development of additional products and/or market acceptance for our products
and services. Any reallocation of the net proceeds of the offering will be
made at the discretion of our Board of Directors but will be in furtherance of
our strategy to achieve growth and profitable operations through the
development of additional products and service markets and augmentation of our
marketing efforts. Our working capital requirements are a function of our
future growth and expansion, neither of which can be predicted with any
reasonable degree of certainty. As a result, we are unable to precisely
forecast the period of time for which net proceeds of this offering will meet
our working capital requirements. However, we expect our internally generated
working capital and the proceeds of this Offering to be sufficient to meet our
needs for at least 12 months from the date of this prospectus. We may need to
seek funds through loans or other financing arrangements in the future, and
there can be no assurance that we will be able to make these arrangements in
the future should the need arise.
Pending our use of the net proceeds of the offering, the funds will be
invested temporarily in certificates of deposit, short-term government
securities or similar investments. Any income from these short-term
investments will be used for working capital.
DIVIDEND POLICY
We have not declared or paid cash dividends on our common stock in the
preceding two fiscal years. We currently intend to retain all future
earnings, if any, to fund the operation of our business, and, therefore, do
not anticipate paying dividends in the foreseeable future. Future cash
dividends, if any, will be determined by our Board of Directors.
<PAGE>
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of September 30,
1999 (i) on an actual basis and (ii) as adjusted to give effect to the
estimated net proceeds from the sale of the shares of common stock we are
offering as part of our Offering and sales of common stock subsequent to
September 30, 1999. The net proceeds reflect estimated offering costs of
approximately $100,000. This section should be read in conjunction with the
consolidated financial statements and related notes contained elsewhere in
this prospectus.
<TABLE>
<CAPTION>
As of September 30, 1999
---------------------------
As
Actual Adjusted(1)(2)
------------ ------------
<S> <C> <C>
Shareholders' Equity
Preferred Stock, $.01 par
value, 50,000,000 shares
authorized; no shares outstanding $ -0- $ -0-
Common Stock, $.001 par value;
authorized 100,010,000 shares:
Class A, issued and outstanding
10,533,492 shares (actual) and
12,419,385 (as adjusted) 10,533 12,419
Class B, issued and outstanding
10,000 shares 10 10
Additional paid-in capital 959,633 5,582,747
Accumulated deficit (716,894) (716,894)
------------ ----------
Total shareholders' equity and
capitalization $ 253,282 $4,878,282
============ ==========
</TABLE>
- -------------
(1) Does not include 2,500,000 shares of Common Stock we may issue upon
exercise of options which may be granted under our Equity Incentive Plan,
1,860,000 of which are subject to outstanding and unexercised options
having an exercise price of $.40 per share and 1,780,000 of which are
subject to future vesting.
(2) Includes 385,893 shares of Common Stock sold during October 1999 for a
total consideration of $225,000.
<PAGE>
<PAGE>
DILUTION
At September 30, 1999, we had a pro forma negative net tangible book
value of ($222,245) or ($.02) per share based upon 10,929,385 shares of Class
A and Class B Common Stock outstanding, giving retroactive effect to September
30, 1999 of the sale of an additional 385,893 shares of stock for $225,000.
Net tangible book value per share is determined by dividing the number of
outstanding shares of common stock into our net book value (total assets less
total liabilities) and then subtracting capitalized, intangible software
developments costs. After giving effect to the sale of the shares of common
stock we are offering and, assuming the sale of all the shares and receipt of
the estimated net proceeds from these sales (after deducting the estimated
offering expenses), the adjusted pro forma net tangible book value as of
September 30, 1999 would have been $4,177,755 or $.34 per share of common
stock. This represents an immediate increase in net tangible book value of
$.36 per share to current stockholders and an immediate dilution of $2.66 per
share, or 89%, to you as an investor in our Offering. The following table
illustrates the per share dilution, assuming all 1,500,000 shares are sold in
our Offering:(1)
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed public offering price per
share of common stock $3.00(2)
Pro forma net book value per share
of common stock before offering ($.02)
Increase per share of common stock
attributable to new investors .36
------
Adjusted pro forma net book value per
share of common stock after offering .34
--------
Dilution of net book value per share of
common stock to new investors $2.66
========
Dilution per share of common stock as
a percentage of offering price 89.0%
========
</TABLE>
- ----------------
(1) Does not include 2,500,000 shares of common stock we may issue upon
exercise of options which may be granted under our Equity Incentive Plan,
1,860,000 of which are subject to outstanding and unexercised options
having an average exercise price of $.40 per share and 1,780,000 of which
are subject to future vesting.
(2) Estimated.
The following table sets forth, as of the date of this offering, the
number of shares of common stock purchased, the percentage of total
consideration paid, and the average price per share paid by (i) our existing
stockholders and (ii) investors purchasing shares of Common Stock in this
offering, before deducting estimated offering expenses we are responsible for
paying.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ ------------------ Price
Number Percent Amount Percent Per Share
-------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stock-
holders 10,929,385 87.9% $1,195,176 21.0% $.11
New Investors 1,500,000(1) 12.1% 4,500,000 79.0% $3.00
---------- ------- --------- ------
Total 12,429,385 100.0% $5,695,176 100.0% $ .45
========== ======= ========= ======
</TABLE>
- ------------
(1) Estimated.
<PAGE>
<PAGE>
CERTAIN MARKET INFORMATION
There currently exists no public trading market for our common stock, and
there can be no assurance that a public trading market will develop or be
sustained in the future. Without an active public trading market, there can
be no assurances that you will be able to liquidate your investment without
considerable delay, if at all. If a market does develop, the price for our
securities may be highly volatile and may bear no relationship to our actual
financial condition or results of operations. Factors we discuss in this
prospectus, including the many risks associated with an investment in us, may
have a significant impact on the market price of our common stock. Also,
because of the relatively low price of our common stock, many brokerage firms
may not effect transactions in the common stock.
<PAGE>
<PAGE>
SELECTED FINANCIAL DATA
Set forth below is our selected financial data as of and for our years
ended March 31, 1999 and 1998 and as of and for the six month periods ended
September 30, 1999 and 1998 financial information is derived from our
consolidated financial statements and related notes included elsewhere in this
prospectus and is qualified by reference to these consolidated financial
statements and the related notes thereto.
<TABLE>
<CAPTION>
Periods Ended Six Months Ended
March 31, September 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Statements of Operations Data
Revenues $3,049,128$1,882,445 $1,542,924 $1,193,301
Operating expenses $3,266,062$1,876,624 $1,888,164 $1,259,962
Operating (loss) income $(216,934) $5,821 $(345,240) $(66,661)
Interest expense $82,309 $25,897 $52,335 $40,521
Net loss $(299,243) $(20,076) $(397,575) $(107,182)
Basic and diluted loss
per share(1) $ (0.49) $ (.004) $ (0.39) $(.023)
Weighted average number of
shares outstanding(1) 6,165,715 4,602,510 10,099,640 4,602,510
</TABLE>
<TABLE>
<CAPTION>
At March 31, At September 30,
-------------------------- -------------
1999 1998 1999
------------ ----------- -------------
<S> <C> <C> <C>
Balance Sheet Data
Total assets $1,891,434 $1,171,699 $1,686,890
Working capital deficit ($359,966) ($31,457) ($709,087)
Total liabilities $1,490,765 $1,166,675 $1,433,608
Accumulated deficit ($319,319) ($20,076) ($716,894)
Shareholders' equity $404,056 $5,024 $253,282
</TABLE>
- --------------
(1) Based upon the weighted average number of shares outstanding for the
years ended March 31, 1998 and 1999 and the six month periods ended
September 30, 1999 and 1998.
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Financial Statements and Notes thereto appearing elsewhere in this
Prospectus.
Overview
We operate with iGeniSys Inc. as the holding company of GeniSys
Information Systems, Inc. ("GeniSys"). Our operations to date have been
conducted through our subsidiary. It is our plan that after the GeniSys
products and services have gained more wide spread market acceptance, that we
will expand through internal growth and acquisition of other companies in the
software/internet related markets.
An independent group of investors formed Zion Enterprises, Inc. ("Zion")
in February 1996 as a Colorado corporation. Zion was formed for the sole
purpose of establishing a widely held company that would subsequently seek a
merger with another entity that desired to merge into a public entity. Zion
had no operations or business activity.
In March 1999, Zion acquired all of the outstanding shares of the common
stock of GeniSys in exchange for 75% of the total issued and outstanding
shares of Zion. Zion became the parent company of GeniSys through this
transaction. As a result of the transaction, the former officers and
directors of GeniSys assumed control of Zion and changed the name to iGeniSys,
Inc. (the "Company"). This transaction has been accounted for as an
acquisition of Zion by GeniSys and a recapitalization of GeniSys. The
historical financial statements prior to this transaction are those of GeniSys
as Zion had no activities and such financial statements are included in this
document.
Our subsidiary, GeniSys, is a Colorado corporation formed on May 1, 1997.
Our primary business is the development of state-of-the-art project and
program management software that is used by governmental and commercial
entities. We also perform ancillary services relating to assisting our
customers in implementing our software and performing independent cost and
risk analyses.
GeniSys has recently developed what we believe to be the first integrated
internet-based project schedule and cost control reporting system on the
market. Further, as a result of our software and professional staff, we have
developed business alliances with Microsoft Corporation and Arthur Andersen,
LLP.
Our operations are based in Houston where our development group is based,
but we perform implementation and training services throughout the country.
Our revenues are generated from software sales and consulting services. We
have a staff of over 20 full-time professionals and we utilize contract
personnel when the need arises. This method of staffing allows us to control
fixed costs while providing the human resources necessary for growth.
Results of Operations - Year ended March 31, 1999 versus the period from
inception (May 1, 1997) to March 31, 1998
Net loss for the year ended March 31, 1999 ("1999") versus the period
from inception (May 1, 1997) to March 31, 1998 ("1998") changed to a net loss
of $299,243 from a net loss of $20,076 in 1998. This decrease in net income
was due to increased operating costs as we expanded our business. Revenues
for 1999 increased 61.9% ($1,166,683) to $3,049,128 from $1,882,445 in 1998.
This increase was due to the expanded marketing efforts by our officers and
the expansion of our alliance with Arthur Andersen. Our revenues also
increased as we were able to increase our consulting hourly rates as our
customer base became more established and we did not need to substantially
discount our billing rates to win work. However, in 1999 our costs of
operations increased 74.1% ($1,389,438) to $3,266,062 from $1,876,624 in 1998.
This increase is a result of the our efforts to grow and reflects increases in
marketing, development and general overhead expenses.
The revenues generated from work performed for Arthur Andersen, LLP
represented $915,630 (29.1%) in 1999 and $785,346 (41.7%) in 1998. Our
management does not believe this dollar level of revenue will decrease in the
future. In addition, another customer accounted for 10% of our revenues
during the year ended March 31, 1999. Our management is attempting to
diversify our customer base and believes the percent of our revenues derived
from these customers will decrease in the future.
Results of Operations -- Six-months ended September 30, 1999 versus the six-
months ended September 30, 1998
Net loss for the six-month period ended September 30, 1999 was $397,575
versus a net loss for the six-month period ended September 30, 1998 of
$107,182. This 371% ($290,393) increase in our net loss is due to making
selective investments in certain of our projects, thus increasing contract
costs coupled with the increased level of marketing and sales efforts.
However, in comparison to the prior six-month period, revenues increased 29.3%
($349,623) from $1,193,301 to $1,542,924 for the period ended September 30,
1999. This increase reflects that our efforts to expand corporate
relationships and our marketing efforts are being successful. Although
revenues increased by $349,623, our costs of operations increased from
$1,259,962 for the six month period ended September 30, 1998 to $1,888,164 (a
50% increase) for the similar period ended September 30, 1999. The primary
cause of this increase in operating costs was increased costs of performing
work under our contracts as we made investments in certain projects to be
certain that our software functioned at the highest level during this initial
product roll-out phase. In addition and as previously noted, our sales and
marketing related expenses increased due to product introduction related
expenses.
Liquidity and Capital Resources
We have financed our operations to date primarily through the private
sale of equity securities and borrowings from our majority shareholder.
During the year ended March 31, 1999, we sold 1,472,083 shares of our common
stock for $580,000. Through October 25, 1999, we sold an additional 964,361
of our common stock for $471,800.
Since we began operations, we have experienced a shortage of working
capital. We need additional working capital in order to support our growth.
We do not believe that the working capital available to us through our
financing agreement will be sufficient to support all of our current and
future growth. As a result, we are depending upon the proceeds of this
Offering to supply us with needed working capital. Unfortunately, since we
are conducting the Offering ourselves on a best-efforts basis, we are
uncertain that this Offering will be successful in providing us with the
needed funds. It is likely that additional financings will be necessary in
the future which may involve either the sale of additional equity or debt. In
either case, the terms of future financings could have an adverse effect on
the value of our securities.
On May 17, 1999, we entered into a credit agreement with a financial
entity. This new agreement provided the funds to fully repay a factoring line
of credit relationship with our majority shareholder of $394,409 and a $56,039
revolving line of credit. Under the terms of this new credit agreement, which
is similar to a factoring arrangement, we are able to obtain financing for 85%
of specific accounts receivables. Provided the accounts receivable are
available, we can borrow up to $2,000,000. For this arrangement, we pay a
processing fee for financing each receivable depending upon the number of days
from the funding of the advance until that invoice is paid by the customer.
In addition, we pay interest on the total amount advanced at a rate equal to
the prime rate plus 2%. The receivables are financed on a full recourse basis
and the agreement can be terminated with 30 days notice after certain events
are met.
As of March 31, 1999, we had a working capital deficit of $359,966
compared to a deficit of $31,457 as of March 31, 1998. We also had a bank
overdraft of $16,632 and $23,937 as of March 31, 1999 and 1998, respectively.
Our accounts receivable remain outstanding to major corporations and
consulting firms and stayed fairly consistent at $933,134 as of March 31, 1999
and $889,091 as of March 31, 1998. Our accounts payable were $508,954 and
$402,378 as of March 31, 1999 and 1998, respectively. Our operations used
cash for the periods ended March 31, 1999 and 1998 of $292,464 and $177,991,
respectively.
As of September 30, 1999 we had a working capital deficit of $709,087
versus a deficit of $359,966 as of March 31, 1999. This increase in the
working capital deficit is due to the cash required to fund the operating loss
for the six-month period ended September 30, 1999 and to fund the selective
investments in our projects and increased marketing efforts, as previously
discussed. As of September 30, 1999, we had a positive cash balance of
$37,421 versus a bank overdraft of $16,632 as of March 31, 1999 and this
improvement in the cash position is due to the proceeds from the sale of our
stock. Accounts receivables decreased to $499,220 as of September 30, 1999
from $933,134 as of March 31, 1999 due our collection efforts and the payment
on government contracts under which we are performing work as a subcontractor.
Our accounts payable remained consistent from March 31, 1999 $508,954 to
September 30, 1999 $549,396. For the six months ended September 30, 1999 and
1998, our cash flow from operations generated $132,117 and $202,157,
respectively.
The Year 2000 Issue
The Problem. The Year 2000 Issue is the result of computer programs being
written using two digits rather than four to define the applicable year. As a
result, any of our computer programs that have date sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000, which,
in turn, could result in system failures or miscalculations causing
disruptions in our operations and the operations of our suppliers and clients.
Our Internal State of Readiness. We have instituted a Year 2000 Project.
As part of our Year 2000 Project, we have completed an initial evaluation of
current internal computer systems, software and embedded technologies. The
evaluation revealed that our internal accounting software and telephone
systems are the major resources that do have Year 2000 compliance issues.
These resources will need to be either replaced or upgraded. Fortunately, the
identified systems and/or programs are commercial "off-the-shelf" products
with Year 2000 compliant versions now available.
We have conducted an assessment of our computer information systems and
have determined the nature and extent of the potential problems we anticipate
will occur relating to the Year 2000 issue. We have identified that our
accounting software package will need to be changed to a version that is Year
2000 compliant. We have investigated the cost of such conversion and we
believe the cost to implement the new version will be less than $5,000. Also,
we have identified that our internal phone system is not Year 2000 compliant.
We have investigated the cost of updating the phone system to be less than
$1,000.
Our management has reviewed the software that our company sells in the
marketplace and have determined that it is fully Year 2000 compliant. Being a
new software development company, we have been aware of the potential impact
of the change to a four year digit code since we began developing our
software. Accordingly, all of our coding has been done using a four year
digit field.
Certain of our software packages utilize data from other software's
database, such as Microsoft's Project. We have reviewed these software
packages and believe that they are fully Year 2000 compliant or will be before
the end of 1999. However, we are subject to these software development
companies completing these changes as they are totally outside of our control.
The Costs to Address our Year 2000 Issues. Expenditures in1998 for the
Year 2000 Project was nominal. We expect that completion of our Year 2000
Project may result in additional expenditures of less than $10,000.
The Risks Associated with our Year 2000 Issues. Our failure to resolve
Year 2000 Issues on or before December 31, 1999 could result in system
failures or miscalculations causing disruption in operations, including, among
other things, a temporary inability to process transactions, send invoices,
send and/or receive e-mail and voice mail, or engage in similar normal
business activities. Additionally, failure of third parties, on whom our
business relies, to timely remediate their Year 2000 Issues could result in
disruptions in our supply of parts and materials, late, missed or unapplied
payments, temporary disruptions in order processing and other general problems
related to our daily operations. While we believe our Year 2000 Project will
adequately address our internal Year 2000 issues, the overall risks associated
with the Year 2000 Issue remain difficult to accurately describe and quantify
due to our reliance on other software vendors, there can be no guarantee that
the Year 2000 Issue will not have a material adverse effect on our operations.
Additionally, while we have generally refrained from performing Year 2000
remediation services for our clients, it is possible that former, present and
future clients could assert that certain services performed by us from time to
time involve or are related to the Year 2000 issue. We have recommended,
integrated and customized various third-party software packages for our
clients, and to the extent that these software programs may not be Year 2000
compliant, we could be subjected to claims as a result of these services.
Since our inception in 1997, we also have designed and developed software and
systems for our clients. Due to the number of engagements we have undertaken
during this period, there can be no assurance that all of these software
programs and systems will be Year 2000 compliant, which could also result in
the assertion of claims against us.
Our policy has been to endeavor to secure provisions in our client
contracts that, among other things, disclaim implied warranties, limit the
duration of our express warranties, and disclaim any liability arising from
third-party software that is integrated, customized or installed by us. There
can be no assurance that we will be able to secure contractual protections in
agreements concerning future projects, or that any contractual protections
secured by us in agreements governing pending and completed projects will
dissuade the other party to the contract from asserting claims against us with
respect to the Year 2000 issue.
Due to the complexity of the Year 2000 issue, upon any failure of
critical client systems or processes that may be directly or indirectly
connected or related to systems or software designed, developed, customized or
implemented by us as described above, we may be subjected to claims regardless
of whether the failure is related to the services provided by us. There can
be no assurance that we would be able to establish that we did not cause or
contribute to the failure of a critical client system or process. There also
can be no assurance that the contractual protections, if any, we secure in
connection with any past, present or future clients will operate to insulate
us from, or limit the amount of, any liability arising from claims asserted
against us. If asserted, the resolution of these claims, and the associated
defense costs, could have a material adverse effect on our business, operating
results and financial condition.
Our Contingency Plan. We have not, to date, developed and implemented a
Year 2000 contingency plan. It is our goal to have the major Year 2000 Issues
resolved by the end of September 1999, with final Year 2000 verification and
validation occurring by December 31, 1999. We will develop and implement a
contingency plan at that time should it appear that our Year 2000 Project has
not been satisfactorily completed.
Recent Accounting Pronouncements
Comprehensive Income. In June 1997, the FASB issued SFAS No. 130,
Reporting Comprehensive Income. This statement is effective for financial
statement issued for periods beginning after December 15, 1997. We adopted
this statement during 1998 and it had no material impact on our financial
statement disclosures.
Segments of an Enterprise and Related Information. In June 1997, the
FASB issued SFAS No. 131, Disclosure about Segments of an Enterprise and
Related Information. This statement is effective for fiscal years beginning
after December 15, 1997. SFAS 131 requires the reporting of profit and loss,
specific revenue and expense items, and assets for reportable segments. It
also requires the reconciliation of total segment revenues, total segment
profit or loss, total segment assets, and other amounts disclosed for
segments, in each case to the amounts in the general purpose financial
statements. As we only operate in one segment, adopting this statement had no
material impact on our financial statement disclosures.
Pension and Other Postretirement Benefits. In February 1998, the FASB
issued FAS No. 132, Employers' Disclosures about Pensions and Other Post-
retirement Benefits. SFAS 132 standardizes the disclosure requirements for
pensions and other post-retirement benefits and requires additional
information on changes in the benefit obligations and fair values of plan
assets. The statement is effective for financial statements for periods
beginning after December 15, 1997 and requires comparative information for
earlier years to be restated. Adoption of SFAS 132 is expected to have no
effect on us, as there are no pension plans.
Derivative and Hedging Activities. In June 1998, the FASB issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. This
statement is effective for fiscal years beginning after June 15, 1999.
Currently, we do not have any derivative financial instruments and does not
participate in hedging activities, therefore management believes SFAS No. 133
will not impact our financial position or results of operations.
<PAGE>
<PAGE>
BUSINESS
Overview
Internet-based Project/Program management and cost control is one of the
key business areas that we emphasize. Large commercial and governmental
entities have projects of all sizes and descriptions, and each of these
represent significant opportunities for performance enhancement. Whether it
is the development of a new aircraft, the construction of a major office
building, a time-sensitive overhaul to a petrochemical plant, or a major
software development project, managers at all levels (including Congressional
oversight) need to monitor the progress of these projects, control their
respective costs, and be alerted when problems arise. The critical need to
provide early warning to senior management of variances in project schedules
and potential cost overruns is the justification for using our project
management practices and software solutions.
Our services span a wide range of software development, strategic
business consulting services. Our software development services have been
provided across an extensive cross-section of industries and have included
everything from the integration of commercial off-the-shelf software into
existing platforms, to the development of new, highly specialized software
applications that utilize the bandwidth capabilities of the Internet to better
meet our clients' needs. Our strategic business consulting services include
completing detailed needs assessments and independent risk assessments, and
providing various inspection services, inspection data management,
construction management and project management staffing and services.
We and our professionals have performed project and program management
work for a very diverse sampling of government entities and prominent
companies, including: the US Department of Defense, US Navy, US Army, US Air
Force, Kinko's, Lockheed Martin Corporation, AT&T Global Information Systems,
Motorola Satellite and Communications, Boeing Corporation, Hughes Aircraft,
Wal-Mart, Mobil Corporation and the City of San Antonio.
Our principal executive offices are located in Houston, Texas at 654
North Belt East, Suite 310, Houston, Texas 77060. Our telephone number at
that address is (281) 820-0200 and our facsimile number is (281) 447-8291.
Our Internet Website address is http://www.genisystems.com. In addition to
our corporate office, we maintain offices in Denver, Colorado, Los Angeles,
California and Washington, D.C.
History
We were originally formed in February 1996 under the name "Zion
Enterprises, Inc." for the limited purpose of making a distribution of our
shares of common stock in order to become a widely held company with a large
stockholder base which would then seek a merger opportunity with a private
company that wanted to become publicly traded through a merger. In March
1999, we acquired all of the outstanding shares of common stock of GeniSys
Information Systems, Inc. in exchange for issuance to the shareholders of
GeniSys Information Systems, Inc. 75% of the total issued and outstanding
shares of our common stock. As a result of the transaction, the former
shareholders, officers and directors of GeniSys Information Systems, Inc.
assumed control of us and changed our name to iGeniSys, Inc. GeniSys
Information Systems, Inc. was formed in March 1997 to pursue the development
of software and ancillary services relating to business systems generally and
project management and cost and risk analysis in particular.
Business Strategy
We were founded by a group of professional project and Enterprise
Managers to provide value-added business systems solutions. We are an
association of professionals with experience in many facets of project and
program management, software design, and customized system implementation. Our
mission focuses on creating new software tools utilizing the "World Wide Web"
and integrating with new three dimensional (3D), "Streaming Technologies"
employing project and program management knowledge acquired from industry best
practices. We have developed solutions and personnel to work on such diverse
and high-level projects as the Crusader Program (DoD), Army Chemical Weapons
De-Militarization Program and Fortune 500 corporate expansion plans.
Our business strategy is to anticipate market needs and apply leading-
edge information technologies to deliver business solutions. Our strategic
goal is to combine current high interest areas such as the internet and web-
based technologies, three-dimensional modeling and video streaming technology
with our more mature offerings to achieve a competitive advantage in the
marketplace.
Our software and experience provides our customers with quality, cost
effective solutions to their project and program management needs. These
products and services are designed to facilitate the integration and
management of project information interrelating estimates, schedules, budgets,
and project risk management. Our services and software attempt to simplify
data collection, integration and analysis, thus allowing real-time comparison
of actual performance data versus planned schedules and budgets. Further, our
software tools work in conjunction with major project management software
systems and have been integrated with customers existing accounting systems to
provide timely management and cost information. We also provide software
customization, training, implementation, and project management personnel to
our customers.
The nature of our business activities allow our project professionals to
interface directly with senior client personnel. The understanding of the
client's business and business strategy developed in the strategy and
architecture phases of the project, combined with the experience of our senior
project personnel and their knowledge of the current compliment of product
solutions available in the marketplace, allow us to bring to the client a
custom tailored solution to virtually any project management problem. Our
ability to meet client needs is further enhanced by our ability to develop our
own state-of-the-art applications and technologies.
Business Activities
Our operations are principally divided into four major business
activities:
* Business project management software design, development,
integration and implementation;
* Business process improvement consulting;
* Independent risk assessments based on schedule, cost and financial
risk; and
* Providing specialized technical services to the process industry.
Business Project Management Software Design, Development, Integration and
Implementation
It is our belief that most enterprises are managed via "forensic
management," e.g. analyzing the past instead of managing the future. Our
products are designed to deliver to our customers the tools necessary to
execute their strategic mission by providing timely information. Through our
experience, we have come to the conclusion that the most effective management
occurs through having current knowledge of the status of projects, as opposed
to guessing what is happening and then determining what went wrong after the
fact. Our software enables our customers to harness real-time information to
make informed and prompt decisions when managing and planning for the future.
Formed in 1997 to pursue the development of software for, and to provide
ancillary services in, the business systems arena, with an emphasis on project
management, systems integration and training, we are working to become
recognized within the software industry, and particularly in the project
management software arena. Our personnel currently are members of the
Microsoft Insiders Group, a select group of companies whose role is to consult
with Microsoft Corporation in the development of its project management
software. We also have served as advisor to nearly every other major project
management software developer, including Welcom and Primavera.
We are currently working or have worked with a number of the Fortune 500
companies, including Enron, Inc., Boeing, Kinko's, Wal-Mart and Temple Inland,
Inc., to improve the efficiency of their existing project management
applications. Through consulting with and providing software customization and
system integration work for our clients, we have not only developed an
understanding of the underlying architecture of many leading-edge and highly-
specialized software applications, but in many cases we have been engaged to
enhance, integrate and develop new software applications to better serve our
clients' needs. By enhancing the functionality of many types of software
applications and providing solutions to the many needs of our highly diverse
client base, we are in a position to recognize voids in the current compliment
of product solutions available in the marketplace, and to develop software
solutions designed to fill these gaps.
Our typical software solutions focus on providing information and
consultation to manage large-scale enterprises and their projects. We have
also developed and assembled sophisticated internet-based software
applications that simplify data collection, integration and analysis and allow
a comparison of planned versus actual performance. Frequently, product
development concepts are brought to our design team as a result of feedback
from our professionals working on assignment with a particular client.
We often integrate commercial off-the-shelf software into our proprietary
systems to provide a more complete solution for our clients. Our systems are
designed to be user friendly and operate on a variety of platforms and
applications. As an ongoing service to our customers, we provide product
upgrades and support, both on-site and from our service department support
team.
Most client assignments involve needs assessments, the development of
custom training programs, on-site implementation, design and execution, and
service desk support to meet a client's needs. As a result, software system
design and implementation represents a significant revenue source and is our
fastest growing service.
Business Process Improvement Consulting
We have consulted with the design teams of the major project management
software packages, including Microsoft Project 98(-Registered Mark-),
Primavera P3(-Registered Mark-) and Open Plan. Additionally, our staff is
active in project management in a number of specific industries including
defense, aerospace, construction, petrochemical and power.
By working directly with a client and completing detailed needs
assessments, our consulting teams are able to provide a wide range of value
added business process services. These include assisting clients in
understanding where their own management systems are not meeting user needs.
Additionally, these engagements often require on-site assistance, including
on-site management, and regulatory compliance assistance. To this end, we
have a history of assisting our clients in bringing their management systems
into compliance with the most stringent governmental or industry reporting
requirements.
Independent Risk Assessments Based on Schedule, Cost and Technical Metrics
We consult on and execute sophisticated risk assessments using work
templates developed in alliance with Arthur Andersen LLP, and Hulett and
Associates, a nationally recognized authority on risk assessments and project
management. Project risk analysis addresses the uncertainty in any project's
estimates of cost, schedule, quality and scope and the likelihood that these
will be completed as planned. Our methods include modeling the project,
interviewing and researching to determine ranges of possible cost and schedule
results based on a broad range of risk "drivers." Results from risk analyses
include the likelihood of overrunning the estimated budget and completion
date, the contingency needed to reduce the risk to an acceptable level, and
the focal point of the greatest risk in the project. Risk analysis can be
conducted at the bid stage, project inception, or throughout the life of the
project as events and risks change.
Our team completed an integrated cost and schedule risk assessment of a
major U.S. government program on the US Army's $15 billion Chemical Weapon
Demilitarization Program ("CWDP"). Independent Risk Assessments have become a
requirement by the U.S. Congress on all large projects and programs. The
alliance has been advised that we will be awarded an on-going risk assessment
contract to monitor the performance of the CWDP that should extend through
completion in 2007.
Providing Specialized Technical Services to the Process Industry
Our technical services division focuses on providing, inspection data
management, construction management and project management services and
staffing to the process industries. We perform these services primarily to
increase our contacts in the project management arena, which services are part
of our marketing plan. Among the project management services provided are
construction management, project engineering, planning and scheduling for new
construction projects, turnarounds and inspection related turnarounds,
including overhauls, outsourcing and engineering services. We currently have
projects in place with three Chevron Chemical locations, Phillips Petroleum,
Coastal Petroleum, Sterling Chemical, and the power and process facilities of
other major industrial companies throughout the world. Additionally, we have
completed a project management assignment for Coastal Aruba, N.V. on their
$140 million expansion project. This project involved setting up a system for
tracking performance, and staffed with 25 project and construction management
professionals.
Products and Services
Overview. Our business focus is to provide value added business
solutions that utilize the latest technologies available. We try to turn the
many learning opportunities we are presented with into meaningful software and
business process solutions for our clients. Our services support our software
products, but with an additional focus on business improvement. This
additional focus on business improvement serves as the primary catalyst for
the development of new products and the enhancement of existing products.
Nearly all of our products have been developed through the recognition of
a broader need uncovered while developing a solution for a specific client
need. For example, we have developed what we believe to be the first internet
based, enterprise wide, project management reporting systems. This system was
created by our development team based on a need demonstrated on several
different client assignments. Our design and development teams concentrate
their efforts on providing easy to use, flexible, solutions that provide key
business information on a timely basis. All of our products are tightly
integrated with the entire Microsoft(-Registered Mark-) Suite of products.
The following is a brief description of our current proprietary software
products:
* Visual Project Manager(-TM-) (VPM(-TM-)) iGeniSys has partnered
with Adaptive Media, Inc. to create what we believe to be the only
internet based system to integrate 3-dimensional drawings with key
business functions. VPM(-TM-) makes it possible to tie key business
information to a visual representation of their products or
facilities, color coding them based on the client's criteria and
providing the information delivered via Internet directly to the
user's desk. It further provides a collaborative environment over
the Internet leveraging web strategies to maximize the effectiveness
of the client's staff and the technology they use. This software
package is being developed by our staff and is scheduled for general
release in January 2000.
* GeniSys Enterprise Manager(-TM-) (GEM(-TM-)) GEM is a project
management tracking and reporting tool enabling an organization to
manage and monitor large projects more effectively. Mission
critical information becomes available to all levels of management
through the integration of Internet browsers and web pages into the
GEM system. This gives the appropriate users access to project
information across the enterprise. This software can be customized
to interface with legacy systems such as SAP, Oracle, J.D. Edwards
and others. This software has been successfully implemented at the
City of San Antonio. GEM is providing critical information to all
of the senior management of the City, tracking progress on active
projects. This software package will be ready for general release
in December 1999.
* Gatekeeper(-TM-) Integrates earned value cost data with scheduling
data providing essential information to management on accurate
earned value. The concept of Earned Value Management Systems (EVMS)
was developed in recent years to assist governmental agencies in
tracking contractor progress on large projects. The niche that
GeniSys fills with Gatekeeper is that, our management believes, no
other competitor has developed such a project. Thus, our product is
applicable to every company executing project work for the
Government. This product is actively marketed and we are presently
installing or have installed this product for company-wide use at
Boeing, Allied Signal, Northrop Grumman and others.
* Tracer(-TM-) This proprietary system was developed based on a need
detected when installing the first round of Gatekeeper. Tracer
assists management in tracking schedule inputs through very complex
systems. It is used primarily by high-end Program Management
Personnel. This tool is scheduled for release by the end of 1999.
Consulting Services
Our employees are trained and experienced consultants offering a range of
project management software implementation, business process, event management
and software training services. Our personnel are available for consultation
or field assignment to support our client projects and business needs,
including serving as construction managers, plant rehabilitation leaders or
planning.
We provide a wide range of value added business process improvement
services. This includes assisting clients in understanding where their own
management systems are not meeting the needs of users by completing detailed
"needs assessments." Our consulting teams develop and implement solutions
based on the results of the needs assessment and detailed reviews with the
client. These assignments often require on-site assistance and can include
"hands on" management. The types of management systems include applications
in manufacturing, government contracting, defense, aerospace, petrochemicals
and other process industries. Many of our consultants have extensive hands-on
experience in governmental contracts for Aerospace, Department of Defense and
NASA.
We are dedicated to quality management and process improvement. When
performing a project, we will document all "as is" processes when developing
and implementing management systems. After the basic service of establishing
management systems has been achieved, our professionals will revisit every
month or reporting cycle the process in which they operate and, based on the
client's changing needs, assess and implement improvements to the existing way
of doing business. Accordingly, our client is provided with a flexible system
that can grow with the client's changing requirements. We will also establish
metrics in which to assets our own performance on jobs, thus allowing us to
track the performance of our own staff and assess visibility into areas that
need extra attention.
