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Registration No.__________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUER
UNDER SECTION 12(B) OR (G) OF
THE SECURITIES EXCHANGE ACT OF 1934
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ALADDIN SYSTEMS HOLDINGS, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
NEVADA 86-0866757
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
165 WESTRIDGE DRIVE, WATSONVILLE, CALIFORNIA 95076
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
ISSUER'S TELEPHONE NUMBER: (831) 761-6200
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.001 PER SHARE
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ALADDIN SYSTEMS HOLDINGS, INC.
FORM 10-SB
Table of Contents
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Part I
Item 1 Description of Business
Item 2 Management's Discussion and Analysis or Plan of Operations
Item 3 Description of Properties
Item 4 Security Ownership of Certain Beneficial Owners and Management
Item 5 Directors, Executive Officers, Promoters and Control Persons
Item 6 Executive Compensation
Item 7 Certain Relationships and Related Transactions
Item 8 Description of Securities
Part II
Item 1 Market For Common Equity and Related Stockholder Matters
Item 2 Legal Proceedings
Item 14 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Item 10 Recent Sales of Unregistered Securities
Item 12 Indemnification of Directors and Officers
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
"Aladdin", "StuffIt" "DropStuff" "Expander", "MacTicker",
"InstallerMaker", "StuffIt Deluxe""Spring Cleaning", "ShrinkWrap",
"InstallerMaker", and "PrivateFile" are trademarks and service marks of Aladdin
Systems Holdings, Inc. All other trademarks, service marks or tradenames
referred to in this Registration Statement on Form 10-SB ("Registration
Statement") are the property of their respective owners. Except as otherwise
required by the context, all references in this Registration Statement to (a)
"we," "us," "our" or "Aladdin" refer to the consolidated operations of Aladdin
Systems Holdings, Inc., a Nevada corporation, and its wholly-owned subsidiary,
Aladdin Systems, Inc., a Delaware corporation, (b) "you" refers to prospective
investors in our common stock and other readers of this Registration Statement,
(c) the "Web" refers to the World Wide Web, and (d) the "site" refer to our Web
site ("www.aladdinsys.com").
This Registration Statement contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended
("Exchange Act"), and Section 27A of the Securities Act of 1933, as amended
("Securities Act"), and is subject to the safe harbors created by those
sections. These forward-looking statements are subject to significant risks and
uncertainties, including information included under Part 1, Items 1 and 2 of
this Registration Statement, which may cause actual results to differ materially
from those discussed in such forward-looking statements. The forward-looking
statements within this Registration Statement are identified by words such as
"believes," "anticipates," "expects," "intends," "may," "will" and other similar
expressions regarding our intent, belief and current expectations. However,
these words are not the exclusive means of identifying such statements. In
addition, any statements which refer to expectations, projections or other
characterizations of future events or circumstances and statements made in the
future tense are forward-looking statements. Readers are cautioned that actual
results may differ materially from those projected in the forward looking
statements as a result of various factors, many of which are beyond our control.
We undertake no obligation to publicly release the results of any revisions to
these forward-looking statements which may be made to reflect events or
circumstances occurring subsequent to the filing of this Registration Statement
with the Securities and Exchange Commission ("SEC"). Readers are urged to
carefully review and consider the various disclosures made by us in this
Registration Statement.
This Registration Statement includes statistical data regarding Aladdin
and the markets in which it operates. Such data is based on our records or are
taken or derived from information published by various sources, including
Dataquest, Forrester Research, Jupiter Communications, and International Data
Corporation. Although these companies specialize in providing market and
strategic information for the information technology industry, and we believe
that data from these companies is generally reliable, this type of data is
inherently imprecise. You are cautioned not to place undue reliance on this
data.
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ITEM 1. DESCRIPTION OF BUSINESS
BACKGROUND
Aladdin is a leading developer and publisher of software products for
the Macintosh and Windows software markets. Aladdin's subsidiary, Aladdin
Systems, Inc. was formed in January, 1989 to publish software for the Macintosh
computer. In May, 1989, Aladdin entered into a publishing agreement to publish
the StuffIt data compression software product for the Macintosh computer
developed by Raymond Lau. Since 1990, Aladdin Systems has refined, expanded and
improved the StuffIt software and today publishes several different versions of
StuffIt for both the Macintosh and Windows markets. We also publish several
other popular software applications including Spring Cleaning, the leading
software uninstaller package for the Macintosh; Private File, a file encryption
application for both the Macintosh and Windows markets; Aladdin Flashback, a
version control application for both the Macintosh and Windows markets which
saves older versions of documents as newer ones are created; DragStrip, a quick
launch application for both the Macintosh and Windows markets; and MacTicker, an
automatically updated stock ticker for the Macintosh which accesses data over
the Internet without the need for separate Web browser software. We sell these
products to consumers through distributors and resellers, as well as directly
from our Web site (www.aladdinsys.com).
In addition to products for the consumer market, we also develops and
markets products to other software developers. Our InstallerMaker software
simplifies the installation of software products for Macintosh computers and the
our StuffIt Engine product for the Macintosh and Windows markets provides
developers with the ability to include compression features in their own
products. In addition, we publish ShrinkWrap, a disk image product which is used
by software developers.
In October, 1999, Aladdin Systems, Inc. entered into a reorganization
with a non-operating public company, Foreplay Golf & Travel Tours, Inc., a
Nevada corporation incorporated on March 26, 1997 ("FGT"). Under the
reorganization agreement (the "Reorganization Agreement"), the Aladdin Systems
stockholders received 1.580827 (the "Exchange Ratio") shares of FGT Common Stock
in exchange for each share of Aladdin Systems, Inc. Common Stock. The Exchange
Ratio is subject to adjustment after closing, pursuant to the terms of the
Reorganization Agreement, to adjust for options issued to employees of Aladdin
Systems which had expired prior to the closing. As part of the reorganization,
Aladdin Systems became a wholly-owned subsidiary of FGT, all of the executive
officers and directors of FGT resigned and certain executive officers and
directors of Aladdin Systems became the executive officers and directors of FGT
which changed its name to Aladdin Systems Holdings, Inc.
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All of our business is currently conducted through Aladdin Systems, and
our principal executive offices are located at 165 Westridge, Watsonville, CA.
Our telephone number at this address is (831) 761-6200.
GENERAL
Aladdin Systems Holdings, Inc., a Nevada corporation (the "Company"),
through its Aladdin Systems, Inc. subsidiary, develops and publishes computer
software that enhances the transmission, access, and organization of information
for businesses and home-based personal computer users. Our strategy is to
produce products that are easy to use, transparent in operation, and minimally
intrusive to the user. Aladdin publishes software for the following market
segments:
- Transmission: Sending or receiving data over the Internet or any
computer network.
- Access: Making data accessible regardless of file format or computing
platform.
- Organization: Managing data on a user's computer.
Our products are divided into two different product groups serving two
different markets: consumer and software developers. While many of our products
are used by both groups, most of our developer products are licensed directly
rather than sold through the retail market.
STUFFIT PRODUCTS (WINDOWS AND MACINTOSH PLATFORMS)
Our flagship product line is Aladdin's StuffIt and other data
compression products: StuffIt Deluxe, DropStuff, Expander, StuffIt Lite and the
StuffIt Engine. StuffIt software is used to compress and expand data. The
software allows users to compress files, directories, hard drives or other media
for either faster transmission over computer networks, including the Internet,
or for archival purposes.
Aladdin Systems commenced publishing StuffIt in 1989 when it acquired
the publishing rights to the product from Raymond Lau, then a 17-year old high
school student. Prior to that time, StuffIt was being published by Mr. Lau as
"shareware", a form of software distribution which allows the free distribution
of the software and requests that the user send payment on the "honor system."
Pursuant to the 1989 publishing agreement with Raymond Lau, Aladdin assumed the
publishing of StuffIt in exchange for royalty payments to Mr. Lau. In 1995, we
purchased all rights to StuffIt from Raymond Lau. Since our release of StuffIt
in 1989, Aladdin has continually improved and updated the product. StuffIt was
originally designed to run only on Macintosh computers. In 1995, Aladdin started
to publish versions of certain StuffIt products for Microsoft Windows-based
computers.
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In November, 1998, we shipped its newest version of StuffIt. This new
version incorporated two major changes: a new compression algorithm that is on
average 20% better than earlier versions of StuffIt, and a new file format
designed to make StuffIt work equally as well under the Microsoft Windows
operating system as it does on the Macintosh. From 1996 to August, 1999, Aladdin
has sold 537,966 copies of StuffIt (all products combined).
StuffIt is considered a worldwide compression standard for the
Macintosh computer. In 1990, America Online adopted StuffIt as their standard
for compressing Macintosh files. We believe that StuffIt products are currently
used by over 10 million users worldwide.
The StuffIt product line is divided into five different software
products, StuffIt Deluxe, DropStuff, Expander, the StuffIt Engine and StuffIt
Lite, designed for multiple computing platforms, and distributed through a
worldwide multi-channel distribution network.
STUFFIT DELUXE (MACINTOSH) - StuffIt Deluxe is a full featured product
offering a complete compression and expansion solution to users. StuffIt Deluxe
is sold commercially through Aladdin's physical and electronic worldwide
distribution network of distributors, resellers, mail order houses, Web-based
retailers, and through our Web site (www.aladdinsys.com). StuffIt Deluxe was
originally released in 1990. A localized kanji version is distributed by our
Japanese distributor.
DROPSTUFF (WINDOWS AND MACINTOSH) - DropStuff allows users to quickly
and easily compress a file by simply moving the file's icon directly over the
DropStuff icon on the user's desktop. DropStuff is distributed as shareware.
Shareware is generally recognized in the software industry as being on the
"honor system" with the software freely distributed at no charge pursuant to a
license agreement which requires payment as a condition of continued use. We
expect that the vast majority of shareware users will not register the software
or pay the license fee. However, we believe that on a historical basis, the
distribution of DropStuff as shareware has benefited Aladdin through an increase
in the number of users of our StuffIt compression standard as well as increasing
Aladdin's goodwill in the computer industry. In 1999, we started distributing
DropStuff through e-commerce retailers as a commercial product. DropStuff is
currently distributed by Apple Computer as part of the Mac OS.
EXPANDER (WINDOWS AND MACINTOSH) - StuffIt Expander for the Macintosh
and Aladdin Expander for Windows are corresponding products which automatically
decompress files that are compressed into the StuffIt format. These products do
not compress files themselves. Expander is freely distributed in order to
encourage the wide distribution of files in StuffIt format and to seed the
market for our commercial products. Despite being freely distributed, Expander
is protected by copyright law and its use is subject to a license agreement. In
addition to decoding files in StuffIt format, Expander also decodes files in
other popular compression and encoding formats, including Zip, Binhex, Base64
(MIME) and TAR, further
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increasing its popularity and usefulness. We have entered into agreements
allowing distribution of StuffIt Expander with third parties such as Apple
Computer, Netscape, IDG Communications and Connectix Corporation. We also
distribute Expander from our Web site (www.aladdinsys.com).
STUFFIT ENGINE (WINDOWS AND MACINTOSH) - The StuffIt Engine is licensed
directly to software developers who wish to incorporate Aladdin's compression
technology into their software. We have licensed the StuffIt Engine to third
parties such as American Online and DataViz.
STUFFIT LITE (MACINTOSH) - StuffIt Lite is a shareware compression
product designed to provide basic compression and expansion capabilities. The
software is only distributed electronically and is available for download
through multiple sources. StuffIt Lite is primarily distributed via our Web site
(www.aladdinsys.com).
SPRING CLEANING (MACINTOSH)
Spring Cleaning is a software uninstaller product for the Macintosh
market which removes unwanted and unused software and related files from a
user's computer. Released in November 1996, it has sold over 370,000 copies and
is the leading product for its market category. Spring Cleaning is published by
Aladdin pursuant to a publishing agreement with The Excelsior Group which grants
to Aladdin perpetual rights to publish the product and to create updates and
derivate products. Spring Cleaning is sold commercially through Aladdin's
physical and electronic worldwide distribution network of distributors,
resellers, mail order houses, Web retailers, and through our Web site
(www.aladdinsys.com). Localized kanji and French language versions of the
product are distributed by our Japanese and French distributors.
PRIVATE FILE (WINDOWS AND MACINTOSH)
Private File incorporates StuffIt compression technology into a data
security software product designed to send secure information over computer
networks including the Internet. Private File was released in 1997. The product
faces competition from many sources, with Network Associates and Symantec being
the market leader. Private File is sold commercially through both retail
software distribution channels and via our Web site (www.aladdinsys.com).
SHRINKWRAP (MACINTOSH)
ShrinkWrap is used by developers and consumers to create disk image
files, allowing the users to create exact copies of their hard disk, floppies,
or CD ROMs. ShrinkWrap was released in 1997. ShrinkWrap's only competition is
Disk Copy from Apple Computer. ShrinkWrap is distributed directly from Aladdin
via our Web site and by other Web-based retailers. A localized kanji version is
distributed by our Japanese distributor.
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ALADDIN FLASHBACK (WINDOWS AND MACINTOSH)
Aladdin FlashBack is a version control product designed to allow users
to restore versions of documents regardless of the application being used, and
protect them from data loss and accidental overwriting. Aladdin Flashback has no
competition in the Macintosh market and several competitors in the Windows
market, including Lost & Found from PowerQuest. None of the competitive products
are dominant the market for such products. Aladdin Flashback was released in
1997 and is sold commercially through Aladdin's physical and electronic
worldwide distribution network of distributors, resellers, mail order houses,
Web-based retailers and through our Web site (www.aladdinsys.com). Localized
kanji, German and French language versions of the product are also distributed
by our Japanese, German and French distributors, respectively.
STUFFIT INSTALLERMAKER (MACINTOSH)
StuffIt InstallerMaker is a product used by software developers to
create custom installers for the distribution of software and is licensed by us
directly to developers. StuffIt InstallerMaker incorporates Aladdin's e-commerce
technology which enables a developer to disable their software after a certain
period of time unless the user enters an authorization code. InstallerMaker's
licensee's include Apple Computer, Lexmark, The Learning Company and
RealNetworks.
DRAGSTRIP (WINDOWS AND MACINTOSH)
In 1999, Aladdin started publishing DragStrip pursuant to a software
publishing agreement with Poppybank Software. DragStrip allows users to launch,
find, organize, and access applications and documents quickly and efficiently,
allowing users to become better organized. DragStrip is sold commercially
through Aladdin's physical and electronic worldwide distribution network of
resellers, mail order houses, Web-based retailers and through our Web site
(www.aladdinsys.com).
MACTICKER (MACINTOSH)
In 1999, we acquired the rights to MacTicker from Galleon Software,
Inc. MacTicker represents a new kind of product for Aladdin. MacTicker is a
browser-less Internet client software which displays a moving stock ticker
across a user's computer screen. The stock quote information is continually fed
to the software from a Web site. Currently, we charge for the MacTicker software
and provides 15 minute delayed stock quotes free of charge. We are currently
exploring alternative revenue models for MacTicker including charging a
subscription fee for real time stock quotes and OEM arrangements with brokerage
houses and financial Web sites.
RESALE OF THIRD PARTY PRODUCTS
We utilize our resources and customer list to resell software products
published by other software companies. Historically, we resold limited numbers
of
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third-party products through "bundling" offers with our product which were
distributed via direct mail efforts. We are now focusing on offering third party
products for sale via our Web site, primarily through a download model, where
the customer receives the product downloaded directly to their computer after
credit card information is entered and verified.
From 1996 through 1998, our revenue from the resale of third-party
products decreased dramatically as we reduced the amount of direct mail
marketing we conducted. During 1999, third-party products have been primarily
conducted through our Web site and 1999 revenues for third-party products sales
increased to $424,881 through August 31, 1999. We currently resell products such
as Eudora from Qualcomm, Norton Anti-Virus for Macintosh from Symantec, Virtual
PC from Connectix and Voice Express Standard from Learner & Hauspie.