Corporate Relationships
We have developed several business relationships which are significant
contributors to the development of our business, both directly, via business
referrals, joint projects and, indirectly, through the value of association.
While we do not have any long-term agreements with any of these associates, we
believe that our relationships are an important asset whose continuation
depends upon our continued performance.
Microsoft Corp.
Microsoft has referred us to provide business solutions and consulting to
many clients. We perform product evaluation studies and consults on
product development for Microsoft as a member of the Microsoft Project
Insider Group ("Insider Group"). The Insider Group is composed of a
select group of companies whose role is to consult with Microsoft,
supporting design strategy for future Microsoft releases of Microsoft
Project, and other planning tools currently under development.
Participating on the Insider Group provides insight into product
development strategy into the future. This knowledge allows our
designers to build software applications for Microsoft planning products
that have an extended useful life, without obsolescence. These software
applications provide industry specific solutions that round out our
ability to develop and implement complete solutions for our clients. We
are also a registered Microsoft Solutions Provider and conduct seminars
on Microsoft at projects throughout the United States.
Arthur Andersen, LLP
We have a formal Master Marketing Agreement with Arthur Andersen. We and
Arthur Andersen are currently assessing project management on the U.S.
Army Chemical Weapons Demilitarization Program. This program includes
large process facilities (budget in excess of $15 billion) constructed or
to be constructed at nine storage facilities in the United States. The
Arthur Andersen alliance grew from one project in late 1997 to our
current level of activity that includes eight projects with additional
projects in the proposal stage. We have also become a resource for
Arthur Andersen for enterprise-wide project and program management
projects.
Adaptive Media, Inc.
We have an agreement with Adaptive Media that enables us to use their 3D
streaming technology in its VPM (-TM-) product. We have integrated the
technology into VPM(-TM-) for Microsoft Project and are working on other
applications. Additionally, we have built a business rule engine that
provides a gateway between the 3D product and standard databases.
Business Engine (previously known as Micro-Frame)
GeniSys also has an agreement under which Business Engine markets one of
our proprietary software products (Gatekeeper(-TM-)) to their customers.
Business Engine is a producer of "Earned Value" cost analysis systems and
our team has concentrated development efforts on the integration of
Gatekeeper(-TM-) with Business Engine's products. They currently market
Gatekeeper(-TM-) to their customers with our professionals being
responsible for needs assessment, implementation and training.
Welcom Software
WELCOM Software is a producer of project management cost and schedule
tools (Open Plan). WELCOM recently approached our team and requested
that we integrate our tools with their products. We will work with this
company on these joint efforts.
Markets
Over the past decade, software focusing on project management has
achieved recognition, enabling the business planner to access tools that were
formerly unavailable to even the most sophisticated user. With the dramatic
pace of business change, the project management software category has
experienced tremendous growth. According to industry figures, between 1991
and 1995 the category tripled in size, growing at a 42% compound annual growth
rate. The advent of Microsoft's Project was the primary catalyst for the
growth of the category. Its arrival in 1990 signaled the first major project
management tool designed and distributed for general use.
General business planners who now use project management software for
personal use are shifting from individual planning to organizational planning.
The move from standalone planning use to more coordinated enterprise-wide
planning has driven new customer needs, including (i) the need for project
management tools useable by the novice and the expert, (ii) the need for a
better way to communicate and collaborate on projects, (iii) the need for
project management tools that fit in easily with other desktop tools, and (iv)
the need for tools that can be part of an organizational planning solution.
Competition
A number of other companies compete with GeniSys in providing the kinds
of services that we do in the areas of project management and strategic
planning. However, we believe that we have competitive advantages based upon
our software development inasmuch as we are able to develop work templates and
software for the improvement of business processes in the areas of project
management, project control, risk assessment and integrated software solutions
that we combine with our expertise and services. In addition, we believe that
we gain competitive advantages through our strategic relationships with
Microsoft, Arthur Andersen and other leaders in the project management field.
Nevertheless, there can be no assurance that larger companies with greater
resources will compete with us in areas in which we have developed niches,
since there exist few monetary barriers to entry into our field.
Intellectual Property
We have developed certain foundation and application software tools,
programs and products that we own and license to our clients on a non-
exclusive basis. We regard this software as proprietary and protect our
rights in it where appropriate with copyrights, trademarks, trade secret laws
and contractual restrictions on disclosure and transferring title. There can
be no assurance that any steps we take in this regard will be adequate to
deter misappropriation of our proprietary rights or independent third party
development of functionally equivalent products.
We have developed and rely on the trademarks that we use with our
products, including GeniSys Enterprise Manager(-TM-) or GEM(-TM-), Visual
Project Manager(-TM-) or VPM(-TM-) , Gatekeeper(-TM-) and Tracer(-TM-).
Wherever possible, we have either applied for, intend to apply for, or have
obtained federal registrations with respect to the use of our trademarks, and
where registrations of particular marks have not been issued, we continue to
claim common law trademark rights to those names. However, there can be no
assurance that we will obtain registrations for all of our trademarks or that
we will not be subject to opposition, cancellation or infringement proceedings
based upon the use of a particular trademark. The loss of the use of any one
or more of our trademarks could have a material adverse effect upon our
ability to profitably market the associated product or service. See "Business
- - Intellectual Property."
In addition, our success is dependent upon our specialized expertise and
methodologies. To protect this proprietary information, we rely upon a
combination of trade secret and common laws, employee nondisclosure policies
and third party confidentiality agreements. However, there can be no
assurance that any of the steps we take will be adequate to deter
misappropriation of our specialized expertise and methodologies.
Specifically, there can be no assurance that others will not independently
develop substantially equivalent proprietary information and techniques or
otherwise gain access to our trade secrets, that our trade secrets will not be
disclosed or that we can effectively protect our rights to unpatented and/or
uncopyrighted trade secrets. Despite precautions we may take, unauthorized
parties may attempt to engineer, reverse engineer, copy or obtain and use our
products and other information we consider proprietary. We pursue a policy of
having our employees and consultants execute non-disclosure agreements at the
beginning of employment or consulting relationships with us. These agreements
provide that all confidential information developed or made known to the
individual during the course of the relationship with us shall be kept
confidential except in specified circumstances. There can be no assurance,
however, that these agreements will provide meaningful protection for our
trade secrets or other proprietary information in the event they are used or
disclosed in an unauthorized manner.
Although we believe that our services and products do not infringe on the
intellectual property rights of others, there can be no assurance that an
infringement claim will not be asserted against us in the future.
Research and Development
We have four full-time employees and two part-time employees devoted to
research and development, which is actually product development as we are
developing products requested by existing customers. Of our full-time
employees, two are software programmers and two are involved in product
architecture. The majority of our research and development is undertaken
under contract with customers and clients as a result of which we may develop
a unique software program or module for the client's use on a non-exclusive
use basis. We generally retain the rights to all products that we develop for
clients so that we can use them for other customers and adapt them to other or
new applications.
Employees and Consultants
We have 20 core full-time employees, of whom 14 are located in our main
office in Houston, Texas and 6 are based in our other locations. In addition
to these core employees, we also have an additional labor pool consisting of
over 35 professionals that are hired on a contract basis, part-time basis or
an as-needed basis.
Facilities
Our principal executive offices are located in Houston, Texas. In
addition, we have offices in Los Angeles, California, Denver, Colorado and
Washington, D.C. Our Houston office consists of approximately 6,643 square
feet which we hold on a four year sublease expiring 2002. Our monthly rent is
$5,536, with triple net adjustments.
Our Los Angeles area office consists of 2,644 square feet which we occupy
under a three year lease in Torrance, California expiring in March 2001. The
monthly rent at that location is $3,305, together with triple net adjustments.
We only have two employees in our Torrance location and do not have immediate
plans to expand that facility.
Our Denver office is shared with Corporate Stock Transfer, Inc., our
stock transfer agent and a company owned by our primary stockholder, Carylyn
K. Bell. We pay a market rate of $1,500 per month for use of this office for
approximately 750 square feet and this rate includes administrative support.
We reimburse this company for all other out-of-pocket expenses incurred on our
behalf.
Our Washington, D.C. office consists of space utilized in the office of
one of our consultants, American Defense International (see "Consultants").
As part of our agreement with these consultants, we utilize their office space
as needed. We do not have any current plans to change these arrangements for
Washington D.C. location.
We believe that each of these facilities are adequate for the foreseeable
future and do not plan any substantial expansion or alteration.
Consultants
We have a consulting agreement with American Defense International
("ADI") which assists us in establishing, developing and maintaining contacts
within the federal government. Under the agreement, ADI is paid a monthly
consulting fee of $7,500 which we share with Andersen Consulting LLP. The
agreement can be terminated by either party at any time.
We also have a consulting arrangement with McCandish Partners, a company
controlled by Carylyn K. Bell, the Company's principal stockholder and wife of
J. Daniel Bell, pursuant to which it pays $3,000 per month for financial
advisory services.
Legal Proceedings
On February 17, 1999, a former employee/independent contractor of a
company previously owned by one of our executive officers, filed suit in
Superior Court in San Diego California, against us, the executive officer, and
our principal stockholders. This suit is captioned Patrick Foley v. Program
Management Solutions Inc.; GeniSys Information Systems, Inc.; et al. On March
25, 1999, we were served with the complaint. The complaint alleges breach of
contract, constructive trust and conspiracy. Our management and legal counsel
believe the suit is without substantial merit, we have asserted counterclaims
and plan to vigorously defend the case.
On June 14, 1999, we were served with a lawsuit captioned C/S Solutions
Inc.; et al v. Jeff Spencer; Program Management Solutions, Inc.; and GeniSys
Information Systems, Inc. This suit was filed in Superior Court in Torrance,
California and the suit contains many allegations of wrongdoing regarding the
Company's activities and a senior officer of the Company. The suit seeks
damages of an unspecified amount. Our management and legal counsel have
reviewed the suit and believe that the lawsuit is without substantial merit,
we have asserted counterclaims and plan to vigorously contest this case.
The pending of these suits is not expected to have a material adverse
effect on us, although they will require a portion of our scarce working
capital to defend.
<PAGE>
<PAGE>
MANAGEMENT
Directors, Executive Officers and Key Employees
The name, position with the Company, age of each Director, executive
officer and key employee of the Company is as follows:
<TABLE>
<CAPTION>
Name(1) Age Position
--------- --- ---------
<S> <C> <C>
J. Daniel Bell 54 Chairman of the Board,
President, Chief Executive
Officer
Carylyn K. Bell 41 Director, Secretary
Walter Strycker 70 Director
Henry Fong 61 Director
Craig Crawford 46 Vice President
Jeffery M. Spencer 40 Vice President
Ward P. Rivenburg 42 Chief Financial Officer
</TABLE>
- -------------
(1) J. Daniel Bell and Carylyn K. Bell are husband and wife.
We conduct business through our wholly owned subsidiary, GeniSys
Information Systems, Inc. The name, position, and age of each Director and
executive officer of such subsidiary are as follows:
<TABLE>
<CAPTION>
Name(2) Age Position
-------- ---- ---------
<S> <C> <C>
J. Daniel Bell 54 Chairman of the Board,
Chief Executive Officer
Craig Crawford 46 Director, President
Jeffery M. Spencer 40 Director, Senior Vice
President
William M. Bell 34 Director
Ward P. Rivenburg 42 Director, Chief Financial
Officer, Secretary and
Treasurer
</TABLE>
- ------------
(2) J. Daniel Bell and Carylyn K. Bell are husband and wife. William M. Bell
is the son of J. Daniel Bell.
The following sets forth biographical information with respect to our
Directors and executive officers for the prior five years:
J. Daniel Bell, Chairman of the Board and Chief Executive Officer, has
many years of experience in managing and building companies, through both
internally generated opportunities and acquisition. Prior to iGeniSys, Mr.
Bell served as Chairman of the Board and Chief Executive Officer of Industrial
Services Technologies, Inc. ("IST"), a Denver-based acquisition platform
company, which achieved revenue growth from $3.5 million to $118.0 million
over a period of eight years. This company was privately sold to Phillip
Services, Inc., a Canadian-based conglomerate serving the process industries.
Over the past ten years, Mr. Bell has managed or co-managed over twelve
acquisitions of various sizes, including Piping Engineering, Inc. a $65
million a year specialty welding and fabrication company, which also provided
project management services to the process industry. Mr. Bell attended Texas
A&M University and graduated from Lamar University with degrees in Economics
and Marketing.
Craig Crawford, Director and President of the subsidiary and Vice
President of the Company, has over twenty years of experience in the process
and mining engineering and construction industries. He has participated in
and managed very large capital projects on a worldwide basis. Prior to
iGeniSys, Mr. Crawford served as Vice President, Western Region, for Piping
Companies, Inc., a $65 million/year specialty welding and mechanical
contracting company. He was the Vice President, West Region, for Serv-Tech,
Inc., and has served in Senior Management positions from Operations to Finance
at Rice University, Brown and Root, Inc. and Goodwin Dannenbaum Littman and
Wingfield, Inc. He attended the Colorado School of Mines, studying Chemical
Engineering, and graduated from North Carolina State University with a BBA,
Business Management.
Jeffery M. Spencer, Senior Vice President and Director of the Subsidiary
and Vice President of the Company, is responsible for the development of tools
and services. Mr. Spencer has over 15 years of experience in business process
improvement, and has developed specific software tools and techniques to
streamline project management. He has developed project management solutions
on a wide range of complex projects, for example: X-33 (Space Plane), JSF
(Joint Strike Fighter), Space Station, NAVAIR (E2-C), Supercollider, Army SDI,
Air Force SDI, and Navy MIDS (Superproject conversion). Prior to GeniSys
Information Systems, Mr. Spencer was the President of Program Management
Solutions Incorporated, a consulting firm specializing the design and
customization of Decision Support Systems utilizing Microsoft Windows-based
products, and customized training programs for related Microsoft Windows
applications. Mr. Spencer received a Bachelors of Science in Production and
Operations Management from California State University, Northridge.
Ward P. Rivenburg, Chief Financial Officer and Director of the Subsidiary
and Chief Financial Officer of the Company, joined us in these positions in
June 1999. Previously Mr. Rivenburg served as Vice President of Finance for
Nationwide Graphics, Inc., a company involved in the consolidation of the
commercial printing industry. While at Nationwide Graphics, Inc., he was
responsible for performing post-acquisition integration of acquired entities
and evaluation and negotiation of potential target companies. Mr. Rivenburg
was the Senior Manager with BDO Seidman, LLP responsible for the Nationwide
engagement assisting us in our initial acquisitions prior to joining this
consolidator. While at BDO, he also assisted other clients with merger and
acquisition efforts and SEC filings. From 1994 to 1998, Mr. Rivenburg was
Finance and Corporate Accounting Manager for Westlake Chemical Corporation
where he supervised the corporate accounting staff and financial operations of
the plastic fabrication division. Prior to Westlake Chemical, he was with
Price Waterhouse for 12 years and was promoted to Senior Manager. At Price
Waterhouse, Mr. Rivenburg managed a specialized consulting group of the firm
performing governmental contracting. He also performed due diligence
evaluations and merger/acquisition analyses and projections, acted as the lead
accounting and reporting expert on initial public offerings, and performed
multiple financial audits for Price Waterhouse clients. Mr. Rivenburg was
with KPMG Peat Marwick for three years after graduating in 1979 from Augustana
College with a BA in Accounting and Business Administration. He became
licensed in 1982 as a Certified Public Accountant in the State of Texas.
Carylyn K. Bell, Director, Secretary and Treasurer, is the wife of J.
Daniel Bell, Chairman of the Board and Chief Executive Officer. In 1985, she
founded Corporate Stock Transfer, Inc., a service company located in Denver,
Colorado representing public and private companies in all aspects of
shareholder needs and continues to serve as its chief executive. From 1988
until 1991, she held the offices of Secretary and Treasurer of Industrial
Services Technologies, Inc., a Denver based acquisition platform company
headed by her husband. She also served as Secretary for E-Management Corp.
from 1987 until 1997.
William M. Bell, Director, is Vice President of Huttner & Company, a
Houston, Texas based management consulting firm. Prior to working with
Huttner & Company, Mr. Bell worked in the corporate finance consulting
department at Coopers & Lybrand, LLP. Mr. Bell is the son of J. Daniel Bell,
our Chairman of the Board and Chief Executive Officer.
Walter Strycker, Director, joined the Board of Directors of iGeniSys Inc.
in June 1999. Mr. Strycker serves as the President of Marine Coastal
Corporation, a financial, merger and acquisition, and corporate business
consulting firm. Mr. Strycker served as Chief Executive officer of Marie
Callender Pie Shops, Inc. from March 1991 to 1995. Prior to 1991, Mr. Strycker
was employed in various executive positions including Senior Vice President
Wheelabrator Environmental Systems, Senior Vice President Signal Energy
Systems, President Air Pollution Control Division of Wheelabrator Frye, and
President of Associates Venture Capital Corporation. Also, Mr. Strycker was a
founder and Chief Financial Officer of Decimus Corporation, a joint venture
with the Bank of America involving financial leasing and computer services.
He also spent fifteen years with the IBM Corporation in various marketing
positions as well as product development. Mr. Strycker is a graduate of the
University of California at Berkeley with a degree in Finance.
Henry Fong, Director, has been the President, Treasurer and a Director of
Equitex, Inc. since its inception in January 1983. Equitex, formerly an
investment company, is now an operating company which has executed a
definitive agreement to merge with a single bank holding company. From 1987
to June 1997, Mr. Fong was Chairman of the Board and Chief Executive Officer
of RDM Sports Group, Inc. and was its President and Treasurer from 1987 to
1996. From July 1996 to October 1997, Mr. Fong was a Director of IntraNet
Solutions, Inc., a publicly held company which provides internet/intranet
solutions to Fortune 1000 companies and was the Chairman of the Board and
Treasurer of its predecessor company, MacGregor Sports and Fitness, Inc., from
February 1991 until the two companies merged in July 1996. From January 1993
to January 20, 1999, Mr. Fong was Chairman of the Board and Chief Executive
Officer of California Pro Sports, Inc., a publicly traded manufacturer and
distributor of in-line skates, hockey equipment and related accessories. From
1959 to 1982 Mr. Fong served in various accounting, finance and budgeting
positions with the Department of the Air Force. During the period from 1972
to 1981, he was assigned to senior supervisory positions at the Department of
the Air Force headquarters in the Pentagon. In 1978 he was selected to
participate in the Federal Executive Development Program, and in 1981 he was
appointed to the Senior Executive Service. In 1970 and 1971, he attended the
Woodrow Wilson School, Princeton University and was a Princeton Fellow in
Public Affairs. Mr. Fong received the Air Force Meritorious Civilian Service
Award in 1982. Mr. Fong is a certified public accountant.
Each director is elected to serve for a term of one year until a
successor is duly elected and qualified.
Our executive officers are elected annually at the first meeting of our
Board of Directors held after each annual meeting of stockholders. Each
executive officer will hold office until his successor is duly elected and
qualified, until his resignation or until he shall be removed in the manner
provided by our By-Laws.
Currently, we do not have standing Audit, Compensation or Nominating
Committees of the Board of Directors. During the last six months of 1999 we
do plan to form an Audit Committee. No member of the Audit Committee will
receive any additional compensation for his service as a member of that
Committee and members of this committee will be primarily comprised of non-
officer directors. The Audit Committee will be responsible for providing
assurance that financial disclosures made by management reasonably portray our
financial condition, results of operations, plan and long-term commitments.
To accomplish this, the Audit Committee will oversee the external audit
coverage, including the annual nomination of the independent public
accountants, review accounting policies and policy decisions, review the
financial statements, including interim financial statements and annual
financial statements, together with auditor's opinions, inquire about the
existence and substance of any significant accounting accruals, reserves or
estimates made by management, review with management the Management's
Discussion and Analysis section of the Annual Report, review the letter of
management representations given to the independent public accountants, meet
privately with the independent public accountants to discuss all pertinent
matters, and report regularly to the Board of Directors regarding its
activities.
We also plan to form a Compensation Committee during fiscal 1999. No
member of the Compensation Committee will receive any additional compensation
for his service as a member of that Committee. The Compensation Committee
will be responsible for reviewing pertinent data and making recommendations
with respect to compensation standards for our executive officers, including
the President and Chief Executive Officer, establishing guidelines and making
recommendations for the implementation of management incentive compensation
plans, reviewing the performance of the President and CEO, establishing
guidelines and standards for the grant of incentive stock options to key
employees under our Equity Incentive Plan, and reporting regularly to our
Board of Directors with respect to its recommendations.
Except for J. Daniel Bell's relationship to Carylyn K. Bell, his wife,
and William M. Bell, his son, there are no family relationships among
Directors, nor any arrangements or understandings between any Director and any
other person pursuant to which any Director was elected as such. Our Class B
Common Stock, which can only be issued to J. Daniel Bell, gives Mr. Bell the
right to elect a majority of the Board. The present term of office of each
Director will expire at the next annual meeting of stockholders.
Director Compensation
During the fiscal year ended March 31, 1999, outside Directors received
no cash compensation or other remuneration for their service on our Board of
Directors, however they were reimbursed their expenses associated with
attendance at meetings or otherwise incurred in connection with the discharge
of their duties.
The Board of Directors has adopted a formula plan pursuant to which
outside Directors are entitled to receive, under our 1999 Equity Incentive
Plan, an initial grant of non-qualified stock options exercisable to purchase
30,000 shares of common stock and, for each additional year of service after
the first year, additional non-qualified stock options exercisable to purchase
10,000 shares of our common stock. All non-qualified stock options issuable
to outside Directors under the Plan have an exercise price equal to the fair
market value of our common stock on the date of grant, and are exercisable for
a period of five years from the date of grant.
Directors who are also our executive officers receive no additional
compensation for their services as Directors.
Executive Compensation
The following table and discussion set forth information with respect to
all compensation earned by or paid to our Chief Executive Officer ("CEO"), and
our most highly compensated executive officers other than the CEO, for all
services rendered in all capacities to us and our subsidiaries for each of our
last two fiscal years ended March 31, 1999 and 1998 (since inception).
However, no disclosure has been made for any executive officer, other than the
CEO, whose total annual salary and bonus does not exceed $100,000.
<PAGE>
<TABLE>
TABLE 1
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
----------------------------------
Annual Compensation(1) Awards Payouts
-------------------------- --------------------- -------
Other All
Annual Restricted Other
Name and Compen- Stock LTIP Compen-
Principal Year Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($)(2) ($) SARs ($) ($)
- --------------- ------- -------- ----- --------- ---------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Daniel J. Bell, 1999 48,412 -0- -0- -0- -0- -0- -0-
Chairman 1998 8,048 -0- -0- -0- -0- -0- -0-
Craig Crawford, Vice 1999 112,932 10,000 -0- -0- -0- -0- -0-
President 1998 55,414 3,000 -0- -0- 470,000 -0- -0-
Jeff Spencer, Vice 1999 150,795 16,000 -0- 29,000 570,000 -0- -0-
President 1998 111,955 10,000 -0- -0- -0- -0- -0-
Ward Rivenburg(1)
- ------------------------------
</TABLE>
<PAGE>
<PAGE>
(1) Mr. Rivenburg joined us in June 1999 at a base compensation level of
$110,000. He receives performance bonuses at the discretion of the Chief
Executive Officer and received 250,000 options to purchase our common
stock.
Employment Agreements
In June 1999, we entered into employment contracts, some of which are
oral, with our Chief Executive Officer, President, Senior Vice President of
Sales, and the Chief Financial Officer. These arrangements require annual
executive compensation totalling $454,000, and payment of performance bonuses
and issuance of stock options at the sole discretion of the Board of
Directors. This compensation level is consistent with the amounts paid during
the year ended March 31, 1999. These agreements are for a one-year period and
automatically renew, unless terminated by either party with 60-day notice.
The annual compensation is as follows:
<TABLE>
<CAPTION>
<S> <C>
J. Daniel Bell $ 72,000
Craig Crawford $116,000
Jeffery M. Spencer $156,000
Ward P. Rivenburg $110,000
</TABLE>
Equity Incentive Plan
On May 17, 1999 we adopted an Equity Incentive Plan. Pursuant to the
Plan, stock options granted to eligible participants may take the form of
incentive stock options or ISOs under Section 422 of the Internal Revenue Code
of 1986, as amended, or options which do not qualify as ISOs, known as non-
qualified stock options or NQSOs. As required by Section 422 of the Code, the
aggregate fair market value of our common stock with respect to our ISOs
granted to an employee exercisable for the first time in any calendar year may
not exceed $100,000. The foregoing limitation does not apply to NQSOs. The
exercise price of an ISO may not be less than 100% of the fair market value of
the shares of our common stock on the date of grant. The exercise price of an
NQSO may be set by the Plan administrator. An option is not transferable,
except by will or the laws of descent and distribution. If the employment of
an optionee terminates for any reason (other than for cause, or by reason of
death, disability, or retirement), the optionee may exercise his options
within a ninety day period following such termination to the extent he was
entitled to exercise such options at the date of termination. Either our
Board of Directors (provided that a majority of directors are "disinterested")
can administer the Plan, or our Board of Directors may designate a committee
comprised of directors meeting certain requirements to administer the Plan.
The Administrator will decide when and to whom to make grants, the number of
shares to be covered by the grants, the vesting schedule, the type of award
and the terms and provisions relating to the exercise of the awards. An
aggregate of 2,500,000 shares of our common stock is reserved for issuance
under the Plan.
At July 14, 1999, we had granted a total of 1,780,000 incentive stock
options under the Plan exercisable at $.40 per share, and 80,000 non-qualified
stock options which have been issued to certain members of our outside Board
of Directors and optionholders exercisable at $.40 per share. All options
have been issued with exercise prices at or above market value on the date of
issuance.
The following tables set forth certain information concerning the
granting and exercise of incentive stock options during the last completed
fiscal year by each of the named executive officers.
<TABLE>
TABLE 2
Option/SAR Grants for Last
Fiscal Year - Individual Grants
<CAPTION>
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise Expiration
Name Granted (#) Fiscal Year Price ($/Sh) Date
- ---------------------- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
J. Daniel Bell -0- -0- -0- -0-
Craig Crawford 470,000 26% $.40 2009
Jeff Spencer 570,000 32% $.40 2009
Ward Rivenburg(1) 250,000 14% $.40 2009
- ---------------------
</TABLE>
(1) Mr. Rivenburg joined us in June 1999 and at this time his options were
granted.
The options granted to these officers vest to these officers over the
next five years. Through July 20, 1999, none of the above shares are
convertible by the officers. Further, no options granted by us as of July 20,
1999 are exercisable.
<PAGE>
<TABLE>
TABLE 3
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
----------------------------------------------------
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($) (1)
Shares Acquired Value Realized Exercisable Exercisable/
Name on Exercise (#) ($) (Unexercisable) Unexercisable
- ---------------- --------------- -------------- --------------- -----------------
<S> <C> <C> <C> <C>
J. Daniel Bell -0- -0- -0- -0-
Craig Crawford -0- -0- 470,000 -0-
Jeff Spencer -0- -0- 570,000 -0-
- ------------------------------
</TABLE>
<PAGE>
<PAGE>
(1) Value Realized is determined by calculating the difference between the
aggregate exercise price of the options and the aggregate fair market
value of our common stock on the date the options are exercised.
(2) The value of unexercised options is determined by calculating the
difference between the fair market value of the securities underlying the
options at fiscal year end and the exercise price of the options. The
fair market value of the securities underlying the options are based upon
the determination of the Board of Directors in light of the arms-length
transactions in the same securities.
Indemnification and Limitation on Liability of Directors
Our Articles of Incorporation provide that we shall indemnify, to the
fullest extent permitted by Colorado law, any director, officer, employee or
agent of the corporation made or threatened to be made a party to a proceeding,
by reason of the former or present official of the person, against judgments,
penalties, fines, settlements and reasonable expenses incurred by the person in
connection with the proceeding if certain standards are met. At present, there
is no pending litigation or proceeding involving any of our directors,
officers, employees or agents where indemnification will be required or
permitted. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to our directors, officers and
controlling persons pursuant to the foregoing provisions, or otherwise, we have
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable.
Our Articles of Incorporation limit the liability of our directors to the
fullest extent permitted by the Colorado Business Corporation Act.
Specifically, our directors will not be personally liable for monetary damages
for breach of fiduciary duty as directors, except for (i) any breach of the
duty of loyalty to us or our stockholders, (ii) acts or omissions not in good
faith or that involved intentional misconduct or a knowing violation of law,
(iii) dividends or other distributions of corporate assets that are in
contravention of certain statutory or contractual restrictions, (iv) violations
of certain laws, or (v) any transaction from which the director derives an
improper personal benefit. Liability under federal securities law is not
limited by the Articles.
<PAGE>
<PAGE>
CERTAIN TRANSACTIONS
Founders' Stock
When we first formed the Company, we issued 895,000 shares of Common Stock
to our original officers and directors in exchange for their services. We then
distributed for no consideration 81,200 shares to approximately 300 persons in
order to create a large shareholder base.
Bridge Loans and Conversion
In anticipation of completing our acquisition of GeniSys Information
Systems, Inc., we arranged for a total of $580,000 of bridge loans in February
1999 which GeniSys Information Systems, Inc. used for working capital. The
persons who made the bridge loans then agreed to convert all of the loans into
1,472,083 shares of Common Stock at the same time that the acquisition of
GeniSys Information Systems, Inc. was completed. This represented conversion
of the bridge loans into Common Stock at a value of $.394 per share.
Acquisition of GeniSys Information Systems, Inc.
In March 1999, we completed the acquisition of 100% of the outstanding
shares of Common Stock of GeniSys Information Systems, Inc. in exchange for
7,516,740 shares of Common Stock. This resulted in the persons who control
GeniSys Information Systems, Inc. acquiring control of the Company as well.
<PAGE>
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the date of this Prospectus, the
stock ownership of each person known by us to be the beneficial owner of five
(5%) percent or more of our common stock, all of our executive officers and
directors individually and all of our directors and executive officers as a
group. Each person has sole voting and investment power with respect to the
shares shown, except as noted.
<TABLE>
<CAPTION>
Percent of Class(1)
Amount and Nature -------------------------
Name and Address of Beneficial Before After
of Beneficial Owner Ownership Offering(2) Offering(2)
- ------------------- ----------------- ----------- -----------
<S> <C> <C> <C>
J. Daniel Bell(3)(4) 42,191 .4% .3%
Carylyn K. Bell(3)(5) 6,682,571 62.0% 53.8%
Jeffery Spencer(6) 1,176,695 10.8% 9.5%
Craig Crawford(7) 1,095,000 10.2% 8.9%
Ward Rivenburg(8) 250,000 2.3% 2.0%
Walter Strycker(9) 30,000 .3% .2%
Henry Fong(10) 30,000 .3% .2%
William Maury Bell(3) 88,071 .8% .7%
Gulfstream Financial 507,614 4.7% 4.1%
Partners, LLC(11)
All Officers and Directors 8,027,142 73.6% 64.6%
as a Group (7 persons)
</TABLE>
- -------------
(1) Under SEC Rules, we include in the number of shares owned by each person
the number of shares issuable under outstanding options if those options
are exercisable within 60 days of the date of this Prospectus. We
calculate the ownership of each person who owns exercisable options by
adding (i) the number of exercisable options for that person only to (ii)
the number of total shares outstanding and dividing that result into (iii)
the total number of shares and exercisable options owned by that person.
(2) Does not give effect to the exercise of any outstanding options or
warrant. Assumes all 1,500,000 shares of common stock are sold in the
Offering.
(3) J. Daniel Bell is the husband of Carylyn K. Bell and the father of William
Maury Bell.
(4) Consists of 10,000 shares of Class B Common Stock and 32,191 shares of
Class A Common Stock.
(5) Includes 500,000 shares of Common Stock held by Mrs. Bell as custodian of
Caitlyn Ann Bell, Christopher Ryan Bell, Henry Daniel Bell, Ian Gregory
Bell and Kathleen Ann Bell under the Colorado Uniform Gifts to Minors Act.
Also includes 3,032,221 shares held of record by McCandish, LLC, a limited
liability company of which Mrs. Bell is a manager and controlling person.
(6) Includes incentive stock options granted under the Plan exercisable to
purchase, in the aggregate, 570,000 shares of common stock at an exercise
price of $.40 per share, subject to future vesting.
(7) Includes options granted by Mrs. Bell to Mr. Crawford exercisable to
purchase from shares of common stock beneficially owned by Mrs. Bell
350,000 shares of common stock at a price of $.001 per share and 275,000
shares of common stock at a price of $.10 per share. Also includes
incentive stock options granted under the Plan exercisable to purchase, in
the aggregate, 470,000 shares of common stock at an exercise price of $.40
per share, subject to future vesting.
(8) Consists of incentive stock options granted under the Plan exercisable to
purchase, in the aggregate, 250,000 shares of common stock at an exercise
price of $.40 per share, subject to future vesting.
(9) Consists of non-qualified stock options granted under the Plan exercisable
to purchase, in the aggregate, 30,000 shares of common stock at an
exercise price of $.40 per share.
(10) Consists of non-qualified stock options granted under the Plan exercisable
to purchase, in the aggregate, 30,000 shares of common stock at an
exercise price of $.40 per share. Does not include the 507,614 shares of
common stock held of record by Gulfstream Financial Partners, LLC, of
which Mr. Fong would be deemed a beneficial owner by virtue of his shared
power to vote and dispose of such shares.
(11) Gulfstream Financial Partners, LLC is a Colorado Limited Liability Company
whose members include Henry Fong, a member of the Board of Directors. The
members have the authority by majority vote to make decisions with respect
to the voting or disposition of those shares owned by us.
<PAGE>
<PAGE>
THE COMPANY OFFERING
We are offering on a best efforts basis up to 1,500,000 shares of our
common stock at an offering price of $3.00 per share. The offering price of
the common stock being offered hereby was arbitrarily determined by us and is
not necessarily related to our assets, book value or financial condition. In
determining the offering price and the number of shares of common stock to be
offered, we considered such factors as our financial condition, our net
tangible book value, limited operating history and general condition of the
securities market. Accordingly, the offering price of the common stock may not
indicate the actual value of the Company.
We are offering the shares of Common Stock to the public through our
officers and directors. We may retain the services of selling agents who are
members of the National Association of Securities Dealers to assist us. On any
sales made by the selling agents, a commission of up to ten percent (10%) may
be paid. To date there exists no arrangements or commitments to retain any
selling agent.
There currently exists no public trading market for our Common Stock, and
we cannot assure you that such a market will develop in the future. In the
absence of an active public trading market, an investor may not be able to
liquidate his investment without considerable delay, if at all. If a market
does develop, the price for our securities may be highly volatile and may bear
no relationship to our actual financial condition or results of operation.