Divided according to these two groups and by products resold, Aladdin's
approximate net revenues for the last three complete years are as follows:
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1998 1997 1996
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<S> <C> <C> <C>
Consumer $6,707,281 $5,775,838 $4,058,623
Developer 1,146,874 1,274,241 1,524,804
Resold Products 148,363 224,835 531,776
Total net revenues $8,002,518 $7,274,914 $6,115,203
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PUBLISHING AGREEMENTS
The software products we publish consist of products which are
developed by our own engineering staff and certain products which have been
licensed from third party developers. Third party software products are
published pursuant to industry standard publishing agreements which provides us
with perpetual rights in the software in exchange for royalty payments ranging
from 5% to 15% of our net revenue from the sales and licensing of such software.
Total royalty payments to developers in 1996, 1997 and 1998 were $24,500,
$201,220 and $226,511, respectively.
PRODUCT SUPPORT
We believes that customer and technical support is an important part of
the Company's overall performance and success. As of August 30, 1999, we had
five full-time employees involved in technical support services, available to
all customers by electronic mail, via our Web site, telephone, or fax. Support
services include explaining how the customer's computer works, how the
customer's other software works in relation to our products, solving problems
with software operation and suggesting solutions to business and personal
computing issues.
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DISTRIBUTION AND MARKETING; MAJOR CUSTOMERS
Our products are marketed through independent distributors in the
United States and Canada, through numerous resellers and mail order companies
and distributors in other countries, directly to corporate and educational
accounts under site licensing agreements, and directly to end-users through
direct marketing campaigns and our Web site (www.aladdinsys.com).
Of our total net revenues for 1998, approximately 30% was through
independent, domestic distributors pursuant to nonexclusive distribution
agreements. Sales to one such distributor, Ingram Micro, accounted for nearly
25% of total net revenues in 1998. Domestic distributors purchase product at a
discount from suggested list prices.
Of our total net revenues for 1998, approximately 12% was through
independent, international distributors. Several of these distributors are
limited by contract to distribution within a specified geographic area. We
currently provides translations of certain products in Japanese, German and
French languages. Sales to such distributors, Act2 (Japan), and Softline (United
Kingdom), accounted for approximately 8%, and 1%, of total net revenues in 1998,
respectively. The Asian economic crisis has affected our sales in the Asian
marketplace. International distributors generally require a somewhat larger
discount in return for various advertising, customer service, and customer
registration duties performed by them.
We give its distributors industry-standard rights of return for stock
balancing and for defective products, and replacement rights when products are
upgraded to new versions. A reserve for returns has been recorded and was
$37,368 and $17,749 at December 31, 1998 and 1997, respectively. Returns
exchanged for product upgrades and new version releases do not have a material
impact on the financial statements because of Aladdin's low cost to replace such
returns. Historically, product returns from end users have not been significant.
PRODUCT DEVELOPMENT
The personal computer software industry continues to undergo rapid
technological change, requiring a continuous high level of enhancement of
existing products and development of new products. We intend to continue the
enhancement of its existing products.
Our future financial performance will depend in part on the successful
development, completion, and introduction of new software products, and on
enhanced versions of existing products, and customer acceptance of those
products. In the future, there is no assurance that we will not encounter
difficulties that could delay or prevent the successful development of, or
marketing of, new products and/or enhancements of existing products. There also
can be no assurance that such
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products will yield positive results or that such results can be obtained on a
timely basis or without the expenditure of substantial funds.
Our software products are developed internally and/or licensed from
independent authors and other software companies. As of August 31, 1999,
eighteen (18) employees were engaged full time in product development. During
years 1998, 1997, and 1996, we spent approximately $1,500,000, $1,470,000 and
$960,000, respectively, on product research and development and enhancement
activities, representing approximately 18.8%, 20.2%, and 15.6%, respectively, of
net revenues in each of these periods.
COMPETITION
The personal computer software market is highly competitive and has
been subject to rapid change, which is expected to continue. Our competitors
include many independent software vendors that have financial, marketing, and
technological resources far in excess of those of ours. Some of these include
Apple, Symantec, Microsoft, Network Associates, PowerQuest, and MindVision. In
addition, certain computer manufacturers may devote significant resources to
creating software, directly competitive with products of Aladdin, for inclusion
with their computers and computer systems without additional charge to
consumers.
Aladdin's software products are marketed primarily through the retail
channel. All of these products face competing products offering many similar
features. Aladdin believes that the principal competitive factors in the market
include product features and functions, ease of understanding and operating the
software, product reliability, price/performance characteristics, name
recognition, and availability and quality of support and training services.
Price competition could become an increasing factor in the personal computer
software market, which could, in turn, be expected to increase pressures on
profit margins in the future.
As the Internet and e-commerce becomes an increasing important channel
for the distribution and sales of software products, we plan to increase our
efforts to sell both our products and the third-party products we resell direct
to consumers via our Web site (www.aladdinsys.com). In order to accomplish this,
we may need to invest money, effort and other resources into our Web efforts
which may divert attention and resources from our traditional sales channels. In
addition, we may be competing against existing and new companies that have
financial, marketing, and technological resources far in excess of Aladdin's. In
the event that we are not able to successfully compete against such companies it
could have a material adverse effect upon our business, results of operations
and financial condition.
PRODUCT PROTECTION
We regard the protection of our copyrights, service marks, trademarks,
trade dress and trade secrets as critical to our future success and rely on a
combination of copyright, trademark, service mark and trade secret laws and
contractual restrictions
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to establish and protect our proprietary rights in products and services. We
regard our software as proprietary and attempt to protect it with copyrights,
trade secret laws, and internal nondisclosure safeguards, as well as
restrictions on disclosure and transferability that are incorporated into its
software license agreements. Aladdin licenses its software products to customers
rather than transferring title. Despite these restrictions, it may be possible
for competitors or users to copy aspects of the Aladdin's products or to obtain
information which Aladdin regards as trade secrets. Computer software generally
can be patented only with difficulty, and existing copyright laws afford only
limited practical protection. Policing unauthorized use of such a broadly
disseminated product as computer software is difficult, and software piracy can
be expected to be a persistent problem for the packaged software industry. These
problems may be particularly acute in international markets. However, because of
the rapid pace of technological change in its industry, such protections are
less significant than factors such as knowledge, ability, and experience of
Aladdin's employees, frequent product enhancements, and the timeliness and
quality of Aladdin support services.
Although we do not believe that we infringe the proprietary rights of
third parties, there can be no assurance that third parties will not claim
infringement by us with respect to past, current or future technologies. We
expect that participants in our markets will be increasingly subject to
infringement claims as the number of software and competitors in our industry
segment grows. Any such claim, whether meritorious or not, could be
time-consuming, result in costly litigation, cause software upgrade delays or
require us to enter into royalty or licensing agreements. Such royalty or
licensing agreements might not be available on terms acceptable to us or at all,
as a result, any such claim could have a material adverse effect upon our
business, results of operations and financial condition.
Since we produce computer software products and are not engaged in
hardware manufacturing, we did not spend any material amounts on compliance with
environmental laws.
GOVERNMENTAL REGULATION
Our company, operations and products and services are all subject to
regulations set forth by various federal, state and local regulatory agencies
including export regulations on compression methods promulgated by the United
States Department of Commerce. We take measures to ensure our compliance with
all such regulations as promulgated by these agencies from time to time. The
cost of compliance with all such regulations is minimal.
As the Web-based portion of our business expands, we may be subject to
any existing or future governmental regulation associated with the Internet.
There are currently few laws and regulations directly applicable to the
Internet. It is possible that a number of laws and regulations may be adopted
with respect to the Internet covering issues such as user privacy, pricing,
content, copyrights, distribution, antitrust and characteristics and quality of
products and services. The growth of the
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market for online commerce may prompt calls for more stringent consumer
protection laws that may impose additional burdens on those companies conducting
business online. Federal and state tax authorities in a number of states are
currently reviewing the appropriate tax treatment of companies engaged in online
commerce, and new state tax regulations may subject us to additional state sales
and income taxes.
Several states have also proposed legislation that would limit the uses
of personal user information gathered online or require online services to
establish privacy policies. The Federal Trade Commission has also initiated
action against at least one online service regarding the manner in which
personal information is collected from users and provided to third parties.
Changes to existing laws or the passage of new laws intended to address these
issues, including some recently proposed changes, could create uncertainty in
the marketplace that could reduce demand for our products or increase the cost
of doing business as a result of litigation costs or increased product delivery
costs, or could in some other manner have a material adverse effect on our
business, results of operations and financial condition. In addition, because
our products are accessible worldwide and we facilitate sales of goods to users
worldwide, other jurisdictions may claim that we are required to qualify to do
business as a foreign corporation in a particular state or foreign country. Our
failure to qualify as a foreign corporation in a jurisdiction where it is
required to do so could subject us to taxes and penalties for the failure to
qualify and could result in our inability to enforce contracts in such
jurisdictions. Any such new legislation or regulation, or the application of
laws or regulations from jurisdictions whose laws do not currently apply to our
business, could have a material adverse effect on our business, results of
operations and financial condition.
EMPLOYEES
As of August 31, 1999, we had 46 full time employees, including 19 in
Marketing, Sales and Support; 7 in Administration; 18 in Research and
Development; and 2 in Shipping and Production. Although talented and qualified
employees are difficult to find in the current tight job market, we have
experienced relative success in attracting and retaining highly motivated and
talented employees.
We believe that the future success of the Company will depend in part
on our continued ability to attract, integrate, retain and motivate highly
qualified technical and managerial personnel, and upon the continued service of
our senior management and key technical personnel. The competition for qualified
personnel in our industry and graphical location is intense, and there can be no
assurance that we will be successful in attracting, integrating, retaining and
motivating a sufficient number of qualified personnel to conduct our business in
the future. From time to time, we also employ independent contractors to support
our research and development, marketing, sales and support and administrative
organizations. We
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have never had a work stoppage, and no employees are represented under
collective bargaining agreements. We consider our relations with our employees
to be good.
SUBSIDIARIES
We have one subsidiary, Transaction Services, Inc. ("TSI"), a
California corporation, which was incorporation in 1997 and is a wholly-owned
subsidiary of Aladdin Systems. TSI was formed in order to provide technology and
services to other software publishers which would allow such companies to make
trial versions of their software available. Currently, TSI transactions only
non-material about of business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
SELECTED FINANCIAL DATA
The following table contains certain selected financial data of the
Company and is qualified by the more detailed financial statements and the notes
thereto provided in this Registration Statement. The financial data as of and
for the years ended December 31, 1998 and 1997, have been derived from the
Company's financial statements, which statements were audited by Hutchinson &
Bloodgood, LLP. The financial data as of September 30, 1999 and for the
nine-month periods ended September 30, 1999 and 1998, has been derived from the
Company's unaudited financial statements.
STATEMENT OF OPERATIONS DATA
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Nine Months Ended Fiscal Year Ended
September 30 December 31,
------------------------ -----------------------
1999 1998 1998 1997
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues $ 6,719,464 $ 5,827,388 $ 8,002,518 $ 7,274,914
Net Income (loss) $ 1,000,866 ($40,629) $ 580,183 (772,999)
Net Income (loss) per share to Shareholders:
Basic $ 0.109 ($0.004) $ 0.063 ($0.085)
Diluted (with options) $ 0.093 ($0.003) $ 0.053 ($.073)
</TABLE>
14
<PAGE> 15
Balance Sheet Data
<TABLE>
<CAPTION>
September 30 December 31,
------------------- --------------------
1999 1998 1998 1997
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Current Assets $1,343,467 $908,797 $1,075,928 $1,040,914
Total Assets $2,363,457 $1,979,576 $2,063,700 $2,341,848
Current Liabilities $777,385 $2,132,167 $1,468,685 $2,457,823
Long Term Debt $330,335 $219,678 $340,145 $215,665
Total Liabilities $1,107,721 $2,351,845 $1,808,829 $2,673,488
Shareholders Equity $1,255,736 ($372,269) $254,870 ($331,640)
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The following discussion of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and notes thereto appearing elsewhere in this Registration Statement.
The matters discussed in this Registration Statement contain forward-looking
statements that involve risks and uncertainties. Our actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to, those discussed below in
"Factors Affecting Our Business, Operating Results, and Financial Condition" as
well as those discussed in this section and elsewhere in this Registration
Statement.
OVERVIEW
Aladdin is a leading developer and publisher of software products for
the Macintosh and Windows software markets. Aladdin's subsidiary, Aladdin
Systems, Inc. was formed in January, 1989 to publish software for the Macintosh
computer. In May, 1989, Aladdin entered into a publishing agreement to publish
the StuffIt file compression software product for the Macintosh computer
developed by Raymond Lau. Since 1990, Aladdin Systems has continually refined,
expanded and improved the StuffIt software and today publishes several different
version of StuffIt for both the Macintosh and Windows markets. The Company also
publishes several other popular software applications including Spring Cleaning,
the leading software uninstaller package for the Macintosh, Private File, a file
encryption application for both the Macintosh and Windows markets, Aladdin
Flashback, a version control application for both the Macintosh and Windows
markets which saves older versions of documents as newer ones are created,
DragStrip, a quick launch application for both the Macintosh and Windows markets
and MacTicker, an automatically updated stock ticker for the Macintosh which
accesses data over the Internet without the need for separate browser software.
Aladdin sells these
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<PAGE> 16
products to consumers through relationships with distributors and resellers, as
well as, directly from our Web site (www.aladdinsys.com).
In addition to products for the consumer market, Aladdin also develops
and markets products to other software developers, InstallerMaker which
simplifies the installation of software products for Macintosh computers and the
StuffIt Engine which provides developers with the ability to include compression
features in their own products.
OPERATING RESULTS
NINE MONTHS ENDED SEPTEMBER 31, 1999 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 31, 1998.
Revenues for the nine months ended September 31, 1999 were $6,719,464,
an increase of $892,076, or approximately 15,3%, compared to $5,827,388 for the
nine months ended September 31, 1998. Revenues increased primarily due to sales
of an upgraded version of StuffIt Deluxe and sales of a new software product,
Aladdin Flashback.
The gross profit for the nine months ended September 31, 1999 was
$5,568,866, an increase of $900,405, or approximately 19.3%, compared to the
gross profit of $4,668,461 for the nine months ended September 31, 1998. Gross
profit increased primarily to due to an increase in sales of products via our
Web site (www.aladdinsys.com) since there is little to no cost of good sold for
software sold via our Web, which increases the overall gross profit margin.
Marketing, Sales and Support expenses for the nine months ended
September 31, 1999 were $2,410,208, a decrease of $320,722 or 11.7%, compared
to $2,730,930 for the nine months ended September 31, 1998. This decrease
reflects a cut in advertising expenses.
Research and Development expenses for the nine months ended September
31, 1999 were $1,278,847, an increase of $118,439 or 10.2%, compared to
$1,160,408 for the nine months ended September 31, 1998.
General and Administrative expenses for the nine months ended September
31, 1999 were $671,693, a decrease of $9,138 or 1.3%, compared to $680,831 for
the nine months ended September 31, 1998.
Profit from operations for the nine months ended September 31, 1999 was
$1,208,117, an increase of $1,111,824 or 1,154% compared to income from
operations of $96,293 for the nine months ended September 31, 1998. This
increase is primarily due to the decrease in both cost of good sold and total
expenses and an increase in sales.
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<PAGE> 17
Interest income for the nine months ended September 31, 1999 was
$3,996, an increase of $3,857 compared to $139 for the nine months ended
September 31, 1998.
FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED TO FISCAL YEAR ENDED
DECEMBER 31, 1997.
Revenues for fiscal 1998 were $8,002,518, an increase of $724,604 or
approximately 10%, compared to $7,274,914 for fiscal 1997. Revenues increased
primarily due to sales of an upgraded version of StuffIt Deluxe and sales of a
new software product, Aladdin Flashback.
Gross profit for fiscal 1998 was $6,597,022, an increase of $763,686 or
13.1% compared to $5,833,336 for fiscal 1997.
Marketing, Sales and Support expenses for fiscal 1998 were $3,520,106,
a decrease of $379,648 or 9.7% compared to $3,899,754 for fiscal 1997. As a
percentage of revenue, Marketing, Sales and Support expenses decreased to 44% in
fiscal 1998 from 53.6% in fiscal 1997, primarily as a result of decreasing
advertising expenses.
Research and Development expenses for fiscal 1998 were $1,506,798, an
increase of $39,932 or 2.7% compared to $1,466,866 for fiscal 1997. As a
percentage of revenue, Research and Development expenses decreased to 18.8% in
fiscal 1998 from 20.2% in fiscal 1997.
General and Administrative expenses for fiscal 1998 were $907,560 a
decrease of $251,574 or 21.7% compared to $1,159,134 for fiscal 1997. As a
percentage of revenue, General and Administrative expenses decreased to 11.3% in
fiscal 1998 from 15.9% in fiscal 1997, primarily as a result of a reduction in
the number of employees and a decrease in consulting fees and recruiting
expenses.
Due to the above, income from operations for fiscal 1998 was $662,559,
an increase of $1,354,977 compared to a loss from operations of $692,418 for
fiscal 1997.
Net income for fiscal 1998 was $580,183, an increase of $1,353,182
compared to the net loss of $772,999 for fiscal 1997. The increase is due
primarily to an increase in sales and a decrease in expenses in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities during the nine months ended
September 31, 1999 was $759,299. Net cash provided by operating activities
during fiscal 1998 was $642,574 an increase of $109,046 compared to net cash
used in operating activities of $366,472 in fiscal 1997. The increase is due
primarily to an increase in sales.
Net cash used in investing activities was $190,883 for the nine months
ended September 31, 1999, primarily reflecting cash used for the acquisition of
software and
17
<PAGE> 18
equipment. Net cash used in investing activities in fiscal 1998 was $26,446
compared with net cash used in fiscal 1997 of $658,077, with both years
reflecting cash used for the acquisition of software and equipment.
Net cash used by financing activities was $323,734 for the nine months
ended September 31, 1999. Net cash used in financing activities for fiscal 1998
was $607,353.
Our capital requirements are dependent on several factors, including
market acceptance of our software and services, timely updating of the Company's
existing software product, developing new software products or acquiring the
rights to existing software products from third parties, the resources devoted
to marketing and selling the Company's services and brand promotions and other
factors. At October 31, 1999, the Company had cash and cash equivalents totaling
$1,073,697, resulting principally from the sale of common stock in a private
placement during October, 1999 which is described herein under Part 2, Item 4,
Recent Sales of Unregistered Securities, and working capital of $1,375,571.
We believe that our current cash and cash equivalents will be
sufficient to meet our anticipated cash needs for working capital and capital
expenditures through 2000. If cash generated from operations is insufficient to
satisfy our liquidity requirements, we may seek to sell additional equity or
debt securities or to obtain a credit facility. The sale of additional equity or
convertible debt securities could result in additional dilution to our
stockholders. The incurrence of indebtedness would result in an increase in our
fixed obligations and could result in operating covenants that would restrict
its operations. There can be no assurance that financing will be available in
amounts or on terms acceptable to us, if at all. If financing is not available
when required or is not available on acceptable terms, we may be unable to
develop or enhance our products or services. In addition, we may be unable to
take advantage of business opportunities or respond to competitive pressures.
Any of these events could have a material and adverse effect on our business,
results of operations and financial condition.
IMPACT OF THE YEAR 2000
Many currently installed computer systems and software products are
coded to accept or recognize only two digit entries in the date code field.
These systems may recognize a date using "00" as the year 1900 rather than the
year 2000. As a result, computer systems and/or software used by many companies
and governmental agencies may need to be upgraded to comply with Year 2000
requirements or risk system failure or miscalculations causing disruptions of
normal business activities.
State of Readiness. The two third-party vendors upon which we
materially rely are Hurricane Electric Internet Services, Inc., which hosts our
Web site on their equipment and provides our connection to the Internet and
DigitalRiver, Inc., which hosts the downloading of software from our Web site.
We have sought
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<PAGE> 19
confirmation from both Hurricane Electric Internet Services, Inc. and
DigitalRiver, Inc., that their systems are Year 2000 compliant.
In addition, we plan to seek verification from other key vendors,
distributors and suppliers that they are Year 2000 compliant or, if they are not
presently compliant, to provide a description of their plans to become so. To
the extent that vendors fail to provide certification that they are Year 2000
compliant by November 1999, we may seek to terminate and replace these
relationships. Until our vendors, distributors and suppliers have provided
verification of their compliance, we will not be able to completely evaluate
whether our systems will need to be revised or replaced.
We are conducting an internal assessment of all material information
technology and non-information technology systems at our headquarters. Until we
complete the assessment, we will not know whether these systems are or will be
Year 2000 compliant by December 1, 1999.
We have conducted an internal assessment on all our products, and have
determined that our products are all Year 2000 compliant.
Costs. To date, we have not incurred any material costs in identifying
or evaluating Year 2000 compliance issues. Most of our expenses have related to,
and are expected to continue to relate to, the upgrades or replacements, when
necessary, of software or hardware, as well as costs associated with time spent
by employees in the evaluation process and Year 2000 compliance matters
generally. These expenses are included in our capital expenditures budget and
are not expected to be material to our financial position or results of
operations. These expenses, however, if higher than anticipated, could have a
material and adverse effect on our business, results of operations and financial
condition.
Risks. There can be no assurance that we will not discover Year 2000
compliance problems in our systems that will require substantial revisions or
replacements. In the event that the operational facilities that support our
business, or our Web-hosting facilities, are not Year 2000 compliant, we may be
unable to deliver goods or services to our customers and portions of our Web
site may become unavailable. In addition, there can be no assurance that
third-party software, hardware or services incorporated into our material
systems will not need to be revised or replaced, which could be time-consuming
and expensive. Our inability to fix or replace third-party software, hardware or
services on a timely basis could result in lost revenues, increased operating
costs and other business interruptions, any of which could have a material and
adverse effect on our business, results of operations and financial condition.
Moreover, the failure to adequately address Year 2000 compliance issues in our
software, hardware or systems could result in claims of mismanagement,
misrepresentation or breach of contract and related litigation, which could be
costly and time-consuming to defend.
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<PAGE> 20
In addition, there can be no assurance that governmental agencies,
utility companies, Internet access companies and others outside our control will
be Year 2000-compliant. The failure by these entities to be Year 2000-compliant
could result in a systemic failure beyond our control, including, for example, a
prolonged Internet, telecommunications or electrical failure, which could also
prevent us from delivering our services to our users, decrease the use of the
Internet or prevent users from accessing our services, any of which would have a
material and adverse effect on our business, results of operations and financial
condition.
Contingency Plan. As discussed above, we are engaged in an ongoing Year
2000 assessment and do not currently have a contingency plan to deal with the
worst case scenario that might occur if technologies on which we depend are not
Year 2000-compliant and fail to operate effectively after the Year 2000. The
results of our Year 2000 compliance evaluation and the responses received from
distributors, suppliers and other third parties with which we conduct business
will be taken into account in determining the need for and nature and extent of
any contingency plans.
If our present efforts to address the Year 2000 compliance issues
discussed above are not successful, or if distributors, suppliers and other
third parties with which we conduct business do not successfully address such
issues, our users could seek alternate suppliers of our products and services.
Any material Year 2000 problem could require us to incur significant
unanticipated expenses to remedy and could divert our management's time and
attention, either of which could have a material and adverse effect on our
business, operating results and financial condition.
This is a Year 2000 readiness disclosure statement within the meaning
of the Year 2000 Information and Readiness Disclosure Act (P.L. 105-271).
EFFECTS OF INFLATION
Due to relatively low levels of inflation in 1997 and 1998, inflation
has not had a significant effect on our results of operations since inception.
ITEM 3. DESCRIPTION OF PROPERTIES
Our executive offices, comprising approximately 12,000 square feet, are
located at 165 Westridge Drive, Watsonville, California 95076. These facilities
are leased pursuant to a lease expiring in the year 2001. The monthly rent is
$13,719. Our leased space is currently adequate for our needs.
We maintain substantially all of our computer systems at our offices.
See "Part 1, Item 1. Business--Operations and Systems." Our operations are
dependent in part on our ability to protect our computer systems against
physical damage from fire, floods, earthquakes, power loss, telecommunications
failures, break-ins or other
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<PAGE> 21
similar events. Furthermore, despite our implementation of network security
measures, our servers are also vulnerable to computer viruses, break-ins and
similar disruptive problems. The occurrence of any of these events could result
in interruptions, delays or cessations in service to our users which could have
a material adverse effect on our business, results of operations and financial
condition.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of October 31, 1999, the ownership
of our common stock by (i) each of our directors and executive officers; (ii)
all of our executive officers and directors as a group; and (iii) all persons
known by us to beneficially own more than 5% of our common stock.
Unless otherwise indicated in the footnotes to the table, (1) the
following individuals have sole voting and sole investment control with respect
to the shares they beneficially own and (2) the address of each beneficial owner
listed below is c/o 165 Westridge Drive, Watsonville, CA 95076.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS (1)
EXECUTIVE OFFICERS AND DIRECTORS (1)
- ----------------------------------- ------------------ -----------
<S> <C> <C> <C>
Jonathan Kahn (2) 1,186,098 12.97%
David Schargel 1,013,469 11.08%
Darryl Lovato (3) 1,157,857 12.66%
Brad Peppard (4) 31,605 nil
Paul Goodman --- ----
- ----------------------------------- ------------------ -----------
All directors and executive officers
as a group (6 Persons) 3,389,029 37.07%
- ----------------------------------- ------------------ -----------
OTHER 5% STOCKHOLDERS (1):
- ----------------------------------- ------------------ -----------
Benna Lovato 1,033,558 11.30%
Marco Gonzalez 680,680 7.44%
</TABLE>
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<PAGE> 22
(1) Calculated pursuant to Rule 13d-3(d) of the Exchange Act. Under
Rule 13d-3(d), shares not outstanding which are subject to options, warrants,
rights or conversion privileges exercisable within 60 days are deemed
outstanding for the purpose of calculating the number and percentage owned by
such person, but are not deemed outstanding for the purpose of calculating the
percentage owned by each other person listed.
(2) Includes 119,020 shares of Common Stock subject to options that are
exercisable within 60 days of the date hereof.
(3) Includes 124,299 shares of Common Stock subject to options that are
exercisable within 60 days of the date hereof.
(4) Includes 31,606 shares of Common Stock subject to options that are
exercisable within 60 days of the date hereof.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the names and positions of our directors
and executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------- --- -------------------------------------
<S> <C> <C>
Jonathan Kahn 41 Chairman, Chief Executive Officer, Treasurer and
Director
- ------------------------- --- -------------------------------------
Darryl Lovato (1) 33 President, Chief Technology Officer and Director
- ------------------------- --- -------------------------------------
David Schargel (2)(3) 34 Director
- ------------------------- --- -------------------------------------
Paul Goodman (2)(3) 40 Director
- ------------------------- --- -------------------------------------
Brad Peppard (2)(3) 43 Director
- ------------------------- --- -------------------------------------
Benna Lovato (1) 33 Secretary
- ------------------------- --- -------------------------------------
</TABLE>
(1) Darryl Lovato and Benna Lovato are married
(2) Member of the Compensation Committee
(3) Member of the Audit Committee
The following sets forth biographical information concerning our
directors and executive officers for at least the past five years:
JONATHAN KAHN is currently Chairman and CEO of Aladdin. Mr. Kahn is one
of the original founders of Aladdin Systems and has served as a Director since
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<PAGE> 23
1988. Prior to becoming CEO in 1997, he served as President, and Vice President
of Sales. Mr. Kahn has extensive expertise in software industry sales,
marketing, business development and licensing arrangements. Mr. Kahn is a
graduate of the University of Rhode Island with a B.A. in Economics.
BRAD PEPPARD has been President of Lime Tree Productions, Inc., a
boutique consulting firm providing marketing and research consulting services to
high tech companies. Mr. Peppard served as Vice President of Marketing at
Aladdin Systems from 1996 through 1998. In 1998, Mr. Peppard became a Director
of Aladdin. Prior to joining Aladdin, Mr. Peppard was responsible for worldwide
marketing at Quarterdeck Office Systems, during which time the company grew from
$20 million to $120 million in revenue. Prior to 1993, he was also Vice
President of Marketing at Software Publishing Corporation, a pioneer in both
high-tech direct marketing and Internet electronic marketing, Mr. Peppard was
President and founder of SoftMail Corporation, one of the leading direct
marketing agencies in the country, as well as president of Monogram Software.
Mr. Peppard has an MBA from Stanford University and a B.A. from Amherst College.
DARRYL LOVATO has been President and Chief Technology Officer of
Aladdin since 1997. Mr. Lovato is a co-founder of Aladdin Systems and has been
responsible for overseeing the Company's technical operations and leading
research on new technologies and products. Mr. Lovato has served as a Director
since the company's founding in 1988. Prior to holding his current title, Mr.
Lovato was Aladdin's Vice President and Chief Technology Officer. Prior to
co-founding Aladdin, Mr. Lovato worked at Apple Computer as a Senior Software
Engineer. Mr. Lovato has over fifteen-years of software programming and
development experience.
DAVID SCHARGEL is the Chairman and President of Aportis Technologies
Corp., a leader in software for carryable and wearable computers (focusing on
Palm Pilot and Window CE computers), which he founded in 1997. Mr. Schargel is
one of the co-founders of Aladdin and served as its President from 1988 to 1994.
Mr. Schargel has served as a Director since 1988. From 1994 through 1997, he
performed various executive roles at Aladdin. Prior to co-founding Aladdin, Mr.
Schargel was Vice President at Olduvai Corporation, a publisher of software for
the Macintosh computer and also had served as Technical Editor at MacUser
Magazine. Mr. Schargel has extensive experience in software product management
and marketing.
PAUL GOODMAN since 1987 has been a partner in the New York City law
firm of Elias, Goodman Shanks & Zizmor, LLP where he concentrates on
representing software and Web companies in a wide range of business and
financing transactions. He has represented Aladdin since its inception. In
addition to a Juris Doctor degree, Mr. Goodman hold a BA and MA degree in
Computer Science, was a former member of the Computer Science faculty of Queens
College, is the author of five books on microcomputer programming and is the
editor and publisher of WebLegalGuide.com, a legal resource for companies
involved in the Web industry.
23
<PAGE> 24
BOARD OF DIRECTORS
All directors hold office until the next annual meeting of shareholders
following their election or until their successors have been elected and
qualified. Executive officers are appointed by and serve at the pleasure of the
Board of Directors. We may adopt provisions in our By-laws and/or Articles of
Incorporation to divide the board of directors into more than one class and to
elect each class for a certain term. These provisions may have the effect of
discouraging takeover attempts or delaying or preventing a change of control of
Aladdin.
BOARD COMMITTEES
The Compensation Committee of the Board of Directors determines the
salaries and incentive compensation of our officers and provides recommendations
for the salaries and incentive compensation of our other employees. The
compensation committee also administers our Stock Option Plan. The current
members of the Compensation Committee are Messrs. Peppard, Schargel and Goodman.
See "Compensation Committee Interlocks and Insider Participation."