Our securities may be quoted on the OTC Electronic Bulletin Board or in
the "pink sheets" maintained by the National Quotations Bureau, Inc. which
reports quotations by brokers or dealers making a market in particular
securities. We have no agreement with any broker or dealer to act as a
marketmaker for our securities and there is no assurance that we will be
successful in obtaining any marketmakers. The lack of a marketmaker for our
securities could adversely influence the market for and price of our
securities, as well as your ability to dispose of, or to obtain accurate
quotations as to the price of, our securities.
<PAGE>
<PAGE>
SELLING SHAREHOLDERS AND PLAN OF DISTRIBUTION
This Prospectus also relates to the resale to the public of shares of
common stock by the Selling Shareholders set forth below. None of the Selling
Shareholders have had any material relationship within the past three years
with us, or any of our predecessors or affiliates, except as specifically
noted.
<TABLE>
<CAPTION>
Shares Shares
Beneficially Owned Shares Beneficially Owned
Name and As of Offering Date Offered After Offering
Address of ------------------- ------- ------------------
Beneficial Owner Number Percent(1) Number Number Percent(1)
- ---------------- -------- --------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
E. Barry Mansur(6) 264,594 2.4% 126,904 137,690 1.0%
c/o Florida Investors
P.O. Box 398
Captive, FL 33924
Van D. Hipp, Jr.(7) 27,919 .3% 25,381 2,538 0%
104 W. Mason Ave.
Alexandria, VA 22301
Summer Breeze, LLC(8) 28,494 .3% 25,904 2,590 0%
14 Red Tail Drive
Highland Ranch, CO 80126
Earnest Mathis IRA
Rollover (9) 18,594 .2% 16,904 1,690 0%
P.O. Box CM-9551
St. Paul, MN 85170
AMN Investments,
Ltd. (10) 139,594 1.3% 126,904 12,690 .1%
5445 DTC Parkway, #520
Englewood, CO 80111
Gulfstream Financial 558,375 5.1% 507,614 50,761 .4%
Partners, LLC(2) (11)
7315 E. Peakview Ave.
Englewood, CO 80111
Gregory Pusey (12) 96,850 .9% 88,405 8,445 .1%
1722 Buffehr Creek Rd.
Vail, CO 81657
Cambridge Holdings,
Ltd. (13) 167,612 1.5% 146,552 21,054 .1%
1722 Buffehr Creek Rd.
Vail, CO 81657
Jill Pusey C/F (14) 22,875 .2% 12,690 10,185 .1%
Christopher Pusey, UGTMA
1722 Buffehr Creek Rd.
Vail, CO 81657
Jill Pusey C/F (15) 33,649 .3% 30,590 3,059 0%
Jacqueline Pusey, UGTMA
1722 Buffehr Creek Rd.
Vail, CO 81657
Sally Rogers(3) (16) 69,797 .6% 63,452 6,345 .1%
4311 Witter Gulch
Evergreen, CO 80439
Mark M. King(4) (17) 69,797 .6% 63,452 6,345 .1%
370 17th St., Suite 2350
Denver, CO 80202
Bruce Rogers and
Sally Rogers,
JTWROS(3) (18) 41,878 .4% 38,071 3,807 0%
4311 Witter Gulch
Evergreen, CO 80439
William M. Bell(5) (19)91,878 .8% 38,071 53,807 .4%
1244 Dexter Street
Denver, CO 80220
Alfred O. Brehmer (20)69,797 .6% 63,452 6,345 .1%
730 17th St., Suite 712
Denver, CO 80202-3516
Milton Herson (21) 13,959 .1% 12,690 1,269 0%
17076 Royal Core Way
Boca Raton, FL 33486
Michael Herson (22) 27,919 .3% 25,381 2,538 0%
1200 North Veitch St., #1322
Arlington, VA 22201
Henry Fong (23) 95,973 .9% 59,666 35,967 .2%
3155 Miro Drive North
Palm Beach Gardens, FL 33410
Norman Brownstein 25,381 .2% 25,381 0 0%
410 - 17th Street
Denver, CO 80202
L.F.S. No. 1 LLC 25,381 .2% 25,381 0 0%
417 - 17th Street
Denver, CO 80202
Jennings D. Bell, Jr. 50,761 .5% 50,761 0 0%
2750 East Cedar Avenue
Denver, CO 80209
Richard S. Morey 58,376 .5% 58,376 0 0%
20010 Coyote Ridge Lane
Katy, TX
Michael Smith 150,761 1.4% 50,761 100,000 .8%
370 17th Street, Suite 3400
Denver, CO 80202
Iris Smith 50,761 .5% 50,761 0 0%
370 17th Street, Suite 3400
Denver, CO 80202
Wayne Mills 200,000 1.8% 200,000 0 0%
5020 Blake Road South
Edina, MN 55436
Peter Silverman 25,381 .2% 25,381 0 0%
136 Monmouth Road
Monroe TWP, NJ 08831
DFG Capital Corp. 19,036 .2% 19,036 0 0%
136 Monmouth Road
Monroe TWP, NJ 08831
Kleopatra Georgiades29,357 .3% 12,690 16,667 .1%
44 Andromahis
Nicosia, Cyprus
- -------------
(1) Shares not outstanding but deemed beneficially owned by virtue of the
individual's right to acquire them as of the date of this Prospectus, or
within 60 days of such date, are treated as outstanding when determining
the percent of the class owned by such individual and when determining the
percent owned by the group.
(2) Henry Fong, a Director of the Company, would be deemed a beneficial owner
of shares held of record by Gulfstream Financial Partners, LLC by virtue
of his ability to exercise shared power to vote and dispose of such
shares.
(3) Sally K. Rogers is Carylyn K. Bell's sister and J. Daniel Bell's sister-
in-law.
(4) Mark M. King is Carylyn K. Bell's brother and J. Daniel Bell's brother-in-
law.
(5) William M. Bell is J. Daniel Bell's son.
(6) Includes warrants exercisable for one year to purchase 12,690 additional
shares of common stock at an exercise price of $1.00 per share.
(7) Includes warrants exercisable for one year to purchase 2,538 additional
shares of common stock at an exercise price of $1.00 per share.
(8) Includes warrants exercisable for one year to purchase 2,590 additional
shares of common stock at an exercise price of $1.00 per share.
(9) Includes warrants exercisable for one year to purchase 12,690 additional
shares of common stock at an exercise price of $1.00 per share.
(10) Includes warrants exercisable for one year to purchase 12,690 additional
shares of common stock at an exercise price of $1.00 per share.
(11) Includes warrants exercisable for one year to purchase 50,761 additional
shares of common stock at an exercise price of $1.00 per share.
(12) Includes warrants exercisable for one year to purchase 3,807 additional
shares of common stock at an exercise price of $1.00 per share.
(13) Includes warrants exercisable for one year to purchase 14,655 additional
shares of common stock at an exercise price of $1.00 per share.
(14) Includes warrants exercisable for one year to purchase 1,269 additional
shares of common stock at an exercise price of $1.00 per share.
(15) Includes warrants exercisable for one year to purchase 3,059 additional
shares of common stock at an exercise price of $1.00 per share.
(16) Includes warrants exercisable for one year to purchase 6,345 additional
shares of common stock at an exercise price of $1.00 per share.
(17) Includes warrants exercisable for one year to purchase 6,345 additional
shares of common stock at an exercise price of $1.00 per share.
(18) Includes warrants exercisable for one year to purchase 3,807 additional
shares of common stock at an exercise price of $1.00 per share.
(19) Includes warrants exercisable for one year to purchase 3,807 additional
shares of common stock at an exercise price of $1.00 per share.
(20) Includes warrants exercisable for one year to purchase 6,345 additional
shares of common stock at an exercise price of $1.00 per share.
(21) Includes warrants exercisable for one year to purchase 1,269 additional
shares of common stock at an exercise price of $1.00 per share.
(22) Includes warrants exercisable for one year to purchase 2,538 additional
shares of common stock at an exercise price of $1.00 per share.
(23) Henry Fong is a director of the Company. Shares include options to
purchase 30,000 and warrants to purchase 5,967 shares of additional common
stock at an exercise price of $1.00 per share. Does not include
securities owned of record by Gulfstream Financial Partners, LLC.
We have agreed to indemnify the Selling Shareholders against specified
liabilities including liabilities under the Securities Act in connection with
their offering. The Selling Shareholders have agreed to indemnify us and our
directors and officers, as well as any persons controlling our company, against
certain liabilities, including liabilities under the Securities Act.
We will pay all expenses to register the shares, except that the Selling
Shareholders will pay any underwriting and brokerage discounts, fees and
commissions, specified attorneys' fees and other expenses to the extent
applicable to them.
Selling Shareholders may sell their shares of common stock either directly
or through a broker-dealer or other agent at prices related to prevailing
market prices or an negotiated prices, in one or more of the following kinds of
transactions:
* Transactions in the over-the-counter market;
* Transactions on a stock exchange that lists our common stock, or
transactions negotiated between Selling Shareholders and purchasers,
or otherwise.
Broker-dealers or agents may purchase shares directly from a Selling
Shareholder or sell shares and warrants to someone else on behalf of a Selling
Shareholder. Broker-dealers may charge commissions to both Selling
Shareholders selling common stock, and purchasers buying shares and warrants
sold by a Selling Shareholder. If a broker buys shares directly from a Selling
Shareholder, the broker may resell the shares through another broker, and the
other broker may receive compensation from the Selling Shareholder for the
resale.
To the extent required by laws, regulations or agreements we have made, we
will use our best efforts to file a Prospectus supplement during the time the
Selling Shareholders are offering or selling shares covered by this Prospectus
in order to add or correct important information about the plan of distribution
for the shares.
In addition to any other applicable laws or regulations, Selling
Shareholders must comply with regulations relating to distributions by Selling
Shareholders, including Regulation M under the Securities Exchange Act of 1934,
as amended.
Some states may require that registration, exemption from registration or
notification requirements be met before Selling Shareholders may sell their
common stock and warrants. Some states may also require Selling Shareholders
to sell their Common Stock only through broker-dealers.
<PAGE>
<PAGE>
DESCRIPTION OF SECURITIES
We are authorized to issue up to 100,010,000 shares of $.001 par value
common stock and 50,000,000 shares of $.01 par value preferred stock. As of
October 26, 1999, 10,919,384 shares of Class A Common Stock, 10,000 shares of
Class B Common Stock and no shares of preferred stock were issued and
outstanding, and there were 281 stockholders of record.
Common Stock
Our authorized common stock consists of 100,000,000 shares of Class A
Common Stock and 10,000 shares of Class B Common Stock. The shares of Class A
Common Stock and Class B Common Stock are identical with respect to the
relative rights and preferences of holders of such shares with respect to
dividends, payment on liquidation, lack of cumulative voting and preemptive
rights. However, the Class B Common Stock may only be issued to J. Daniel
Bell, our Chairman and CEO, or an entity controlled by Mr. Bell. The holders
of Class B Common Stock voting as a separate class have the right to elect a
majority of the members of our Board of Directors. All issued and outstanding
shares of Class B Common Stock automatically convert into an equal number of
Class A Common Stock if and when transferred to any person other than J. Daniel
Bell.
Each holder of common stock is entitled to one vote for each share held of
record. There is no right to cumulative voting of shares for the election of
directors. The shares of Class A Common Stock are not entitled to pre-emptive
rights and are not subject to redemption or assessment. Each share of Class A
Common Stock is entitled to share ratably in distributions to stockholders and
to receive ratably such dividends as may be declared by our Board of Directors
out of funds legally available therefor. Upon our liquidation, dissolution or
winding up, the holders of Class A Common Stock are entitled to receive, pro-
rata, our assets which are legally available for distribution to stockholders.
The issued and outstanding shares of common stock are validly issued, fully
paid and non-assessable.
Preferred Stock
We are authorized to issue up to 50,000,000 shares of $.01 par value
preferred stock. Our preferred stock can be issued in one or more series as
may be determined from time-to-time by our Board of Directors. In establishing
a series our Board of Directors shall give to it a distinctive designation so
as to distinguish it from the shares of all other series and classes, shall fix
the number of shares in such series, and the preferences, rights and
restrictions thereof. All shares of any one series shall be alike in every
particular. Our Board of Directors has the authority, without stockholder
approval, to fix the rights, preferences, privileges and restrictions of any
series of preferred stock including, without limitation: (1) the rate of
distribution, (2) the price at and the terms and conditions on which shares
shall be redeemed, (3) the amount payable upon shares for distributions of any
kind, (4) sinking fund provisions for the redemption of shares, and (5) the
terms and conditions on which shares may be converted if the shares of any
series are issued with the privilege of conversion, and (6) voting rights
except as limited by law.
Although we currently do not have any plans to issue shares of preferred
stock or to designate any series of preferred stock, there can be no assurance
that we will not do so in the future. As a result, we could authorize the
issuance of a series of preferred stock which would grant to holders preferred
rights to our assets upon liquidation, the right to receive dividend coupons
before dividends would be declared to common stockholders, and the right to the
redemption of such shares, together with a premium, prior to the redemption to
common stock. Our common stockholders have no redemption rights. In addition,
our Board could issue large blocks of voting stock to fend off unwanted tender
offers or hostile takeovers without further stockholder approval.
Warrants
We have issued to certain investors a total of 147,205 Class A Warrants,
each exercisable for one year to purchase a share of our common stock at a
price of $1.00 per share. The Class A Warrants expire on October 31, 2000. We
have the ability to repurchase the warrants if we have registered the exercise
of the warrants with the Commission and our public trading price has been more
than $1.50 per share for at least ten consecutive trading days. In such event,
holders of the warrant will have a 30 day notice period in which to exercise
the warrants, and any warrants not exercised will be redeemed by us at a
redemption price of $.01 per share.
Transfer Agent, Warrant Agent and Registrar
The transfer agent and registrar for our common stock is Corporate Stock
Transfer, Inc., Denver, Colorado. Ms. Carylyn Bell, one of our directors,
executive officers and principal shareholders, is the controlling person of the
transfer agent.
Reports to Stockholders
We intend to furnish annual reports to stockholders which will include
audited financial statements reported on by our independent certified public
accountants. In addition, we will issue unaudited quarterly or other interim
reports to stockholders as it deems appropriate.
LEGAL MATTERS
The validity of the issuance of the shares we are offering will be passed
upon for us by Neuman, Drennen & Stone, LLC, Boulder, Colorado.
EXPERTS
The audited consolidated financial statements of iGeniSys, Inc. and
subsidiaries included herein and elsewhere in the Registration Statement have
been audited by Gelfond Hochstadt Pangburn, P.C., independent certified public
accountants, for the periods and to the extent set forth in their reports
appearing herein and elsewhere in the Registration Statement. Such financial
statements have been so included in reliance upon the reports of such firm
given upon their authority as experts in auditing and accounting.
AVAILABLE INFORMATION
We have filed a registration statement on Form SB-2 with the Securities
and Exchange Commission, in Washington, D.C., in accordance with the provisions
of the Securities Act of 1933, as amended. This prospectus does not contain
all of the information set forth in the registration statement. Rather,
certain portions of the registration statement have been omitted as permitted
by the rules and regulations of the SEC. For further information about us and
the shares of common stock we are offering, you should read carefully the
registration statement, including the exhibits and financial statement
schedules we are filing with it. Statements contained in this prospectus
concerning the provisions of other documents filed as exhibits to the
registration statement are not necessarily complete and, in each instance, you
should refer to the copies of those documents filed as exhibits to the
registration statement. The registration statement may be obtained from the
SEC upon payment of the prescribed fees and may be examined at the principal
office of the SEC in Washington, D.C. We are not currently subject to the
informational requirements of the Securities Exchange Act of 1934, as amended.
However, as a result of our Offering, we will become subject to these
requirements and, in accordance with the Exchange Act will file periodic
reports, proxy materials and other information with the SEC. In addition, we
will furnish our stockholders with annual reports containing audited financial
statements certified by our independent accountants and any interim reports
containing unaudited financial information as we may determine to be necessary
or desirable. We will provide without charge to each person who receives a copy
of this prospectus, upon written or oral request, a copy of any of the
information that is incorporated by reference in this prospectus (not including
exhibits to the information that is incorporated by reference unless the
exhibits are themselves specifically incorporated by reference). Your request
for this information should be directed to our President and CEO, J. Daniel
Bell, 3200 Cherry Creek South Drive, Suite 430, Denver, Colorado 80209 or Ward
P. Rivenburg, our Chief Financial Officer, at our corporate office in Houston.
<PAGE>
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
This index relates to the consolidated financial statements set forth in
this Prospectus of iGeniSys, Inc.
Independent Auditors' Report of Gelfond Hochstadt
Pangburn, P.C.. . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets as of March 31, 1999
and 1998 and as of September 30, 1999 (unaudited) . . . . . . . . F-3
Consolidated Statements of Operations for the year ended
March 31, 1999, for the period May 1, 19997 (inception) to
March 31, 1998, and for the six months ended September 30,
1999 (unaudited) and 1998 . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Shareholders' Equity for the year
ended March 31, 1999 and for the period from May 1, 1997
(inception) to March 31, 1998 and the six month period
ending September 30, 1999 (unaudited) . . . . . . . . . . . . . . F-7
Consolidated Statements of Cash Flows for the year ended
March 31, 1999, for the period May 1, 1997 (inception) to
March 31, 1998, and for the six months ended September 30,
1999 (unaudited) and 1998 . . . . . . . . . . . . . . . . . . . . F-9
Notes to Consolidated Financial Statements . . . . . . . . . . . . F-11
<PAGE>
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders
iGeniSys, Inc.
We have audited the consolidated balance sheets of iGeniSys, Inc. and
subsidiary as of March 31, 1999 and 1998, and the related statements of
operations, shareholders' equity, and cash flows for the year ended March 31,
1999 and the period from May 1, 1997 (inception) to March 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of iGeniSys, Inc. and subsidiary
as of March 31, 1999 and 1998 and the results of their operations and their
cash flows for the year ended March 31, 1999 and the period from May 1, 1997
(inception) to March 31, 1998, in conformity with generally accepted accounting
principles.
GELFOND HOCHSTADT PANGBURN, P.C.
Denver, Colorado
June 25, 1999
<PAGE>
<PAGE>
iGENISYS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
</TABLE>
<TABLE>
<CAPTION>
March 31,
---------------------- September 30,
1999 1998 1999
-------- --------- ------------
(unaudited)
<S> <C> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash $ 37,421
Accounts receivable, net of
allowance for doubtful
accounts of $79,500, $50,000,
and $100,000 as of March 31,
1999 and 1998 and Septem- $ 933,134 $ 889,091 499,220
ber 30, 1999, respectively
Other receivables 12,055 33,649 60,537
Contracts in process 125,611 45,723 59,631
Prepaid expenses and other 36,689 47,853 59,719
---------- ---------- -----------
Total current assets 1,107,489 1,016,316 716,528
EQUIPMENT, net (Note 3) 147,359 94,078 160,416
INTANGIBLES AND OTHER ASSETS:
Development costs, net of accumulated
amortization of $10,366 at
March 31, 1999 and $56,464 549,819 46,521 700,527
at September 30, 1999
Royalties (Note 2) 81,000 11,000 81,000
Deposits and other 9,154 3,784 28,419
----------- ---------- -----------
$1,894,821 $1,171,699 $1,686,890
=========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Bank overdraft $ 16,632 $ 23,937
Accounts payable, trade 508,954 402,378 $ 549,396
Revolving line of credit
(Notes 4 and 9) 56,039 - 343,908
Revolving line of credit and
notes payable to shareholder
(Note 2) 394,409 144,000 56,500
Current portion of obligations
under capital leases (Note 5) 30,790 23,903 30,790
Accrued payroll, taxes and
withholdings 257,396 84,159 258,717
Due to affiliate (Note 2) 161,235 363,396 126,304
Management fees payable,
affiliate (Note 2) 42,000 6,000 60,000
---------- ---------- -----------
Total current liabilities 1,467,455 1,047,773 1,425,615
LONG-TERM DEBT:
Convertible note payable,
shareholder (Note 2) - 75,000 -
Long-term portion of obliga-
tions under capital leases
(Note 5) 23,310 43,902 7,993
---------- ---------- -----------
Total liabilities 1,490,765 1,166,675 1,433,608
---------- ---------- -----------
COMMITMENTS (Note 6 and 9)
SHAREHOLDERS' EQUITY (Notes 7 and 9):
Preferred stock, $.01 par;
authorized 50,000,000 shares;
no issued and outstanding
shares
Common stock, $.001 par value;
authorized 100,010,000 shares:
Class A; issued and outstanding
9,955,023 and 4,634,351 shares
as of March 31, 1999 and
1998, respectively, 10,533,492
at September 30, 1999 9,954 4,634 10,533
Class B; issued and outstanding
10,000 shares (1999 and 1998) 10 10 10
Additional paid-in capital 713,411 20,456 959,633
Accumulated deficit (319,319) (20,076) (716,894)
---------- ---------- -----------
404,056 5,024 253,282
---------- ---------- -----------
$1,894,821 $1,171,699 $1,686,890
=========== ========== ==========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements
<PAGE>
<PAGE>
iGENISYS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the
period For the six months
For the year May 1, 1997 ended September 30,
Ended (inception) ----------------------
March 31, to March 31, 1999 1998
------------------------ ---------- ---------
(unaudited)
<S> <C> <C> <C> <C>
REVENUES $ 3,049,128 $1,882,445 $ 1,542,924 $ 1,193,301
------------------------ ---------- ---------
OPERATING EXPENSES:
Contract costs 1,478,633 1,036,945 927,748 574,987
Selling, general and administrative:
Affiliates (Note 2) 36,000 6,000 18,000 18,000
Other 1,693,673 827,426 867,901 647,014
Depreciation and amortization 57,756 6,253 74,515 19,961
------------------------ ---------- ---------
3,266,062 1,876,624 1,888,164 1,259,962
------------------------ ---------- ---------
OPERATING (LOSS) INCOME (216,934) 5,821 (345,240) (66,661)
INTEREST EXPENSE
Shareholder (Note 2) 29,823 17,218 8,204 29,804
Other 52,486 8,679 44,131 10,717
---------- --------- ---------- ---------
82,309 25,897 52,335 40,521
------------------------ ---------- ---------
NET LOSS $ (299,243) $ (20,076)$ (397,575) $ (107,182)
=========== ============ ========== =========
BASIC AND DILUTED LOSS PER SHARE $ (0.05) $ (0.00) $ (0.04) $ (0.02)
=========== ============ ========== =========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 6,165,715 4,602,510 10,099,640 4,602,510
=========== ============ ========== =========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements
<PAGE>
<PAGE>
iGENISYS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED MARCH 31, 1999 AND FOR THE PERIOD
FROM MAY 1, 1997 (INCEPTION) TO MARCH 31, 1998
AND THE SIX MONTH PERIOD ENDING SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Class A Class B Addi- Total
Common Stock Common Stock tional Retained Share-
------------------ -------------- Paid-In Earnings holders'
Shares Amount Shares Amount Capital (Deficit) Equity
-------- -------- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, May 1, 1997 - - - - - - -
Common stock issued
for cash 4,634,351 $ 4,634 10,000 $ 10 $ 20,456 $ 25,100
---------- -------- ------- ------- --------- --------- -----------
Net income - - - - - $(20,076) (20,076)
BALANCES, March 31, 1998 4,634,351 4,634 10,000 10 20,456 (20,076) 5,024
Conversion of notes and
interest payable 2,129,711 2,130 79,605 81,735
Common stock issued for
services 742,678 742 34,758 35,500
Acquisition of the assets
of Zion Enterprise, Inc.
(Note 1) 976,200 976 64 1,040
Common stock issued for
cash 1,472,083 1,472 578,528 580,000
Net loss - - - - - (299,243) (299,243)
---------- -------- ------- ------- --------- --------- -----------
BALANCES, March 31, 1999 9,955,023 $ 9,954 10,000 $ 10 $ 713,411 $(319,319) $ 404,056
Common stock issued for
cash, unaudited 578,469 579 246,222 246,801
Net loss, unaudited - - - - - (397,575) (397,575)
---------- -------- ------- ------- --------- --------- -----------
BALANCES, September 30,
1999, unaudited 10,533,492 $ 10,533 10,000 $ 10 $ 959,633 $(716,894) $ 253,282
=========== ======== ======= ======= ========= ========= ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements
<PAGE>
<PAGE>
iGENISYS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the
period For the six
For the year May 1, 1997 months ended
Ended (inception), September 30,
March 31, to March 31, 1999 1998
----------- ----------- ---------- ---------
(unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (299,243) $ (20,076) $ (397,575) $ (107,182)
Adjustments to reconcile net loss
to net cash used in operating
activities -
Provision for doubtful accounts 79,500 50,000 20,500 50,000
Depreciation and amortization 57,755 6,252 74,515 19,961
Expense incurred upon issuance of
common stock 35,500 - - -
(Increase) decrease in -
Accounts and other receivables (123,543) (939,091) 365,972 35,780
Contracts in process (79,888) (45,723) 65,980 (4,277)
Prepaid expenses and other 32,758 (81,502) (27,457) (265,443)
Deposits (5,369) (3,784) (19,265) (2,149)
Increase (decrease) in -
Accounts payable 113,311 402,378 40,442 378,537
Accrued payroll, taxes and
withholdings 173,237 84,159 25,936 183,301
Due to affiliate (312,482) 363,396 (34,931) (104,371)
Management fees payable, affiliate 36,000 6,000 18,000 18,000
----------- ----------- ---------- ---------
Net cash used in operating
activities (292,464) (177,991) 132,117 202,157
----------- ----------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (88,013) (29,434) (41,474) (49,554)
Development costs (513,665) (46,521) (196,806) (255,578)
Purchase of royalties (70,000) (11,000)
----------- ----------- ---------- ---------
Net cash used in operating activities (671,678) (86,955) (238,280) (305,132)
----------- ----------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) bank
overdraft (7,305) 23,937 (39,860) 63,502
Proceeds from notes payable to
shareholder 558,355 225,000
(Repayments of) proceeds from
revolving line of credit to
shareholder (307,946) (6,000) (335,909) 44,000
Proceeds from line of credit, net 166,360 - 287,869
Repayments of obligations under
capital leases (26,362) (3,091) (15,316) (4,527)
Proceeds from issuances of common stock 581,040 25,100 246,800
----------- ----------- ---------- ---------
Net cash provided by financing
activities 964,142 264,946 143,584 102,975
----------- ----------- ---------- ---------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS - - 37,421 -
CASH AND CASH EQUIVALENTS, BEGINNING - - - -
----------- ----------- ---------- ---------
CASH AND CASH EQUIVALENTS, ENDING $ - $ - $ 37,421 $ -
=========== =========== ========== =========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for interest $ 87,232 $ 20,974 $ 52,335 $ 37,521
Cash paid for taxes - - - -
=========== =========== ========== =========
</TABLE>
<PAGE>
Page>
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
During the period from May 1, 1997 (inception) to March 31, 1998 and the year
ended March 31, 1999, the Company executed capital lease agreements for the
purchase of property and equipment totaling $12,657 and $70,896, respectively.
During 1999 the Company's major stockholder converted $75,000 of convertible
notes payable plus accrued interest of $6,735 into 2,129,711 shares of the
Company's common stock, in satisfaction of amounts due.
The accompanying notes to financial statements
are an integral part of these statements.
<PAGE>
<PAGE>
iGENISYS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1999 AND 1998 AND SIX MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998, (UNAUDITED)
1. Organization and summary of significant accounting policies:
Corporate Background
Genisys Information Systems Inc. ("Genisys") is a Colorado corporation
formed on May 1, 1997 and it is the operating subsidiary of iGenisys, Inc.
(the "Company"). The Company's primary business is the development of state-
of-the-art project management software that is used by governmental and
commercial entities. Through March 31, 1999 (and September 30, 1999,
unaudited), substantially all of the Company's customers were located
throughout the United States. Genisys also performs ancillary services
relating to assisting its customers in implementing its software and
performing independent cost and risk analyses.
An independent group of investors formed Zion Enterprises, Inc. ("Zion")
in February 1996 as a Colorado corporation. Zion was formed for the sole
purpose of establishing a widely held company that would subsequently seek a
merger with another entity that desired to merge. Through March 1999, Zion had
no operations or business activity.
In March 1999, Zion acquired all of the outstanding shares of the common
stock of Genisys in exchange for newly issued shares of Zion, whereby Genisys'
shareholders received 75% of the outstanding post-merger common stock. Zion
became the parent company of Genisys through this transaction. As a result of
the transaction, the former officers and directors of Genisys assumed control
of Zion and changed the name to iGeniSys, Inc. This transaction has been
accounted for as an acquisition of Zion by Genisys and a recapitalization of
Genisys. The historical financial statements prior to this transaction are
those of Genisys as Zion had no significant activities. Also, the equity
accounts of Genisys have been restated to reflect the exchange ratio of one
Genisys share for 4.184 Zion shares. All significant intercompany
transactions have been eliminated in consolidation.
The consolidated balance sheet as of September 30, 1999, the consolidated
statements of operations and cash flows for the six months ended September 30,
1999 and 1998, and the consolidated statements of shareholders' equity for the
six months ended September 30, 1999 have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows for all such periods have been made. The
results of operations for the six months ended September 30, 1999 are not
necessarily indicative of the operating results for the full year.
Significant Accounting Policies
Basis of Preparation of Financial Statements -- The accompanying financial
statements have been prepared assuming that the Company will continue as a
going concern. The Company has incurred operating losses since inception due
to the development of its software products and efforts to gain market
acceptance for such products. These losses have caused the Company to operate
with limited liquidity and created a deficit working capital as of March 31,
1999. Management has developed a plan to increase its working capital and
subsequent to March 31, 1999 has raised equity capital of $471,800 as
discussed in Note 9 through private placement of securities. This plan
includes the effort to raise additional equity through a second private sale
followed by a public sale of securities during fiscal year ended March 31,
2000. Management's plans also include reducing operating costs while
increasing sales and marketing efforts. However, the Company is not certain
as to whether it will be successful in raising additional equity or increasing
revenues. If management's plans are not successful, operations could be
significantly reduced.
Contracts in Process -- Contracts in process represent the cost of work
performed on contracts that have not been billed to the customer.
Property and Equipment -- Property and equipment is stated at cost.
Depreciation, including amortization of capital leases, is provided for on the
straight-line method over the shorter of the lease term or estimated useful
lives of the assets, primarily five years.
Development Costs -- Due to the nature of its products and customers, the
Company has not incurred any material Research and Development costs that have
been expensed. The Company's software development costs consists primarily of
enhancements and software production from costs related to products for which
technological and market feasibility has been established. Accordingly, such
costs have been capitalized as incurred. Capitalization ceases when the
product has been completed and has been installed at various customers, at
which time amortization of the capitalized cost begins on a straight-line
basis over the estimated lives of the products, which are generally five
years. Amortization expense of approximately $10,366 was recorded related to
these costs during the year ended March 31, 1999; no amortization was recorded
in the period ended March 31, 1998. During the six month period ended
September 30, 1999 (unaudited), $46,098 was recorded as amortization costs; no
amortization was recorded in the corresponding period in 1998.
Management assesses the carrying values of its development costs and
other long-lived assets for impairment when circumstances warrant such a
review. Based on its review, management does not believe that any impairment
has occurred as of March 31, 1999 and 1998, nor as of September 30, 1999
(unaudited).
Revenue Recognition -- Sales of the Company's software products are
recognized when shipped. The Company's revenues from consulting and
implementation services are recognized when the services are performed.
Income Taxes -- Deferred tax assets and liabilities are recorded for the
estimated future tax effects of: (a) temporary differences between the tax
basis of assets and liabilities and amounts reported in the balance sheets,
and (b) operating loss and tax credit carryforwards. The overall change in
deferred tax assets and liabilities for the period measures the deferred tax
expense for the period. Effects of changes in enacted tax laws on deferred
tax assets and liabilities are reflected as adjustments to tax expense in the
period of enactment. The measurement of deferred tax assets may be reduced by
a valuation allowance based on judgmental assessment of available evidence if
deemed more likely than not that some or all of the deferred tax assets will
not be realized.
Basic and Diluted Loss per Share -- The Company determines basic and
diluted loss per share in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 128, Earnings Per Share, which is effective for the
years ended after December 31, 1997. The basic net earnings (loss) per common
share is computed by dividing the net loss by the weighted average number of
shares outstanding during a period. Diluted net earnings (loss) per common
share is computed by dividing the net loss, adjusted on an as if converted
basis, by the weighted average number of common shares outstanding plus
potential dilutive securities. Stock options are not considered in the
calculation, as the impact of the potential common shares would be to decrease
loss per share.
Cash and Cash Equivalents -- Cash and Cash Equivalents include cash and
other highly liquid investments with maturities of three months or less at the
date of acquisition. Cash equivalents are stated at cost, which approximates
market value.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions. These estimates and assumptions affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results will be determined based on the outcome of
future events and could differ from the estimates.
Credit and Other Risk Considerations -- The Company's accounts receivable
and its costs and estimated earnings in excess of costs on uncompleted
contracts subject the Company to credit risk, as collateral is generally not
required. The Company performs credit evaluations of its customers' financial
condition and maintains allowances for potential credit losses. In the
opinion of management, actual losses and allowances have been within its
expectations. The carrying amount of the Company's receivables and its costs
and estimated earnings in excess of costs on uncompleted contracts
approximates their fair value.
For the periods ended March 31, 1999 and 1998, approximately 29% and 42 %
of the Company's revenues were billed to one customer, respectively
(approximately 54.2% and 9.9% for the six-month periods ended September 30,
1999 and 1998, respectively, unaudited). At March 31, 1999 and 1998,
approximately 56% and 47%, respectively, of total receivables were due from
this customer. Also for the year ended March 31, 1999, another customer
accounted for 10% of the Company's sales (approximately 19.0% and 14.0% for
the six-month periods ended September 30, 1999 and 1998, respectively,
unaudited). Additionally, two other customers accounted for 10% and 12% of
total accounts receivables at March 31, 1999. At March 31, 1998, another two
customers accounted for 13% and 17% of total accounts receivable.
The Company is subject to risks and uncertainties common to growing
technology-based companies, including rapid technological change, growth and
commercial acceptance of its products, dependence on principal products and
third party technology, new product development, new product introductions and
other activities of competitors, dependence on key personnel, and limited
operating history.
Stock- based Compensation - SFAS No. 123, Accounting for Stock-Based
Compensation, allows companies to choose whether to account for employee
stock-based compensation on a fair value method, or to continue accounting for
such compensation under the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB
25). The Company has chosen to account for employee stock-based compensation
using APB 25. Accordingly, compensation cost for stock options is measured as
the excess, if any, of the quoted market price of the Company's stock at the
date of the grant over the options' exercise price.