The Audit Committee of the Board of Directors reviews, acts on and
reports to the Board of Directors with respect to various auditing and
accounting matters, including the selection of our independent auditors, the
scope of the annual audits, fees to be paid to the auditors, the performance of
our independent auditors and our accounting practices. The current members of
the audit committee are Messrs. Kahn, Goodman and Schargel.
The Finance Committee of the Board of Directors reviews, acts on and
reports to the Board of Directors with respect to various financing matters. The
current members of the audit committee are Messrs. Kahn, Goodman and Schargel.
The Board of Directors does not have a nominating committee.
DIRECTORS' COMPENSATION
Directors who are also employees of Aladdin receive no compensation for
serving on the Board of Directors. With respect to directors who are not
employees ("Non-Employee Directors"), we intend to reimburse such directors for
all travel and other expenses incurred in connection with attending meetings of
the Board of Directors and any committees of the Board. Non-Employee Directors
are also eligible to receive and have received grants of non-qualified stock
options under our Stock Option Plan, and we intend to establish a Non-Employee
Director Stock Option Plan which will provide for initial option grants of a
fixed number of shares of our common stock to Non-Employee Directors and
successive annual option grants to such Non-Employee Directors covering an
additional fixed number of shares to provide us with an effective way to recruit
and retain qualified individuals to serve as members of the Board of Directors.
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<PAGE> 25
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
We did not have a Compensation Committee or other committee of the
Board of Directors performing similar functions during the fiscal years ending
December 31, 1997 and 1998. Messrs. Kahn and Lovato are each officers of Aladdin
and, as members of the Board of Directors, participated in deliberations of the
Board of Directors relating to the compensation of our executive officers. The
Board of Directors established a Compensation Committee as of October, 1999. See
"Board Committees."
ITEM 6. EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following table sets forth the compensation awarded or paid to, or
earned by, our Chief Executive Officer and all our other executive officers who
earned in excess of $100,000 in salary and bonus (collectively the "Named
Executives") for services rendered to us during the year ended December 31,
1998:
SUMMARY COMPENSATION TABLE (1)(2)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------- --------------------------------
SALARY ($) OTHER ($) NUMBER OF SECURITIES
UNDERLYING OPTIONS (#)(3)
<S> <C> <C> <C>
NAME AND
PRINCIPAL
POSITION
Jonathan Kahn, CEO
1998 $126,526 0 89,286
1997 $111,065 $6,000(4) 188,844
1996 $79,717 $106,232(4) 0
Darryl Lovato,
President and Chief
Technology Officer
1998 $126,526 0 89,286
1997 $111,065 $17,339(4) 188,844
1996 $75,327 $103,178(4) 0
</TABLE>
(1) Information set forth herein includes services rendered by the
named executives while employed by Aladdin Systems prior to the reorganization
and by Aladdin following the Reorganization.
(2) The columns for "Bonus", "Other Annual Compensation", "Restricted
Stock Awards", "LTP Payouts" and "All other Compensation" have been omitted
because there is no compensation required to be reported.
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<PAGE> 26
(3) Represents options granted to such executives during 1998 by
Aladdin Systems, Inc. prior to the Reorganization, expressed as converted to
options to purchase the shares of Registrant (adjusted to reflect the 1.580827
conversion factor applied upon the Reorganization). Subject to the terms of the
Reorganization Agreement, the conversion factor applied to the options is
subject to certain adjustments as set forth in Part 1, Item 1 "Description of
Business".
(4) Represents distributions made to such named executives in
connection with their ownership of stock in Aladdin Systems, Inc.
The following table sets forth certain information concerning options
granted to the named executives during 1998.
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1998 (1)
<TABLE>
<CAPTION>
Number of % of Total Exercise Expiration
Securities Options Price Per Date(5)
Underlying Granted to Share
Options Employee ($/SH)(4)
Granted (2) In 1998 (3)
NAME
<S> <C> <C> <C> <C>
Jonathan
Kahn 89,286 33.9% 1.21 October, 2007
Darryl
Lovato 89,286 33.9% 1.21 October, 2007
</TABLE>
(1) No SARs were granted to the Named Executives during 1998.
(2) Each option represents the right to purchase one share of our
common stock (adjusted to reflect the 1.580827 conversion factor applied upon
the Reorganization). Subject to the terms of the Reorganization Agreement, the
conversion factor applied to the options is subject to certain adjustments as
set forth in Part 1, Item 1 "Description of Business.
(3) In 1998, we granted officers, employees and consultants options to
purchase an aggregate of 263,602 shares of our common stock (adjusted to reflect
the 1.580827 conversion factor applied upon the Reorganization). Subject to the
terms of the Reorganization Agreement, the conversion factor applied to the
options is subject to certain adjustments as set forth in Part 1, Item 1
"Description of Business.
(4) The fair market value of our common stock on the date of grant for
each of the listed options, as determined by our board of directors, was $1.10
per share
26
<PAGE> 27
(adjusted to reflect the 1.580827 conversion factor applied upon the
Reorganization). Subject to the terms of the Reorganization Agreement, the
conversion factor applied to the options is subject to certain adjustments as
set forth in Part 1, Item 1 "Description of Business".
(5) Options may terminate before their expiration dates if the
optionee's status as an employee or consultant is terminated or upon the
optionee's death or disability.
OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth certain information with respect to the
named executives concerning exercisable and unexercisable stock options held by
them as of December 31, 1998. None of these executive officers exercised options
to purchase common stock in 1998.
AGGREGATE OPTION EXERCISES IN 1998 AND YEAR END OPTION VALUES (1)
<TABLE>
<CAPTION>
Name Number of Unexercised Value of Unexercised In-the-
Options at Year End(#) Money Options at Year End (2)
--------------------------- ----------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jonathan Kahn 136,509 141,716 $150,159 $155,887
Darryl Lovato 131,766 141,716 $144,942 $155,887
</TABLE>
(1) No SARs were owned or exercised by any of the Named Executives
during 1998.
(2) Based on a per share fair market value of our common stock equal to
$1.10 per share, the fair market value as determined by our Board of Directors
at December 31, 1998 (adjusted to reflect the 1.580827 conversion factor applied
upon the Reorganization). Subject to the terms of the Reorganization Agreement,
the conversion factor applied to the options is subject to certain adjustments
as set forth in Part 1, Item 1 "Description of Business".
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EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
On October 25, 1999 we entered into an employment agreement with
Jonathan Kahn (the "Kahn Employment Agreement"). Under the Kahn Employment
Agreement, Jonathan Kahn is to serve as our Chief Executive Officer and perform
such duties as may be reasonably assigned to him by the Board of Directors. The
Kahn Employment Agreement provides for an annual base salary of $150,000.00. The
Kahn Employment Agreement also provides that Jonathan Kahn is to receive options
to purchase shares of our Common stock in an amount as to be determined, from
time to time, by the Board of Directors of the Company, and that he is eligible
to receive vacation in accordance with the Company's policies. He is also
eligible to participate in the health, life insurance, medical, retirement and
other benefit programs which we may offer from time to time.
The term of the Kahn Employment Agreement lasts until September 30,
2002 unless terminated pursuant to the terms thereof. We may terminate the Kahn
Employment Agreement only for cause. The term "cause" is defined in the Kahn
Employment Agreement as: (i) the willful neglect of duties reasonably assigned
by the Board of Directors; (ii) material breach of the agreement; or (iii)
willful gross misconduct. If Jonathan Kahn is terminated without cause or in the
event of a change of control of the Company, defined as a change in control of
at least 40% of the voting shares of the Company, he is to receive severance pay
through September 31, 2002 equal to: (i) the base salary; (ii) bonus
compensation; (iii) vested options to purchase Common stock; (iv) health
insurance; and (v) any unused vacation time. If Jonathan Kahn resigns from his
position for good cause, including a substantial reduction in his position,
duties or a material breach of the agreement by us, he is to be deemed
terminated without cause and is eligible to receive severance.
On October 25, 1999 we entered into an employment agreement with Darryl
Lovato (the "Lovato Employment Agreement"). Under the Lovato Employment
Agreement, Darryl Lovato is to serve as our President and Chief Technology
Officer and perform such duties as may be reasonably assigned to him by the
Board of Directors. The Lovato Employment Agreement provides for an annual base
salary of $150,000.00. The Lovato Employment Agreement also provides that Darryl
Lovato is to receive options to purchase shares of our Common stock, in an
amount as to be determined, from time to time, by the Board of Directors of the
Company, and that he is eligible to receive vacation in accordance with the
Company's policies. He is also eligible to participate in the health, life
insurance, medical, retirement and other benefit programs which we may offer
from time to time.
The term of the Lovato Employment Agreement lasts until September 30,
2002 unless terminated pursuant to the terms thereof. We may terminate the
Lovato Employment Agreement only for cause. The term "cause" is defined in the
Lovato Employment Agreement as: (i) the willful neglect of duties reasonably
assigned by the Board of Directors; (ii) material breach of the agreement; or
(iii)
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willful gross misconduct. If Darryl Lovato is terminated without cause or in the
event of a change of control of the Company, defined as a change in control of
at least 40% of the voting shares of the Company, he is to receive severance pay
through September 31, 2002 equal to: (i) the base salary; (ii) bonus
compensation; (iii) vested options to purchase Common stock; (iv) health
insurance; and (v) any unused vacation time. If Darryl Lovato resigns from his
position for good cause, including a substantial reduction in his position,
duties or a material breach of the agreement by us, he is to be deemed
terminated without cause and is eligible to receive severance.
EMPLOYEE BENEFIT PLANS
STOCK OPTION PLAN
Our Stock Option Plan (the "Plan") was adopted by the Board of
Directors, and ratified and approved by our stockholders, as of the closing of
the Reorganization. The following description of our Stock Option Plan is a
summary and qualified in its entirety by the text of the plan, which is filed as
an exhibit to this Registration Statement.
The purpose of the Plan is to enhance our profitability and stockholder
value by enabling us to offer stock based incentives to employees, directors and
consultants. The Plan authorizes the grant of options to purchase shares of
common stock to employees, directors and consultants of Aladdin and its
affiliates. Under the Plan, we may grant incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986 and non-qualified
stock options. Incentive stock options may only be granted our employees.
The number of shares available for options under the Plan is 3,000,000.
The Plan is administered by the Compensation Committee of the board. Subject to
the provisions of the Plan, the Compensation Committee has authority to
determine the employees, directors and consultants of Aladdin who are to be
awarded options and the terms of such awards, including the number of shares
subject to such option, the fair market value of the common stock subject to
options, the exercise price per share and other terms.
Incentive stock options must have an exercise price equal to at least
100% (110% if the grant is to a stockholder holding more than 10% of our voting
stock) of the fair market value of a share on the date of the award and
generally cannot have a duration of more than 10 years (five years if the grant
is to a stockholder holding more than 5% of our voting stock). Terms and
conditions of awards are set forth in written agreements between Aladdin and the
respective option holders. Awards under the Plan may not be made after the tenth
anniversary of the date of its adoption but awards granted before that date may
extend beyond that date.
If the employment with Aladdin of the holder of an incentive stock
option is terminated for any reason other than as a result of the holder's death
or disability or
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for "cause" as defined in the Plan, the holder may exercise the option, to the
extent exercisable on the date of termination of employment, until the earlier
of the option's specified expiration date and 90 days after the date of
termination. If an option holder dies or becomes disabled, both incentive and
non-qualified stock options may generally be exercised, to the extent
exercisable on the date of death or disability, by the option holder or the
option holder's survivors until the earlier of the option's specified
termination date and one year after the date of death or disability.
As of October 31, 1999, 12,086 shares had been issued as the result of
the exercise of options previously granted under the Plan, 1,669,239 shares were
subject to outstanding options and 1,330,761 shares were available for future
grants. The exercise prices of the outstanding options ranged from $1.10 to
approximately $1.90. The options under the Plan vest over varying lengths of
time pursuant to various option agreements that we have entered into with the
grantees of such options.
We have not registered the Plan, or the shares subject to issuance
thereunder, pursuant to the Securities Act. Absent registration, such shares,
when issued upon exercise of options, would be "restricted securities" as that
term is defined in Rule 144 under the Securities Act.
Optionees have no rights as stockholders with respect to shares subject
to options prior to the issuance of shares pursuant to the exercise thereof.
Options issued to employees under the Plan shall expire no later than ten years
after the date of grant. An option becomes exercisable at such time and for such
amounts as determined at the discretion of the Board of Directors or the
Compensation Committee at the time of the grant of the option. An optionee may
exercise a part of the option from the date that part first becomes exercisable
until the option expires. The purchase price for shares to be issued to an
employee upon his exercise of an option is determined by the Board of Directors
or the Compensation Committee on the date the option is granted. The purchase
price is payable in full in cash, by promissory note, by net exercise or by
delivery of shares of our Common stock when the option is exercised.
The Plan provides for adjustment as to the number and kinds of shares
covered by the outstanding options and the option price therefor to give effect
to any stock dividend, stock split, stock combination or other reorganization of
or by Aladdin.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCK OPTION PLAN. In 1997, Jonathan Kahn and Darryl Lovato received
options to purchase up to 119,500 and 119,938 shares of Common Stock,
respectively, with exercise prices of $1.87 to $1.91 per share and $1.74 to
$1.91 per share, respectively. These options vest in 48 monthly installments.
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In 1998, Jonathan Kahn and Darryl Lovato each received options to
purchase up to 56,500 shares of Common Stock, respectively, with exercise prices
of $1.91 per share. These options vest in 48 monthly installments.
In 1999, Brad Peppard received options to purchase up to 20,000 shares
of Common Stock, with exercise prices of $2.50 per share. These options vest in
48 monthly installments.
The foregoing number of shares for which options have been granted
prior to the Reorganization represents shares of Aladdin Systems Common Stock
and are not shown as adjusted to reflect the 1.580287 for 1 conversion ratio
applied to shares of Aladdin Systems Common Stock at the time of the
reorganization
REORGANIZATION. In October, 1999, Aladdin Systems, Inc. entered into
the Reorganization with a non-operating public company, Foreplay Golf & Travel
Tours, Inc., a Nevada corporation incorporated on March 26, 1997 ("FGT"). Under
the Reorganization Agreement, the Aladdin Systems stockholders received 1.580287
shares of FGT Common Stock in exchange for each of their shares of Aladdin
Systems, Inc. Common Stock . Additionally, the holders of options to purchase
shares of Common stock of Aladdin Systems, Inc. terminated their options and
received options to purchase shares of Common Stock of FGT. As a result of the
Reorganization, Aladdin Systems, Inc. became a wholly-owned subsidiary of FGT.
FGT adopted the Aladdin Systems, Inc. Stock Option Plan. An aggregate of
7,441,628 shares of Common Stock and options to purchase an aggregate of
1,669,239 shares of Common Stock were issued to the former Aladdin Systems, Inc.
stockholders and option holders, respectively, in the Reorganization and the
Aladdin Systems, Inc. stockholders owned approximately 81.4% of FGT immediately
after the Reorganization. As part of the Reorganization, all of the executive
officers and directors of FGT resigned and the executive officers and directors
of Aladdin Systems became the executive officers and directors of FGT which
changed its name to Aladdin Systems Holdings, Inc.
BAYTREE CAPITAL ASSOCIATES, LLC. In July, 1999 Aladdin Systems, Inc.
entered into an agreement with Baytree Capital Associates, LLC which we assumed
after the Reorganization. Under the agreement, Baytree provided financial
consulting and assistance to Aladdin Systems, Inc. which included the
identification of a merger candidate and the assistance with the Reorganization.
For their services, Baytree received 50,000 shares of our Common Stock and was
paid $20,000 plus $10,000 in non-accountable expense reimbursement. In addition,
Baytree has been granted an 18 month right of first refusal with respect to any
subsequent financings.
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ITEM 8. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The descriptions in this Item and in other sections of this
Registration Statement of our securities and various provisions of our Articles
of Incorporation and our Bylaws are summaries. Statements contained in this
Registration Statement relating to such provisions are not necessarily complete,
and reference is made to the Articles of Incorporation and Bylaws, copies of
which have been filed with the SEC as exhibits to this Registration Statement,
and provisions of applicable law.
Our authorized capital stock consists of 50,000,000 shares of common
stock, par value $.001 per share, and 1,000,000 shares of Preferred Stock, par
value $.001. As of October 31, 1999, 9,141,628 shares of our common stock were
issued and outstanding and 3,000,000 shares of common stock were reserved for
issuance upon exercise of options issuable under our stock option plan. Only our
common stock is being registered under the Exchange Act pursuant to this
Registration Statement. As of August 30, 1999, no shares of our Preferred Stock
were issued and outstanding.
DESCRIPTION OF COMMON STOCK
The holders of our common stock are entitled to equal dividends and
distributions per share with respect to the common stock when, as and if
declared by the Board of Directors from funds legally available therefor. No
holder of any shares of our common stock has a preemptive right to subscribe for
any of our securities, nor are any common shares subject to redemption or
convertible into other of our securities. Upon liquidation, dissolution or
winding up of Aladdin, and after payment of creditors and preferred
stockholders, if any, the assets will be divided pro-rata on a share-for-share
basis among the holders of the shares of common stock. All shares of common
stock now outstanding are fully paid, validly issued and non-assessable.
Each share of common stock is entitled to one vote with respect to the
election of any director or any other matter upon which shareholders are
required or permitted to vote. Holders of the common stock do not have
cumulative voting rights, so the holders of more than 50% of the combined shares
voting for the election of directors may elect all of the directors if they
choose to do so, and, in that event, the holders of the remaining shares will
not be able to elect any members to the Board of Directors.
ANTI-TAKEOVER EFFECTS OF VARIOUS PROVISIONS OF NEVADA LAW AND OUR ARTICLES OF
INCORPORATION AND BYLAWS
We are incorporated under the laws of the State of Nevada and are
therefore subject to various provisions of the Nevada corporation laws which may
have the effect of delaying or deterring a change in the control or management
of Aladdin.
Nevada's "Combination with Interested Stockholders Statute," Nevada
Revised Statutes 78.411-78.444, which applies to Nevada corporations like us
having
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at least 200 stockholders, prohibits an "interested stockholder" from entering
into a "combination" with the corporation, unless certain conditions are met. A
"combination" includes (a) any merger with an "interested stockholder," or any
other corporation which is or after the merger would be, an affiliate or
associate of the interested stockholder, (b) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of assets, in one transaction or
a series of transactions, to an "interested stockholder," having (i) an
aggregate market value equal to 5% or more of the aggregate market value of the
corporation's assets, (ii) an aggregate market value equal to 5% or more of the
aggregate market value of all outstanding shares of the corporation, or (iii)
representing 10% or more of the earning power or net income of the corporation,
(c) any issuance or transfer of shares of the corporation or its subsidiaries,
to the "interested stockholder," having an aggregate market value equal to 5% or
more of the aggregate market value of all the outstanding shares of the
corporation, (d) the adoption of any plan or proposal for the liquidation or
dissolution of the corporation proposed by the "interested stockholder," (e)
certain transactions which would have the effect of increasing the proportionate
share of outstanding shares of the corporation owned by the "interested
stockholder," or (f) the receipt of benefits, except proportionately as a
stockholder, of any loans, advances or other financial benefits by an
"interested stockholder." An "interested stockholder" is a person who (i)
directly or indirectly owns 10% or more of the voting power of the outstanding
voting shares of the corporation or (ii) an affiliate or associate of the
corporation which at any time within three years before the date in question was
the beneficial owner, directly or indirectly, of 10% or more of the voting power
of the then outstanding shares of the corporation.
A corporation to which the statute applies may not engage in a
"combination" within three years after the interested stockholder acquired its
shares, unless the combination or the interested stockholder's acquisition of
shares was approved by the Board of Directors before the interested stockholder
acquired the shares. If this approval was not obtained, then after the
three-year period expires, the combination may be consummated if all the
requirements in the Articles of Incorporation are met and either (a)(i) the
Board of Directors of the corporation approves, prior to such person becoming an
"interested stockholder," the combination or the purchase of shares by the
"interested stockholder" or (ii) the combination is approved by the affirmative
vote of holders of a majority of voting power not beneficially owned by the
"interested stockholder" at a meeting called no earlier than three years after
the date the "interested stockholder" became such or (b) the aggregate amount of
cash and the market value of consideration other than cash to be received by
holders of common shares and holders of any other class or series of shares
meets the minimum requirements set forth in Sections 78.411 through 78.443,
inclusive, and prior to the consummation of the combination, except in limited
circumstances, the "interested stockholder" will not have become the beneficial
owner of additional voting shares of the corporation.
Nevada's "Control Share Acquisition Statute," Nevada Revised Statute
(S)78.378-78.379, prohibits an acquirer, under certain circumstances, from
voting shares of a target corporation's stock after crossing certain threshold
ownership
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percentages, unless the acquirer obtains the approval of the target
corporation's stockholders. The Control Share Acquisition Statute only applies
to Nevada corporations with at least 200 stockholders, including at least 100
record stockholders who are Nevada residents, and which do business directly or
indirectly in Nevada. While we do not currently exceed these thresholds, we may
well do so in the near future. In addition, although we do not presently "do
business" in Nevada within the meaning of the Control Share Acquisition Statute,
we may do so in the future. Therefore, it is likely that the Control Share
Acquisition Statute will apply to us in the future. The statute specifies three
thresholds: at least one-fifth but less than one-third, at least one-third but
less than a majority, and a majority or more, of all the outstanding voting
power. Once an acquirer crosses one of the above thresholds, shares which it
acquired in the transaction taking it over the threshold or within ninety days
become "Control Shares" which are deprived of the right to vote until a majority
of the disinterested stockholders restore that right. A special stockholders'
meeting may be called at the request of the acquirer to consider the voting
rights of the acquiror's shares no more than 50 days (unless the acquirer agrees
to a later date) after the delivery by the acquirer to the corporation of an
information statement which sets forth the range of voting power that the
acquirer has acquired or proposes to acquire and certain other information
concerning the acquirer and the proposed control share acquisition. If no such
request for a stockholders' meeting is made, consideration of the voting rights
of the acquiror's shares must be taken at the next special or annual
stockholders' meeting. If the stockholders fail to restore voting rights to the
acquirer or if the acquirer fails to timely deliver an information statement to
the corporation, then the corporation may, if so provided in its articles of
incorporation or bylaws, call certain of the acquiror's shares for redemption.
Our Articles of Incorporation and Bylaws do not currently permit us to call an
acquiror's shares for redemption under these circumstances. The Control Share
Acquisition Statute also provides that the stockholders who do not vote in favor
of restoring voting rights to the Control Shares may demand payment for the
"fair value" of their shares (which is generally equal to the highest price paid
in the transaction subjecting the stockholder to the statute).
Certain provisions of our Bylaws which are summarized below may affect
potential changes in control of Aladdin. The Board of Directors believes that
these provisions are in the best interests of stockholders because they will
encourage a potential acquirer to negotiate with the Board of Directors, which
will be able to consider the interests of all stockholders in a change in
control situation. However, the cumulative effect of these terms maybe to make
it more difficult to acquire and exercise control of Aladdin and to make changes
in management more difficult.
The Bylaws provide the number of directors of Aladdin shall be
established by the Board of Directors, but shall be no less than one. Between
stockholder meetings, the Board may appoint new directors to fill vacancies or
newly created directorships. A director may be removed from office by the
affirmative vote of 66-2/3% of the combined voting power of the then outstanding
shares of stock entitled to vote generally in the election of directors.
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The Bylaws further provide that stockholder action may be taken at a
meeting of stockholders and may be effected by a consent in writing if such
consent is signed all of the holders of common stock.
We are not aware of any proposed takeover attempt or any proposed
attempt to acquire a large block of our common stock.
The provisions described above may have the effect of delaying or
deterring a change in the control or management of Aladdin.
APPLICATION OF CALIFORNIA GCL
Although we are incorporated in Nevada, our headquarters is in the
State of California. Section 2115 of the California GCL ("Section 2115")
provides that certain provisions of the California GCL shall be applicable to a
corporation organized under the laws of another state to the exclusion of the
law of the state in which it is incorporated, if the corporation meets certain
tests regarding the business done in California and the number of its California
stockholders.
An entity such as us can be subject to Section 2115 if the average of
the property factor, payroll factor and sales factor deemed to be in California
during its latest full income year is more than 50 percent and more than
one-half of its outstanding voting securities are held of record by persons
having addresses in California. Section 2115 does not apply to corporations with
outstanding securities listed on the New York or American Stock Exchange, or
with outstanding securities designated as qualified for trading as a national
market security on NASDAQ, if such corporation has at least 800 beneficial
holders of its equity securities. Since the average of our property factor,
payroll factor and sales factor deemed to be in California during our latest
fiscal year was almost 100%, and over 75% of our outstanding voting securities
are held of record by persons having addresses in California, and our securities
do not currently qualify as a national market security on NASDAQ, we are subject
to Section 2115.
During the period that we are subject to Section 2115, the provisions
of the California GCL regarding the following matters are made applicable to the
exclusion of the law of the State of Nevada: (i) general provisions and
definitions; (ii) annual election of directors; (iii) removal of directors
without cause; (iv) removal of directors by court proceedings; (v) filling of
director vacancies where less than a majority in office were elected by the
stockholders; (vi) directors' standard of care; (vii) liability of directors for
unlawful distributions; (viii) indemnification of directors, officers and
others; (ix) limitations on corporate distributions of cash or property; (x)
liability of a stockholder who receives an unlawful distribution; (xi)
requirements for annual stockholders meetings; (xii) stockholders' right to
cumulate votes at any election of directors; (xiii) supermajority vote
requirements; (xiv) limitations on sales of assets; (xv) limitations on mergers;
(xvi) reorganizations; (xvii) dissenters' rights in connection with
reorganizations; (xviii)
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required records and papers; (xix) actions by the California Attorney General;
and (xx) rights of inspection.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
No shares of our common stock have previously been registered with the
SEC. Our common stock has been trading on the National Association of Security
Dealers Over-The-Counter Market Bulletin Board ("OTCBB") since June 10, 1998
first under the symbol "FLGA" and after October 25, 1999 had traded under the
symbol "ALHIE". There has never been an active trading market for the securities
of this Company.
As of September 30, 1999 there were approximately 50 holders of record
of our common stock, which figure does not take into account those stockholders
whose certificates are held in the name of broker-dealers or other nominees.
DIVIDEND POLICY
We do not anticipate that we will pay cash dividends or make
distributions in the foreseeable future. We currently intend to retain and
invest future earnings to finance our operations.
TRANSFER AGENT
Our transfer agent for our common stock is Pacific Stock Transfer, 5844
South Pecos Road, Suite D, Las Vegas, Nevada 89120.
ITEM 2. LEGAL PROCEEDINGS
There is presently one pending legal proceedings to which we are a
party. In James E. Grimes Company, Inc. v. Aladdin Systems, Inc., Superior Court
of the State of California, Sacramento County, Case No, 99AS02616, James E.
Grimes Company, Inc. ("Grimes") has alleged that Aladdin is indebted to Grimes
in the amount of $122,047.14 for goods and services allegedly provided to
Aladdin by Grimes. We have answered the Complaint and we believe that Grimes's
claims are without merit and intend to defend our position vigorously.
Notwithstanding the foregoing, Aladdin has agreed to settle such litigation for
the amount of $75,000.00 rather then incur the potential costs of defending this
litigation. Subsequent to the commencement of this action by Grimes in May,
1999, Grimes filed for bankruptcy and the settlement of the action is subject to
the approval of the bankruptcy court. As a condition of the settlement, Aladdin
shall receive a full release of all potential claims that Grimes may have
against Aladdin.
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To the best of our knowledge, there are presently no other legal
proceedings to which we or any of our subsidiaries is a party or to which any of
our property is subject and, to the best of its knowledge, no such actions
against us are contemplated or threatened.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
Set forth in chronological order is information regarding shares of
common stock issued and options and warrants and other convertible securities
granted by us during the past three years. Also included is the consideration,
if any, received by us for such shares and options and information relating to
the section of the Securities Act, or rule of the SEC under which exemption from
registration was claimed.
Transactions described in Items (1) through (5) below refer to the
securities of Aladdin Systems, Inc., a Delaware corporation which was the
predecessor entity of the filer of this Registration Statement, and transactions
described in Items (6) through (9) below refer to the securities of Aladdin
Systems Holdings, Inc., a Nevada corporation which is the filer of this
Registration Statement.
Unless otherwise indicated, information in this Item 10 regarding
shares of our Common Stock reflect the 1.580287 for 1 conversion ratio applied
to shares of Aladdin Systems, Inc. Common Stock at the time of the
reorganization. The conversion ratio is subject to certain adjustments as set
forth in Part 1, Item 1 "Description of Business".
(1) In 1997, we issued options to purchase up to 1,400,595 shares of
Common Stock to certain employees, directors and consultants of the Company with
an exercise price of $1.70 to $1.74 per share pursuant to the Company's Stock
Option Plan. These issuances were made in reliance on Section 4(2) of the
Securities Act and/or Rule 701 promulgated under the Securities Act and were
made without general solicitation or advertising. The purchasers were
sophisticated investors with access to all relevant information necessary to
evaluate these investments,and who represented to the Company that the shares
were being acquired for investment.
(2) In 1998, we issued options to purchase up to 245,900 shares of
Common Stock to certain employees, directors and consultants of the Company with
an exercise price of $1.74 to $1.91 per share pursuant to the Company's Stock
Option Plan. These issuances were made in reliance on Section 4(2) of the
Securities Act
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and/or Rule 701 promulgated under the Securities Act and were made without
general solicitation or advertising. The purchasers were sophisticated investors
with access to all relevant information necessary to evaluate these
investments, and who represented to the Company that the shares were being
acquired for investment.
(3) In from January 1, 1999 through October 24, 1999, we issued options
to purchase up to 168,850 shares of Common Stock to certain employees, directors
and consultants of the Company with an exercise price of $2.50 to $3.00 per
share pursuant to the Company's Stock Option Plan. These issuances were made in
reliance on Section 4(2) of the Securities Act and/or Rule 701 promulgated under
the Securities Act and were made without general solicitation or advertising.
The purchasers were sophisticated investors with access to all relevant
information necessary to evaluate these investments,and who represented to the
Company that the shares were being acquired for investment.
(4) In 1998, we issued to Jonathan Kahn 3,204 shares of Common Stock in
exchange for converting an outstanding promissory note from the Company to
Jonathan Kahn in the amount of $6,327.
(5) In September, 1999, we issued the aggregate amount of 5,313 shares
of Common Stock upon the exercise of options to purchase Common Stock which were
granted to employees, directors and consultants of the Company between 1997 and
1998. The issuances were made in reliance on Section 4(2) of the Securities Act
and were made without general solicitation or advertising. The purchasers were
sophisticated investors with access to all relevant information necessary to
evaluate these investments, and who represented to the Company that the shares
were being acquired for investment.
(6) In October 1999, under the terms of the Reorganization, the Company
issued the aggregate amount of 7,441,628 shares of Common Stock to the
shareholders of Aladdin Systems Holdings in exchange for their shares of Common
Stock of Aladdin Systems, Inc. The number of shares of the Company issued to the
Aladdin Systems shareholders is subject to adjustment after closing, pursuant to
the terms of the Reorganization Agreement, to adjust for options issued to
employees of Aladdin Systems which had expired prior to the closing. The
issuances were made in reliance on Section 4(2) of the Securities Act and were
made without general solicitation or advertising. The purchasers were
sophisticated investors with access to all relevant information necessary to
evaluate these investments, and who represented to the Company that the shares
were being acquired for investment.