Recent Accounting Pronouncements
COMPREHENSIVE INCOME - In June 1997, the Financial Accounting Standards
("FASB") issued SFAS No. 130, Reporting Comprehensive Income. This statement
is effective for financial statement issued for periods beginning after
December 15, 1997. The Company adopted this statement during 1998 and it had
no material impact on the Company's financial statement disclosures.
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION - In June 1997, the
FASB issued SFAS No. 131, Disclosure about Segments of an Enterprise and
Related Information. This statement is effective for fiscal years beginning
after December 15, 1997. SFAS 131 requires the reporting of profit and loss,
specific revenue and expense items, and assets for reportable segments. It
also requires the reconciliation of total segment revenues, total segment
profit or loss, total segment assets, and other amounts disclosed for
segments, in each case to the amounts in the general purpose financial
statements. As the Company only operates in one segment, adopting this
statement had no material impact on the Company's financial statement
disclosures.
PENSION AND OTHER POSTRETIREMENT BENEFITS - In February 1998, the FASB
issued FAS No. 132, Employers' Disclosures about Pensions and Other Post-
retirement Benefits. SFAS 132 standardizes the disclosure requirements for
pensions and other post-retirement benefits and requires additional
information on changes in the benefit obligations and fair values of plan
assets. The statement is effective for financial statements for periods
beginning after December 15, 1997 and requires comparative information for
earlier years to be restated. Adoption of SFAS 132 is expected to have no
effect on the Company, since there are no pension plans.
DERIVATIVE AND HEDGING ACTIVITIES - In June 1998, the FASB issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. This
statement is effective for fiscal years beginning after June 15, 2000.
Currently, the Company does not have any derivative financial instruments and
does not participate in hedging activities, therefore management believes SFAS
No. 133 will not impact the Company's financial position or results of
operations.
FAIR VALUE OF FINANCIAL INSTRUMENTS - SFAS No. 107, Disclosures about
Fair Value of Financial Instruments, requires the Company to disclose
estimated fair values for its financial instruments, for which it is
practicable to estimate. The fair value of the Company's payables to the
shareholder, affiliate and related party and the royalty receivable are not
practicable to estimate due to the related party nature of the underlying
transactions. Management believes that the carrying amounts of the Company's
other financial instruments approximates their fair values primarily because
of the short-term maturity of these instruments.
Estimates are not necessarily indicative of the amounts which could be
realized or would be paid in a current market exchange. The effect of using
different market assumptions and/or estimation methodologies may be material
to the estimated fair value amount.
2. Related party transactions:
Through a series of transactions, the Company acquired the rights to
receive royalty payments from software in which one of Company's officers has
an interest. These rights were obtained in exchange for total consideration
of $81,000. Management expects that this amount will be recovered from the
future royalty payments.
The Company has entered into a management contract for professional
services with an entity, which is controlled by the Company's majority
shareholder ("major shareholder"). The contract provides for management fees
of $3,000 per month. During the year ended March 31, 1999 and the period
ended March 31, 1998, the Company charged $36,000 and $6,000, respectively, to
expenses in fees pursuant to this agreement. As of March 31, 1999 and 1998,
$42,000 and $6,000, respectively, are payable under this contract. As of
September 30, 1999, the Company owes $60,000 under this contract and charged
$18,000 to expense for fees under this agreement during each of the six month
periods ended September 30, 1999 and 1998 (unaudited).
The Company had a revolving line of credit with the major shareholder
totaling $321,409 at March 31, 1999 collateralized by specific customer
invoices. This financing arrangement was a factoring arrangement for the
Company. Payments received on these accounts were forwarded to the
stockholder as they were paid and the appropriate amount of the note retired.
Interest charged on these notes is equal to the rate which the stockholder
borrows funds to advance on these notes (7.75% at March 31, 1999). This note
was repaid subsequent to March 31, 1999 as discussed in Note 8.
In addition, the Company had notes payable with the major shareholder for
$58,000 and $15,000 as of March 31, 1999 and for $94,000 and $50,000 as of
March 31, 1998. The notes accrued interest at an annual prime rate, which was
7.75% and 8.5% as of March 31, 1999 and 1998, respectively. These notes are
payable on demand, and accordingly are classified as current liabilities. As
of September 30, 1999, the balances of these notes were $41,500 and $15,000,
respectively.
During the year ended March 31, 1998, the Company borrowed $75,000 under
a convertible debt agreement with the major stockholder. Interest accrued
monthly on the outstanding principal at the rate of 6%. Under the terms of
the agreement, the unpaid principal amount and accrued interest was
convertible into common stock at a current market price at the option of the
major stockholder. As of August 31, 1998, the major shareholder converted
$75,000 of unpaid principal and related accrued interest of $6,735 into
2,129,711 shares of the Company's common stock.
The Company and an entity controlled by the Company's major shareholder
shared employees, common lease space, third-party vendor accounts, and a line
of credit as discussed in Note 4. Further, the Company and this related
entity borrowed funds on an unsecured non-interest bearing basis from each
other from time to time as a cash flow vehicle, not a primary funding source.
During the periods ended March 31, 1999 and 1998, the maximum net amount
payable to the related entity approximated $370,000 and $415,000,
respectively. As of March 31, 1999 and 1998, the Company owed $186,235 and
$363,395, respectively, to this related entity for the net amount of inter-
company transactions. As of September 30, 1999 (unaudited), this due to
affiliate had been reduced to $151,304. The Company ceased the inter-company
borrowings in June 1999 once the credit agreement discussed in Note 9 was
obtained. The Company intends to pay off the balance remaining within the
next six-months and, accordingly, the balance is classified as a current
liability.
3. Equipment:
Equipment is summarized by major classification as follows as:
<TABLE>
<CAPTION>
March 31, March 31, September 30,
1999 1998 1999
------------ ------------ -------------
<S> <C> <C> <C>
(unaudited)
Computer equipment $ 148,247 $ 93,447 $ 149,144
Computer software 10,915 5,260 35,615
Furniture and fixtures 41,839 1,624 54,605
------------ ------------ -------------
Total depreciable assets 201,001 100,331 239,364
Less accumulated
depreciation (53,642) (6,253) (78,948)
------------ ------------ -------------
$ 147,359 $ 94,078 $ 160,416
============ ============ =============
</TABLE>
Included in these assets are certain assets under a capital lease
obligation (Note 5). As of March 31, 1999 and 1998, the net amount of leased
equipment was approximately $57,000 and $68,500, respectively. As of
September 30, 1999 (unaudited), the net balance approximated $49,000.
4. Revolving lines of credit:
During the year ended March 31, 1999 the Company and a related entity
were party to a joint loan and security agreement with a financial institution
which allowed the companies to borrow up to $750,000 under a revolving line of
credit. As of March 31, 1999, the Company's share of this line of credit was
$56,039. At March 31, 1998, there were no balances outstanding under this
line of credit. A general of assignment accounts receivable, property and
equipment, and software costs secures borrowings under the line of credit.
Under the terms of the agreement, the Company and the related entity are co-
borrowers, and each has joint and several liability on the outstanding
balance. The borrowings bear interest at variable rates equal to the Central
Bank of Houston's Index Rate plus 3.0% (approximately 9% at March 31, 1999).
The credit facility was repaid in April 1999 as discussed in Note 9.
5. Capital lease obligations:
The Company has certain assets under capital lease obligations. The
leases require total monthly payments of $2,731 and have been recorded using
the Company's marginal cost of borrowing at the time the leases were entered
into of 12%.
The minimum lease payments required under the capital leases together
with the present value of the minimum lease payments at March 31, 1999 are as
follows:
<TABLE>
<CAPTION>
<S> <C>
2000 $ 30,790
2001 15,556
2002 8,376
2003 8,376
----------
Total 63,098
Less amount representing interest (8,998)
----------
Present value of future minimum
lease payments 54,100
Less current portion 30,790
----------
Long-term portion $ 23,310
==========
</TABLE>
Total interest expense related to these capital leases was $8,223 and
$891 in 1999 and 1998, respectively.
6. Commitments:
Leases:
The Company leases office space in Houston and Los Angeles under
operating leases that expire through 2002. The leases generally require the
Company to pay for utilities, insurance, property taxes and maintenance.
Rental expense was approximately $110,000 and $70,000 for the periods ended
March 31, 1999 and 1998, respectively. For the six months ended September 30,
1999 (unaudited), rental expense was $59,640. Future minimum lease payments
are approximately $120,000 annually through 2002.
7. Capital stock:
The Company has 50,000,000 shares of $.01 par value preferred stock
authorized, with no shares issued. These shares, when issued, will have
preferences and restrictions as determined by the Company's Board of
Directors.
The common stock of the Company is divided into Class A and Class B
shares. There are a total of 100,010,000 shares of $.001 par value common
stock authorized with 10,000 being designated as Class B shares. The rights
of Class A and B shares are identical, except that Class B shares may only be
issued to the Company's Chairman of the Board and Chief Executive Officer.
Further, Class B shares have the right to elect a majority of the Board of
Directors and such shares can be converted to Class A shares on a one-for-one
basis at the sole discretion of the holder.
In March 1999 and as part of the transaction discussed in Note 1, new
investors in Zion loaned Genisys $580,000, at 10% interest annually, on a
temporary basis while the documentation of the stock purchase was being
completed. Prior to March 31, 1999, loan holders converted the temporary
loans of $580,000 into 1,472,083 shares of stock in the Company. Due to the
intent of the Company and investors, this transaction has been accounted for
as a sale of stock for cash in the accompanying financial statements.
During the year ended March 31, 1999, the Company issued 742,678 shares
of Class A common stock to two senior officers of the Company. The Company
recorded compensation expense of $35,500, based on management's estimate of
the fair value of the common stock.
8. Income taxes:
The Company has net operating loss carryforwards in excess of $250,000 as
of March 31, 1999 to offset future taxable income. Such net operating losses
begin to expire after 2019. As of March 31, 1999, the Company has provided a
100% valuation allowance for the deferred tax asset relating to such net
operating losses because it could not be determined that it was more likely
than not that the deferred tax asset would be realized through future
earnings. The Company has no other material deferred tax items since the
accounting methods used for financial reporting and income tax purposes are
substantially comparable.
9. Subsequent events:
On May 17, 1999, the Company entered into a credit agreement with a
financial entity. This new agreement provided the funds to fully repay the
note payable to the majority shareholder (Note 2) and the revolving line of
credit (Note 4). As of September 30, 1999 (unaudited), the Company had an
outstanding balance of $348,908 on this credit agreement. Under the terms of
this agreement, which is similar to a factoring arrangement, the Company is
able to obtain financing for 85% of specific accounts receivable. The Company
pays a processing fee for financing each receivable depending upon the number
of days from the funding of the advance until that invoice is paid by the
customer. In addition, the Company pays interest on the total amount advanced
at a rate equal to the prime rate plus 2%. The receivables are financed on a
full recourse basis and, accordingly, this financial arrangement is accounted
for as a borrowing. The agreement can be terminated with 30 days notice after
certain events are met.
Subsequent to March 31, 1999 and through October 19, 1999, the Company
raised $471,800 from the sale of its common stock through two private
placements. The Company has issued an additional 964,361 shares of common
stock in connection with these sales (unaudited).
In May 1999, the Company adopted the 1999 Equity Incentive Plan (the
"Plan"), which provides for awards in the form of options, including incentive
stock options (ISOs), nonstatutory options (NSOs), stock bonuses, rights to
purchase restricted stock, and stock appreciation rights (SARs). Employees,
directors, consultants and advisors of the Company will be eligible for the
grant of NSOs, stock bonuses, and rights to purchase restricted stock. Only
employees will be eligible for the grant of ISOs and SARs. Options issued are
to have exercise prices not less than the fair value of the Company's common
stock on the date of grant. The Company has reserved 2,500,000 shares of
common stock for issuance pursuant to the exercise of common stock under the
plan. In June 1999, the Company granted options to purchase 1,860,000 shares
of common stock an exercise price of $.40 per share, and of which 1,780,000
options are subject to future vesting. Options generally vest over a five year
period and options expire in July 2009. Management believes that the exercise
price of the options granted to employees was equal to the market value of the
Company's common stock at the date of grant (based on the Company's private
placements of common stock) and, accordingly, no compensation expense has been
recorded.
In May and June of 1999, the Company was named as a defendant in two
separate lawsuits in the state of California. One suit was filed by a
competing software company and the second by an individual. The suit, brought
by the corporation contains many allegations regarding the activities of the
Company and two senior officers of the Company, and it seeks damages of an
unspecified amount. The individual claims monies owed for past services to an
entity previously controlled by an officer of the Company. Management and
legal counsel believe that the lawsuits are without merit, have filed
counterclaims, and plan to vigorously contest both cases, including possibly
filing countersuits. The resolution of these suits is not expected to have a
material effect on the Company.
In June 1999, the Company entered into employment contracts, some of
which are oral, with its Chief Executive Officer, President, Senior Vice
President of Sales, and the Chief Financial Officer. These arrangements
require annual compensation of approximately $454,000 in the aggregate,
payment of performance bonuses, and issuance of stock options at the sole
discretion of the Board of Directors. This compensation level is consistent
with the amounts paid to senior executives during the year ended March 31,
1999. These agreements are for a one-year period and automatically renew,
unless terminated by either party with 60-day notice.
The Company plans to file a registration statement with the Securities
and Exchange Commission for the offering of 1,500,000 shares of Class A common
stock at a proposed offering price yet to be determined.
In October 1999, the Company issued to certain investors a total of
147,205 Class A Warrants, each exercisable for one year to purchase a share of
our common stock at a price of $1.00 per share. The Class A Warrants expire
on October 31, 2000. The Company has the ability to repurchase the warrants
if we have registered the exercise of the warrants with the Commission and our
public trading price has been more than $2.00 per share for at least ten
consecutive trading days. In such event, holders of the warrant will have a
30 day notice period in which to exercise the warrants, and any warrants not
exercised will be redeemed at a redemption price of $.01 per share.
<PAGE>
<PAGE>
You should rely only on the information contained in this document or that we
have referred you to. We have not authorized anyone to provide you with
information that is different. This Prospectus is not an offer to sell common
stock and is not soliciting an offer to buy common stock in any state where
the offer or sale is not permitted.
iGeniSys, Inc.
3,490,611 Shares of Common Stock
November ___, 1999
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
The only statute, charter provision, bylaw, contract, or other
arrangement under which any controlling person, director or officers of the
Registrant is insured or indemnified in any manner against any liability which
he may incur in his capacity as such, is as follows:
Sections 7-109-101 through 7-109-110 of the Colorado Corporation Code
provide as follows:
7-109-101. Definitions. As used in this article:
(1) "Corporation" includes any domestic or foreign entity that is a
predecessor of a corporation by reason of a merger or other transaction
in which the predecessor's existence ceased upon consummation of the
transaction.
(2) "Director" means an individual who is or was a director of a corporation
or an individual who, while a director of a corporation, is or was
serving at the corporation's request as a director, officer, partner,
trustee, employee, fiduciary, or agent of another domestic or foreign
corporation or other person or of an employee benefit plan. A director
is considered to be serving an employee benefit plan at the corporation's
request if his or her duties to the corporation also impose duties on, or
otherwise involve services by, the director to the plan or to
participants in or beneficiaries of the plan. "Director" includes,
unless the context requires otherwise, the estate or personal
representative of a director.
(3) "Expenses" includes counsel fees.
(4) "Liability" means the obligation incurred with respect to a proceeding to
pay a judgment, settlement, penalty, fine, including an excise tax
assessed with respect to an employee benefit plan, or reasonable
expenses.
(5 "Official capacity" means, when used with respect to a director, the
office of director in a corporation and, when used with respect to a
person other than a director as contemplated in section 7-109-107, the
office in a corporation held by the officer or the employment, fiduciary,
or agency relationship undertaken by the employee, fiduciary, or agent on
behalf of the corporation. "Official capacity" does not include service
for any other domestic or foreign corporation or other person or employee
benefit plan.
(6) "Party" includes a person who was, is, or is threatened to be made a
named defendant or respondent in a proceeding.
(7) "Proceeding" means any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative and
whether formal or informal.
7-109-102. Authority to indemnify directors.
(1) Except as provided in subsection (4) of this section, a corporation may
indemnify a person made a party to a proceeding because the person is or
was a director against liability incurred in the proceeding if:
(a) The person conducted himself or herself in good faith; and
(b) The person reasonable believed:
(I) In the case of conduct in an official capacity with the
corporation, that his or her conduct was in the corporation's
best interests; and
(II) In all other cases, that his or her conduct was at least not
opposed to the corporation's best interests; and
(c) In the case of any criminal proceeding, the person had no reasonable
cause to believe his or her conduct was unlawful.
(2) A director's conduct with respect to an employee benefit plan for a
purpose the director reasonably believed to be in the interests of the
participants in or beneficiaries of the plan is conduct that satisfies
the requirement of subparagraph (II) of paragraph (b) of subsection (1)
of this section. A director's conduct with respect to an employee
benefit plan for a purpose that the director did not reasonably believe
to be in the interests of the participants in or beneficiaries of the
plan shall be deemed not to satisfy the requirements of paragraph (a) of
subsection (1) of this section.
(3) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not,
of itself, determinative that the director did not meet the standard of
conduct described in this section.
(4) A corporation may not indemnify a director under this section:
(a) In connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the
corporation; or
(b) In connection with any other proceeding charging that the director
derived an improper personal benefit, whether or not involving
action in an official capacity, in which proceeding the director was
adjudged liable on the basis that he or she derived an improper
personal benefit.
(5) Indemnification permitted under this section in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.
7-109-103. Mandatory indemnification of directors. Unless limited by its
articles of incorporation, a corporation shall indemnify a person who was
wholly successful, on the merits or otherwise, in the defense of any
proceeding to which the person was a party because the person is or was a
director, against reasonable expenses incurred by him or her in connection
with the proceeding.
7-109-104. Advance of expenses to directors.
(1) A corporation may pay for or reimburse the reasonable expenses incurred
by a director who is a party to a proceeding in advance of final
disposition of the proceeding if:
(a) The director furnishes to the corporation a written affirmation of
the director's good faith belief that he or she has met the standard
of conduct described in section 7-109-102;
(b) The director furnishes to the corporation a written undertaking,
executed personally or on the director's behalf, to repay the
advance if it is ultimately determined that he or she did not meet
the standard of conduct; and
(c) A determination is made that the facts then known to those making
the determination would not preclude indemnification under this
article.
(2) The undertaking required by paragraph (b) of subsection (1) of this
section shall be an unlimited general obligation of the director but need
not be secured and may be accepted without reference to financial ability
to make repayment.
(3) Determinations and authorizations of payments under this section shall be
made in the manner specified in section 7-109-106.
7-109-105. Court-ordered indemnification of directors.
(1) Unless otherwise provided in the articles of incorporation, a director
who is or was a party to a proceeding may apply for indemnification to
the court conducting the proceeding or to another court of competent
jurisdiction. On receipt of an application, the court, after giving any
notice the court considers necessary, may order indemnification in the
following manner:
(a) If it determines that the director is entitled to mandatory
indemnification under section 7-109-103, the court shall order
indemnification, in which case the court shall also order the
corporation to pay the director's reasonable expenses incurred to
obtain court-ordered indemnification.
(b) If it determines that the director is fairly and reasonable entitled
to indemnification in view of all the relevant circumstances,
whether or not the director met the standard of conduct set forth in
section 7-109-102 (1) or was adjudged liable in the circumstances
described in section 7-109-102 (4), the court may order such
indemnification as the court deems proper; except that the
indemnification with respect to any proceeding in which liability
shall have been adjudged in the circumstances described in section
7-109-102 (4) is limited to reasonable expenses incurred in
connection with the proceeding and reasonable expenses incurred to
obtain court-ordered indemnification.
7-109-106. Determination and authorization of indemnification of directors.
(1) A corporation may not indemnify a director under section 7-109-102 unless
authorized in the specific case after a determination has been made that
indemnification of the director is permissible in the circumstances
because the director has met the standard of conduct set forth in section
7-109-102. A corporation shall not advance expenses to a director under
section 7-109-104 unless authorized in the specific case after the
written affirmation and undertaking required by section 7-109-104 (1) (a)
and (1) (b) are received and the determination required by section 7-109-
104 (1) (-C-) has been made.
(2) The determinations required by subsection (1) of this section shall be
made:
(a) By the board of directors by a majority vote of those present at a
meeting at which a quorum is present, and only those directors not
parties to the proceeding shall be counted in satisfying the quorum;
or
(b) If a quorum cannot be obtained, by a majority vote of a committee of
the board of directors designated by the board of directors, which
committee shall consist of two or more directors not parties to the
proceeding; except that directors who are parties to the proceeding
may participate in the designation of directors for the committee.
(3) If a quorum cannot be obtained as contemplated in paragraph (a) of
subsection (2) of this section, and a committee cannot be established
under paragraph (b) of subsection (2) of this section, or, even if a
quorum is obtained or a committee is designated, if a majority of the
directors constituting such quorum or such committee so directs, the
determination required to be made by subsection (1) of this section shall
be made:
(a) By independent legal counsel selected by a vote of the board of
directors or the committee in the manner specified in paragraph (a)
or (b) of subsection (2) of this section or, if a quorum of the full
board cannot be obtained and a committee cannot be established, by
independent legal counsel selected by a majority vote of the full
board of directors; or
(b) By the shareholders.
(4) Authorization of indemnification and advance of expenses shall be made in
the same manner as the determination that indemnification or advance of
expenses is permissible; except that, if the determination that
indemnification or advance of expenses is permissible is made by
independent legal counsel, authorization of indemnification and advance
of expenses shall be made by the body that selected such counsel.
7-109-107. Indemnification of officers, employees, fiduciaries, and agents.
(1) Unless otherwise provided in the articles of incorporation:
(a) An officer is entitled to mandatory indemnification under section 7-
109-103, and is entitled to apply for court-ordered indemnification
under section 7-109-105, in each case to the same extent as a
director;
(b) A corporation may indemnify and advance expenses to an officer,
employee, fiduciary, or agent of the corporation to the same extent
as to a director; and
(c) A corporation may also indemnify and advance expenses to an officer,
employee, fiduciary, or agent who is not a director to a greater
extent, if not inconsistent with public policy, and if provided for
by its bylaws, general or specific action of its board of directors
or shareholders, or contract.
7-109-108. Insurance. A corporation may purchase and maintain insurance on
behalf of a person who is or was a director, officer, employee, fiduciary, or
agent of the corporation, or who, while a director, officer, employee,
fiduciary, or agent of the corporation, is or was serving at the request of
the corporation as a director, officer, partner, trustee, employee, fiduciary,
or agent of another domestic or foreign corporation or other person or of an
employee benefit plan, against liability asserted against or incurred by the
person in that capacity or arising from his or her status as a director,
officer, employee, fiduciary, or agent, whether or not the corporation would
have power to indemnify the person against the same liability under section 7-
109-102, 7-109-103, or 7-109-107. Any such insurance may be procured from any
insurance company designated by the board of directors, whether such insurance
company is formed under the laws of this state or any other jurisdiction of
the United States or elsewhere, including any insurance company in which the
corporation has an equity or any other interest through stock ownership or
otherwise.
7-109-109. Limitation of indemnification of directors.
(1) A provision treating a corporation's indemnification of, or advance of
expenses to, directors that is contained in its articles of incorporation
or bylaws, in a resolution of its shareholders or board of directors, or
in a contract, except an insurance policy, or otherwise, is valid only to
the extent the provision is not inconsistent with sections 7-109-101 to
7-109-108. If the article of incorporation limit indemnification or
advance of expenses, indemnification and advance of expenses are valid
only to the extent not inconsistent with the articles of incorporation.
(2) Sections 7-109-101 to 7-109-108 do not limit a corporation's power to pay
or reimburse expenses incurred by a director in connection with an
appearance as a witness in a proceeding at a time when he or she has not
been made a named defendant or respondent in the proceeding.
7-109-110. Notice to shareholder of indemnification of director. If a
corporation indemnifies or advances expenses to a director under this article
in connection with a proceeding by or in the right of the corporation, the
corporation shall give written notice of the indemnification or advance to the
shareholders with or before the notice of the next shareholders' meeting. If
the next shareholder action is taken without a meeting at the instigation of
the board of directors, such notice shall be given to the shareholders at or
before the time the first shareholder signs a writing consenting to such
action.
* * *
b. Article XII of Registrant's Articles of Incorporation provide that
the corporation may indemnify each director, officer, and any employee or
agent of the corporation, his heirs, executors and administrators, against
expenses reasonably incurred or any amounts paid by him in connection with any
action, suit or proceeding to which he may be made a party by reason of his
being or having been a director, officer, employee or agent of the corporation
to the extent permitted by the law as recited above in subparagraph (a).
c. Article XII of Registrant's Articles of Incorporation provides, in
part:
"e. To the maximum extent permitted by law or by public
policy, directors of this Corporation are to have no personal
liability for monetary damages for breach of fiduciary duty as
a director."
Item 25. Other Expenses of Issuance and Distribution.
The estimated expenses of the offering are to be borne by us, are as
follows:
<TABLE>
<CAPTION>
<S> <C>
SEC Filing Fee $ 3,000
Printing Expenses 5,000
Accounting Fees and Expenses 15,000
Legal Fees and Expenses 25,000
Blue Sky Fees and Expenses 5,000
Registrar and Transfer Agent Fee 2,000
Marketing Expenses 30,000
Miscellaneous 15,000
--------
Total $100,000
</TABLE>
Item 26. Recent Sales of Unregistered Securities.
1. In March, 1999, we issued to a total of 17 persons, all of whom
qualified as "accredited investors" and aggregate of 1,472,083
shares of common stock in conversion of an aggregate of
$580,000 in convertible debt. The shares were the securities,
which were taken for investment and were subject to appropriate
transfer restrictions, were issued without registration under
the Securities Act in reliance upon the exemption provided in
Section 4(2) of the Securities Act.
2. In March, 1999, we issued an aggregate of 7,516,740 shares of
common stock in exchange for all of the issued and outstanding
shares of capital stock of GeniSys Information Systems, Inc.
The shares were issued exclusively to persons who qualified as
"accredited investors" within the meaning of Rule 501(a) of
Regulation D under the Securities Act. The securities, which
were taken for investment and were subject to appropriate
transfer restrictions, were issued without registration under
the Securities Act, in reliance upon the exemption provided in
Section 4(2) of the Securities Act.
3. Between April and October 1999, we issued an aggregate of
518,528 shares of common stock in consideration of $204,300, or
$.394 per share. The shares were issued exclusively to nine
investors who qualified as "accredited investors" within the
meaning of Rule 501(a) of Regulation D under the Securities
Act. The securities, which were taken for investment and
subject to appropriate transfer restrictions, were issued
without registration under the Securities Act pursuant to
exemption set forth in Section 4(2) of the Securities Act and
Rule 506 of Regulation D thereunder.
4. Between September and October 1999, we issued an aggregate of
445,833 shares of common stock in consideration of $267,500, or
$.60 per share. The shares were issued exclusively to six
investors who qualified as "accredited investors" within the
meaning of Rule 501(a) of Regulation D under the Securities
Act. The securities, which were taken for investment and
subject to appropriate transfer restrictions, were issued
without registration under the Securities Act pursuant to
exemption set forth in Section 4(2) of the Securities Act and
Rule 506 of Regulation D thereunder.
Item 27. Exhibits
a. The following Exhibits are filed as part of this Registration
Statement pursuant to Item 601 of Regulation S-B:
Exhibit No. Title
2.0 Agreement Concerning the Exchange of Common Stock between Zion
Enterprises, Inc. and GeniSys Information Systems, Inc.
3.1 Amended and Restated Articles of Incorporation
3.2 Bylaws
4.1 Specimen Common Stock Certificate
4.2 Specimen Warrant Certificate
5.0 Opinion of Neuman, Drennen & Stone, LLC
10.1 1999 Equity Incentive Plan
21.0 List of Subsidiaries
23.1 Consent of Neuman, Drennen & Stone, LLC
23.2 Consent of Gelfond Hochstadt Pangburn, P.C.
Item 28. Undertakings
The undersigned Registrant hereby undertakes:
1. To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
a. Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
b. Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement;
c. Include any additional or changed material information on the
plan of distribution.
2. That, for determining liability under the Securities Act, to treat
each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be the
initial bona fide offering.
3. To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
4. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
5. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred and
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered hereby, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form SB-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, in the City of Denver, State of Colorado on the 1st day of
November, 1999.
iGENISYS, INC.
By: /s/ J. Daniel Bell
---------------------------------
J. Daniel Bell, President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities with iGeniSys, Inc. and on the dates indicated.
Sgnature Position Date
- -------- -------- ----
/s/ Daniel J. Bell Chairman of the Board, President, 11/1/99
- -------------------------- Chief Executive Officer
Daniel J. Bell
/s/ Carylyn K. Bell Director, Secretary 11/1/99
- ---------------------------
Carylyn K. Bell
/s/ Walter Strycker Director 11/1/99
- ---------------------------
Walter Strycker
/s/ Henry Fong Director 11/1/99
- ---------------------------
Henry Fong
/s/ Craig Crawford Vice President 11/1/99
Craig Crawford
/s/ Jeffery M. Spencer Vice President 11/1/99
- ---------------------------
Jeffery M. Spencer
/s/ Ward P. Rivenburg Chief Financial Officer 11/1/99
- ---------------------------
Ward P. Rivenburg
<PAGE>
AGREEMENT
CONCERNING THE EXCHANGE OF COMMON STOCK
BETWEEN
ZION ENTERPRISES, INC.
AND
GENISYS INFORMATION SYSTEMS, INC. AND
THE STOCKHOLDERS OF GENISYS INFORMATION SYSTEMS, INC.
<PAGE>
<PAGE>
INDEX
ARTICLE I - EXCHANGE OF SECURITIES 1
1.1 - Issuance of Shares 1
1.2 - Exemption from Registration 1
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF GENISYS 1
2.1 - Organization 1
2.2 - Capital 2
2.3 - Subsidiaries 2
2.4 - Directors and Officers 2
2.5 - Financial Statements 2
2.6 - Absence of Changes 2
2.7 - Absence of Undisclosed Liabilities 2
2.8 - Tax Returns 2
2.9 - Investigation of Financial Condition 2
2.10 - Trade Names and Rights 2
2.11 - Compliance with Laws 3
2.12 - Litigation 3
2.13 - Authority; Counsel 3
2.14 - Ability to Carry Out Obligations 3
2.15 - Full Disclosure 3
2.16 - Assets 3
2.17 - Material Contracts 3
2.18 - Indemnification 3
2.19 - Restricted Securities 4
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF ZION 4
3.1 - Organization 4
3.2 - Capital 4
3.3 - Subsidiaries 4
3.4 - Directors and Officers 4
3.5 - Financial Statements 4
3.6 - Absence of Changes 4
3.7 - Absence of Undisclosed Liabilities 4
3.8 - Tax Returns 4
3.9 - Investigation of Financial Condition 5
3.10 - Trade Names and Rights 5
3.11 - Compliance with Laws 5
3.12 - Litigation 5
3.13 - Authority 5
3.14 - Ability to Carry Out Obligations 5
3.15 - Full Disclosure 5
3.16 - Assets and Liabilities 5
3.17 - Material Contracts 5
3.18 - Indemnification 5
ARTICLE IV - COVENANTS PRIOR AND SUBSEQUENT
TO CLOSING 6
4.1 - Investigative Rights 6
4.2 - Conduct of Business 6
4.3 - Continuing Relationship with Affiliated Companies 6
4.4 - Audited Financial Statements of GeniSys 6
4.5 - Offering of Zion Securities in Repayment of Loan 6
4.6 - Registration of Investor Shares 6
4.7 - Guarantee Regarding Bank Loan 7
ARTICLE V - CONDITIONS PRECEDENT TO ZION'S PERFORMANCE 7
5.1 - Conditions 7
5.2 - Accuracy of Representations 7
5.3 - Performance 7
5.4 - Absence of Litigation 7
5.5 - Officer's Certificate 7
5.6 - Certificate of Good Standing 7
5.7 - Guarantee of J. Daniel Bell and Carylyn K. Bell 7
ARTICLE VI - CONDITIONS PRECEDENT TO GENISYS'S PERFORMANCE 7
6.1 - Conditions 7
6.2 - Collateralized Loan 7
6.3 - Accuracy of Representations 7
6.4 - Performance 7
6.5 - Absence of Litigation 7
6.6 - Officer's Certificate 7
ARTICLE VII - CLOSING 8
7.1 - Closing 8
7.2 - Ownership of Zion 9
ARTICLE VIII- MISCELLANEOUS 9
8.1 - Captions and Headings 9
8.2 - No Oral Change 9
8.3 - Non-Waiver 9
8.4 - Time of Essence 9
8.5 - Entire Agreement 9
8.6 - Choice of Law 9
8.7 - Counterparts 10
8.8 - Notices 10
8.9 - Binding Effect 10
8.10 - Mutual Cooperation 10
8.11 - Finders 10
8.12 - Announcements 10
8.13 - Expenses 10
8.14 - Survival of Representations and Warranties 10
8.15 - Exhibits 10
8.16 - Binding Effect 10
Signatures 11
EXHIBITS
Allocation of Shares Exhibit 1.1
Subscription Agreement Exhibit 1.2
Financial Statements of GeniSys Exhibit 2.5
Tax Returns Exhibit 2.8
Litigation Involving GeniSys . Exhibit 2.12
Material Contracts of GeniSys Exhibit 2.17
Assets and Liabilities of Zion Exhibit 3.16
Material Contracts of Zion Exhibit 3.17
Financial Statements of Zion Exhibit 3.5
<PAGE>
<PAGE>
AGREEMENT
AGREEMENT made this 12th day of March, 1999, by and between ZION
ENTERPRISES, INC., a Colorado corporation ("Zion"), GENISYS INFORMATION
SYSTEMS, INC., a Colorado corporation ("GeniSys"), J. Daniel Bell, Carylyn K.
Bell and the shareholders of GeniSys who are listed on Exhibit 1.1 hereto and
have executed Subscription Agreements in the form attached in Exhibit 1.2
hereto.