(7) In October 1999, under the terms of the Reorganization, the holders
of options to purchase Common Stock of Aladdin Systems, Inc., exchanged their
options for options to purchase the aggregate amount of 1,669,239 shares of
Common Stock of the Company. These issuances were made in reliance on Section
4(2) of the Securities Act and/or Rule 701 promulgated under the Securities Act
and were made without general solicitation or advertising. The purchasers were
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sophisticated investors with access to all relevant information necessary to
evaluate these investments, and who represented to the Company that the shares
were being acquired for investment.
(8) In October 1999, pursuant to the terms of the Reorganization
Agreement, the Company conducted a private offering of its Common stock.
Pursuant to that offering, a total of 1,000,000 shares of Common stock were sold
for total cash consideration of $1,000,000. The issuances were made in reliance
on Section 4(2) of the Securities Act and/or Regulation D promulgated under the
Securities Act and were made without general solicitation or advertising. The
purchasers were sophisticated investors with access to all relevant information
necessary to evaluate these investments, and who represented to the Company that
the shares were being acquired for investment.
(9) In October 1999, the Company issued 50,000 shares of Common stock
to Baytree Capital Associates pursuant to the terms of a Letter Agreement with
Baytree Capital Associates for financial business consulting services. The
issuance was made in reliance on Section 4(2) of the Securities Act and/or
Regulation D promulgated under the Securities Act and was made without general
solicitation or advertising. The purchaser was a sophisticated investor with
access to all relevant information necessary to evaluate the investment, and who
represented to the Company that the shares were being acquired for investment.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The General Corporation Law of Nevada limits the liability of officers
and directors for breach of fiduciary duty except in certain specified
circumstances, and also empowers corporations organized under Nevada Law to
indemnify officers, directors, employees and others from liability in certain
circumstances such as where the person successfully defended himself on the
merits or acted in good faith in a manner reasonably believed to be in the best
interests of the corporation.
Our Articles of Incorporation, with certain exceptions, eliminate any
personal liability of a directors or officers to us or our stockholders for
monetary damages for the breach of such person's fiduciary duty, and, therefore,
an officer or director cannot be held liable for damages to us or our
stockholders for gross negligence or lack of due care in carrying out his (or
her) fiduciary duties as a director or officer except in certain specified
instances. We may also adopt by-laws which provide for indemnification to the
full extent permitted under law which includes all liability, damages and costs
or expenses arising from or in connection with service for, employment by, or
other affiliation with us to the maximum extent and under all circumstances
permitted by law.
There is no pending litigation or proceeding involving one of our
directors, officers, employees or other agents as to which indemnification is
being sought, and
39
<PAGE> 40
we are not aware of any pending or threatened litigation that may result in
claims for indemnification by any director, officer, employee or other agent.
We have purchased directors and officers liability insurance to defend
and indemnify directors and officers who are subject to claims made against them
for their actions and omissions as directors and officers of Aladdin. The
insurance policy provides standard directors and officers liability insurance in
the amount of $1,000,000.
We intend to enter into indemnification agreements with our directors
and officers. These agreements will provide, in general, that we shall indemnify
and hold harmless such directors and officers to the fullest extent permitted by
law against any judgments, fines, amounts paid in settlement, and expenses
(including attorneys' fees and disbursements) incurred in connection with, or in
any way arising out of, any claim, action or proceeding (whether civil or
criminal) against, or affecting, such directors and officers resulting from,
relating to or in any way arising out of, the service of such persons as our
directors and officers.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons pursuant to
the foregoing provisions or otherwise, we have has been advised that in the
opinion of the SEC, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
PART F/S
FINANCIAL STATEMENTS
Reference is made to the Financial Statements together with the notes
thereto and the report thereon from David Coffey, C.P.A. and Hutchinson &
Bloodgood, LLP appearing on pages F-1 through F-44 of this Form 10-SB.
PART III
ITEM 1. INDEX TO EXHIBITS
<TABLE>
<S> <C>
(A) Index to Financial Statements
Proforma Combined Statement of Income
as of September 30, 1999 (unaudited) F-1
Proforma Combined Statement of Income
as of December 31, 1998 (unaudited) F-2
</TABLE>
40
<PAGE> 41
<TABLE>
<S> <C>
Proforma Combined Balance Sheet
as of September 30, 1999 (unaudited) F-3
Notes to Proforma Combined Statements F-5
Aladdin Systems, Inc. Balance Sheet
as of September 30, 1999 (unaudited) F-8
Aladdin Systems, Inc. Statement of Income
as of September 30, 1999 (unaudited) F-10
Aladdin Systems, Inc. Statement of Cash Flow
as of September 30, 1999 (unaudited) F-11
Notes to September 30, 1999 Statements F-12
Foreplay Golf & Travel Tours, Inc.
Balance Sheet as of September 30, 1999 (unaudited) F-13
Foreplay Golf & Travel Tours, Inc.
Statement of Operations as of September 30, 1999 (unaudited) F-14
Foreplay Golf & Travel Tours, Inc.
Statement of Cash Flows as of September 30, 1999 (unaudited) F-15
Notes to September 30, 1999 Statements F-16
Report of Independent Certified Public
Accountants, Hutchinson & Bloodgood, LLP F-17
Aladdin Systems, Inc. Balance Sheet
as of December 31, 1998 and 1997 F-18
Aladdin Systems, Inc. Statement of Income
as of December 31, 1998 and 1997 F-20
Aladdin Systems, Inc. Statement of Cash Flow
as of December 31, 1998 and 1997 F-21
Notes to Financial Statements F-22
Report of Independent Certified Public
Accountants, David Coffey, C.P.A. F-30
Foreplay Golf & Travel Tours, Inc.
Statement of Operations as of December 31, 1998 F-31
</TABLE>
41
<PAGE> 42
<TABLE>
<S> <C>
Foreplay Golf & Travel Tours, Inc.
Balance Sheet as of December 31, 1998 F-32
Foreplay Golf & Travel Tours, Inc.
Statement of Changes in Stockholders Equity
as of December 31, 1998 F-33
Foreplay Golf & Travel Tours, Inc.
Statement of Cash Flows as of December 31, 1998 F-34
Report of Independent Certified Public
Accountants, David Coffey, C.P.A. F-37
Foreplay Golf & Travel Tours, Inc.
Balance Sheet as of December 31, 1997 F-38
Foreplay Golf & Travel Tours, Inc.
Statement of Operations as of December 31, 1997 F-39
Foreplay Golf & Travel Tours, Inc.
Statement of Changes in Stockholders Equity
as of December 31, 1997 F-40
Foreplay Golf & Travel Tours, Inc.
Statement of Cash Flows as of December 31, 1997 F-41
Notes to Financial Statements F-42
</TABLE>
(B) EXHIBITS
The following exhibits are filed with this Registration Statement:
<TABLE>
<CAPTION>
Exhibit No. Exhibit Name
- ----------- -------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Reorganization dated as of October 12 1999 by
and among FGT, Gary Ulmer, Aladdin Systems, Inc. and the
shareholders of Aladdin Systems, Inc.
3.1 Articles of Incorporation of the Registrant.
3.2 Certificate of Amendment to the Articles of Incorporation of the
Registrant.
3.3 By-Laws of Registrant.
</TABLE>
42
<PAGE> 43
<TABLE>
<S> <C>
4.1 Sample Stock Certificate of the Registrant.
4.2 See Exhibit Nos 2.1 2.2, 2.3 and 2.4.
10.19 Letter Agreement, dated July 14, 1999 by and between Bay Tree Capital
Associates, LLC and the Registrant. (To Be Filed By Amendment)
10.20 Employment Agreement dated October 25, 1999 by and between Mr.
Jonathan Kahn and the Registrant. (To Be Filed By Amendment)
10.20 Employment Agreement dated October 25, 1999 by and between Mr.
Darryl Lovato and the Registrant. (To Be Filed By Amendment)
10.21 Stock Option Plan of the Registrant. (To Be Filed By Amendment)
10.22 Form of Stock Option Agreement issued under the Stock Option Plan
of the Registrant. (To Be Filed By Amendment)
21.1 Subsidiaries of Registrant
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
ALADDIN SYSTEMS HOLDINGS, INC.
(Registrant)
Date: November 9, 1999 By: /s/ Jonathan Kahn
-----------------------------------
Jonathan Kahn, Chief Executive
Officer and Treasurer
43
<PAGE> 44
FINANCIAL SCHEDULES
<PAGE> 45
ALADDIN SYSTEMS HOLDINGS, INC.
(Formerly Foreplay Golf & Travel Tours, Inc.)
ALADDIN SYSTEMS, INC.
PROFORMA COMBINED STATEMENT OF INCOME
(Unaudited)
Giving effect to an Acquisition on October 31, 1999
<TABLE>
<CAPTION>
Aladdin
Systems Aladdin Proforma
Holdings, Systems, Increase Proforma
Inc. Inc. (Decrease) Combined
(Nine months (Nine months
ended ended
9-30-99) 9-30-99
<S> <C> <C> <C> <C>
SALES $ -- $ 6,719,463 $ -- $ 6,719,463
COST OF SALES -- 1,150,598 -- 1,150,598
GROSS PROFIT -- 5,568,865 -- 5,568,865
Operating Expenses
Marketing, sales, and support 1,587 2,410,208 -- 2,411,795
Research and development -- 1,278,847 -- 1,278,847
General and administrative 13,261 850,693 50,000(3) 913,954
Total operating expenses 14,848 4,539,748 50,000 4,604,596
INCOME (LOSS) FROM OPERATIONS (14,848) 1,029,117 (50,000) 964,269
INTEREST AND OTHER INCOME 72 19,569 -- 19,641
INTEREST EXPENSE -- (47,820) -- (47,820)
INCOME BEFORE INCOME TAXES (14,776) 1,000,866 (50,000) 936,090
PROVISION FOR INCOME TAXES -- -- -- --
NET INCOME (LOSS) $ (14,776) $ 1,000,866 $ (50,000) $ 936,090
</TABLE>
The accompanying notes are an integral part of this statement of income
F-1
<PAGE> 46
ALADDIN SYSTEMS HOLDINGS, INC.
(Formerly Foreplay Golf & Travel Tours, Inc.)
ALADDIN SYSTEMS, INC.
PROFORMA COMBINED STATEMENT OF INCOME
(Unaudited)
Giving effect to an Acquisition on October 31, 1999
<TABLE>
<CAPTION>
Aladdin
Systems Aladdin Proforma
Holdings, Systems, Increase Proforma
Inc. Inc. (Decrease) Combined
(Year ended (Year ended
12-31-98) 12-31-98)
<S> <C> <C> <C> <C>
SALES $ -- $ 8,002,518 $ -- $ 8,002,518
COST OF SALES -- 1,405,496 -- 1,405,496
GROSS PROFIT -- 6,597,022 -- 6,597,022
Operating Expenses
Marketing, sales, and support -- 3,520,106 -- 3,520,106
Research and development -- 1,506,798 -- 1,506,798
General and administrative 9,113 907,560 -- 916,673
Total operating expenses 9,113 5,934,464 -- 5,943,577
INCOME (LOSS) FROM OPERATIONS (9,113) 662,558 -- 653,445
INTEREST AND OTHER INCOME -- 11,346 -- 11,346
INTEREST EXPENSE -- (175,490) -- (175,490)
INCOME BEFORE INCOME TAXES (9,113) 498,414 -- 489,301
PROVISION FOR INCOME TAXES -- (81,769) -- (81,769)
NET INCOME (LOSS) $ (9,113) $ 580,183 $ -- $ 571,070
</TABLE>
The accompanying notes are an integral part of this statement of income
F-2
<PAGE> 47
ALADDIN SYSTEMS HOLDINGS, INC.
(Formerly Foreplay Golf & Travel Tours, Inc.)
ALADDIN SYSTEMS, INC.
PROFORMA COMBINED BALANCE SHEET
(Unaudited)
Giving effect to an Acquisition on October 25, 1999
<TABLE>
<CAPTION>
Aladdin
Systems Aladdin Proforma
Holdings, Systems, Increase Proforma
Inc. Inc. (Decrease) Combined
ASSETS (9-30-99) (9-30-99)
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 825 $ 305,249 $ 1,000,000(3) $ 1,241,074
(65,000) (3)
Accounts receivable -- 744,683 -- 744,683
Inventories -- 81,698 -- 81,698
Prepaid expenses -- 46,469 -- 46,469
Note receivable 4,094 -- -- 4,094
Interest receivable 72 -- -- 72
Deferred income tax benefit -- 165,368 -- 165,368
Total Current Assets 4,991 1,343,467 935,000 2,283,458
Property and Equipment, net -- 497,490 -- 497,490
Other Assets
Deferred income tax benefit -- 98,191 -- 98,191
Organization costs, net 98 -- -- 98
Capitalized software costs, net -- 324,343 -- 324,343
Deposit and other assets -- 99,966 -- 99,966
Total Other Assets 98 522,500 -- 522,598
Total Assets $ 5,089 $ 2,363,457 $ 935,000 $ 3,303,546
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ -- $ 284,986 $ -- $ 284,986
StuffIt payable - current -- 34,973 -- 34,973
</TABLE>
F-3
<PAGE> 48
<TABLE>
<CAPTION>
Aladdin
Systems Aladdin Proforma
Holdings, Systems, Increase Proforma
Inc. Inc. (Decrease) Combined
(9-30-99) (9-30-99)
<S> <C> <C> <C> <C>
Severance 19,961 -- 19,961
Taxes / benefits payable -- 6,577 -- 6,577
Notes payables -- 318,216 -- 318,216
Accrued expenses -- 112,673 -- 112,673
Total Current Liabilities -- 777,386 -- 777,386
Long-term Obligations
StuffIt payable -- 79,802 -- 79,802
Notes payables -- 250,533 -- 250,533
Total Long-term Obligations -- 330,335 -- 330,335
Stockholders' Equity
Preferred stock; $.001 par value, 1,000,000
shares authorized, no shares issued and
outstanding -- -- -- --
Common stock; $.001 par value, 50,000,000
shares authorized, 9,141,628 shares
issued and outstanding 1,434 47,092 (784)(1) 9,142
1,000(2)
(47,092)(3)
7,442(3)
50(3)
Additional paid-in capital 35,653 109,235 784(1) 1,137,274
999,000(2)
(65,000)(2)
47,092(3)
(7,442)(3)
49,950(3)
(31,998)(4)
Retained earnings (deficit) (31,998) 1,099,409 31,998(4) 1,049,409
(50,000)(3) --
Total Stockholders'
Equity (deficit) 5,089 1,255,736 935,000 2,195,825
Total Liabilities and
Stockholders' Equity $ 5,089 $ 2,363,457 $ 935,000 $ 3,303,546
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-4
<PAGE> 49
ALADDIN HOLDINGS, INC.
(Formerly Foreplay Golf & Travel Tours, Inc.)
(A Nevada Corporation)
ALADDIN SYSTEMS, INC.
(A Delaware Corporation)
PROFORMA COMBINED BALANCE SHEET AND INCOME STATEMENT
(Unaudited)
The following unaudited proforma combined balance sheet and statement of income
aggregates the unaudited balance sheet and statement of operations of Aladdin
Holdings, Inc. formerly Foreplay Golf & Travel Tours, Inc. (Parent) (A Nevada
Corporation) as of June 30, 1999, and the unaudited balance sheet and statement
of income of Aladdin Systems, Inc. (Subsidiary) (a Delaware Corporation) as of
June 30, 1999 giving effect to a transaction completed on October 25, 1999,
wherein Parent acquired Subsidiary as a wholly-owned subsidiary (the
"Acquisition"). This business combination will be treated as a reverse
acquisition and as a recapitalization of Subsidiary. Parent will issued common
stock in exchange for all of the issued and outstanding shares of Subsidiary.
The following proforma balance sheet and statement of income uses the
assumptions as described in the notes and the historical financial information
available at June 30, 1999. The financial statements of Parent at June 30, 1999
are unaudited. The financial statements of Subsidiary at June 30, 1999 are also
unaudited.
The unaudited proforma combined balance sheet and statement of income should be
read in conjunction with the separate financial statements and related notes
thereto of Parent and Subsidiary. The unaudited proforma condensed combined
balance sheet and statement of income is not necessarily indicative of the
condensed combined balance sheet and statement of income which might have
existed for the period indicated or the results of operations as they may appear
now or in the future.
F-5
<PAGE> 50
ALADDIN HOLDINGS, INC.
(Formerly Foreplay Golf & Travel Tours, Inc.)
ALADDIN SYSTEMS, INC.
PROFORMA COMBINED NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
ALADDIN HOLDINGS, INC. (the Company) - (Formerly Foreplay Golf & Travel
Tours, Inc.) was incorporated under the laws of the State of Nevada on March 26,
1997. The Company was organized to conduct business in the travel industry. The
Company was unable to establish a relationship with an existing travel agent to
book airline travel and was unable to successfully launch its business. The
Company depleted its cash in connection with its attempted business endeavors
and had to discontinue all operations in early 1999.
ALADDIN SYSTEMS, INC. (ALADDIN) - Founded in 1988, Aladdin is a leading
Macintosh utility software company serving the transmission, access and
organization markets. During Aladdin's ten-year history, the company has
established worldwide channels of distribution and expanded its proprietary
compression standard, StuffIt, and established it as a recognizable Internet
brand. In 1998, Aladdin expanded the StuffIt product line into the Window
marketplace, making Aladdin a single source provider of compression software.
Proforma Adjustments - (1) The Company reverse split its common stock on a 2.2
to 1 basis and canceled 2,000 shares decreasing shares outstanding to 650,000
shares. (2) The Company sold 1,000,000 post-split shares of common stock for
$1.00 per share for $1,000,000. Costs of the offering and acquisition were
$65,000. (3) The Company acquired all of the issued and outstanding shares of
Aladdin in exchange for 7,441,628 restricted shares of previously authorized but
unissued shares of its common stock. The business combination is a reverse
acquisition and will be treated as a recapitalization of Aladdin. As part of the
acquisition 50,000 shares of common stock of the Company was issued to and
investment banker. The shares have been valued at $1.00 per share and treated as
an expense of the acquisition in these proforma financial statements. (4) This
is part of the recapitalization transaction and entry. It eliminates the
retained deficit of the Company accounting for the transaction as if the shares
were exchanged by Aladdin for the net assets of the Company.
Stock Option Plan - The Company has adopted, with the approval of its
stockholders, a Stock Option Plan (the "Plan"), pursuant to which it is
authorized to grant options to purchase up to 3,000,000 shares of common stock
to the Company's key employees, officers, directors, consultants, and other
agents and advisors.
F-6
<PAGE> 51
Awards under the Plan will consist of stock options (both non-qualified options
and options intended to qualify as "Incentive Stock Options" under Section 422
of the Internal Revenue Code of 1986, as amended), restricted stock awards,
deferred stock awards, stock appreciation rights and other stock-based awards,
which are described in the Plan.
The Plan will be administered by the Board of Directors which will determine the
persons to whom awards will be granted, the number of awards to be granted and
the specific terms of each grant, including the vesting thereof, subject to the
provisions of the Plan.
In connection with qualified stock options, the exercise price of each option
may not be less than 100% of the fair market value of the common stock on the
date of grant (or 110% of the fair market value in the case of a grantee holding
more than 10% of the outstanding stock of the Company). The aggregate fair
market value of shares for which qualified stock options are exercisable for the
first time by such employee (10% shareholder) during any calendar year may not
exceed $100,000. Non-qualified stock options granted under the Plan my be
granted at a price determined by the Board of Directors, not to be less than the
fair market value of the common stock on the date of grant.
The plan also contains certain change in control provisions which could cause
options and other awards to become immediately exercisable and restrictions and
deferral limitations applicable to other awards to lapse in the event any
"person", as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, including a "group" as defined in Section 13(d), but
excusing certain stockholders of the Company, became the beneficial owners of
more than 25% of the Company's outstanding shares of common stock.
The Company granted options to purchase approximately 1,719,726 shares at
closing, to be divided amongst employees of the Company and other associated
persons. The exercise price will range from $1.00 to $1.90 per share.
F-7
<PAGE> 52
ALADDIN SYSTEMS, INC. and SUBSIDIARY
Consolidated Balance Sheets
as of September 31, 1999
(unaudited)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash $ 305,246
Accounts Receivable-trade $ 744,683
Current Inventory $ 81,698
Prepaid Expenses $ 46,469
Deferred Income Tax Benefits $ 165,368
Total Current Assets $ 1,343,464
FIXED ASSETS
Total $ 1,262,004
Less: Accumulated Depreciation $ (764,514)
Total Fixed Assets $ 497,490
OTHER ASSETS
Deferred Income Tax Benefits $ 98,191
Capitalized Software $ 1,204,347
Accumulated Amortization $ (880,003)
Capitalized Software, net of amort. $ 324,343
Deposits Paid $ 99,966
Total Other Assets $ 522,500
TOTAL ASSETS $ 2,363,454
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 284,985
StuffIt Payable - Current $ 34,973
Severance - Current $ 19,961
Accrued Expenses $ 318,216
Taxes Payable/Benefits Payable $ 6,577
Notes Payable $ 112,673
Total Current Liabilities $ 777,385
LONG TERM LIABILITIES
StuffIt Payable $ 79,802
Notes Payable $ 250,533
Total Long-term Liabilities $ 330,335
TOTAL LIABILITIES $ 1,107,721
</TABLE>
F-8
<PAGE> 53
<TABLE>
<S> <C>
OWNERS EQUITY
Equity Accounts
Capital Stock $ 47,092
Paid In Capital $ 109,235
Retained Earnings $ 1,099,406
Total Equity Accounts $ 1,255,733
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,363,454
</TABLE>
F-9
<PAGE> 54
ALADDIN SYSTEMS, INC. and SUBSIDIARY
Consolidated Statements of Income and Retained Earnings
as of September 31, 1999
(unauditied)
<TABLE>
<S> <C>
SALES $6,719,464
COSTS OF SALES $1,150,598
GROSS PROFIT $5,568,866
OPERATING EXPENSES
Marketing, Sales and Support $2,410,208
Research & Development $1,278,847
General & Administrative $ 671,693
Total Expenses $4,360,748
INCOME (LOSS) FROM OPERATIONS $1,208,117
INTEREST AND OTHER INCOME $ 19,569
INTEREST EXPENSE $ 47,820
INCOME BEFORE INCOME TAXES $1,179,866
PROVISION FOR INCOME TAXES $ 179,003
NET INCOME $1,000,863
</TABLE>
F-10
<PAGE> 55
ALADDIN SYSTEMS, INC, & SUBSIDIARY
Consolidated Statements of Cash Flow
as of September 31, 1999
(unauditied)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 1,000,863
Depreciation and amortization $ 239,897
Accrued Expenses $ 96,823
Accounts Receivable $ (14,741)
Inventories $ (11,208)
Accounts Payable $ (474,198)
Prepaid expenses and other assets $ (78,138)
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 759,299
CASH FLOWS FROM INVESTING ACTIVITIES
Equipment & Etc $ (173,924)
Capitalized software cost $ (16,959)
CASH (USED IN) INVESTING ACTIVITIES $ (190,883)
CASH FLOWS FROM FINANCING ACTIVITIES
New equipment leases $ 105,951
Demand Notes $ (54,000)
Silicon Valley Bank $ (160,887)
Raymond Lau $ (26,103)
Flashback $ (50,000)
Shrinkwrap Mac $ (35,000)
Shrinkwrap Win $ --
Severance packages $ (36,539)
Capitalized leases $ (67,157)
Cash Provided By (Used In) Financing Activities $ (323,734)
NET INCREASE (DECREASE) IN CASH $ 244,682
CASH AT BEGINNING OF PERIOD $ 60,564
CASH AT END OF PERIOD $ 305,246
</TABLE>
F-11
<PAGE> 56
ALADDIN SYSTEMS, INC. and SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Aladdin Systems, Inc. (the Company) has elected to omit substantially
all footnotes to the financial statements for the nine months ended September
30, 1999.
UNAUDITED INFORMATION
The information furnished herein was taken from the books and records
of the Company without audit. However, such information reflects all adjustments
which are, in the opinion of management, necessary to properly reflect the
results of the period presented. The information presented is not necessarily
indicative of the results from operations expected for the full fiscal year.
F-12
<PAGE> 57
FOREPLAY GOLF & TRAVEL TOURS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET SEPTEMBER 30, 1999
(Unaudited)
<TABLE>
<S> <C>
ASSETS
Cash $ 825
Organizational costs less accumulated
amortization of $97 98
Note receivable 4,094
Interest receivable 72
Total Assets $ 5,089
LIABILITIES & STOCKHOLDERS' EQUITY
Accounts payable $ 0
Total Liabilities 0
Stockholders' Equity
Common stock, authorized 25,000,000 shares
at $.001 par value, issued and outstanding
1,434,400 shares 1,434
Additional paid-in capital 35,653
Deficit accumulated during the
development stage (31,998)
Total Stockholders' Equity 5,089
Total Liabilities and Stockholders' Equity $ 5,089
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE> 58
FOREPLAY GOLF & TRAVEL TOURS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS AND DEFICIT
(Unaudited)
<TABLE>
<CAPTION>
January 1, 1999 January 1, 1998
To Sept. 30, 1999 To Sept. 30, 1998
<S> <C> <C>
Interest income $ 72 $ 0
Expenses
Advertising 1,587 0
Amortization 30 30
Conferences 667 2,086
Consulting 7,850 4,500
Depreciation 615 573
Licenses and fees 190 85
Office supplies 490 579
Professional fees 3,005 0
Publications 414 351
Rent 0 1,200
Total expenses 14,848 9,404
Net Loss (14,776) (9,404)
Retained earnings, beginning of period (17,222) (6,909)
Deficit accumulated during the
development stage (31,998) (16,313)
Earnings (loss) per share
assuming dilution: Net loss (.01) $ (.01)
Weighted average shares outstanding 1,434,400 1,063,661
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-14
<PAGE> 59
FOREPLAY GOLF & TRAVEL TOURS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
January 1, 1999 January 1, 1998
To Sept. 30, 1999 To Sept. 30, 1998
----------------- -----------------
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
Net Loss $ (14,776) $ (9,404)
Non-cash items included in net loss
Amortization 30 30
Depreciation 615 573
Adjustments to reconcile net loss to
cash used by operating activity
Decrease in prepaid offering costs 2,136
Decrease in accounts payable (300) (5,329)
NET CASH PROVIDED BY
OPERATING ACTIVITIES (14,431) (11,994)
CASH FLOWS USED BY INVESTING ACTIVITIES
Office furniture and equipment 0 3,333
Sale of office furniture and equipment (4,094) 0
Note receivable and accrued interest 4,166 0
NET CASH USED BY
INVESTING ACTIVITIES 72 3,333
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 0 834
Paid-in capital 0 40,886
Less offering costs 0 (10,633)
NET CASH PROVIDED BY
FINANCING ACTIVITIES 0 31,087
NET INCREASE IN CASH (14,503) 15,760
CASH AT BEGINNING OF PERIOD 15,328 160
CASH AT END OF PERIOD $ 825 $ 15,920
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-15
<PAGE> 60
FOREPLAY GOLF & TRAVEL TOURS, INC.
(A DEVELOPMENT STAGE COMPANY)
September 30, 1999
NOTES TO THE FINANCIAL STATEMENTS
Foreplay Golf & Travel Tours, Inc. (the Company) has elected to omit
substantially all footnotes to the financial statements for the nine months
ended September 30, 1999.
UNAUDITED INFORMATION
The information furnished herein was taken from the books and records
of the Company without audit. However, such information reflects all adjustments
which are, in the opinion of management, necessary to properly reflect the
results of the period presented. The information presented is not necessarily
indicative of the results from operations expected for the full fiscal year.
F-16
<PAGE> 61
Independent Auditors' Report on the Financial Statements
To the Board of Directors
Aladdin Systems, Inc.
Watsonville, California
We have audited the accompanying consolidated balance sheets of Aladdin Systems,
Inc. and subsidiary, as of December 31, 1998 and 1997, and the related
consolidated statements of income and retained earnings (deficit) and cash flows
for the years then ended. These consolidated financial statements arc the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Aladdin Systems,
Inc. and subsidiary as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
March 29, 1999
F-17
<PAGE> 62
ALADDIN SYSTEMS, INC. and SUBSIDIARY
Consolidated Balance Sheets
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash (Note 2) $ 60,564 $ 51,789
Accounts receivable - trade 729,942 736,942
Inventories 70,491 84,685
Prepaid expenses 49,563 57,300
Deferred income tax benefit (Note 7) 165,368 110,198
Total current assets 1,075,928 1,040,914
PROPERTY AND EQUIPMENT
Office furniture and fixtures 302,513 302,513
Computer equipment 685,647 664,199
Trade show display 99,920 99,920
Total cost 1,088,080 1,066,633
Less: accumulated depreciation 649,323 505,201
Total fixed assets 438,757 561,432
OTHER ASSETS, net:
Deferred income tax benefit (Note 7) 98,191 69,992
Capitalized software costs, net of amortization 432,091 650,777
Deposits and other assets 18,733 18,733
Total other assets 549,015 739,502
TOTAL ASSETS 2,063,700 $ 2,341,848
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current part of long-term debt (Note 4) $ 251,644 $ 570,456
Accounts payable - trade 792,280 968,354
Payable to bank (Note 3) 160,888 424,173
Related party payables (Note 5) 69,000 225,062
Accrued expenses 194,873 269,778
Total current liabilities 1,468,685 2,457,823
LONG-TERM OBLIGATIONS: (Note 4)
Notes payable (software) 225,877 396,860
Related party payables (Note 5) 145,062
Severance agreements 56,500 149,222
Capitalized leases 164,350 240,039
Less: current part (251,644) (570,456)
Total long-term obligations 340,145 215,665
Total liabilities 1,808,829 2,673,488
</TABLE>
F-18
<PAGE> 63
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
STOCKHOLDERS' EQUITY
Capital stock, common, par value $0.01; 6,705,882 shares authorized, 4,709,222
and 4,705,882 shares issued and outstanding in 1998 and 1997, respectively 47,092 47,059
Paid in Capital 109,235 102,941
Retained earnings (deficit) 98,543 (481,640)
Total stockholders' equity (deficit) 254,870 (331,640)
TOTAL LIABILITIES AND EQUITY $ 2,063,700 2,341,848
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE> 64
ALADDIN SYSTEMS, INC. and SUBSIDIARY
Consolidated Statements of Income and Retained Earnings
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
Amount Percent Amount Percent
<S> <C> <C> <C> <C>
SALES 8,002,518 100.0% $ 7,274,914 100.0%
COST OF SALES 1,405,496 17.6 1,441,578 19.8
GROSS PROFIT 6,597,022 82.4 5,833,336 80.2
OPERATING EXPENSES
Marketing, sales and support 3,520,106 44.0 3,899,754 53.6
Research and development 1,506,798 18.8 1,466,866 20.2
General and administrative 907,560 11.3 1,159,134 15.9
Total 5,934,464 74.2 6,525,754 89.7
INCOME (LOSS) FROM OPERATIONS 662,559 8.3 (692,418) (9.5)
INTEREST AND OTHER INCOME 11,346 0.1 7,455 0.1
LOSS ON DISPOSITION OF ASSETS (10,664)
INTEREST EXPENSE (175,490) (2.2) (145,910) (2.0)
INCOME BEFORE INCOME TAXES 498,414 6.2 (841,537) (11.6)
PROVISION FOR INCOME TAXES (Note 7) (81,769) (1.0) (68,538) (0.9)
NET INCOME (LOSS) 580,183 7.3% (772,999) 0.6%
RETAINED EARNINGS, BEGINNING (481,640) 291,359
RETAINED EARNINGS, ENDING $ 98,543 $ (481,640)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE> 65
ALADDIN SYSTEMS, INC, & SUBSIDIARY
Consolidated Statements of Cash Flow
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) 580,183 $(772,999)
Adjustments to reconcile net income (loss) to cash
provided by (used in) operating activities:
Depreciation and amortization expense 367,808 252,201
(Increase) decrease in accounts receivable 7,000 (152,429)
(Increase) decrease in inventories 14,194 (41,198)
(Increase) in prepaid expenses and deferred income taxes (75,632) (35,118)
Increase (decrease) in accounts payable (176,074) 309,906
Increase (decrease) in accrued expenses (74,905) 73,165
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 642,574 (366,472)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (21,446) (390,859)
Additions to capitalized software costs (5,000) (305,000)
Decrease in deposits 37,782
CASH (USED IN) INVESTING ACTIVITIES (26,446) (658,077)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from (repayments to) related parties (11,000) 146,102
Increase (decrease) in payable to bank (263,286) 424,173
proceeds from issuance of capital stock 6,327 --
Increase (decrease) in long term debt (339,394) 149,274
(607,353) 719,549
NET INCREASE (DECREASE) IN CASH 8,775 (305,000)
CASH AT BEGINNING OF YEAR 51,789 356,789
CASH AT END OF YEAR $ 60,564 $ 51,789
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
Cash paid during the year for:
Interest $ 165,242 $ 142,807
Income taxes 1,600 1,600
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE> 66
ALADDIN SYSTEMS, INC. and SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1998 and 1997
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of business
Aladdin Systems, Inc. is based in Watsonville, California. The
Company develops, publishes, and distributes computer software
on the Macintosh platform, and more recently Windows, to
customers worldwide. The wholly owned subsidiary, Transaction
Services, Inc. possesses the technology to sell and download
programs over the interact, using unlocking keys, for Aladdin
and other third party vendors.