WHEREAS, Zion desires to acquire all of the issued and outstanding shares
of common stock of GeniSys from the GeniSys shareholders in exchange for an
aggregate of 7,516,740 newly issued unregistered shares of the no par value
common stock of Zion;
WHEREAS, GeniSys desires to assist Zion in acquiring all of the issued
and outstanding shares of GeniSys pursuant to the terms of this Agreement; and
WHEREAS, all of the GeniSys shareholders, by execution of Exhibit 1.2
hereto, agree to exchange all 1,797,500 shares of GeniSys for 7,516,740 shares
of Zion.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
representations contained herein, the parties hereto agree as follows:
ARTICLE I
Exchange of Securities
1.1 Issuance of Shares. Subject to the terms and conditions of this
Agreement, Zion agrees to issue and exchange 7,516,740 fully paid and
nonassessable unregistered shares of its no par value common stock (the "Zion
Shares") ) for all issued and outstanding shares of the $.01 par value Class A
and Class B common stock of GeniSys (the "GeniSys Shares") held by the GeniSys
shareholders ("GeniSys Shareholders"). Exhibit 1.1 lists all GeniSys
Shareholders, their shareholdings in GeniSys and the number of Zion Shares to
be issued to them. All Zion Shares will be issued directly to the GeniSys
Shareholders on the Closing Date, as hereinafter defined.
1.2 Exemption from Registration. The parties hereto intend that all
Zion Shares to be issued to the GeniSys Shareholders shall be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Act"), pursuant to Section 4(2) of the Act and the rules and regulations
promulgated thereunder. In furtherance thereof, the GeniSys Shareholders will
execute and deliver to Zion on the Closing Date a Subscription Agreement in
the form set forth in Exhibit 1.2 hereto.
ARTICLE II
Representations and Warranties of GeniSys
GeniSys, J. Daniel Ball and Carylyn K. Bell hereby represent and warrant
to Zion that:
2.1 Organization. GeniSys is a corporation duly organized, validly
existing and in good standing under the laws of Colorado, has all necessary
corporate powers to own its properties and to carry on its business as now
owned and operated by it, and is duly qualified to do business and is in good
standing in each of the states where its business requires qualification.
2.2 Capital. The authorized capital stock of GeniSys consists solely of
11,010,000 shares of which 1,000,000 shares constitute $.01 par value
preferred stock, 10,000,000 shares constitute $.01 par value Class A Common
Stock and 10,000 shares constitute $.01 par value Class B Common Stock. There
currently are no shares of Preferred Stock, 1,787,500 shares of Class A Common
Stock and 10,000 shares of Class B Common Stock issued and outstanding. All
of the outstanding common stock of GeniSys is duly and validly issued, fully
paid and nonassessable. There are no outstanding subscriptions, options,
rights, warrants, debentures, instruments, convertible securities or other
agreements or commitments obligating GeniSys to issue or to transfer from
treasury any additional shares of its capital stock of any class.
2.3 Subsidiaries. GeniSys does not have any subsidiaries or own any
interest in any other enterprise.
2.4 Directors and Officers. The names and titles of all directors and
officers of GeniSys as of the date of this Agreement are as follows: J. Daniel
Bell, President, Chief Executive Officer, Chairman and Director.
2.5 Financial Statements. Exhibit 2.5 hereto consists of the unaudited
financial statements of GeniSys for the year ended December 31, 1998 (the
"GeniSys Financial Statements"). The GeniSys Financial Statements have been
prepared in accordance with generally accepted accounting principles and
practices ("GAAP") consistently applied.
2.6 Absence of Changes. Since December 31, 1998, there has not been any
change in the financial condition or operations of GeniSys, except for changes
in the ordinary course of business, which changes have not in the aggregate
been materially adverse.
2.7 Absence of Undisclosed Liabilities. As of the date of GeniSys's
most recent balance sheet included in Exhibit 2.5, GeniSys did not have any
material debt, liability or obligation of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, that is
not reflected in such balance sheet except for those debts, liabilities and
obligations in the ordinary course of business.
2.8 Tax Returns. Within the times and in the manner prescribed by law,
GeniSys has filed all federal, state and local tax returns required by law and
has paid all taxes, assessments and penalties due and payable except for the
year 1997 for which no tax returns have been filed and there may be taxes due
as set forth in Exhibit 2.8. No filings are currently due and no taxes have
been paid for 1998 but GeniSys anticipates minimal taxes as disclosed in
Exhibit 2.8. There are no present disputes of any nature payable by GeniSys.
2.9 Investigation of Financial Condition. Without in any manner
reducing or otherwise mitigating the representations contained herein, Zion
and its legal counsel and accountants shall have the opportunity to meet with
GeniSys's accountants and attorneys to discuss the financial condition of
GeniSys. GeniSys shall make available to Zion all books and records of
GeniSys.
2.10 Trade Names and Rights. GeniSys owns and holds all necessary
trademarks, service marks, trade names, copyrights, patents and proprietary
information and other rights necessary or material to its business as now
conducted or proposed to be conducted.
2.11 Compliance with Laws. GeniSys has complied with, and is not in
violation of, applicable federal, state or local statutes, laws and
regulations affecting its properties or the operation of its business where
the failure to comply or any violation would have a material adverse effect on
GeniSys and has disclosed any and all such non-compliances and/or violations
to Zion.
2.12 Litigation. GeniSys is not a defendant in any suit, action,
arbitration or legal, administrative or other proceeding, or governmental
investigation which is pending or, to the best knowledge of GeniSys,
threatened against or affecting GeniSys or its business, assets or financial
condition where the failure to disclose would have a material adverse effect
on GeniSys, except as disclosed in Exhibit 2.12. GeniSys is not in default
with respect to any order, writ, injunction or decree of any federal, state,
local or foreign court, department, agency or instrumentality applicable to
it. GeniSys is not engaged in any material litigation to recover monies due
to it.
2.13 Authority; Counsel. The Board of Directors of GeniSys has
authorized the execution of this Agreement and the consummation of the
transactions contemplated herein, and GeniSys has full power and authority to
execute, deliver and perform this Agreement, and this Agreement is a legal,
valid and binding obligation of GeniSys and is enforceable in accordance with
its terms and conditions. By execution of Exhibit 1.2, all of the GeniSys
Shareholders have agreed to and have approved the terms of this Agreement.
2.14 Ability to Carry Out Obligations. The execution and delivery of
this Agreement by GeniSys and the performance by GeniSys of its obligations
hereunder in the time and manner contemplated will not cause, constitute or
conflict with or result in (a) any breach or violation of any of the
provisions of or constitute a default under any license, indenture, mortgage,
instrument, article of incorporation, bylaw, or other agreement or instrument
to which GeniSys is a party, or by which it may be bound, nor will any
consents or authorizations of any party other than those hereto be required,
(b) an event that would permit any party to any agreement or instrument to
terminate it or to accelerate the maturity of any indebtedness or other
obligation of GeniSys, or (c) an event that would result in the creation or
imposition of any lien, charge or encumbrance on any asset of GeniSys.
2.15 Full Disclosure. None of the representations and warranties made
by GeniSys herein or in any exhibit, certificate or memorandum furnished or to
be furnished by GeniSys, or on its behalf, contains or will contain any untrue
statement of material fact or omit any material fact the omission of which
would be misleading.
2.16 Assets. GeniSys has good and marketable title to all of its
property, free and clear of all liens, claims and encumbrances, except as
otherwise indicated in Exhibit 2.5.
2.17 Material Contracts. GeniSys's only material contracts are those
disclosed in Exhibit 2.17 attached hereto.
2.18 Indemnification. GeniSys agrees to indemnify, defend and hold Zion
harmless against and in respect of any and all claims, demands, losses, costs,
expenses, obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties and reasonable attorney fees, that it shall
incur or suffer, which arise out of, result from or relate to any breach of,
or failure by GeniSys to perform any of its representations, warranties,
covenants or agreements in this Agreement or in any schedule, certificate,
exhibit or other instrument furnished or to be furnished by GeniSys under this
Agreement.
2.19 Restricted Securities. GeniSys and the GeniSys Shareholders, by
execution of this Agreement and of Exhibit 1.2, respectively acknowledge that
all of the shares of Zion to be issued hereunder are restricted securities and
none of such shares of Zion may be sold or publicly traded except in
accordance with the provisions of the Securities Act of 1933, as amended.
ARTICLE III
Representations and Warranties of Zion
Zion represents and warrants to GeniSys that:
3.1 Organization. Zion is a corporation duly organized, validly
existing and in good standing under the laws of Colorado, has all necessary
corporate powers to own its properties and to carry on its business as now
owned and operated by it, and is duly qualified to do business and is in good
standing in each of the states where its business requires qualification.
3.2 Capital. The authorized capital stock of Zion consists of (i)
25,000,000 shares of no par value common stock, of which 976,200 shares of
common stock are currently issued and outstanding, and (ii) 10,000,000 shares
of no par value preferred stock, none of which are outstanding. All of the
outstanding common stock is duly and validly issued, fully paid and
nonassessable. There are no other outstanding subscriptions, options, rights,
warrants, debentures, instruments, convertible securities or other agreements
or commitments obligating Zion to issue or to transfer from treasury any
additional shares of its capital stock of any class, except as set forth in
this Section 3.2.
3.3 Subsidiaries. Zion does not have any subsidiaries or own any
interest in any other enterprise.
3.4 Directors and Officers. Earnest Mathis, Jr. is Zion's President and
a director, Gary McAdam is Zion's Secretary/Treasurer and a director and Gary
A. Agron is a director of Zion.
3.5 Financial Statements. Exhibit 3.5 hereto consists of the audited
financial statements of Zion for the period ended October 31, 1998 (the "Zion
Financial Statements"). The Zion Financial Statements have been prepared in
accordance with generally accepted accounting principles and practices
consistently followed by Zion throughout the period indicated, and fairly
present the financial position of Zion as of the date of the balance sheet
included in the Zion Financial Statements and the results of operations for
the period indicated.
3.6 Absence of Changes. Since October 31, 1998, there has not been any
change in the financial condition or operations of Zion.
3.7 Absence of Undisclosed Liabilities. Except as otherwise disclosed
in this Agreement, as of the date hereof and as of the Closing Date, Zion did
not have and will not have any material debt, liability or obligation of any
nature, whether accrued, absolute, contingent or otherwise, and whether due or
to become due, that is not reflected in such balance sheet.
3.8 Tax Returns. Zion is current with all any federal, state and local
tax returns required by law and has paid all taxes, assessments, and penalties
due and payable.
3.9 Investigation of Financial Condition. Without in any manner
reducing or otherwise mitigating the representations contained herein, GeniSys
and its legal counsel and accountants shall have the opportunity to meet with
Zion's accountants and attorneys to discuss the financial condition of Zion.
Zion shall make available to GeniSys all books and records of Zion.
3.10 Trade Names and Rights. Zion does not own nor use any patent,
trademark, service mark, trade name or copyright in its business.
3.11 Compliance with Laws. Zion has complied with, and is not in
violation of, applicable federal, state or local statutes, laws or regulations
affecting its properties or the operation of its business, including all
federal and state securities laws.
3.12 Litigation. Zion is not a party in any suit, action, arbitration,
or legal, administrative or other proceeding, or governmental investigation
which is pending or, to the best knowledge of Zion, threatened against or
affecting Zion or its business, assets or financial condition. Zion is not in
default with respect to any order, writ, injunction or decree of any federal,
state, local or foreign court, department, agency or instrumentality
applicable to it. Zion is not engaged in any material litigation to recover
monies due to it.
3.13 Authority. The Board of Directors of Zion, has authorized the
execution of this Agreement and the transactions contemplated herein, and Zion
has full power and authority to execute, deliver and perform this Agreement,
and this Agreement is the legal, valid and binding obligation of Zion, and is
enforceable in accordance with its terms and conditions.
3.14 Ability to Carry Out Obligations. The execution and delivery of
this Agreement by Zion and the performance by Zion of its obligations
hereunder will not cause, constitute or conflict with or result in (a) any
breach or violation of any of the provisions of or constitute a default under
any license, indenture, mortgage, instrument, article of incorporation, bylaw
or other agreement or instrument to which Zion is a party, or by which it may
be bound, nor will any consents or authorization of any party other than those
hereto be required, (b) an event that would permit any party to any agreement
or instrument to terminate it or to accelerate the maturity of any
indebtedness or other obligation of Zion, or (c) an event that would result in
the creation or imposition of any lien, charge or encumbrance on any asset of
Zion.
3.15 Full Disclosure. None of the representations and warranties made
by Zion herein, or in any exhibit, certificate or memorandum furnished or to
be furnished by Zion or on its behalf, contains or will contain any untrue
statement of material fact or omit any material fact the omission of which
would be misleading.
3.16 Assets. Zion has no assets or liabilities except these listed in
Exhibit 3.16.
3.17 Material Contracts. Zion has no material contracts except these
listed in Exhibit 3.17.
3.18 Indemnification. Zion agrees to indemnify, defend and hold GeniSys
harmless against and in respect of any and all claims, demands, losses, costs,
expenses, obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties, and reasonable attorney fees, that it shall
incur or suffer, which arise out of, result from or relate to any breach of,
or failure by Zion to perform any of its representations, warranties,
covenants or agreements in this Agreement or in any schedule, certificate,
exhibit or other instrument furnished or to be furnished by Zion under this
Agreement.
ARTICLE IV
Covenants Prior and Subsequent to Closing
4.1 Investigative Rights. From the date of this Agreement until the
Closing Date, each party shall provide to the other party, and such other
party's counsel, accountants, auditors and other authorized representatives,
full access during normal business hours and upon reasonable advance written
notice to all of each party's properties, books, contracts, commitments and
records for the purpose of examining the same. Each party shall furnish the
other party with all information concerning each party's affairs as the other
party may reasonably request.
4.2 Conduct of Business. Prior to the Closing Date, each party shall
conduct its business in the normal course and shall not sell, pledge or assign
any assets without the prior written approval of the other party, except in
the normal course of business. Neither party shall amend its Articles of
Incorporation or Bylaws (except as may be described in this Agreement),
declare dividends, redeem or sell stock or other securities, incur additional
or newly-funded liabilities, acquire or dispose of fixed assets, change
employment terms, enter into any material or long-term contract, guarantee
obligations of any third party, settle or discharge any balance sheet
receivable for less than its stated amount, pay more on any liability than its
stated amount, or enter into any other transaction other than in the normal
course of business.
4.3 Continuing Relationships with Affiliated Companies. It is
acknowledged that J. Daniel Bell is also a principal of Dunn International and
PMSI ("Bell Companies") that currently provide services and products similar
to the that of GeniSys. J. Daniel Bell agrees, after Closing, not to divert
any clients or potential clients from GeniSys to either of the Bell Companies.
4.4. Audited Financial Statements of GeniSys. Within forty five (45)
days of the Closing Date, GeniSys will complete audited financial statements
for the year ended December 31, 1998 and the period ending March 31, 1999.
All such statements shall be prepared in accordance with generally accepted
accounting practices. The foregoing forty five (45) days may be extended by
written agreement between Zion and Zion's current President, Earnest Mathis,
Jr.
4.5 Offering of Zion Securities in Repayment of Loans. Zion is in the
process of borrowing up to $550,000 from certain individuals and entities (the
"Investors") which it has or will in turn loan to GeniSys. Following the
Closing Date, Zion will exchange up to 1,395,939 shares of its Common Stock
for $550,000 (or $.394 per share) in full payment of the Investors' loans to
Zion. Upon conversion of the loans to shares of Common Stock, the loans by
the Investors to Zion and the Zion loan to GeniSys will be canceled.
4.6 Registration of Investors Shares. GeniSys and J. Daniel Bell agree
that within forty five (45) days of the Closing Date they will cause Zion to
file an SB-2 Registration Statement with the Securities and Exchange
Commission to register the shares of Zion Common Stock issued in conversion of
the Investor loans mentioned in Section 4.5 above. The foregoing forty five
(45) days may be extended by written agreement between Zion, J. Daniel Bell
and Zion's current President, Earnest Mathis, Jr. It is further agreed that
no other shares of Zion Common Stock will be registered pursuant to this SB-2
Registration Statement ("SB-2") unless (i) such shares are being offered as
part of an equity offering for cash pursuant to the SB-2 and/or (ii) such
shares are sold in any private placement subsequent to the closing at a price
if not less than $.394 per share and a maximum of an aggregate of $250,000 is
raised in all such private placements and the current President of Zion,
Earnest Mathis, Jr. agrees in writing to the inclusion of the private
placement shares in the SB-2. Further, it is agreed that the Investors
referenced in Section 4.5 above shall have the opportunity to participate in
the purchase of one-half of all private placements referenced in 4.6 (ii)
herein.
4.7 Guarantee Regarding Bank Loan. There is currently a loan from
Central Bank - Houston, Texas, with a balance of $248,650.17 secured by the
assets of GeniSys and Dunn International, Inc. ("Dunn"), of which $202,070.09
is a debt of GeniSys and $46,580.08 is a debt of Dunn. J. Daniel Bell and
Carylyn K. Bell agree to guarantee that Central Bank will not assert a claim
against or execute upon GeniSys assets for any debts of Dunn and shall
indemnify Zion from any losses or damages, including but not limited to
attorney's fees and court costs resulting from any claim by Central Bank or
the holder of Central Bank's loan position against GeniSys' assets for
indebtedness of Dunn.
ARTICLE V
Conditions Precedent to Zion's Performance
5.1 Conditions. Zion's obligations hereunder shall be subject to the
satisfaction at or before the Closing of all the conditions set forth in this
Article V. Zion may waive any or all of these conditions in whole or in part
without prior notice; provided, however, that no such waiver of a condition
shall constitute a waiver by Zion of any other condition of or any of Zion's
other rights or remedies, at law or in equity, if GeniSys shall be in default
of any of its representations, warranties or covenants under this Agreement.
5.2 Accuracy of Representations. All representations and warranties by
GeniSys in this Agreement or in any written statement that shall be delivered
to Zion by GeniSys under this Agreement shall be true and accurate on and as
of the Closing Date as though made at that time.
5.3 Performance. GeniSys shall have performed, satisfied and complied
with all covenants, agreements and conditions required by this Agreement to be
performed or complied with by it on or before the Closing Date.
5.4 Absence of Litigation. No action, suit, or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened against GeniSys on or before the Closing Date, except
as disclosed in Section 2.12 above.
5.5 Officer's Certificate. GeniSys shall have delivered to Zion a
certificate dated the Closing Date and signed by J. Daniel Bell as the Chief
Executive Officer of GeniSys certifying that each of the conditions specified
in this Article has been fulfilled and that all of the representations set
forth in Article II are true and correct as of the Closing Date.
5.6 Certificate of Good Standing. GeniSys shall have delivered to Zion a
certificate of corporate good standing of GeniSys dated within 60 days of the
date of Closing.
5.7 Guarantee of J. Daniel Bell and Carylyn K. Bell. GeniSys shall have
delivered to Zion the personal guarantee set forth in Section 4.7 above.
ARTICLE VI
Conditions Precedent to GeniSys's Performance
6.1 Conditions. GeniSys's obligations hereunder shall be subject to the
satisfaction at or before the Closing of all the conditions set forth in this
Article VI. GeniSys may waive any or all of these conditions in whole or in
part without prior notice; provided, however, that no such waiver of a
condition shall constitute a waiver by GeniSys of any other condition of or
any of GeniSys's rights or remedies, at law or in equity, if Zion shall be in
default of any of its representations, warranties or covenants under this
Agreement.
6.2 Accuracy of Representations. All representations and warranties by
Zion in this Agreement or in any written statement that shall be delivered to
GeniSys by Zion under this Agreement shall be true and accurate on and as of
the Closing Date as though made at that time.
6.3 Performance. Zion shall have performed, satisfied and complied with
all covenants, agreements and conditions required by this Agreement to be
performed or complied with by it on or before the Closing Date.
6.4 Absence of Litigation. No action, suit or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened against Zion on or before the Closing Date.
6.5 Officer's Certificate. Zion shall have delivered to GeniSys a
certificate dated the Closing Date and signed by Earnest Mathis, Jr., as the
Chief Executive Officer of Zion, certifying that each of the conditions
specified in this Article has been fulfilled and that all of the
representations set forth in Article III are true and correct as of the
Closing Date.
6.6 Certificate of Good Standing. Zion shall have delivered to GeniSys a
certificate of corporate good standing of Zion dated within 60 days of the
date of Closing.
ARTICLE VII
Closing
7.1 Closing. The Closing of this Agreement shall be held at the Law
Offices of Michael J. Tauger, at any mutually agreeable time and date (the
"Closing Date") on March 12, 1999, unless extended by mutual agreement. At
the Closing:
(a) GeniSys shall deliver to Zion copies of Exhibit 1.2 executed by
all of the GeniSys Shareholders together with certificates representing all
outstanding GeniSys Shares duly endorsed to Zion;
(b) Zion shall deliver to the GeniSys Shareholders 7,516,740 shares
of Zion common stock, for which the GeniSys Shares have been exchanged,
pursuant to the share computations set forth in Exhibit 1.1 hereto;
(c) Zion shall deliver to GeniSys (i) Earnest Mathis, Jr's
certificate described in Section 6.5 and (ii) a signed consent of Zion's
directors, approving this Agreement and each matter to be approved under this
Agreement and (iii) Certificate of Good Standing of Zion.
(d) GeniSys shall deliver to Zion (i) J. Daniel Bell's certificate
described in Section 5.5 (ii) a signed consent and/or minutes of its directors
approving this Agreement and each matter to be approved under this Agreement
and (iii) Certificate of Good Standing of GeniSys.
(e) GeniSys shall deliver to Zion the personal guarantee set forth
in Section 4.7 above.
7.2 Ownership of Zion. Following the Closing, excluding the Zion shares
being issued to the Investors in accordance with Section 4.5 above, the stock
ownership of Zion shares shall be as follows:
GeniSys Shareholders 7,516,740 shares
Zion Shareholders 976,200 shares
Total 8,492,940 shares
ARTICLE VIII
Miscellaneous
8.1 Captions and Headings. The article and section headings throughout
this Agreement are for convenience and reference only and shall not define,
limit or add to the meaning of any provision of this Agreement.
8.2 No Oral Change. This Agreement and any provision hereof may not be
waived, changed, modified or discharged orally, but only by an agreement in
writing signed by the party against whom enforcement of any such waiver,
change, modification or discharge is sought.
8.3 Non-Waiver. The failure of any party to insist in any one or more
cases upon the performance of any of the provisions, covenants or conditions
of this Agreement or to exercise any option herein contained shall not be
construed as a waiver or relinquishment for the future of any such provisions,
covenants or conditions. No waiver by any party of one breach by another
party shall be construed as a waiver with respect to any other subsequent
breach.
8.4 Time of Essence. Time is of the essence of this Agreement and of
each and every provision hereof.
8.5 Entire Agreement. This Agreement contains the entire Agreement and
understanding between the parties hereto and supersedes all prior
negotiations, agreements and understandings.
8.6 Choice of Law. This Agreement has been executed by all parties in
the State of Colorado and shall be governed by and construed and enforced
pursuant with the laws of the State of Colorado (without regard to any
conflict of laws or principals). All actions, suits and proceedings arising
out of or in connection with this Agreement shall be brought in the courts in
the State of Colorado which shall be the exclusive forum therefor. The
parties hereby irrevocably submit to the in personam jurisdiction and process
of the courts in the State of Colorado.
8.7 Counterparts. This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
8.8 Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice
is to be given, or on the third day after mailing if mailed to the party to
whom notice is to be given, by first class mail, registered or certified,
postage prepaid, and properly addressed as follows:
Zion: Zion Enterprises, Inc.
26 West Dry Creek Circle, Suite 600
Littleton, Colorado 80120
Attn: Earnest Mathis, Jr.
GeniSys: GeniSys Information Systems, Inc.
654 North Belt, Suite 310
Houston, Texas 77060
Attn: J. Daniel Bell
8.9 Binding Effect. This Agreement shall inure to and be binding upon
the heirs, executors, personal representatives, successors and assigns of each
of the parties to this Agreement.
8.10 Mutual Cooperation. The parties hereto shall cooperate with each
other to achieve the purpose of this Agreement and shall execute such other
and further documents and take such other and further actions as may be
necessary or convenient to effect the transaction described herein.
8.11 Finders. The parties hereto represent that no finder has brought
about this Agreement, and no finder's fee has been paid or is payable by
either party.
8.12 Announcements. The parties will consult and cooperate with each
other as to the timing and content of any public announcements regarding this
Agreement.
8.13 Expenses. Each party will pay its own legal, accounting and other
out-of-pocket expenses incurred in connection with this Agreement.
8.14 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the parties set forth in this
Agreement or in any instrument, certificate, opinion or other writing
providing for in it, shall survive the Closing and remain in force for twelve
(12) months thereafter.
8.15 Exhibits. As of the execution hereof, the parties have provided
each other with the Exhibits described herein. Any material changes to the
Exhibits shall be immediately disclosed to the other party.
8.16 Binding Effect. This Agreement is a binding agreement on all
parties and is enforceable by its terms.
In witness whereof, the parties have executed this Agreement on the date
indicated above.
ZION ENTERPRISES, INC. GENISYS INFORMATION SYSTEMS, INC.
By: By:
-------------------------- ----------------------------
Earnest Mathis, Jr., J. Daniel Bell, Chief
President Executive Officer
J. DANIEL BELL CARYLYN K. BELL
- ------------------------------- ----------------------------------
J. Daniel Bell Carylyn K. Bell
<PAGE>
<PAGE>
EXHIBIT 1.1
SCHEDULE OF GENISYS SHAREHOLDERS
AND
ALLOCATION OF ZION SHARES
Number of Zion
Name of Number of GeniSys Common Shares
GeniSys Shareholder Shares Exchanged To Be Issued
- ------------------- ----------------- --------------
Carylyn Bell 1,609,000 (Class A) 6,732,221
J. Daniel Bell 10,000 (Class B) 41,841
Jeffrey Spencer 145,000 (Class A) 606,695
John Winchester 32,500 (Class A) 135,983
--------- ----------
Total 1,796,500 7,516,740
<PAGE>
<PAGE>
EXHIBIT 1.2
SUBSCRIPTION AGREEMENT
In connection with my exchange of no par value common stock of GeniSys
Corporation ("GeniSys") for the no par value common stock (the "Common Stock")
of Zion Enterprises, Inc. ("Zion"), I acknowledge the matters set forth below
and promise that the statements made herein are true. I understand that Zion
is relying on my truthfulness in issuing the Common Stock to me.
I understand that the Common Stock is being issued to me in a private
transaction in exchange for my shares of GeniSys and in reliance upon the
exemption provided in section 4(2) of the Securities Act of 1933, as amended
(the "Act") for non-public offerings and pursuant to a Share Exchange
Agreement between Zion and GeniSys. I understand that the Zion Common Stock
is "restricted" under applicable securities laws and may not be sold by me
except in a registered offering (which may not ever occur) or in a private
transaction like this one. I know this is an illiquid investment and that
therefore I may be required to hold the Common Stock for an indefinite period
of time, but under no circumstances less than one year from the date of its
issuance.
I am acquiring the Common Stock solely for my own account, for long-term
investment purposes only and not with a view to sale or other distribution. I
agree not to dispose of any Common Stock unless and until counsel for Zion
shall have determined that the intended disposition is permissible and does
not violate the Act, any applicable state securities laws or rules and
regulations promulgated thereunder.
All information, financial and otherwise, or documentation pertaining to
all aspects of my acquisition of the Common Stock and the activities and
financial information of Zion has been made available to me and my
representatives, if any, and I have had ample opportunity to meet with and ask
questions of senior officers of Zion, and I have received satisfactory answers
to any questions I asked.
In acquiring the Common Stock, I have reviewed the Agreement Concerning
the Exchange of Common Stock between GeniSys and Zion and the Exhibits thereto
and have made an independent investigation of Zion. I am an experienced
investor, have made speculative investments in the past and am capable of
analyzing the merits of an investment in the Common Stock.
I understand that the Common Stock is highly speculative, involves a
great degree of risk and should only be acquired by individuals who can afford
to lose their entire investment. Nevertheless, I consider this a suitable
investment for me because I have adequate financial resources and income to
maintain my current standard of living even after my acquisition of the Common
Stock. I know that Zion is merely a "shell" company with no assets or
liabilities, its financial affairs can fluctuate dramatically from time to
time, and that although I could lose my entire investment, I am acquiring the
Common Stock because I believe the potential rewards are commensurate with the
risk. Even if the Common Stock became worthless, I could still maintain my
standard of living without significant hardship on me or my family.
Dated as of this _____ day of _______________________, 1999.
-----------------------------------
Signature
-----------------------------------
Name, Please Print
-----------------------------------
Residence Address
-----------------------------------
City, State and Zip Code
-----------------------------------
Area Code and Telephone Number
-----------------------------------
Social Security Number
-----------------------------------
Number of GeniSys Shares Exchanged
<PAGE>
<PAGE>
EXHIBIT 3.16
ASSETS AND LIABILITIES OF ZION
The only asset of Zion is a promissory note (the "GeniSys Note") dated
February 17, 1999 reflecting a loan by Zion as Lender and GeniSys as Borrower
in the principal amount of up to $550,000.
The only liabilities of Zion are promissory notes executed by Zion to
certain individuals and entities (the "Investors") currently in the total
principal amount of $505,000 and which, at Closing, shall not exceed the
principal amount of $550,000. All principal amounts borrowed by Zion from the
Investors prior to Closing shall be loaned to GeniSys pursuant to the GeniSys
Note and the Loan Agreement between GeniSys and Zion.
<PAGE>
<PAGE>
EXHIBIT 3.17
MATERIAL CONTRACTS OF ZION
The only material contract of Zion is a Loan Agreement dated February 17,
1999 between Zion as Lender and GeniSys as Borrower whereby Zion agrees to
loan to GeniSys up to $550,000 in accordance with the terms and conditions of
the Loan Agreement, a copy of which is attached to this Exhibit 3.17.
<PAGE>
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
iGENISYS, INC.
(Corporate Name as Amended)
Formerly
ZION ENTERPRISES, INC.
(Current Name)
Pursuant to Colorado Revised Statues, Sec. 7-110-107, the undersigned
being the President and Secretary of iGeniSys, Inc. (corporate name as
amended), formerly Zion Enterprises, Inc. (current corporate name) (the
"Company" or the "Corporation"), hereby affirm that the following Amended and
Restated Articles of Incorporation correctly set forth the provisions of the
Articles of Incorporation of the Company, as amended, as said Articles of
Incorporation have been approved by a vote of the shareholders of the Company
at a special meeting called for that purpose, on May 17, 1999 that the number
of shares which voted at said special meeting for the Amended and Restated
Articles of Incorporation was sufficient for such approval, and that the
following Amended and Restated Articles of Incorporation supersede the
original Articles of Incorporation and all amendments thereto.
ARTICLE I
NAME
The name of the corporation is to be "iGeniSys, Inc."
ARTICLE II
TERMS OF EXISTENCE
The corporation shall exist in perpetuity, from and after the date of
filing this Certificate of Incorporation with the Secretary of State of the
State of Colorado, unless sooner dissolved or disincorporated according to
law.
ARTICLE III
OBJECT, PURPOSES AND POWERS
Section 1. General Objects and Purposes. To engage in any lawful
activity as may from time to time be authorized by the corporation's Board of
Directors, which is not prohibited by law or by these Articles of
Incorporation. To undertake such other activities as the Board of Directors
may deem reasonable or necessary in the furtherance of the general or specific
purposes and powers of the corporation.
Section 2. General Powers. Further, the corporation shall have and
may exercise all the rights, powers and privileges now or hereafter conferred
upon corporations organized under the laws of the State of Colorado and in
addition may do everything necessary, suitable, proper for, or incident to,
the accomplishment of any of these corporate purposes.
Section 3. Specific Purposes and Powers. Subject to any specific
written limitations or restrictions imposed by the Colorado Corporation Code
or by other law, or by these Articles of Incorporation, and not in limitation
of any of the statutory powers herein granted, the corporation shall have the
following purposes and exercise the following specific powers:
a. To Deal in Real Property. To acquire, hold, own, improve, manage,
operate, let as lessor, sell, convey or mortgage, or otherwise deal with,
either alone or in conjunction with others, real estate of every right, title
or interest, character and description whatsoever and wheresoever situated.
b. To Deal in Personal Property, Generally. To acquire, hold, own,
manage, operate, mortgage, pledge, hypothecate, exchange, sell, deal in and
dispose of, either alone or in conjunction with others, personal property and
commodities of every right, title or interest, character and description
whatsoever and wheresoever situated.
c. To Enter into Profit Sharing Arrangements and Partnerships. To
enter into any lawful arrangement for sharing profits, union of interest,
reciprocal association, or cooperative association with any corporation,
association, partnership, individual, or other legal entity for the carrying
on of any business, the purpose of which is similar to the Purposes set forth
in Section 1 of this Article, and to enter into any general or limited
partnership, the purpose of which is similar to such Purposes.
d. To Execute Guarantees. To make any guaranty respecting stocks,
dividends, securities, indebtedness, interest, contracts or other obligations
created by any individual, partnership, association, corporation, or other
entity, to the extent that such guaranty is made in pursuance to the Purposes
set forth in Section 1 of this Article.
e. To Borrow Funds. To borrow or raise monies for any of the Purposes
of the corporation set forth in Section 1 of this Article, and, from time to
time, without limit as to amount, to execute, accept, endorse, and deliver as
evidence of such borrowing, all kinds of securities, including, but without
limiting the generality thereof, promissory notes, drafts, bills of exchange,
warrants, bonds, debentures and other negotiable or non-negotiable instruments
and evidences of indebtedness; and to secure the payment and full performance
of such securities by mortgage on, or pledge, conveyance or assignment in
trust of, the whole, or any part of the assets of the corporation.
f. To Lend Funds. To lend money to individuals or other business
entities and to charge interest for the same and to engage in the business,
buying, loaning money upon, selling, transferring, assigning, discounting,
borrowing money upon and pledging as collateral, and otherwise dealing as
principal agent or broker in bills of lading, warehouse receipts, evidence of
deposit and storage of personal property, bonds, stocks, promissory notes,
commercial paper account, invoices, choses in action, interest in estates,
contracts, mortgages on real or personal property, pledges of personal
property and other evidence of indebtedness of persons, firms or corporations,
and owning, holding or conveying such real estate as may be necessary in the
operating of its business, and purchasing, acquiring and holding shares of
stock in other corporations, domestic and foreign, and doing all things
incidental thereto; to do a general brokerage business, to buy, sell and deal
in all kinds of listed and unlisted stocks and bonds on commission; not for
the purpose of carrying on the business of banking, insurance or the operation
of railroads or the discounting of bills and notes, or the buying and selling
of bills of exchange.
Section 4. All the foregoing listed powers and/or purposes of the
corporation are both purposes and powers of the corporation and shall be
construed as such.
ARTICLE IV
CAPITAL STOCK
Section 1. The total number of shares of capital stock which the
corporation shall have authority to issue is one hundred fifty million ten
thousand (150,010,000) shares, of which one hundred million ten thousand
(100,010,000) shall be designated common stock, having a par value of one-
tenth of one cent ($.001) each, and of which fifty million (50,000,000) shall
be designated preferred stock of the corporation, having a par value of one
cent ($.01) each. All or any part of the common stock may be issued by the
corporation from time to time and for such consideration and on such terms as
may be determined and fixed by the Board of Directors, without action of the
stockholders, as provided by law, unless the Board of Directors deems it
advisable to obtain the advice of the stockholders. Said stock may be issued
for money, property, services or other things of value, and when issued shall
be issued as fully paid and non-assessable. The private property of stock
holders shall not be liable for corporation debts. Subject to the
preferences, rights and restrictions which may be ascribed to the preferred
stock of the corporation by the Board of Directors, the preferences and
relative participating optional or other special rights and qualifications,
limitations or restrictions thereof of the common stock of the corporation are
as follows:
a. Dividends. Dividends may be paid upon the common stock, as and when
declared by the Board of Directors, out of funds of the corporation legally
available therefor.
b. Payment on Liquidation. Upon any liquidation, dissolution and
termination of the corporation, and after payment or setting aside of any
amount sufficient to provide for payment in full of all debts and liabilities
of, and other claims against the corporation, the assets shall be distributed
pro rata to the holders of the common stock.
c. Voting Rights. At any meeting of the stockholders of the
Corporation each holder of Common Stock shall be entitled to one vote for each
share outstanding in the name of such holder on the books of the Corporation
on the date fixed for determination of voting rights.
The stockholders, by vote or concurrence of a majority of the
outstanding shares of the Corporation entitled to vote on the subject matter,
may take any action which would otherwise require a two-thirds (2/3) vote
under the Colorado Corporation Code, as amended.
d. Cumulative Voting. Cumulative voting shall not be allowed in the
election of directors or for any other purpose.
e. Pre-Emptive Rights. Unless otherwise determined by the Board of
Directors, no stockholder of the corporation shall have pre-emptive rights to
subscribe for any additional shares of stock, or for other securities of any
class, or for rights, warrants or options to purchase stock for the scrip, or
for securities of any kind convertible into stock or carrying stock purchase
warrants or privileges.
f. Restrictions on Sale or Disposition. All lawful restrictions on the
sale or other disposition of shares may be placed upon all or a portion or
portions of the certificates evidencing the corporation's shares.
Section 2. The authorized common stock of the Company shall consist
of a total of one hundred million ten thousand (100,010,000) shares having a
par value of $.001 each. The common stock shall be divided into two classes
of which one hundred million (100,000,000) shares shall be designated Class A
Common Stock and ten thousand (10,000) shares shall be designated Class B
Common Stock. The shares of Class A Common Stock and Class B Common Stock
shall be identical in all respects as to the relative rights and preferences
of holders of such Class A and Class B Common Stock with respect to dividends,
payment on liquidation, lack of cumulative voting and pre-emptive rights and
restrictions on sale or disposition as more fully set forth in Section 1 of
this Article IV. However, the Class B Common Stock may only be issued to J.
Daniel Bell or an entity directly or indirectly controlled by J. Daniel Bell;
and holders of Class B Common Stock, voting as a separate class to the
exclusion of all other classes of capital stock of the Corporation, shall have
the right to elect a majority of the members of the Company's Board of
Directors. All issued and outstanding shares of Class B Common Stock shall
automatically convert into an equal number of shares of Class A Common Stock,
with respect to the shares so transferred, upon transfer to a person other
than J. Daniel Bell or an entity controlled directly or indirectly by J.
Daniel Bell.
Section 3. The preferred stock of the corporation shall be issued in
one or more series as may be determined from time to time by the Board of
Directors. In establishing a series the Board of Directors shall give to it a
distinctive designation so as to distinguish it from the shares of all other
series and classes, shall fix the number of shares in such series, and the
preferences, rights and restrictions thereof. All shares of any one series
shall be alike in every particular. All series shall be alike except that
there may be variation as to the following: (1) the rate of distribution, (2)
the price at and the terms and conditions on which shares shall be redeemed,
(3) the amount payable upon shares for distributions of any kind, (4) sinking
fund provisions for the redemption of shares, and (5) the terms and conditions
on which shares may be converted if the shares of any series are issued with
the privilege of conversion, and (6) voting rights except as limited by law.
<PAGE>
ARTICLE V
REGISTERED OFFICE AND AGENT
The address of the registered office of the corporation will be at 370
17th Street, Suite 2350, Denver, CO 80202. The name of the registered agent
at such address is Carylyn K. Bell. The principal office of this corporation
and its principal place of business is the same address as that of the initial
registered office. The corporation may conduct part or all of its business in
the County of Boulder, or the State of Colorado, or the United States, or of
the world, and it may hold, purchase, mortgage, lease and convey real and
personal property in any of such places.
ARTICLE VI
DIRECTORS
The business and affairs of this corporation and the management thereof
shall be vested in a Board of Directors consisting of not less than one (1)
nor more than ten (10) members. Directors need not be stockholders of the
corporation.
The number of directors may be increased or decreased from time to time,
within the limits stated above, by action of the majority of the whole Board
of Directors.
ARTICLE VII
RIGHTS OF DIRECTORS, OFFICERS AND MANAGEMENT
TO CONTRACT WITH CORPORATION
No contract or other transaction between the corporations or any other
corporation whether or not a majority of the shares of capital stock of such
other corporation is owned by this corporation, and no act of this corporation
shall be in any way affected or invalidated by the fact that any of the
directors, officers or other members of the management of this corporation are
pecuniarily or otherwise interested in or are directors, officers or members
of management of such other corporation. Any director, officer or other
member of management of this corporation individually, or any firm of which
such director, officer or member of management may be a member, may be a party
to, or may be pecuniarily or otherwise interested in, any contract or
transaction of this corporation, provided, however, that the fact that he or
such firm is so interested shall be disclosed or shall have been known to the
Board of Directors of this corporation or a majority thereof. Any director of
this corporation who is also a director, officer or member of management of
such other corporation, or who is so interested, may be counted in determining
the existence of a quorum at any meeting of the Board of Directors of this
corporation that shall authorize such contract or transaction, and may vote at
any such meeting to authorize such contract or transaction, with like force
and effect as if he were not such director, officer or member of management of
such other corporation or not so interested.
ARTICLE VIII
INDEMNIFICATION
The Corporation may and shall indemnify each director, officer and any
employee or agent of the Corporation, his heirs, executors and administrators,
against any and all expenses or liability reasonably incurred by him in
connection with any action, suit or proceeding to which he may be a party by
reason of his being or having been a director, officer, employee or agent of
the Corporation to the full extent required or permitted by the Colorado
Corporation Code, as amended.
ARTICLE IX
CORPORATE OPPORTUNITIES
The officers, directors and other members of management of this
corporation shall be subject to the Doctrine of Corporate Opportunities only
insofar as it applies to business opportunities in which this corporation has
expressed an interest as determined from time to time by the corporation's
Board of Directors as evidenced by resolutions appearing in the corporation's
Minutes. When such areas of interest are delineated, all such business
opportunities within such areas or interests which come to the attention of
the officers, directors and other members of management of this corporation
shall be disclosed promptly to this corporation and made available to it. The
Board of Directors may reject any business opportunity presented to it and
therefore any officer, director or other member of management may avail
himself of such opportunity. Until such time as this corporation, through its
Board of Directors, has designated an area of interest, the officers,
directors and other members of management of this corporation shall be free to
engage in such areas of interest on their own and this Doctrine shall not
limit the rights of any officer, director or other member of this corporation
to continue a business existing prior to the time that such area of interest
is designated by this corporation.
ARTICLE X
PARTIAL LIQUIDATION
The Board of Directors may, from time to time, distribute to the
corporation's shareholders, in partial liquidation, out of stated capital or
capital surplus of the corporation, a portion of its assets, in cash or
properties if (a) at the time the corporation is solvent; (b) such
distribution would not render the corporation insolvent; (c) all cumulative
dividends on all preferred or special classes of shares entitled to
preferential dividends shall have been paid fully; (d) the distribution would
not reduce the remaining net assets of the corporation below the aggregate
preferential amount payable in the amount of voluntary liquidation to the
holders of shares having preferential rights to the assets of the corporation
in the event of liquidation; (e) the distribution is not made out of capital
surplus arising from unrealized depreciation of assets of re-evaluation of
surplus; (f) the distribution is identified as a distribution in partial
liquidation and the amount per share is disclosed to the shareholders
receiving the same concurrently with the distribution thereof.
ARTICLE XI
DIRECTORS' LIABILITY
a. A director of this corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent that such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Colorado as the same exists or may hereafter be amended.
b. Any repeal or modification of the foregoing paragraph A by the
stockholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of such
repeal or modification.
IN WITNESS WHEREOF, the President of GeniSys International, Inc. has
hereunto set his hand and seal this 30th day of June, 1999.
iGENISYS, INC.
/s/ Carylyn K. Bell By: /s/ J. Daniel Bell
- --------------------------------- ------------------------------
Carylyn K. Bell, Registered Agent J. Daniel Bell, President
ATTEST:
/s/ Carylyn K. Bell
- ---------------------------------
Carylyn K. Bell, Secretary
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
I, Gini Goldstein, a Notary Public, hereby certify that on the 30th day
of June, 1999, personally appeared before me J. Daniel Bell and Carylyn K.
Bell as President and Secretary, respectively, of iGeniSys, Inc., who, being
by me first duly sworn, severally declared that they were the persons who
signed the foregoing document and that the statements therein contained are
true.
My commission expires: 10/10/99
[SEAL]
/s/ Notary Public
--------------------------------
Notary Public
<PAGE>
BYLAWS
OF
ZION ENTERPRISES, INC.,
a Colorado corporation
<PAGE>
<PAGE>
BYLAWS
Table of Contents
Article. . . . . . . . . . . . . . . . . . . . . . . . . . .Page
I. Offices . . . . . . . . . . . . . . . . . . . . . . . 1
II. Shareholders. . . . . . . . . . . . . . . . . . . . . 1
III. Board of Directors. . . . . . . . . . . . . . . . . . 8
IV. Officers and Agents . . . . . . . . . . . . . . . . . 12
V. Stock . . . . . . . . . . . . . . . . . . . . . . . . 15
VI. Indemnification of Certain Persons. . . . . . . . . . 17
VII. Provision of Insurance. . . . . . . . . . . . . . . . 20
VIII. Miscellaneous . . . . . . . . . . . . . . . . . . . . 20
Effective: March 1, 1996
<PAGE>
<PAGE>
BYLAWS
OF
ZION ENTERPRISES, INC.
ARTICLE I
Offices
The principal office of the corporation shall be designated from time to
time by the corporation and may be within or outside of Colorado.
The corporation may have such other offices, either within or outside
Colorado, as the board of directors may designate or as the business of the
corporation may require from time to time.
The registered office of the corporation required by the Colorado
Business Corporation Act to be maintained in Colorado may be, but need not be,
identical with the principal office, and the address of the registered office
may be changed from time to time by the board of directors.
ARTICLE II
Shareholders
Section 1. Annual Meeting. The annual meeting of the shareholders shall
be held each year on a date and at a time fixed by the board of directors of
the corporation (or by the president in the absence of action by the board of
directors), beginning with the year 1997, for the purpose of electing
directors and for the transaction of such other business as may come before
the meeting. If the election of directors is not held on the day fixed as
provided herein for any annual meeting of the shareholders, or any adjournment
thereof, the board of directors shall cause the election to be held at a
special meeting of the shareholders as soon thereafter as it may conveniently
be held.
A shareholder may apply to the district court in the county in Colorado
where the corporation's principal office is located or, if the corporation has
no principal office in Colorado, to the district court of the county in which
the corporation's registered office is located to seek an order that a
shareholder meeting be held (i) if an annual meeting was not held within six
months after the close of the corporation's most recently ended fiscal year or
fifteen months after its last annual meeting, whichever is earlier, or (ii) if
the shareholder participated in a proper call of or proper demand for a
special meeting and notice of the special meeting was not given within thirty
days after the date of the call or the date the last of the demands necessary
to require calling of the meeting was received by the corporation pursuant to
C.R.S. ? 7-107-102(1)(b), or the special meeting was not held in accordance
with the notice.
Section 2. Special Meetings. Unless otherwise prescribed by statute,
special meetings of the shareholders may be called for any purpose by the
president or by the board of directors. The president shall call a special
meeting of the shareholders if the corporation receives one or more written
demands for the meeting, stating the purpose or purposes for which it is to be
held, signed and dated by holders of shares representing at least ten percent
of all the votes entitled to be cast on any issue proposed to be considered at
the meeting.
Section 3. Place of Meeting. The board of directors may designate any
place, either within or outside Colorado, as the place for any annual meeting
or any special meeting called by the board of directors. A waiver of notice
signed by all shareholders entitled to vote at a meeting may designate any
place, either within or outside Colorado, as the place for such meeting. If
no designation is made, or if a special meeting is called other than by the
board, the place of meeting shall be the principal office of the corporation.
Section 4. Notice of Meeting. Written notice stating the place, date,
and hour of the meeting shall be given not less than ten nor more than sixty
days before the date of the meeting, except that (i) if the number of
authorized shares is to be increased, at least thirty days' notice shall be
given, or (ii) any other longer notice period is required by the Colorado
Business Corporation Act. The secretary shall be required to give such notice
only to shareholders entitled to vote at the meeting except as otherwise
required by the Colorado Business Corporation Act.
Notice of a special meeting shall include a description of the purpose or
purposes of the meeting. Notice of an annual meeting need not include a
description of the purpose or purposes of the meeting except the purpose or
purposes shall be stated with respect to (i) an amendment to the articles of
incorporation of the corporation, (ii) a merger or share exchange in which the
corporation is a party and, with respect to a share exchange, in which the
corporation's shares will be acquired, (iii) a sale, lease, exchange or other
disposition, other than in the usual and regular course of business, of all or
substantially all of the property of the corporation or of another entity
which this corporation controls, in each case with or without the goodwill,
(iv) a dissolution of the corporation, (v) restatement of the articles of
incorporation, or (vi) any other purpose for which a statement of purpose is
required by the Colorado Business Corporation Act. Notice shall be given
personally or by mail, private carrier, telegraph, teletype, electronically
transmitted facsimile or other form of wire or wireless communication by or at
the direction of the president, the secretary, or the officer or persons
calling the meeting, to each shareholder of record entitled to vote at such
meeting. If mailed and if in a comprehensible form, such notice shall be
deemed to be given and effective when deposited in the United States mail,
properly addressed to the shareholder at his address as it appears in the
corporation's current record of shareholders, with first class postage
prepaid. If notice is given other than by mail, and provided that such notice
is in a comprehensible form, the notice is given and effective on the date
actually received by the shareholder.
If requested by the person or persons lawfully calling such meeting, the
secretary shall give notice thereof at corporate expense. No notice need be
sent to any shareholder if three successive notices mailed to the last known
address of such shareholder have been returned as undeliverable until such
time as another address for such shareholder is made known to the corporation
by such shareholder. In order to be entitled to receive notice of any
meeting, a shareholder shall advise the corporation in writing of any change
in such shareholder's mailing address as shown on the corporation's books and
records.
When a meeting is adjourned to another date, time or place, notice need
not be given of the new date, time or place if the new date, time or place of
such meeting is announced before adjournment at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact
any business which may have been transacted at the original meeting. If the
adjournment is for more than 120 days, or if a new record date is fixed for
the adjourned meeting, a new notice of the adjourned meeting shall be given to
each shareholder of record entitled to vote at the meeting as of the new
record date.
A shareholder may waive notice of a meeting before or after the time and
date of the meeting by a writing signed by such shareholder. Such waiver
shall be delivered to the corporation for filing with the corporate records,
but this delivery and filing shall not be conditions to the effectiveness of
the waiver. Further, by attending a meeting either in person or by proxy, a
shareholder waives objection to lack of notice or defective notice of the
meeting unless the shareholder objects at the beginning of the meeting to the
holding of the meeting or the transaction of business at the meeting because
of lack of notice or defective notice. By attending the meeting, the
shareholder also waives any objection to consideration at the meeting of a
particular matter not within the purpose or purposes described in the meeting
notice unless the shareholder objects to considering the matter when it is
presented.
Section 5. Fixing of Record Date. For the purpose of determining
shareholders entitled to (i) notice of or vote at any meeting of shareholders
or any adjournment thereof, (ii) receive distributions or share dividends,
(iii) demand a special meeting, or (iv) make a determination of shareholders
for any other proper purpose, the board of directors may fix a future date as
the record date for any such determination of shareholders, such date in any
case to be not more than seventy days, and, in case of a meeting of
shareholders, not less than ten days, prior to the date on which the
particular action requiring such determination of shareholders is to be taken.
If no record date is fixed by the directors, the record date shall be the day
before the notice of the meeting is given to shareholders, or the date on
which the resolution of the board of directors providing for a distribution is
adopted, as the case may be. When a determination of shareholders entitled to
vote at any meeting of shareholders is made as provided in this section, such
determination shall apply to any adjournment thereof unless the board of
directors fixes a new record date, which it must do if the meeting is
adjourned to a date more than 120 days after the date fixed for the original
meeting. Unless otherwise specified when the record date is fixed, the time
of day for such determination shall be as of the corporation's close of
business on the record date.
Notwithstanding the above, the record date for determining the
shareholders entitled to take action without a meeting or entitled to be given
notice of action so taken shall be the date a writing upon which the action is
taken is first received by the corporation. The record date for determining
shareholders entitled to demand a special meeting shall be the date of the
earliest of any of the demands pursuant to which the meeting is called.
Section 6. Voting Lists. After a record date is fixed for a
shareholders' meeting, the secretary shall make, at the earlier of ten days
before such meeting or two business days after notice of the meeting has been
given, a complete list of the shareholders entitled to be given notice of such
meeting or any adjournment thereof. The list shall be arranged by voting
groups and within each voting group by class or series of shares, shall be in
alphabetical order within each class or series, and shall show the address of
and the number of shares of each class or series held by each shareholder.
For the period beginning the earlier of ten days prior to the meeting or two
business days after notice of the meeting is given and continuing through the
meeting and any adjournment thereof, this list shall be kept on file at the
principal office of the corporation, or at a place (which shall be identified
in the notice) in the city where the meeting will be held. Such list shall be
available for inspection on written demand by any shareholder (including for
the purpose of this Section 6 any holder of voting trust certificates) or his
agent or attorney during regular business hours and during the period
available for inspection. The original stock transfer books shall be prima
facie evidence as to who are the shareholders entitled to examine such list or
transfer books or to vote at any meeting of shareholders.
Any shareholder, his agent or attorney may copy the list during regular
business hours and during the period it is available for inspection, provided
(i) the shareholder has been a shareholder for at least three months
immediately preceding the demand or holds at least five percent of all
outstanding shares of any class of shares as of the date of the demand, (ii)
the demand is made in good faith and for a purpose reasonably related to the
demanding shareholder's interest as a shareholder, (iii) the shareholder
describes with reasonable particularity the purpose and the records the
shareholder desires to inspect, (iv) the records are directly connected with
the described purpose, and (v) the shareholder pays a reasonable charge
covering the costs of labor and material for such copies, not to exceed the
estimated cost of production and reproduction.
Section 7. Recognition Procedure for Beneficial Owners. The board of
directors may adopt by resolution a procedure whereby a shareholder of the
corporation may certify in writing to the corporation that all or a portion of
the shares registered in the name of such shareholder are held for the account
of a specified person or persons. The resolution may set forth (i) the types
of nominees to which it applies, (ii) the rights or privileges that the
corporation will recognize in a beneficial owner, which may include rights and
privileges other than voting, (iii) the form of certification and the
information to be contained therein, (iv) if the certification is with respect
to a record date, the time within which the certification must be received by
the corporation, (v) the period for which the nominee's use of the procedure
is effective, and (vi) such other provisions with respect to the procedure as
the board deems necessary or desirable. Upon receipt by the corporation of a
certificate complying with the procedure established by the board of
directors, the persons specified in the certification shall be deemed, for the
purpose or purposes set forth in the certification, to be the registered
holders of the number of shares specified in place of the shareholder making
the certification.
Section 8. Quorum and Manner of Acting. A majority of the votes
entitled to be cast on a matter by a voting group represented in person or by
proxy, shall constitute a quorum of that voting group for action on the
matter. If less than a majority of such votes are represented at a meeting, a
majority of the votes so represented may adjourn the meeting from time to time
without further notice, for a period not to exceed 120 days for any one
adjournment. If a quorum is present at such adjourned meeting, any business
may be transacted which might have been transacted at the meeting as
originally noticed. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum, unless the
meeting is adjourned and a new record date is set for the adjourned meeting.
If a quorum exists, action on a matter other than the election of
directors by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast within the voting group
opposing the action, unless the vote of a greater number or voting by classes
is required by law or the articles of incorporation.
Section 9. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy by signing an appointment form or similar writing, either
personally or by his duly authorized attorney-in-fact. A shareholder may also
appoint a proxy by transmitting or authorizing the transmission of a telegram,
teletype, or other electronic transmission providing a written statement of
the appointment to the proxy, a proxy solicitor, proxy support service
organization, or other person duly authorized by the proxy to receive
appointments as agent for the proxy, or to the corporation. The transmitted
appointment shall set forth or be transmitted with written evidence from which
it can be determined that the shareholder transmitted or authorized the
transmission of the appointment. The proxy appointment form or similar
writing shall be filed with the secretary of the corporation before or at the
time of the meeting. The appointment of a proxy is effective when received by
the corporation and is valid for eleven months unless a different period is
expressly provided in the appointment form or similar writing.
Any complete copy, including an electronically transmitted facsimile, of
an appointment of a proxy may be substituted for or used in lieu of the
original appointment for any purpose for which the original appointment could
be used.
Revocation of a proxy does not affect the right of the corporation to
accept the proxy's authority unless (i) the corporation had notice that the
appointment was coupled with an interest and notice that such interest is
extinguished is received by the secretary or other officer or agent authorized
to tabulate votes before the proxy exercises his authority under the
appointment, or (ii) other notice of the revocation of the appointment is
received by the secretary or other officer or agent authorized to tabulate
votes before the proxy exercises his authority under the appointment. Other
notice of revocation may, in the discretion of the corporation, be deemed to
include the appearance at a shareholders' meeting of the shareholder who
granted the proxy and his voting in person on any matter subject to a vote at
such meeting.
The death or incapacity of the shareholder appointing a proxy does not
affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other
officer or agent authorized to tabulate votes before the proxy exercises his
authority under the appointment.
The corporation shall not be required to recognize an appointment made
irrevocable if it has received a writing revoking the appointment signed by
the shareholder (including a shareholder who is a successor to the shareholder
who granted the proxy) either personally or by his attorney-in-fact,
notwithstanding that the revocation may be a breach of an obligation of the
shareholder to another person not to revoke the appointment.
Subject to Section 11 and any express limitation on the proxy's authority
appearing on the appointment form, the corporation is entitled to accept the
proxy's vote or other action as that of the shareholder making the
appointment.
Section 10. Voting of Shares. Each outstanding share, regardless of
class, shall be entitled to one vote, except in the election of directors, and
each fractional share shall be entitled to a corresponding fractional vote on
each matter submitted to a vote at a meeting of shareholders, except to the
extent that the voting rights of the shares of any class or classes are
limited or denied by the articles of incorporation as permitted by the
Colorado Business Corporation Act. Cumulative voting shall not be permitted
in the election of directors or for any other purpose. Each record holder of
stock shall be entitled to vote in the election of directors and shall have as
many votes for each of the shares owned by him as there are directors to be
elected and for whose election he has the right to vote.
At each election of directors, that number of candidates equaling the
number of directors to be elected, having the highest number of votes cast in
favor of their election, shall be elected to the board of directors.
Except as otherwise ordered by a court of competent jurisdiction upon a
finding that the purpose of this Section would not be violated in the
circumstances presented to the court, the shares of the corporation are not
entitled to be voted if they are owned, directly or indirectly, by a second
corporation, domestic or foreign, and the first corporation owns, directly or
indirectly, a majority of the shares entitled to vote for directors of the
second corporation except to the extent the second corporation holds the
shares in a fiduciary capacity.
Redeemable shares are not entitled to be voted after notice of redemption
is mailed to the holders and a sum sufficient to redeem the shares has been
deposited with a bank, trust company or other financial institution under an
irrevocable obligation to pay the holders the redemption price on surrender of
the shares.
Section 11. Corporation's Acceptance of Votes. If the name signed on a
vote, consent, waiver, proxy appointment, or proxy appointment revocation
corresponds to the name of a shareholder, the corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver, proxy appointment or
proxy appointment revocation and give it effect as the act of the shareholder.
If the name signed on a vote, consent, waiver, proxy appointment or proxy
appointment revocation does not correspond to the name of a shareholder, the
corporation, if acting in good faith, is nevertheless entitled to accept the
vote, consent, waiver, proxy appointment or proxy appointment revocation and
to give it effect as the act of the shareholder if:
(i) the shareholder is an entity and the name signed purports to be that of
an officer or agent of the entity;
(ii) the name signed purports to be that of an administrator, executor,
guardian or conservator representing the shareholder and, if the corporation
requests, evidence of fiduciary status acceptable to the corporation has been
presented with respect to the vote, consent, waiver, proxy appointment or
proxy appointment revocation;
(iii) the name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder and, if the corporation requests, evidence of
this status acceptable to the corporation has been presented with respect to
the vote, consent, waiver, proxy appointment or proxy appointment revocation;
(iv) the name signed purports to be that of a pledgee, beneficial owner or
attorney-in-fact of the shareholder and, if the corporation requests, evidence
acceptable to the corporation of the signatory's authority to sign for the
shareholder has been presented with respect to the vote, consent, waiver,
proxy appointment or proxy appointment revocation;
(v) two or more persons are the shareholder as co-tenants or fiduciaries and
the name signed purports to be the name of at least one of the co-tenants or
fiduciaries, and the person signing appears to be acting on behalf of all the
co-tenants or fiduciaries; or
(vi) the acceptance of the vote, consent, waiver, proxy appointment or proxy
appointment revocation is otherwise proper under rules established by the
corporation that are not inconsistent with this Section 11.
The corporation is entitled to reject a vote, consent, waiver, proxy
appointment or proxy appointment revocation if the secretary or other officer
or agent authorized to tabulate votes, acting in good faith, has reasonable
basis for doubt about the validity of the signature on it or about the
signatory's authority to sign for the shareholder.
Neither the corporation nor its officers nor any agent who accepts or
rejects a vote, consent, waiver, proxy appointment or proxy appointment
revocation in good faith and in accordance with the standards of this Section
is liable in damages for the consequences of the acceptance or rejection.
Section 12. Informal Action by Shareholders. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a written consent (or counterparts thereof) that sets forth the
action so taken is signed by all of the shareholders entitled to vote with
respect to the subject matter thereof and received by the corporation. Such
consent shall have the same force and effect as a unanimous vote of the
shareholders and may be stated as such in any document. Action taken under
this Section 12 is effective as of the date the last writing necessary to
effect the action is received by the corporation, unless all of the writings
specify a different effective date, in which case such specified date shall be
the effective date for such action. If any shareholder revokes his consent as
provided for herein prior to what would otherwise be the effective date, the
action proposed in the consent shall be invalid. The record date for
determining shareholders entitled to take action without a meeting is the date
the corporation first receives a writing upon which the action is taken.
Any shareholder who has signed a writing describing and consenting to
action taken pursuant to this Section 12 may revoke such consent by a writing
signed by the shareholder describing the action and stating that the
shareholder's prior consent thereto is revoked, if such writing is received by
the corporation before the effectiveness of the action.
Section 13. Meetings by Telecommunication. Any or all of the
shareholders may participate in an annual or special shareholders' meeting by,
or the meeting may be conducted through the use of, any means of communication
by which all persons participating in the meeting may hear each other during
the meeting. A shareholder participating in a meeting by this means is deemed
to be present in person at the meeting.
ARTICLE III
Board of Directors
Section 1. General Powers. 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, its board of directors, except as
otherwise provided in the Colorado Business Corporation Act or the articles of
incorporation.
Section 2. Number, Qualifications and Tenure. The number of directors
of the corporation shall be fixed from time to time by the board of directors,
within a range of no less than one or more than nine, but no decrease in the
number of directors shall have the effect of shortening the term of any
incumbent director. A director shall be a natural person who is eighteen
years of age or older. A director need not be a resident of Colorado or a
shareholder of the corporation.
Directors shall be elected at each annual meeting of shareholders. Each
director shall hold office until the next annual meeting of shareholders
following his election and thereafter until his successor shall have been
elected and qualified. Directors shall be removed in the manner provided by
the Colorado Business Corporation Act. Any director may be removed by the
shareholders of the voting group that elected the director, with or without
cause, at a meeting called for that purpose. The notice of the meeting shall
state that the purpose or one of the purposes of the meeting is removal of the
director. A director may be removed only if the number of votes cast in favor
of removal exceeds the number of votes cast against removal.
Section 3. Vacancies. Any director may resign at any time by giving
written notice to the secretary. Such resignation shall take effect at the
time the notice is received by the secretary unless the notice specifies a
later effective date. Unless otherwise specified in the notice of
resignation, the corporation's acceptance of such resignation shall not be
necessary to make it effective. Any vacancy on the board of directors may be
filled by the affirmative vote of a majority of the shareholders at a special
meeting called for that purpose or by the board of directors. If the
directors remaining in office constitute fewer than a quorum of the board, the
directors may fill the vacancy by the affirmative vote of a majority of all
the directors remaining in office. If elected by the directors, the director
shall hold office until the next annual shareholders' meeting at which
directors are elected. If elected by the shareholders, the director shall
hold office for the unexpired term of his predecessor in office; except that,
if the director's predecessor was elected by the directors to fill a vacancy,
the director elected by the shareholders shall hold office for the unexpired
term of the last predecessor elected by the shareholders.
Section 4. Regular Meetings. A regular meeting of the board of
directors shall be held without notice immediately after and at the same place
as the annual meeting of shareholders. The board of directors may provide by
resolution the time and place, either within or outside Colorado, for the
holding of additional regular meetings without other notice.
Section 5. Special Meetings. Special meetings of the board of directors
may be called by or at the request of the president or any one (1) of the
directors. The person or persons authorized to call special meetings of the
board of directors may fix any place, either within or outside Colorado, as
the place for holding any special meeting of the board of directors called by
them, provided that no meeting shall be called outside the State of Colorado
unless a majority of the board of directors has so authorized.
Section 6. Notice. Notice of the date, time and place of any special
meeting shall be given to each director at least two days prior to the meeting
by written notice either personally delivered or mailed to each director at
his business address, or by notice transmitted by private courier, telegraph,
telex, electronically transmitted facsimile or other form of wire or wireless
communication. If mailed, such notice shall be deemed to be given and to be
effective on the earlier of (i) five days after such notice is deposited in
the United States mail, properly addressed, with first class postage prepaid,
or (ii) the date shown on the return receipt, if mailed by registered or
certified mail return receipt requested, provided that the return receipt is
signed by the director to whom the notice is addressed. If notice is given by
telex, electronically transmitted facsimile or other similar form of wire or
wireless communication, such notice shall be deemed to be given and to be
effective when sent, and with respect to a telegram, such notice shall be
deemed to be given and to be effective when the telegram is delivered to the
telegraph company. If a director has designated in writing one or more
reasonable addresses or facsimile numbers for delivery of notice to him,
notice sent by mail, telegraph, telex, electronically transmitted facsimile or
other form of wire or wireless communication shall not be deemed to have been
given or to be effective unless sent to such addresses or facsimile numbers,
as the case may be.
A director may waive notice of a meeting before or after the time and
date of the meeting by a writing signed by such director. Such waiver shall
be delivered to the secretary for filing with the corporate records, but such
delivery and filing shall not be conditions to the effectiveness of the
waiver. Further, a director's attendance at or participation in a meeting
waives any required notice to him of the meeting unless at the beginning of
the meeting, or promptly upon his later arrival, the director objects to
holding the meeting or transacting business at the meeting because of lack of
notice or defective notice and does not thereafter vote for or assent to
action taken at the meeting. Neither the business to be transacted at, nor
the purpose of, any regular or special meeting of the board of directors need
be specified in the notice or waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of directors fixed by the
board of directors pursuant to Article III, Section 2 or, if no number is
fixed, a majority of the number in office immediately before the meeting
begins, shall constitute a quorum for the transaction of business at any
meeting of the board of directors.
Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the
board of directors.
Section 9. Compensation. By resolution of the board of directors, any
director may be paid any one or more of the following: his expenses, if any,
of attendance at meetings, a fixed sum for attendance at each meeting, a
stated salary as director, or such other compensation as the corporation and
the director may reasonably agree upon. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor.
Section 10. Presumption of Assent. A director of the corporation who is
present at a meeting of the board of directors or committee of the board at
which action on any corporate matter is taken shall be presumed to have
assented to all action taken at the meeting unless (i) the director objects at
the beginning of the meeting, or promptly upon his arrival, to the holding of
the meeting or the transaction of business at the meeting and does not
thereafter vote for or assent to any action taken at the meeting, (ii) the
director contemporaneously requests that his dissent or abstention as to any
specific action taken be entered in the minutes of the meeting, or (iii) the
director causes written notice of his dissent or abstention as to any specific
action to be received by the presiding officer of the meeting before its
adjournment or by the secretary promptly after the adjournment of the meeting.
A director may dissent to a specific action at a meeting, while assenting to
others. The right to dissent to a specific action taken at a meeting of the
board of directors or a committee of the board shall not be available to a
director who voted in favor of such action.
Section 11. Committees. By resolution adopted by a majority of all the
directors in office when the action is taken, the board of directors may
designate from among its members an executive committee and one or more other
committees, and appoint one or more members of the board of directors to serve
on them. To the extent provided in the resolution, each committee shall have
all the authority of the board of directors, except that no such committee
shall have the authority to (i) authorize distributions, (ii) approve or
propose to shareholders actions or proposals required by the Colorado Business
Corporation Act to be approved by shareholders, (iii) fill vacancies on the
board of directors or any committee thereof, (iv) amend articles of
incorporation, (v) adopt, amend or repeal the bylaws, (vi) approve a plan of
merger not requiring shareholder approval, (vii) authorize or approve the
reacquisition of shares unless pursuant to a formula or method prescribed by
the board of directors, or (viii) authorize or approve the issuance or sale of
shares, or contract for the sale of shares or determine the designations and
relative rights, preferences and limitations of a class or series of shares,
except that the board of directors may authorize a committee or officer to do
so within limits specifically prescribed by the board of directors. The
committee shall then have full power within the limits set by the board of
directors to adopt any final resolution setting forth all preferences,
limitations and relative rights of such class or series and to authorize an
amendment of the articles of incorporation stating the preferences,
limitations and relative rights of a class or series for filing with the
Secretary of State under the Colorado Business Corporation Act.
Sections 4, 5, 6, 7, 8 or 12 of Article III, which govern meetings,
notice, waiver of notice, quorum, voting requirements and action without a
meeting of the board of directors, shall apply to committees and their members
appointed under this Section 11.
Neither the designation of any such committee, the delegation of
authority to such committee, nor any action by such committee pursuant to its
authority shall alone constitute compliance by any member of the board of
directors or a member of the committee in question with his responsibility to
conform to the standard of care set forth in Article III, Section 14 of these
bylaws.
Section 12. Informal Action by Directors. Any action required or
permitted to be taken at a meeting of the directors or any committee
designated by the board of directors may be taken without a meeting if a
written consent (or counterparts thereof) that sets forth the action so taken
is signed by all of the directors entitled to vote with respect to the action
taken. Such consent shall have the same force and effect as a unanimous vote
of the directors or committee members and may be stated as such in any
document. Unless the consent specifies a different effective time or date,
action taken under this Section 12 is effective at the time or date the last
director signs a writing describing the action taken, unless, before such
time, any director has revoked his consent by a writing signed by the director
and received by the president or the secretary of the corporation.
Section 13. Telephonic Meetings. The board of directors may permit any
director (or any member of a committee designated by the board) to participate
in a regular or special meeting of the board of directors or a committee
thereof through the use of any means of communication by which all directors
participating in the meeting can hear each other during the meeting. A
director participating in a meeting in this manner is deemed to be present in
person at the meeting.
Section 14. Standard of Care. A director shall perform his duties as a
director, including without limitation his duties as a member of any committee
of the board, in good faith, in a manner he reasonably believes to be in the
best interests of the corporation, and with the care an ordinarily prudent
person in a like position would exercise under similar circumstances. In
performing his 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 the persons herein
designated. However, he shall not be considered to be acting in good faith if
he has knowledge concerning the matter in question that would cause such
reliance to be unwarranted. A director shall not be liable to the corporation
or its shareholders for any action he takes or omits to take as a director if,
in connection with such action or omission, he performs his duties in
compliance with this Section 14.
The designated persons on whom a director is entitled to rely are (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 accountant, or other person as to matters which the director
reasonably believes to be within such person's professional or expert
competence, or (iii) a committee of the board of directors on which the
director does not serve if the director reasonably believes the committee
merits confidence.
ARTICLE IV
Officers and Agents
Section 1. General. The officers of the corporation may be a
president, a secretary and a treasurer, and may also include one or more vice
presidents, each of which officer shall be appointed by the board of directors
and shall be a natural person eighteen years of age or older. One person may
hold more than one office. The board of directors or an officer or officers
so authorized by the board may appoint such other officers, assistant
officers, committees and agents, including a chairman of the board, assistant
secretaries and assistant treasurers, as they may consider necessary. Except
as expressly prescribed by these bylaws, the board of directors or the officer
or officers authorized by the board shall from time to time determine the
procedure for the appointment of officers, their authority and duties and
their compensation, provided that the board of directors may change the
authority, duties and compensation of any officer who is not appointed by the
board.
Section 2. Appointment and Term of Office. The officers of the
corporation to be appointed by the board of directors shall be appointed at
each annual meeting of the board held after each annual meeting of the
shareholders. If the appointment of officers is not made at such meeting or
if an officer or officers are to be appointed by another officer or officers
of the corporation, such appointments shall be made as determined by the board
of directors or the appointing person or persons. Each officer shall hold
office until the first of the following occurs: his successor shall have been
duly appointed and qualified, his death, his resignation, or his removal in
the manner provided in Section 3.
Section 3. Resignation and Removal. An officer may resign at any time
by giving written notice of resignation to the president, secretary or other
person who appoints such officer. The resignation is effective when the
notice is received by the corporation unless the notice specifies a later
effective date.
Any officer or agent may be removed at any time with or without cause by
the board of directors or an officer or officers authorized by the board.
Such removal does not affect the contract rights, if any, of the corporation
or of the person so removed. The appointment of an officer or agent shall not
in itself create contract rights.
Section 4. Vacancies. A vacancy in any office, however occurring, may
be filled by the board of directors, or by the officer or officers authorized
by the board, for the unexpired portion of the officer's term. If an officer
resigns and his resignation is made effective at a later date, the board of
directors, or officer or officers authorized by the board, may permit the
officer to remain in office until the effective date and may fill the pending
vacancy before the effective date if the board of directors or officer or
officers authorized by the board provide that the successor shall not take
office until the effective date. In the alternative, the board of directors,
or officer or officers authorized by the board of directors, may remove the
officer at any time before the effective date and may fill the resulting
vacancy.
Section 5. President. The president or any other officer appointed by
the president to do so, shall preside at all meetings of shareholders and all
meetings of the board of directors unless the board of directors has appointed
a chairman, vice chairman, or other officer of the board and has authorized
such person to preside at meetings of the board of directors. Subject to the
direction and supervision of the board of directors, the president shall be
the chief executive officer of the corporation, and shall have general and
active control of its affairs and business and general supervision of its
officers, agents and employees. Unless otherwise directed by the board of
directors, the president shall attend in person or by substitute appointed by
him, or shall execute on behalf of the corporation written instruments
appointing a proxy or proxies to represent the corporation, at all meetings of
the stockholders of any other corporation in which the corporation holds any
stock. On behalf of the corporation, the president may in person or by
substitute or by proxy execute written waivers of notice and consents with
respect to any such meetings. At all such meetings and otherwise, the
president, in person or by substitute or proxy, may vote the stock held by the
corporation, execute written consents and other instruments with respect to
such stock, and exercise any and all rights and powers incident to the
ownership of said stock, subject to the instructions, if any, of the board of
directors. The president shall have custody of the treasurer's bond, if any.
The president shall have such additional authority and duties as are
appropriate and customary for the office of president and chief executive
officer, except as the same may be expanded or limited by the board of
directors from time to time.
Section 6. Vice Presidents. The vice presidents shall assist the
president and shall perform such duties as may be assigned to them by the
president or by the board of directors. In the absence of the president, the
vice president, if any (or, if more than one, the vice presidents in the order
designated by the board of directors, or if the board makes no such
designation, then the vice president designated by the president, or if
neither the board nor the president makes any such designation, the senior
vice president as determined by first election to that office), shall have the
powers and perform the duties of the president.
Section 7. Secretary. The secretary shall (i) prepare and maintain as
permanent records the minutes of the proceedings of the shareholders and the
board of directors, a record of all actions taken by the shareholders or board
of directors without a meeting, a record of all actions taken by a committee
of the board of directors in place of the board of directors on behalf of the
corporation, and a record of all waivers of notice of meetings of shareholders
and of the board of directors or any committee thereof, (ii) see that all
notices are duly given in accordance with the provisions of these bylaws and
as required by law, (iii) serve as custodian of the corporate records and of
the seal of the corporation and affix the seal to all documents when
authorized by the board of directors, (iv) keep at the corporation's
registered office or principal place of business a record containing the names
and addresses of all shareholders in a form that permits preparation of a list
of shareholders arranged by voting group and by class or series of shares
within each voting group, that is alphabetical within each class or series and
that shows the address of, and the number of shares of each class or series
held by, each shareholder, unless such a record shall be kept at the office of
the corporation's transfer agent or registrar, (v) maintain at the
corporation's principal office the originals or copies of the corporation's
articles of incorporation, bylaws, minutes of all shareholders' meetings and
records of all action taken by shareholders without a meeting for the past
three years, all written communications within the past three years to
shareholders as a group or to the holders of any class or series of shares as
a group, a list of the names and business addresses of the current directors
and officers, a copy of the corporation's most recent corporate report filed
with the Secretary of State, and financial statements showing in reasonable
detail the corporation's assets and liabilities and results of operations for
the last three years, (vi) have general charge of the stock transfer books of
the corporation, unless the corporation has a transfer agent, (vii)
authenticate records of the corporation, and (viii) in general, perform all
duties incident to the office of secretary and such other duties as from time
to time may be assigned to him by the president or by the board of directors.
Assistant secretaries, if any, shall have the same duties and powers, subject
to supervision by the secretary. The directors and/or shareholders may
however respectively designate a person other than the secretary or assistant
secretary to keep the minutes of their respective meetings.
Any books, records, or minutes of the corporation may be in written form
or in any form capable of being converted into written form within a
reasonable time.
Section 8. Treasurer. The treasurer shall be the principal financial
officer of the corporation, shall have the care and custody of all funds,
securities, evidences of indebtedness and other personal property of the
corporation and shall deposit the same in accordance with the instructions of
the board of directors. Subject to the limits imposed by the board of
directors, he shall receive and give receipts and acquittances for money paid
in on account of the corporation, and shall pay out of the corporation's funds
on hand all bills, payrolls and other just debts of the corporation of
whatever nature upon maturity. He shall perform all other duties incident to
the office of the treasurer and, upon request of the board, shall make such
reports to it as may be required at any time. He shall, if required by the
board, give the corporation a bond in such sums and with such sureties as
shall be satisfactory to the board, conditioned upon the faithful performance
of his duties and for the restoration to the corporation of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation. He shall have such other powers and
perform such other duties as may from time to time be prescribed by the board
of directors or the president. The assistant treasurers, if any, shall have
the same powers and duties, subject to the supervision of the treasurer.
The treasurer shall also be the principal accounting officer of the
corporation. He shall prescribe and maintain the methods and systems of
accounting to be followed, keep complete books and records of account as
required by the Colorado Business Corporation Act, prepare and file all local,
state and federal tax returns, prescribe and maintain an adequate system of
internal audit and prepare and furnish to the president and the board of
directors statements of account showing the financial position of the
corporation and the results of its operations.
ARTICLE V
Stock
Section 1. Certificates. The board of directors shall be authorized to
issue any of its classes of shares with or without certificates. The fact
that the shares are not represented by certificates shall have no effect on
the rights and obligations of shareholders. If the shares are-represented by
certificates, such shares shall be represented by consecutively numbered
certificates signed, either manually or by facsimile, in the name of the
corporation by the president. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, such certificate may
nonetheless be issued by the corporation with the same effect as if he were
such officer at the date of its issue. All certificates shall be
consecutively numbered, and the names of the owners, the number of shares, and
the date of issue shall be entered on the books of the corporation. Each
certificate representing shares shall state upon its face:
(i) That the corporation is organized under the laws of Colorado;
(ii) The name of the person to whom issued;
(iii) The number and class of the shares and the designation of the series, if
any, that the certificate represents;
(iv) The par value, if any, of each share represented by the certificate;
(v) Any restrictions imposed by the corporation upon the transfer of the
shares represented by the certificate.
If shares are not represented by certificates, within a reasonable time
following the issue or transfer of such shares, the corporation shall send the
shareholder a complete written statement of all of the information required to
be provided to holders of uncertificated shares by the Colorado Business
Corporation Act.
Section 2. Consideration for Shares. Certificated or uncertificated
shares shall not be issued until the shares represented thereby are fully
paid. The board of directors may authorize the issuance of shares for
consideration consisting of any tangible or intangible property or benefit to
the corporation, including cash, promissory notes, services performed or other
securities of the corporation. Future services shall not constitute payment
or partial payment for shares of the corporation. The promissory note of a
subscriber or an affiliate of a subscriber shall not constitute payment or
partial payment for shares of the corporation unless the note is negotiable
and is secured by collateral, other than the shares being purchased, having a
fair market value at least equal to the principal amount of the note. For
purposes of this Section 2, "promissory note" means a negotiable instrument on
which there is an obligation to pay independent of collateral and does not
include a non-recourse note.
Section 3. Lost Certificates. In case of the alleged loss, destruction
or mutilation of a certificate of stock, the board of directors may direct the
issuance of a new certificate in lieu thereof upon such terms and conditions
in conformity with law as the board may prescribe. The board of directors may
in its discretion require an affidavit of lost certificate and/or a bond in
such form and amount and with such surety as it may determine before issuing a
new certificate.
Section 4. Transfer of Shares. Upon surrender to the corporation or to
a transfer agent of the corporation of a certificate of stock duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and receipt of such documentary stamps as may be required by law and
evidence of compliance with all applicable securities laws and other
restrictions, the corporation shall issue a new certificate to the person
entitled thereto, and cancel the old certificate. Every such transfer of
stock shall be entered on the stock books of the corporation which shall be
kept at its principal office or by the person and at the place designated by
the board of directors.
Except as otherwise expressly provided in Article II, Sections 7 and 11,
and except for the assertion of dissenters' rights to the extent provided in
Article 113 of the Colorado Business Corporation Act, the corporation shall be
entitled to treat the registered holder of any shares of the corporation as
the owner thereof for all purposes, and the corporation shall not be bound to
recognize any equitable or other claim to, or interest in, such shares or
rights deriving from such shares on the part of any person other than the
registered holder, including without limitation any purchaser, assignee or
transferee of such shares or rights deriving from such shares, unless and
until such other person becomes the registered holder of such shares, whether
or not the corporation shall have either actual or constructive notice of the
claimed interest of such other person.
Section 5. Transfer Agent, Registrars and Paying Agents. The board may
at its discretion appoint one or more transfer agents, registrars and agents
for making payment upon any class of stock, bond, debenture or other security
of the corporation. Such agents and registrars may be located either within
or outside Colorado. They shall have such rights and duties and shall be
entitled to such compensation as may be agreed.
ARTICLE VI
Indemnification of Certain Persons
Section 1. Indemnification. For purposes of Article VI, a "Proper
Person" means any person (including the estate or personal representative of a
director) who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether formal or informal, by
reason of the fact that he is or was a director, officer, employee, fiduciary
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee, fiduciary or
agent of any foreign or domestic profit or nonprofit corporation or of any
partnership, joint venture, trust, profit or nonprofit unincorporated
association, limited liability company, or other enterprise or employee
benefit plan. The corporation shall indemnify any Proper Person against
reasonably incurred expenses (including attorneys' fees), judgments,
penalties, fines (including any excise tax assessed with respect to an
employee benefit plan) and amounts paid in settlement reasonably incurred by
him in connection with such action, suit or proceeding if it is determined by
the groups set forth in Section 4 of this Article that he conducted himself in
good faith and that he reasonably believed (i) in the case of conduct in his
official capacity with the corporation, that his conduct was in the
corporation's best interests, or (ii) in all other cases (except criminal
cases), that his conduct was at least not opposed to the corporation's best
interests, or (iii) in the case of any criminal proceeding, that he had no
reasonable cause to believe his conduct was unlawful. Official capacity
means, when used with respect to a director, the office of director and, when
used with respect to any other Proper Person, the office in a corporation held
by the officer or the employment, fiduciary or agency relationship undertaken
by the employee, fiduciary, or agent on behalf of the corporation. Official
capacity does not include service for any other domestic or foreign
corporation or other person or employee benefit plan.
A director's conduct with respect to an employee benefit plan for a
purpose the director reasonably believed to be in the interests of the
participants in or beneficiaries of the plan is conduct that satisfies the
requirement in (ii) of this Section 1. A director's conduct with respect to
an employee benefit plan for a purpose that the director did not reasonably
believe to be in the interests of the participants in or beneficiaries of the
plan shall be deemed not to satisfy the requirement of this section that he
conduct himself in good faith.
No indemnification shall be made under this Article VI to a Proper Person
with respect to any claim, issue or matter in connection with a proceeding by
or in the right of a corporation in which the Proper Person was adjudged
liable to the corporation or in connection with any proceeding charging that
the Proper Person derived an improper personal benefit, whether or not
involving action in an official capacity, in which he was adjudged liable on
the basis that he derived an improper personal benefit. Further,
indemnification under this section in connection with a proceeding brought by
or in the right of the corporation shall be limited to reasonable expenses,
including attorneys' fees, incurred in connection with the proceeding.
Section 2. Right to Indemnification. The corporation shall indemnify
any Proper Person who was wholly successful, on the merits or otherwise, in
defense of any action, suit, or proceeding as to which he was entitled to
indemnification under Section 1 of this Article VI against expenses (including
attorneys' fees) reasonably incurred by him in connection with the proceeding
without the necessity of any action by the corporation other than the
determination in good faith that the defense has been wholly successful.
Section 3. Effect of Termination of Action. The termination of any
action, suit or proceeding by judgment, order, settlement or conviction, or
upon a plea of nolo contendere or its equivalent shall not of itself create a
presumption that the person seeking indemnification did not meet the standards
of conduct described in Section 1 of this Article VI. Entry of a judgment by
consent as part of a settlement shall not be deemed an adjudication of
liability, as described in Section 2 of this Article VI.
Section 4. Groups Authorized to Make Indemnification Determination.
Except where there is a right to indemnification as set forth in Sections 1 or
2 of this Article or where indemnification is ordered by a court in Section 5,
any indemnification shall be made by the corporation only as determined in the
specific case by a proper group that indemnification of the Proper Person is
permissible under the circumstances because he has met the applicable
standards of conduct set forth in Section 1 of this Article. This
determination shall be made by the board of directors by a majority vote of
those present at a meeting at which a quorum is present, which quorum shall
consist of directors not parties to the proceeding ("Quorum"). If a Quorum
cannot be obtained, the determination shall be made by a majority vote of a
committee of the board of directors designated by the board, which committee
shall consist of two or more directors not parties to the proceeding, except
that directors who are parties to the proceeding may participate in the
designation of directors for the committee. If a Quorum of the board of
directors cannot be obtained and the committee cannot be established, or even
if a Quorum is obtained or the committee is designated and a majority of the
directors constituting such Quorum or committee so directs, the determination
shall be made by (i) independent legal counsel selected by a vote of the board
of directors or the committee in the manner specified in this Section 4 or, if
a Quorum of the full board of directors cannot be obtained and a committee
cannot be established, by independent legal counsel selected by a majority
vote of the full board (including directors who are parties to the action) or
(ii) a vote of the shareholders.
Authorization of indemnification and advance of expenses shall be made in
the same manner as the determination that indemnification or advance of
expenses is permissible except that, if the determination that indemnification
or advance of expenses is permissible is made by independent legal counsel,
authorization of indemnification and advance of expenses shall be made by the
body that selected such counsel.
Section 5. Court-Ordered Indemnification. Any Proper Person may apply
for indemnification to the court conducting the proceeding or to another court
of competent jurisdiction for mandatory indemnification under Section 2 of
this Article, including indemnification for reasonable expenses incurred to
obtain court-ordered indemnification. If a court determines that the Proper
Person is entitled to indemnification under Section 2 of this Article, the
court shall order indemnification, including the Proper Person's reasonable
expenses incurred to obtain court-ordered indemnification. If the court
determines that such Proper Person is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, whether or not he
met the standards of conduct set forth in Section 1 of this Article or was
adjudged liable in the proceeding, the court may order such indemnification as
the court deems proper except that if the Proper Person has been adjudged
liable, indemnification shall be limited to reasonable expenses incurred in
connection with the proceeding and reasonable expenses incurred to obtain
court-ordered indemnification.
Section 6. Advance of Expenses. Reasonable expenses (including
attorneys' fees) incurred in defending an action, suit or proceeding as
described in Section 1 may be paid by the corporation to any Proper Person in
advance of the final disposition of such action, suit or proceeding upon
receipt of (i) a written affirmation of such Proper Person's good faith belief
that he has met the standards of conduct prescribed by Section 1 of this
Article VI, (ii) a written undertaking, executed personally or on the Proper
Person's behalf, to repay such advances if it is ultimately determined that he
did not meet the prescribed standards of conduct (the undertaking shall be an
unlimited general obligation of the Proper Person but need not be secured and
may be accepted without reference to financial ability to make repayment), and
(iii) a determination is made by the proper group (as described in Section 4
of this Article VI) that the facts as then known to the group would not
preclude indemnification. Determination and authorization of payments shall
be made in the same manner specified in Section 4 of this Article VI.
Section 7. Additional Indemnification to Certain Persons Other Than
Directors. In addition to the indemnification provided to officers,
employees, fiduciaries or agents because of their status as Proper Persons
under this Article, the corporation may also indemnify and advance expenses to
them if they are not directors of the corporation to a greater extent than is
provided in these bylaws, if not inconsistent with public policy, and if
provided for by general or specific action of its board of directors or
shareholders or by contract.
Section 8. Witness Expenses. The sections of this Article VI do not
limit the corporation's authority to pay or reimburse expenses incurred by a
director in connection with an appearance as a witness in a proceeding at a
time when he has not been made or named as a defendant or respondent in the
proceeding.
Section 9. Report to Shareholders. Any indemnification of or advance of
expenses to a director in accordance with this Article VI, if arising out of a
proceeding by or on behalf of the corporation, shall be reported in writing to
the shareholders with or before the notice of the next shareholders' meeting.
If the next shareholder action is taken without a meeting at the instigation
of the board of directors, such notice shall be given to the shareholders at
or before the time the first shareholder signs a writing consenting to such
action.
ARTICLE VII
Provision of Insurance
Section 1. Provision of Insurance. By action of the board of directors,
notwithstanding any interest of the directors in the action, the corporation
may purchase and maintain insurance, in such scope and amounts as the board of
directors deems appropriate, on behalf of any person who is or was a director,
officer, employee, fiduciary or agent of the corporation, or who, while a
director, officer, employee, fiduciary or agent of the corporation, is or was
serving at the request of the corporation as a director, officer, partner,
trustee, employee, fiduciary or agent of any other foreign or domestic profit
or nonprofit corporation or of any partnership, joint venture, trust, profit
or nonprofit unincorporated association, limited liability company, other
enterprise or employee benefit plan, against any liability asserted against,
or incurred by, him in that 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 Article VI or applicable law. Any such
insurance may be procured from any insurance company designated by the board
of directors of the corporation, whether such insurance company is formed
under the laws of Colorado or any other jurisdiction of the United States or
elsewhere, including any insurance company in which the corporation has an
equity interest or any other interest, through stock ownership or otherwise.
ARTICLE VIII
Miscellaneous
Section 1. Seal. The board of directors may adopt a corporate seal,
which shall contain the name of the corporation and the words, "Seal,
Colorado."
Section 2. Fiscal Year. The fiscal year of the corporation shall be as
established by the board of directors.
Section 3. Amendments. The board of directors shall have power, to the
maximum extent permitted by the Colorado Business Corporation Act, to make,
amend and repeal the bylaws of the corporation at any regular or special
meeting of the board unless the shareholders, in making, amending or repealing
a particular bylaw, expressly provide that the directors may not amend or
repeal such bylaw. The shareholders also shall have the power to make, amend
or repeal the bylaws of the corporation at any annual meeting or at any
special meeting called for that purpose.
Section 4. Receipt of Notices by the Corporation. Notices, shareholder
writings consenting to action, and other documents or writings shall be deemed
to have been received by the corporation when they are actually received: (1)
at the registered office of the corporation in Colorado; (2) at the principal
office of the corporation (as that office is designated in the most recent
document filed by the corporation with the secretary of state for Colorado
designating a principal office) addressed to the attention of the secretary of
the corporation; (3) by the secretary of the corporation wherever the
secretary may be found; or (4) by any other person authorized from time to
time by the board of directors or the president to receive such writings,
wherever such person is found.
Section 5. Gender. The masculine gender is used in these bylaws as a
matter of convenience only and shall be interpreted to include the feminine
and neuter genders as the circumstances indicate.
Section 6. Conflicts. In the event of any irreconcilable conflict
between these bylaws and either the corporation's articles of incorporation or
applicable law, the latter shall control.
Section 7. Definitions. Except as otherwise specifically provided in
these bylaws, all terms used in these bylaws shall have the same definition as
in the Colorado Business Corporation Act.
<PAGE>
Incorporated Under the Laws of The State of Colorado
No. _________________ _______________
* SPECIMEN *
iGENISYS, INC.
100,010,000 Shares Common Stock -- Par Value $.001 Each
** ____________________________________________________ **
______________________________________________________________________
DATE:_________________
_____________________________________ ___________________
Secretary President
<PAGE>
The Securities represented by this instrument have not been registered under
the Securities Act of 1933 (the "Securities Act") or qualified under the
securities laws of any state, in reliance upon exemptions from such
registration and qualification requirements.
CLASS A REDEEMABLE
WARRANT CERTIFICATE
For the Purchase of Common Shares,
$.001 Par Value per Share
of
iGENISYS, INC.
(a Colorado corporation)
Warrant No. Warrants
WA -
THIS WARRANT CERTIFIES THAT, for value received, _____________________,
or registered assigns ("Warrantholder") is the registered owner of the above
indicated number of Warrants entitling the Warrantholder, commencing upon the
Exercise Date, as defined in paragraph 1 of this Certificate, but before 5:00
o'clock p.m., Mountain Time, on the _____ day of _____________, ______
("Expiration Date") but not thereafter, to subscribe for, purchase and receive
one (1) fully paid and non-assessable share of Common Stock, $.001 par value
(the "Common Stock") of iGeniSys, Inc., a Colorado corporation (the
"Company"), at a purchase price of $1.00 per share of Common Stock ("Exercise
Price") upon presentation and surrender of this Warrant and upon payment of
the Exercise Price for such of the shares of Common Stock of the Company, at
any time after the Exercise Date, but only subject to the conditions set forth
herein. The Exercise Price, the number of shares purchasable upon exercise of
each Warrant, and the Expiration Date are subject to adjustments described
herein. The Warrantholders may exercise all or any number of the Warrants
represented hereby. Upon exercise of this Warrant, the form of election
hereinafter provided for must be duly executed and the instructions for
registration of the Common Stock acquired by such exercise must be completed.
If the rights represented hereby shall not be exercised at or before the
Expiration Date, this Warrant shall become and be void without further force
or effect, and all rights represented hereby shall cease and expire.
1. TERM OF WARRANT. The Warrants evidenced by this Warrant Certificate
may be exercised in whole or in part at any time commencing the earlier of (i)
120 days from the date of issue or (ii) the effective date of a Registration
Statement registering for sale under the Securities Act of 1933, as amended
("Securities Act") the shares of Common Stock issuable upon such exercise, and
ending at 5:00 p.m. Mountain Time, on the _____ day of ______________, _______
("Expiration Date"); provided, however, that the Company may extend the
Exercise Period of this Warrant by giving notice of such extension.
2. NOTICE OF EXTENDED EXPIRATION DATE. The Company may extend the
Expiration Date for the exercise of this Warrant at any time by giving thirty
(30) days' written notice thereof to the Warrantholder. If this Warrant is
not exercised on or before the extended Expiration Date, it shall become
wholly void.
3. ADJUSTMENTS OF EXERCISE PRICE AND SHARES. In the event the Common
Stock issuable upon exercise of this Warrant shall be changed into the same or
different number of shares of any class or classes of stock, whether by
capital reorganization, reclassification or otherwise, or in the event the
Company shall at any time issue Common Stock by way of dividend or other
distribution on any stock of the Company, or subdivide or combine the
outstanding shares of Common Stock, then in each such event the Holder of this
Warrant shall have the right thereafter to exercise such Warrant and receive
the kind and amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification or other change by
holders of the number of shares of Common Stock into which such Warrant might
have been exercised immediately prior to such reorganization, reclassification
or change. In the case of any such reorganization, reclassification or
change, the Exercise Price shall also be appropriately adjusted so as to
maintain the aggregate Exercise Price. Further, in case of any consolidation
or merger of the Company with or into another corporation in which
consolidation or merger the Company is not the continuing corporation, or in
case of any sale or conveyance to another corporation of the property of the
Company as an entirety, or substantially as an entirety, the Company shall
cause effective provision to be made so that the Warrantholder shall have the
right thereafter, by exercising this Warrant, to purchase the kind and amount
of shares of stock and other securities and property receivable upon such
consolidation, merger, sale or conveyance by holders of the number of shares
of Common Stock into which such Warrant might have been exercised immediately
prior to such consolidation, merger, sale or conveyance, which provision shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Warrant. The foregoing
provisions shall similarly apply to successive reclassifications, capital
reorganizations and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances. Notwithstanding the foregoing,
no adjustment of the Exercise Price shall be made as a result of or in
connection with (1) the issuance of Common Stock of the Company pursuant to
options, warrants and share purchase agreements now in effect or hereafter
outstanding or created, (2) the establishment of option plans of the Company,
the modification, renewal or extension of any plan now in effect or hereafter
created, or the issuance of Common Stock upon exercise of any options pursuant
to such plans, (3) the issuance of Common Stock in connection with an
acquisition, consolidation or merger of any type in which the Company is the
continuing corporation, or (4) the issuance of Common Stock in consideration
of such cash, property or service as may be approved by the Board of Directors
of the Company and permitted by applicable law.
4. ADJUSTMENT TO PURCHASE PRICE. The Company may, in its sole
discretion, lower the purchase price at any time, or from time-to-time. When
any adjustment is made in the purchase price, the Company shall cause a copy
of such statement to be mailed to the Warrantholder, as of a date within ten
(10) days after the date when the purchase price has been adjusted.
5. MANNER OF EXERCISE. The Warrantholder of the Warrants evidenced by
this Warrant Certificate may exercise all or any whole number of such Warrants
during the Exercise Period in the manner stated herein. This Warrant
Certificate, together with the purchase form provided herein duly executed by
the Warrantholder or by the Warrantholder's duly authorized attorney, plus
payment of the exercise price in the manner set forth in Paragraph 6 below,
shall be surrendered to the Company. If upon exercise of any Warrants
evidenced by this Warrant Certificate the number of Warrants exercised shall
be less than the total number of Warrants so evidenced, there shall be issued
to the Warrantholder a new Warrant Certificate evidencing the number of
Warrants not so exercised.
6. MANNER OF PAYMENT. The exercise price of each Warrant shall be
paid, to the extent permitted by applicable statutes and regulations, either
(I) in cash at the time the Warrant is exercised, (ii) by delivery to the
Company of other Common Stock of the Company valued at its then established
fair market value, (iii) by delivery to the Company of either options or
warrants of the Company, including, without limitation, this Warrant, valued
at the difference between their exercise price and the then established fair
market value of the Company's Common Stock, (iv) according to a deferred
payment or other arrangement (which may include, without limiting the
generality of the foregoing, the use of other Common Stock of the Company)
with the holder hereof, or (v) any other form of legal consideration that may
be acceptable to the Board of Directors, in their discretion. For the
purposes of this Paragraph 6, the fair market value of the Company's Common
Stock shall be (I) the closing sale price for the Common Stock on the primary
exchange upon which the shares are listed and traded on the date the Warrant
is exercised, or (ii) if the shares are not traded on any national exchange,
the closing sale price for the Common Stock on the NASDAQ National Market on
the date the Warrant is exercised, or (iii) if the shares or neither traded on
a national exchange nor listed on the NASDAQ National Market, then the average
of the bid and ask prices for the Common Stock in the Over-The-Counter Market
as quoted on the NASDAQ Small-Cap Market or (iv) if the shares of Common Stock
are neither traded on a national exchange or the NASDAQ National Market nor
quoted on the NASDAQ Small-Cap Market, the average of the bid and ask prices
for the Common Stock as quoted by any recognized securities quotation service
such as the National Quotation Bureau, Inc. or the OTC Electronic Bulletin
Board on the date the Warrant is exercised. In the case of any deferred
payment arrangement, any interest shall be payable at least annually and shall
be charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Internal Revenue Code, of any
amounts other than amounts stated to be interest under the deferred payment
arrangement.
7. REDEMPTION. The Company shall have the right to redeem any or all
outstanding and unexercised Warrants evidenced by this Certificate at a
redemption price of $0.01 per Warrant upon thirty (30) days' written notice in
the event (I) a Registration Statement registering for sale under the
Securities Act of 1933, as amended (the "Act"), the shares of the Company's
Common Stock issuable upon exercise of the Warrant, has been filed with the
Securities and Exchange Commission and is in effect on the date of written
notice and the redemption date contained therein, (ii) there has been
developed and exists on the date of written notice a public trading market for
the Company's Common Stock and such shares are listed for quotation on the
NASDAQ Stock Market or OTC Electronic Bulletin Board, and (iii) the public
trading price of the Company's Common Stock has equaled or exceeded $2.00 per
share for ten (10) or more consecutive trading days. On each occasion that
the Company elects to exercise its rights of redemption, the Company must mail
such written notice within ten (10) days following the satisfaction of all of
the foregoing conditions. The holders of the Warrants called for redemption
shall have the right to exercise the Warrants evidenced hereby until the close
of business on the date next preceding the date fixed for redemption. On or
after the date fixed for redemption, the holder hereof shall have no rights
with respect to this Warrant except the right to receive $0.01 per Warrant
upon surrender of this Certificate.
8. RESERVATION OF COMMON STOCK. The Company agrees that the number of
shares of Common Stock sufficient to provide for the exercise of the Warrant
upon the basis herein set forth will at all times during the term of this
Warrant be reserved for the exercise thereof.
9. ISSUANCE OF COMMON STOCK UPON EXERCISE. The Company, at its
expense, shall cause to be issued, within ten (10) days after exercise of this
Warrant, a certificate or certificates in the name requested by the
Warrantholder of the number of shares of Common Stock to which the
Warrantholder is entitled upon such exercise. All shares of Common Stock or
other securities delivered upon the exercise of the Warrants shall be validly
issued, fully paid and non-assessable.
10. NO RIGHT AS STOCKHOLDER. The Warrantholder is not, by virtue of
ownership of the Warrant, entitled to any rights whatsoever of a stockholder
of the Company.
11. NO ASSIGNMENT. This Warrant may not be assigned without the written
consent of the Company.
Dated: _______________, _______ iGENISYS, INC.
By:
------------------------------
J. Daniel Bell, President
By:
------------------------------
Carylyn K. Bell, Secretary
countersigned
CORPORATE STOCK TRANSFER, INC.
By:
-----------------------------
Transfer Agent and Registrar
Authorized Officer
<PAGE>
<PAGE>
iGENISYS, INC.
ELECTION OF PURCHASE
Transfer Fee: $15.00 per certificate issued.
The undersigned hereby irrevocably elects to exercise _______ Warrants
represented by this Warrant Certificate, and to purchase the common shares
issuable upon the exercise of such Warrants, and requests that the
certificates for such shares shall be issued in the name of:
---------------------------------
Name
---------------------------------
---------------------------------
Address
---------------------------------
Social Security or other identifying
number
and be delivered to _____________________________ at ______________________
__________________________________ and, if said number of Warrants shall not
be all the Warrants evidenced by this Warrant certificate, that a new Warrant
certificate for the balance of such Warrants be registered in the name of, AND
delivered to, the undersigned at the address stated below.
Dated:______________
---------------------------------
Name of Warrantholder
---------------------------------
---------------------------------
Address
---------------------------------
Signature
ASSIGNMENT
For value received ________________________ hereby sell, assign, and
transfer unto ______________________________________ Warrants represented by
this Warrant certificate, together with all right, title, and interest
therein, and do hereby irrevocably constitute and appoint ________________
________________ attorney, to transfer this Warrant certificate on the books
of the Company, with full power of substitution.
Dated:__________________
---------------------------------
---------------------------------
SIGNATURE GUARANTEED: NOTICE: The signature to this assignment must
correspond with the name as written upon the
face of the certificate, in every particular,
without alteration or enlargement, or any change
whatever.
IMPORTANT: SIGNATURE MUST BE GUARANTEED BY A COMMERCIAL BANK OR MEMBER FIRM
OF ONE OF THE FOLLOWING STOCK EXCHANGES: NEW YORK STOCK EXCHANGE, PACIFIC
COAST STOCK EXCHANGE, AMERICAN STOCK EXCHANGE, MIDWEST STOCK EXCHANGE.
<PAGE>
NEUMAN & DRENNEN, LLC
Attorneys at Law
TEMPLE-BOWRON HOUSE
1507 PINE STREET
BOULDER, COLORADO 80302
Telephone: (303) 449-2100
Facsimile: (303) 449-1045
October 26, 1999
iGeniSys, Inc.
654 North Belt East, Suite 310
Houston, Texas 77060
Re: Registration Statement on Form SB-2
Ladies and Gentlemen:
We have acted as counsel to iGeniSys, Inc. (the "Company") in connection
with Registration Statement on Form SB-2 (the "Registration Statement") to be
filed with the United Stated Securities and Exchange Commission, Washington,
D.C., pursuant to the Securities Act of 1933, as amended, covering the
registration of an aggregate of 3,490,611 shares of Common Stock, $.001 par
value ("Common Stock"). In connection with such representation of the
Company, we have examined such corporate records, and have made such inquiry
of government officials and Company officials and have made such examination
of the law as we deemed appropriate in connection with delivering this
opinion.
Based upon the foregoing, we are of the opinion as follows:
1. The Company has been duly incorporated and organized under the laws of
the State of Colorado and is validly existing as a corporation in good
standing under the laws of that state.
2. The Company's authorized capital consists of one hundred million ten
thousand (100,010,000) shares of Common Stock having a par value of
$0.001 each and fifty million (50,000,000) shares of Preferred Stock
having a par value of $.01 each.
3. The 1,500,000 shares of the Company's Common Stock being registered for
sale and offered to the public by the Company as more fully described in
the Registration Statement are lawfully and validly issued, fully paid
and non-assessable securities of the Company.
4. The 1,990,611 shares of the Company's Common Stock being registered for
sale and offered to the public by the Selling Shareholders as more fully
described in the Registration Statement are duly and validly authorized,
legally issued, fully paid and non-assessable.
Sincerely,
Clifford L. Neuman
CLN:gg
<PAGE>
iGENISYS, INC. fka ZION ENTERPRISES, INC.
1999 EQUITY INCENTIVE PLAN
INTRODUCTION
On May 17, 1999 the Board of Directors adopted this 1999 Equity Incentive
Plan (the "Plan") which Plan was approved by the Stockholders on May 17, 1999.
1. PURPOSES
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company and its
Affiliates may be given an opportunity to benefit from increases in
value of the common stock of the Company ("Common Stock") through
the granting of (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses and (iv) rights to purchase restricted
stock, and (v) stock appreciation rights, all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees, Directors or Consultants, to secure
and retain the services of new Employees, Directors and Consultants,
and to provide incentives for such persons to exert maximum efforts
for the success of the Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which
responsibility for administration of the Plan has been delegated
pursuant to subsection 3(c), be either (i) Options granted pursuant
to Section 6 or 7 hereof, including Incentive Stock Options and
Nonstatutory Stock Options, or (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 8 hereof, or
(iii) stock appreciation rights granted pursuant to Section 9
hereof. All Options shall be separately designated Incentive Stock
Options or Nonstatutory Stock Options at the time of grant, and a
separate certificate or certificates will be issued for shares
purchased on exercise of each type of Option.
2. DEFINITIONS
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means iGeniSys, Inc.
(f) "CONCURRENT STOCK APPRECIATION RIGHT" OR "CONCURRENT RIGHT" means a
right granted pursuant to subsection 9(b)(2) of the Plan.
(g) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is
compensated for such services, provided that the term "Consultant"
shall not include Directors who are paid only a director's fee by
the Company or who are not compensated by the Company for their
services as Directors.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means the
employment or relationship as a Director or Consultant is not
interrupted or terminated. The Board, in its sole discretion, may
determine whether Continuous Status as an Employee, Director or
Consultant shall be considered interrupted in the case of: (i) any
leave of absence approved by the Board, including sick leave,
military leave, or any other personal leave; or (ii) transfers
between locations of the Company or between the Company, Affiliates
or their successors.
(i) "DIRECTOR" means a member of the Board.
(j) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither
service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(l) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock of the Company determined as follows:
(1) If the Common Stock is listed on any established stock
exchange, or traded on the Nasdaq National Market or the Nasdaq
SmallCap Market, the Fair Market Value of a share of Common
Stock shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest
volume of trading in Common Stock) on the last market trading
day prior to the day of determination, as reported in the Wall
Street Journal or such other source as the Board deems
reliable;
(2) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(m) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code
and the regulations promulgated thereunder.
(n) "INDEPENDENT STOCK APPRECIATION RIGHT" means a right granted
pursuant to subsection 9(b)(3) of the Plan.
(o) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or
subsidiary, does not receive compensation (directly or indirectly)
from the Company or its parent or subsidiary for services rendered
as a consultant or in any capacity other than as a Director (except
for an amount as to which disclosure would not be required under
Item 404(a) of Regulation S-K promulgated pursuant to the Securities
Act of 1933 ("Regulation S-K"), does not possess an interest in any
other transaction as to which disclosure would be required under
Item 404(a) of Regulation S-K, and is not engaged in a business
relationship as to which disclosure would be required under Item
404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.
(p) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(q) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(r) "OPTION" means a stock option granted pursuant to the Plan.
(s) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual
Option grant. Each Option Agreement shall be subject to the terms
and conditions of the Plan.
(t) "OPTIONEE" means a person to whom an Option is granted pursuant to
the Plan.
(u) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the
meaning of Treasury regulations promulgated under Section 162(m) of
the Code), is not a former employee of the Company or an "affiliated
corporation" receiving compensation for prior services (other than
benefits under a tax qualified pension plan), was not an officer of
the Company or an "affiliated corporation" at any time, and is not
currently receiving direct or indirect remuneration from the Company
or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside
director" for purposes of Section 162(m) of the Code.
(v) "PLAN" means this iGeniSys, Inc. 1999 Equity Incentive Plan.
(w) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(x) "STOCK APPRECIATION RIGHT" means any of the various types of rights
which may be granted under Section 9 of the Plan.
(y) "STOCK AWARD" means any right granted under the Plan, including any
Option, any stock bonus, and any right to purchase restricted stock.
(z) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and
conditions of an individual Stock Award grant. Each Stock Award
Agreement shall be subject to the terms and conditions of the Plan.
(aa) "TANDEM STOCK APPRECIATION RIGHT" OR "TANDEM RIGHT" means a right
granted pursuant to subsection 9(b)(1) of the Plan.
3. ADMINISTRATION
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in
subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each
Stock Award shall be granted; whether a Stock Award will be an
Incentive Stock Option, a Nonstatutory Stock Option, a stock
bonus, a right to purchase restricted stock, a Stock
Appreciation Right, or a combination of the foregoing; the
provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be
permitted to receive stock pursuant to a Stock Award; whether a
person shall be permitted to receive stock upon exercise of an
Independent Stock Appreciation Right; and the number of shares
with respect to which a Stock Award shall be granted to each
such person.
<PAGE>
(2) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise
of this power, may correct any defect, omission or
inconsistency in the Plan or in any Stock Award Agreement, in a
manner and to the extent it shall deem necessary or expedient
to make the Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section 15.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best
interests of the Company which are not in conflict with the
provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee or
committees ("Committee") of one or more members of the Board. In
the discretion of the Board, a Committee may consist solely of two
or more Outside Directors, in accordance with Code Section 162(m),
or solely of two or more Non-Employee Directors, in accordance with
Rule 16b-3. If administration is delegated to a Committee, the
Committee shall have, in connection with the administration of the
Plan, the powers theretofore possessed by the Board (and references
in this Plan to the Board shall thereafter be to the Committee),
subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the
Board. The Board may abolish the Committee at any time and revest
in the Board the administration of the Plan.
4. SHARES SUBJECT TO THE PLAN
(a) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock
Awards shall not exceed in the aggregate two million five hundred
thousand (2,500,000) shares of Common Stock (determined without
giving effect to any stock split that may be made in anticipation of
the Company's initial public offering of the Common Stock). If any
Stock Award shall for any reason expire or otherwise terminate, in
whole or in part, without having been exercised in full (or vested
in the case of Restricted Stock), the stock not acquired under such
Stock Award shall revert to and again become available for issuance
under the Plan. Shares subject to Stock Appreciation Rights
exercised in accordance with Section 9 of the Plan shall not be
available for subsequent issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY
(a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than
Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees, Directors or Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person owns (or is deemed to
own pursuant to Section 424(d) of the Code) stock possessing more
than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of any of its Affiliates unless
the exercise price of such Option is at least one hundred ten
percent (110%) of the Fair Market Value of such stock at the date of
grant and the Option is not exercisable after the expiration of five
(5) years from the date of grant.
6. OPTION PROVISIONS
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise)
the substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of
the stock subject to the Option on the date the Option is granted,
and the exercise price of each Nonstatutory Stock Option shall be
not less than eighty-five percent (85%) of the Fair Market Value of
the stock subject to the Option on the date the Option is granted.
Notwithstanding the foregoing, an Option may be granted with an
exercise price lower than that set forth in the preceding sentence
if such Option is granted pursuant to an assumption or substitution
for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes
and regulations, either (i) in cash at the time the Option is
exercised, or (ii) at the discretion of the Board or the Committee,
at the time of the grant of the Option, (A) by delivery to the
Company of other Common Stock of the Company, (B) according to a
deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other Common
Stock of the Company) with the person to whom the Option is granted
or to whom the Option is transferred pursuant to subsection 6(d), or
(C) in any other form of legal consideration that may be acceptable
to the Board.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate
of interest necessary to avoid the treatment as interest, under any
applicable provisions of the Code, of any amounts other than amounts
stated to be interest under the deferred payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and
distribution, and shall be exercisable during the lifetime of the
person to whom the Incentive Stock Option is granted only by such
person. A Nonstatutory Stock Option may be transferred to the
extent provided in the Option Agreement; provided that if the Option
Agreement does not expressly permit the transfer of a Nonstatutory
Stock Option, the Nonstatutory Stock Option shall not be
transferable except by will, by the laws of descent and distribution
or pursuant to a domestic relations order satisfying the
requirements of Rule 16b-3, and shall be exercisable during the
lifetime of the person to whom the Option is granted only by such
person or any transferee pursuant to a domestic relations order.
Notwithstanding the foregoing, the person to whom the Option is
granted may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the
event of the death of the Optionee, shall thereafter be entitled to
exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may,
but need not, be equal). The Option Agreement may provide that from
time to time during each of such installment periods, the Option may
become exercisable ("vest") with respect to some or all of the
shares allotted to that period, and may be exercised with respect to
some or all of the shares allotted to such period and/or any prior
period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and
conditions on the time or times when it may be exercised (which may
be based on performance or other criteria) as the Board may deem
appropriate. The provisions of this subsection 6(e) are subject to
any Option provisions governing the minimum number of shares as to
which an Option may be exercised.
(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an
Employee, Director or Consultant terminates (other than upon the
Optionee's death or disability), the Optionee may exercise his or
her Option (to the extent that the Optionee was entitled to exercise
it at the date of termination) but only within such period of time
ending on the earlier of (i) the date three (3) months after the
termination of the Optionee's Continuous Status as an Employee,
Director or Consultant (or such longer or shorter period specified
in the Option Agreement), or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after termination,
the Optionee does not exercise his or her Option within the time
specified in the Option Agreement, the Option shall terminate, and
the shares covered by such Option shall revert to and again become
available for issuance under the Plan.
(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result
of the Optionee's disability, the Optionee may exercise his or her
Option (to the extent that the Optionee was entitled to exercise it
at the date of termination), but only within such period of time
ending on the earlier of (i) the date twelve (12) months following
such termination (or such longer or shorter period specified in the
Option Agreement), or (ii) the expiration of the term of the Option
as set forth in the Option Agreement. If, at the date of
termination, the Optionee is not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of
the Option shall revert to and again become available for issuance
under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the
Option shall terminate, and the shares covered by such Option shall
revert to and again become available for issuance under the Plan.
(h) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a three-month period (or 12 month period in the case of
totally disabled Optionees) after the termination of, the Optionee's
Continuous Status as an Employee, Director or Consultant, the Option
shall be fully vested and may be exercised by the Optionee's estate,
by a person who acquired the right to exercise the Option by bequest
or inheritance or by a person designated to exercise the option upon
the Optionee's death pursuant to subsection 6(d), but only within
the period ending on the earlier of (i) the date twelve (12) months
following the date of death (or such longer or shorter period
specified in the Option Agreement), or (ii) the expiration of the
term of such Option as set forth in the Option Agreement. If, at
the time of death, the Optionee was not entitled to exercise his or
her entire Option, the shares covered by the unexercisable portion
of the Option shall revert to and again become available for
issuance under the Plan. If, after death, the Option is not
exercised within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and
again become available for issuance under the Plan.
(i) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee,
Director or Consultant to exercise the Option as to any part or all
of the shares subject to the Option prior to the full vesting of the
Option. Any unvested shares so purchased may be subject to a
repurchase right in favor of the Company or to any other restriction
the Board determines to be appropriate.
(j) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options
hereunder, the Board or Committee shall have the authority (but not
an obligation) to include as part of any Option Agreement a
provision entitling the Optionee to a further Option (a "Re-Load
Option") in the event the Optionee exercises the Option evidenced by
the Option agreement, in whole or in part, by surrendering other
shares of Common Stock in accordance with this Plan and the terms
and conditions of the Option Agreement. Any such Re-Load Option (i)
shall be for a number of shares equal to the number of shares
surrendered as part or all of the exercise price of such Option;
(ii) shall have an expiration date which is the same as the
expiration date of the Option the exercise of which gave rise to
such Re-Load Option; and (iii) shall have an exercise price which is
equal to one hundred percent (100%) of the Fair Market Value of the
Common Stock subject to the Re- Load Option on the date of exercise
of the original Option. Notwithstanding the foregoing, a Re-Load
Option which is an Incentive Stock Option and which is granted to a
10% stockholder (as described in subsection 5(b)), shall have an
exercise price which is equal to one hundred ten percent (110%) of
the Fair Market Value of the stock subject to the Re-Load Option on
the date of exercise of the original Option and shall have a term
which is no longer than five (5) years.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board or Committee may designate
at the time of the grant of the original Option; PROVIDED, HOWEVER,
that the designation of any Re-Load Option as an Incentive Stock
Option shall be subject to the one hundred thousand dollars
($100,000) annual limitation on exercisability of Incentive Stock
Options described in subsection 13(d) of the Plan and in Section
422(d) of the Code. There shall be no Re-Load Options on a Re-Load
Option. Any such Re-Load Option shall be subject to the
availability of sufficient shares under subsection 4(a) and shall be
subject to such other terms and conditions as the Board or Committee
may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.
7. OPTION GRANTS FOR NON-EMPLOYEE DIRECTORS
Unless otherwise explicitly provided by the Board, Non-Employee Directors
shall not be eligible for any Stock Awards under the Plan other than the
nonstatutory stock options provided under this Section 7 on the following
terms and conditions:
(a) INITIAL GRANT FOR NON-EMPLOYEE DIRECTORS. Each person who is a Non-
Employee Director at the date the Company's initial public offering
of shares of common stock is effective or who becomes a Non-Employee
Director as of any date thereafter shall, upon such date, be granted
an option to purchase thirty thousand (30,000) shares of Common
Stock on the terms and conditions set forth herein.
(b) ANNUAL GRANT. Following each annual meeting of the Company's
stockholders occuring after the effectiveness of the initial public
offering of the Common Stock, (i) each person who continuously has
been a Non-Employee Director for a full year since the last annual
meeting of the Company's stockholders automatically shall be granted
an option to purchase ten thousand (10,000) shares of Common Stock
(determined without giving effect to any stock split that may be
made in anticipation of the Company's initial public offering of
the Common Stock) on the terms and conditions set forth herein, and
(ii) each other person who is then a Non-Employee Director
automatically shall be granted an option to purchase, on the terms
and conditions set forth herein, the number of shares of common
stock of the Company (rounded up to the nearest whole share)
determined by multiplying ten thousand (10,000) shares (determined
without giving effect to any stock split that may be made in
anticipation of the Company's initial public offering of the Common
Stock) by a fraction, the numerator of which is the number of days
the person continuously has been a Non-Employee Director as of the
date of such grant and the denominator of which is 365.
(c) TERM. The term of each Non-Employee Director's option commences on
the date it is granted and, unless sooner terminated as set forth
herein, expires on the date ("Expiration Date") ten (10) years from
the date of grant. If the Non-Employee Director's Continuous Status
as an Employee, Director or Consultant terminates, the option shall
terminate on the earlier of the Expiration Date or the date three
(3) months following the date of termination of such Continuous
Status (twelve (12) months if such termination is due to death or
disability). In any and all circumstances, a Non-Employee
Director's option may be exercised following termination of his or
her Continuous Status as an Employee, Director or Consultant only as
to that number of shares as to which it was exercisable on the date
of termination of such status under the provisions of subsection
7(g).
(d) PRICE. The exercise price of each Non-Employee Director's option
shall be one hundred percent (100%) of the fair market value of the
stock subject to such option on the date such option is granted.
(e) CONSIDERATION. Payment of the exercise price of each option is due
in full in cash upon any exercise when the number of shares being
purchased upon such exercise is less than 1,000 shares. However,
when the number of shares being purchased upon an exercise is 1,000
or more shares, the Non-Employee Director may elect to make payment
of the exercise price under one of the following alternatives:
(1) Payment of the exercise price per share in cash or by check at
the time of exercise; or
(2) Provided that at the time of the exercise the Company's common
stock is publicly traded and quoted regularly in the Wall
Street Journal, payment by delivery of shares of common stock
of the Company already owned by the optionee, held for the
period required to avoid a charge to the Company's reported
earnings, and owned free and clear of any liens, claims,
encumbrances or security interest, which common stock shall be
valued at its fair market value on the date preceding the date
of exercise; or
(3) Payment by a combination of the methods of payment specified in
Paragraphs (1) and (2) above.
Notwithstanding the foregoing, a Non-Employee Director's option
may be exercised pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board which
results in the receipt of cash (or check) by the Company prior
to the issuance of shares of the Company's common stock.
(f) TRANSFERABILITY. A Non-Employee Director's option shall not be
transferable except by will or by the laws of descent and
distribution, or pursuant to a domestic relations order satisfying
the requirements of Rule 16b-3 and shall be exercisable during the
lifetime of the Non-Employee Director only by such person (or by his
guardian or legal representative) or transferee pursuant to such an
order. Notwithstanding the foregoing, a Non-Employee Director may,
by delivering written notice to the Company in a form satisfactory
to the Company, designate a third party who, in the event of the
death of the Non-Employee Director, shall thereafter be entitled to
exercise the option.
(g) VESTING. A Non-Employee Director's initial grant under Section 7(a)
shall be immediately exercisable upon grant.
8. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus
or restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee
shall determine and designate in such agreement but in no event
shall the purchase price be less than eighty-five percent (85%) of
the stock's Fair Market Value on the date such award is made.
Notwithstanding the foregoing, the Board or the Committee may
determine that eligible participants in the Plan may be awarded
stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company for its benefit.
(b) TRANSFERABILITY. No rights under a stock bonus or restricted stock
purchase agreement shall be transferable except by will or the laws
of descent and distribution or, if the agreement so provides,
pursuant to a domestic relations order satisfying the requirements
of Rule 16b-3, so long as stock awarded under such agreement remains
subject to the terms of the agreement.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the
time of purchase; (ii) at the discretion of the Board or the
Committee, according to a deferred payment or other arrangement with
the person to whom the stock is sold; or (iii) in any other form of
legal consideration that may be acceptable to the Board or the
Committee in its discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration of the Plan has been
delegated may award stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or
for its benefit.
(d) VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company
in accordance with a vesting schedule to be determined by the Board
or the Committee.
(e) TERMINATION OF CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an
Employee, Director or Consultant terminates, the Company may
repurchase or otherwise reacquire any or all of the shares of stock
held by that person which have not vested as of the date of
termination under the terms of the stock bonus or restricted stock
purchase agreement between the Company and such person.
9. STOCK APPRECIATION RIGHTS
(a) The Board or Committee shall have full power and authority,
exercisable in its sole discretion, to grant Stock Appreciation
Rights under the Plan to Employees, Directors and Consultants. To
exercise any outstanding Stock Appreciation Right, the holder must
provide written notice of exercise to the Company in compliance with
the provisions of the Stock Award Agreement evidencing such right.
Except as provided in subsection 5(c), no limitation shall exist on
the aggregate amount of cash payments the Company may make under the
Plan in connection with the exercise of a Stock Appreciation Right.
(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
(1) TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock Appreciation
Rights will be granted appurtenant to an Option, and shall,
except as specifically set forth in this Section 9, be subject
to the same terms and conditions applicable to the particular
Option grant to which it pertains. Tandem Stock Appreciation
Rights will require the holder to elect between the exercise of
the underlying Option for shares of stock and the surrender, in
whole or in part, of such Option for an appreciation
distribution. The appreciation distribution payable on the
exercised Tandem Right shall be in cash (or, if so provided, in
an equivalent number of shares of stock based on Fair Market
Value on the date of the Option surrender) in an amount up to
the excess of (A) the Fair Market Value (on the date of the
Option surrender) of the number of shares of stock covered by
that portion of the surrendered Option in which the Optionee is
vested over (B) the aggregate exercise price payable for such
vested shares.
(2) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Rights will
be granted appurtenant to an Option and may apply to all or any
portion of the shares of stock subject to the underlying Option
and shall, except as specifically set forth in this Section 9,
be subject to the same terms and conditions applicable to the
particular Option grant to which it pertains. A Concurrent
Right shall be exercised automatically at the same time the
underlying Option is exercised with respect to the particular
shares of stock to which the Concurrent Right pertains. The
appreciation distribution payable on an exercised Concurrent
Right shall be in cash (or, if so provided, in an equivalent
number of shares of stock based on Fair Market Value on the
date of the exercise of the Concurrent Right) in an amount
equal to such portion as shall be determined by the Board or
the Committee at the time of the grant of the excess of (A) the
aggregate Fair Market Value (on the date of the exercise of the
Concurrent Right) of the vested shares of stock purchased under
the underlying Option which have Concurrent Rights appurtenant
to them over (B) the aggregate exercise price paid for such
shares.
(3) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent Rights will
be granted independently of any Option and shall, except as
specifically set forth in this Section 9, be subject to the
same terms and conditions applicable to Nonstatutory Stock
Options as set forth in Section 6. They shall be denominated
in share equivalents. The appreciation distribution payable on
the exercised Independent Right shall be not greater than an
amount equal to the excess of (A) the aggregate Fair Market
Value (on the date of the exercise of the Independent Right) of
a number of shares of Company stock equal to the number of
share equivalents in which the holder is vested under such
Independent Right, and with respect to which the holder is
exercising the Independent Right on such date, over (B) the
aggregate Fair Market Value (on the date of the grant of the
Independent Right) of such number of shares of Company stock.
The appreciation distribution payable on the exercised
Independent Right shall be in cash or, if so provided, in an
equivalent number of shares of stock based on Fair Market Value
on the date of the exercise of the Independent Right.
10. CANCELLATION AND RE-GRANT OF OPTIONS
(a) The Board or the Committee shall have the authority to effect, at
any time and from time to time, (i) the repricing of any outstanding
Options and/or any Stock Appreciation Rights under the Plan and/or
(ii) with the consent of any adversely affected holders of Options
and/or Stock Appreciation Rights, the cancellation of any
outstanding Options and/or any Stock Appreciation Rights under the
Plan and the grant in substitution therefor of new Options and/or
Stock Appreciation Rights under the Plan covering the same or
different numbers of shares of stock, but having an exercise price
per share not less than: eighty-five percent (85%) of the Fair
Market Value for a Nonstatutory Stock Option, one hundred percent
(100%) of the Fair Market Value in the case of an Incentive Stock
Option or, in the case of an Incentive Stock Option held by a 10%
stockholder (as described in subsection 5(b)), not less than one
hundred ten percent (110%) of the Fair Market Value per share of
stock on the new grant date. Notwithstanding the foregoing, the
Board or the Committee may grant an Option and/or Stock
Appreciation Right with an exercise price lower than that set forth
above if such Option and/or Stock Appreciation Right is granted as
part of a transaction to which section 424(a) of the Code applies.
(b) Shares subject to an Option or Stock Appreciation Right canceled
under this Section 10 shall continue to be counted against the
maximum award of Options and Stock Appreciation Rights permitted to
be granted pursuant to the Plan. The repricing of an Option and/or
Stock Appreciation Right hereunder resulting in a reduction of the
exercise price, shall be deemed to be a cancellation of the original
Option and/or Stock Appreciation Right and the grant of a substitute
Option and/or Stock Appreciation Right; in the event of such
repricing, both the original and the substituted Options and Stock
Appreciation Rights shall be counted against the maximum awards of
Options and Stock Appreciation Rights permitted to be granted
pursuant to the Plan, to the extent required by Section 162(m) of
the Code.
11. COVENANTS OF THE COMPANY
(a) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to
satisfy such Stock Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be
required to issue and sell shares under Stock Awards; provided,
however, that this undertaking shall not require the Company to
register under the Securities Act of 1933, as amended (the
"Securities Act") either the Plan, any Stock Award or any stock
issued or issuable pursuant to any such Stock Award. If, after
reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of stock
under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Stock Awards
unless and until such authority is obtained.
12. USE OF PROCEEDS FROM STOCK
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
13. MISCELLANEOUS
(a) The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock
Award or any part thereof will vest, notwithstanding the provisions
in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.
(b) Neither an Employee, Director nor a Consultant nor any person to
whom a Stock Award is transferred in accordance with the Plan shall
be deemed to be the holder of, or to have any of the rights of a
holder with respect to, any shares subject to such Stock Award
unless and until such person has satisfied all requirements for
exercise of the Stock Award pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Consultant
or other holder of Stock Awards any right to continue in the employ
of the Company or any Affiliate, or to continue serving as a
Consultant and Director, or shall affect the right of the Company or
any Affiliate to terminate the employment of any Employee with or
without notice and with or without cause, or the right to terminate
the relationship of any Consultant pursuant to the terms of such
Consultant's agreement with the Company or Affiliate or service as a
Director pursuant to the Company's By-Laws.
(d) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock
Options are exercisable for the first time by any Optionee during
any calendar year under all plans of the Company and its Affiliates
exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in
which they were granted) shall be treated as Nonstatutory Stock
Options.
(e) The Company may require any person to whom a Stock Award is granted,
or any person to whom a Stock Award is transferred in accordance
with the Plan, as a condition of exercising or acquiring stock under
any Stock Award, (1) to give written assurances satisfactory to the
Company as to such person's knowledge and experience in financial
and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters, and that he or she is
capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award;
and (2) to give written assurances satisfactory to the Company
stating that such person is acquiring the stock subject to the Stock
Award for such person's own account and not with any present
intention of selling or otherwise distributing the stock. The
foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares
upon the exercise or acquisition of stock under the Stock Award has
been registered under a then currently effective registration
statement under the Securities Act, or (ii) as to any particular
requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then
applicable securities laws. The Company may, upon advice of counsel
to the Company, place legends on stock certificates issued under the
Plan as such counsel deems necessary or appropriate in order to
comply with applicable securities laws, including, but not limited
to, legends restricting the transfer of the stock.
(f) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal,
state or local tax withholding obligation relating to the exercise
or acquisition of stock under a Stock Award by any of the following
means or by a combination of such means: (1) tendering a cash
payment; (2) authorizing the Company to withhold shares from the
shares of the Common Stock otherwise issuable to the participant as
a result of the exercise or acquisition of stock under the Stock
Award; or (3) delivering to the Company owned and unencumbered
shares of the Common Stock of the Company.
14. ADJUSTMENTS UPON CHANGES IN STOCK
(a) If any change is made in the stock subject to the Plan, or subject
to any Stock Award, without the receipt of consideration by the
Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of shares subject to
the Plan and the maximum number of shares subject to award to any
person during any calendar year, and the outstanding Stock Awards
will be appropriately adjusted in the class(es) and number of shares
and price per share of stock subject to such outstanding Stock
Awards. Such adjustments shall be made by the Board or the
Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a "transaction not involving the
receipt of consideration by the Company".)
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or
consolidation in which the Company is not the surviving corporation;
or (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Common Stock outstanding
immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash
or otherwise, then to the extent permitted by applicable law: (i)
any surviving corporation or an Affiliate of such surviving
corporation shall assume any Stock Awards outstanding under the Plan
or shall substitute similar Stock Awards for those outstanding under
the Plan, or (ii) such Stock Awards shall continue in full force and
effect. In the event any surviving corporation and its Affiliates
refuse to assume or continue such Stock Awards, or to substitute
similar options for those outstanding under the Plan, then, with
respect to Stock Awards held by persons then performing services as
Employees, Directors or Consultants, the time during which such
Stock Awards may be exercised shall be accelerated and the Stock
Awards terminated if not exercised prior to such event.
15. AMENDMENT OF THE PLAN AND STOCK AWARDS
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 14 relating to adjustments
upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent
stockholder is necessary for the Plan to satisfy the requirements of
Section 422 of the Code, Rule 16b-3 or any Nasdaq or securities
exchange listing requirements.
(b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to,
amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding
the exclusion of performance-based compensation from the limit on
corporate deductibility of compensation paid to certain executive
officers.
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide
eligible Employees, Directors or Consultants with the maximum
benefits provided or to be provided under the provisions of the Code
and the regulations promulgated thereunder relating to Incentive
Stock Options and/or to bring the Plan and/or Incentive Stock
Options granted under it into compliance therewith.
(d) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the
Plan unless (i) the Company requests the consent of the person to
whom the Stock Award was granted and (ii) such person consents in
writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; provided, however, that the rights and
obligations under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the person
to whom the Stock Award was granted and (ii) such person consents in
writing.
16. TERMINATION OR SUSPENSION OF THE PLAN
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate ten (10) years from the
date the Plan is adopted by the Board or approved by the
stockholders of the Company, whichever is earlier. No Stock Awards
may be granted under the Plan while the Plan is suspended or after
it is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan
is in effect shall not be impaired by suspension or termination of
the Plan, except with the consent of the person to whom the Stock
Award was granted.
17. EFFECTIVE DATE OF PLAN
This amendment and restatement of the Plan shall become effective on the
date of closing of the initial public offering pursuant to an effective
registration statement covering the offer and sale of Common Stock to the
public, but no Stock Awards granted under the Plan shall be exercised unless
and until the Plan has been approved by the stockholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan
is adopted by the Board.
IN WITNESS WHEREOF, the Company has executed this Plan on the ____ day of
_______________, 1999.
iGENISYS, INC.
By:
---------------------------------
J. Daniel Bell, President
By:
---------------------------------
Carylyn K. Bell, Secretary
<PAGE>
LIST OF SUBSIDIARIES
GeniSys Information Systems, Inc., a Colorado corporation
NEUMAN & DRENNEN, LLC
ATTORNEYS AT LAW
1507 PINE STREET
BOULDER, COLORADO 80302
October 26, 1999
iGeniSys, Inc.
654 North Belt East, Suite 310
Houston, TX 77060
Re: S.E.C. Registration Statement on Form SB-2
Ladies and Gentlemen:
We hereby consent to the inclusion of our opinion regarding the legality
of the securities being registered by the Registration Statement to be filed
with the United States Securities and Exchange Commission, Washington D.C.,
pursuant to the Securities Act of 1933, as amended, by IGeniSys, Inc., a
Colorado corporation, (the "Company") in connection with the offering of up
to 3,490,611 shares of its Common Stock, $.001 par value, as proposed and more
fully described in such Registration Sttement.
We further consent to the reference in such Registration Statement to our
having given such opinions.
Sincerely,
Clifford L. Neuman
CLN:gg
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
iGeniSys, Inc.
We consent to the use in this Registration Statement on Form SB-2 of our
report dated June 25, 1999, relating to the consolidated financial statements
of iGeniSys, Inc. and to the reference to our Firm under the caption "Experts"
in the Prospectus.
Gelfond Hochstadt Pangburn, P.C.
Denver, Colorado
October 28, 1999
[ARTICLE] 5
[CIK] 0001098065
[NAME] IGENISYS, INC.
<TABLE>
<S> <C> <C>
[PERIOD-TYPE] YEAR 6-MOS
[FISCAL-YEAR-END] MAR-31-1999 SEP-30-1999
[PERIOD-START] APR-1-1998 APR-1-1999
[PERIOD-END] MAR-31-1999 SEP-30-1999
[CASH] 0 37,421
[SECURITIES] 0 0
[RECEIVABLES] 933,134 499,220
[ALLOWANCES] 79,500 100,000
[INVENTORY] 0 0
[CURRENT-ASSETS] 1,107,489 716,528
[PP&E] 147,359 160,416
[DEPRECIATION] 55,642 78,948
[TOTAL-ASSETS] 1,894,821 1,686,890
[CURRENT-LIABILITIES] 1,467,455 1,425,615
[BONDS] 0 0
[PREFERRED-MANDATORY] 0 0
[PREFERRED] 10 10
[COMMON] 9,954 10,533
[OTHER-SE] 394,092 242,739
[TOTAL-LIABILITY-AND-EQUITY] 1,894,821 1,686,890
[SALES] 3,049,128 1,542,924
[TOTAL-REVENUES] 3,049,128 1,542,924
[CGS] 1,478,633 927,748
[TOTAL-COSTS] 3,266,062 1,888,164
[OTHER-EXPENSES] 0 0
[LOSS-PROVISION] 0 0
[INTEREST-EXPENSE] 82,309 52,535
[INCOME-PRETAX] (299,243) (397,575)
[INCOME-TAX] 0 0
[INCOME-CONTINUING] (299,243) (397,575)
[DISCONTINUED] 0 0
[EXTRAORDINARY] 0 0
[CHANGES] 0 0
[NET-INCOME] (299,243) (397,575)
[EPS-BASIC] (.05) (.04)
[EPS-DILUTED] (.05) (.04)
</TABLE>