Principles of Consolidation
The consolidated financial statements include the accounts of
Aladdin Systems, Inc. and its wholly owned subsidiary,
Transaction Services, Inc., which was formed November 14,
1996, both of which are under common control. Intercompany
transactions and balances have been eliminated in
consolidation.
Accounting Policies
The accounting policies relative to the carrying value of
property and equipment are indicated in captions on the
balance sheets. Other significant accounting policies are:
Use of Estimates
Management uses estimates and assumptions in preparing
financial statements. Those estimates and assumptions
affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities, and
the reported revenues and expenses.
Cash Equivalents
For purposes of the statement of cash flows, cash
equivalents include time deposits, certificates of
deposit and all highly liquid debt instruments with
original maturities of three months or less.
F-22
<PAGE> 67
Accounts Receivable
Bad debts are recorded as an expense in the period in
which they become uncollectible. No allowance for
doubtful accounts is provided as expected losses are not
material. There is an allowance for returns that is based
on an average yearly return percentage applied to total
accounts receivable.
Inventory
Inventory is stated at the lower of cost (first-in,
first-out method) or market.
Depreciation
Depreciation is provided for on an accelerated basis over
estimated useful lives:
<TABLE>
<S> <C>
Software 5 years
Furniture and equipment 5 - 7 years
Computer equipment 5 years
Trade show display 5 - 7 years
</TABLE>
F-23
<PAGE> 68
ALADDIN SYSTEMS, INC. and SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1998 and 1997
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Capitalized Software Costs
The Company follows Statement of Financial Accounting
Standards No. 86, "Accounting for the Costs of Computer
Software to be Sold, Leased, or Otherwise Marketed" for all
software development costs. As a result, software development
costs incurred after the development of technological
feasibility are capitalized and amortized to cost of revenues
on a product by product basis at the greater of the amount
computed using the ratio of current gross revenues for a
product to the total of rent and anticipated future gross
revenues or the straight-line method over the remaining
estimated economic life of the product. Generally, an
estimated economic life of five yews is assigned to
capitalized software development costs. No costs for the
internal development of software are being capitalized for
1998 or 1997. Capitalized purchased software costs are being
amortized using the straight-line method over the remaining
economic life, considered to be five years.
Income Taxes
As a corporation the Company is subject to income taxes at
statutory rates. The Company's income taxes arc accounted for
under the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes", which
requires the liability method of accounting.
Deferred income taxes reflect the impact of 'temporary
differences' between amounts of assets and liabilities for
financial reporting purposes and such amounts measured by tax
laws. Temporary differences which give rise to deferred tax
assets (liabilities) principally include certain reserves and
depreciation.
Note 2. CASH DEPOSITS IN EXCESS OF INSURED LIMITS
F-24
<PAGE> 69
The Company maintains cash at a local financial institution.
The cash balance is insured by the Federal Deposit Insurance
Corporation up to $100,000. At December 31, 1998 and 1997, the
Company's uninsured bank balances totaled $41,223 and
$122,497, respectively. A reconciliation of the Company's cash
position is presented below:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Uninsured bank balances $ 41,223 $ 122,497
Insured bank balances 108,591 128,27
Plus, deposits in transit 11,241 37,322
Less, outstanding checks (100,491) (236,308)
--------- ---------
$ 60,564 $ 51,789
</TABLE>
Note 3. BANK FACTORING AGREEMENT
The Company has an arrangement with Silicon Valley Bank where
the bank advances 50% of pledged receivables up to $1,200,000
and when those receivables are paid, the bank then remits the
remaining 50%, less an interest and administrative fee, to the
Company. Interest is charged at 1.25% per month on the average
daily balance and the administrative fee is.5% of the face
amount of each receivable pledged. The balance due the Bank at
December 31, 1998 and 1997 was $160,888 and $424,173,
respectively.
Note 4. LONG-TERM DEBT
Long-term debt and the related current portion as of December
31, 1998 and 1997, consist of the following:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Notes payable, software $225,877 $396,860
Severance agreements 56,500 149,222
Capitalized leases 164,350 240,039
446,727 786,121
Less current part 251,644 570,456
$195,083 $215,665
</TABLE>
The Company acquired all ownership rights of StuffIt Software
in 1994 and the purchase price was payable in monthly
installments of $19,444
F-25
<PAGE> 70
with an imputed interest rate of 10%. In 1997, the payment
plan was restructured to be payable monthly at $27,708,
subordinated to all other borrowing, with an option to convert
any remaining amount of the note to common stock. During 1998
the payment plan was again restructured to be payable monthly
at $5,000. The note is scheduled to be paid in full in 2001.
Two other software programs were acquired in 1997 and the
unpaid portion is being paid as there is sufficient cash flow.
These notes are considered current and will be paid in full in
1999.
The Company entered into severance agreements with former
management employees in 1994 and 1996, whereby the Company
will pay each former employee the sum of $175,000 over a 42
month period. The full amount of the payments has been
recorded as an expense in the years the agreements were
entered into. Two other employees are eligible to participate
in the severance agreement should they elect to leave the
employ of the Company.
The Company acquired equipment under long-term, noncancellable
leases. There are four leases with interest rates ranging from
16% to 19.37% and monthly payments of $138 to $5,134. One of
the leases was paid off in 1999, two will be paid in full in
2000, and the fourth will be paid in full in 2002. The leases
are secured by leased assets with a cost of $217,234 and a
book value of $184,048 as of December 31, 1998.
Aggregate maturities or payments required on principal under
long-term debt for each of the remaining years are as follows:
<TABLE>
<S> <C>
1999 $251,644
2000 120,451
2001 65,602
2002 9,030
$446,727
</TABLE>
Note 5. RELATED PARTY TRANSACTIONS;
Related Party Notes
During 1997, certain Stockholders, the Company's former
President a key employee, and a relative of a stockholder lent
the Company a total of $225,062, in the form of demand notes
with interest payable monthly at rates from 7% to 12%. These
notes contain a conversion feature
F-26
<PAGE> 71
where they can be converted into common stock in part or whole
at any time for $1.74 per share. The notes are subordinated to
all other financing by the Company. During 1998 the Company
paid $11,000 against these notes resulting in a balance
remaining of $214,062 as of December 31, 1998. The Company
estimates that it will pay $69,000 of this balance during
1999.
Note 6 COMMITMENTS
Facility Lease
The Company conducts its operations from facilities that are
leased under an operating lease expiring July 31, 2001. Rent
expense was $162,645 and $154,769 in 1998 and 1997. The
minimum rental commitment for the next four years, and in the
aggregate, subject to a cost of living adjustment each year,
is as follows:
<TABLE>
<S> <C>
1999 $ 162,500
2000 162,500
2001 81,250
$ 406,250
</TABLE>
Note 7. PROVISION FOR INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Statutory tax liability:
California $ 1,600 $ 1,600
Adjustments for:
Net operating loss carryforward 3,432 (229,378)
Depreciation differences (35,187) (10,604)
Capitalized software development costs 21,563
Interest on installment sale 11,598 (15,905)
Contributions -- 143
Severance payments 28,672 (19,936)
California Franchise tax 453 1,543
Valuation allowance (92,337) 182,436
Deferred tax provision (83,369) (70,138)
Provision for income tax $ (81,769) $ (68,538)
</TABLE>
F-27
<PAGE> 72
<TABLE>
<CAPTION>
Deferred tax assets consist of 1998 1997
<S> <C> <C>
Deferred tax asset, current:
Net operating loss carryforward $ 187,188 $ 164,506
State taxes 544 544
Interest on installment sale 11,339 16,627
Severance payments 21,420 38,719
Valuation allowance (55,123) (110,198)
$ 165,368 110,198
Deferred tax asset long-term:
Net operating loss carry forward $ 77,951 $ 104,066
Depreciation 63,289 28,102
Interest on installment sale -- 6,310
Severance payments 1,236 12,608
State deferred tax (11,555) (11,102)
Valuation allowance (32,730) (69,992)
$ 98,191 $ 69,992
</TABLE>
Realization of deferred tax assets is dependent upon
sufficient future taxable income during the period that
deductible temporary differences and carryforwards are
expected to be available to reduce taxable income. A valuation
allowance has been established for 25% of the deferred tax
asset. The Company has available at December 31, 1998,
$738,268 for Federal and $159,817 for California, unused
operating loss forwards that may be applied against future
taxable income and that expire in 2011 and 2012.
Note 8. RESEARCH AND DEVELOPMENT
Research and development costs are charged to operations when
incurred and arc included in operating expenses. The amounts
charged in 1998 and 1997 were $1,506,798 and $1,466,866,
respectively.
Note 9. STOCK OPTION PLAN
During 1996, the Company implemented a stock option plan
whereby it could issue options for 2 million shares with
varying vesting dates, typically 4 years, to employees and
others as a form of compensation.
F-28
<PAGE> 73
Prior to each issuance, the grant must have board approval.
Currently the option prices are reflective of a price
determined by the Board that is meant to reflect a market
price so there is no dilution of earnings or compensation cost
to be disclosed. A summary of the plan follows:
<TABLE>
<CAPTION>
Shares Price Range
<S> <C> <C>
Outstanding at 12/3 1/96 196,079.00
Granted 1,416,595 1.70 - 1.91
Returned 293,796
Outstanding at 12/31/97 1,318,878
Options exercisable at 12/31/97 314,517
Granted 245,400 1.74 - 2.75
Returned 551,997
Outstanding at 12/3 1/98 1,012,281
Options exercisable at 12/31/98 631,304
</TABLE>
Note 10. RETIREMENT PLAN
The Company has established a 401 (k) retirement plan for all
employees. All employees may elect to contribute up to 15% of
their gross salary not to exceed federal tax law limitations.
The company may elect to match a portion of the employee
contributions, however, there were no company matching
contributions in either 1998 or 1997.
F-29
<PAGE> 74
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTS
To the Board of Directors and Stockholders of Foreplay Golf & Travel Tours, Inc.
Las Vegas, Nevada
I have audited the accompanying balance sheet of Foreplay Golf & Travel
Tours, Inc. (a development stage company) as of December 31, 1998 and the
related statements of operations, cash flows and changes in stockholders' equity
for the period from March 26, 1997 (date of inception) to December 31, 1998.
These financial statements are the responsibility of Foreplay Golf & Travel
Tours, Inc.'s management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit of the financial statements provide a reasonable basis
for my opinion.
In my opinion, the accompanying financial statements present fairly, in
all material respects, the financial position of Foreplay Golf & Travel Tours,
Inc. December 31, 1998 and the results of operations, cash flows and changes in
stockholders' equity for the year then ended in conformity with generally
accepted accounting principles.
David Coffey C.P.A.
April 10, 1999
F-30
<PAGE> 75
FOREPLAY GOLF & TRAVEL TOURS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS AND DEFICIT
ACCUMULATED DURING THE DEVELOPMENT STAGE
FOR THE YEAR ENDED December 31, 1998
(With Cumulative Figures From Inception)
<TABLE>
<CAPTION>
From Inception,
January 1, 1998 March 26, 1997
To Dec. 31, 1998 To Dec. 31, 1998
<S> <C> <C>
Income $ 0 $ 0
Expenses
Amortization 39 68
Bank charges 30 182
Conferences 2,604 4,468
Consulting 4,500 7,500
Depreciation 880 1,445
Licenses and fees 85 170
Lodging 0 162
Meals 0 60
Office supplies 549 1,371
Publications 426 596
Rent 1,200 1,200
Total expenses 10,313 17,222
Net Loss (10,313) $ (17,222)
Retained earnings, (6,909)
beginning of period -----------
Deficit accumulated during
the development stage $ (17,222)
Earnings (loss) per share assuming dilution:
Net loss $ (.09) $ (.19)
Weighted average shares outstanding 1,155,833 907,488
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE> 76
FOREPLAY GOLF & TRAVEL TOURS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Cash $ 15,328
Organizational costs less accumulated
amortization of $68 127
Office equipment, less accumulated 4,710
depreciation of $l,445
Total Assets $ 20,165
LIABILITIES & STOCKHOLDERS' EQUITY
Accounts payable - stockholder $ 300
Total Liabilities 300
Stockholders' Equity
Common stock, authorized 25,000,000 shares
at $.001 par value, issued and outstanding 1,434
1,434,400 shares
Additional paid-in capital 35,653
Deficit accumulated during the
development stage (17,222)
Total Stockholders' Equity 19,865
Total Liabilities and Stockholders' Equity $ 20,165
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE> 77
FOREPLAY GOLF & TRAVEL TOURS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
PERIOD FROM March 26, 1997 (Date of Inception)
To December 31, 1998
<TABLE>
<CAPTION>
Common Stock Paid-in Additional
Shares Amount Capital Total
<S> <C> <C> <C> <C>
Balance,
March 26, 1997 $ -- $ -- $ -- $ --
Issuance of common
stock for cash 600,000 600 5,400 6,000
Less net loss -- -- -- (6,909)
-------- -------- -------- --------
Balance,
December 31, 1997 600,000 600 5,400 (909)
Issuance of common
stock for cash 834,400 834 40,886 41,720
Less offering costs 0 0 (10,633) (10,633)
Less net loss -- -- -- (10,313)
-------- -------- -------- --------
Balance, December 31, 1998 600,000 $ 1,434 $ 35,653 $ 19,865
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE> 78
FOREPLAY GOLF & TRAVEL TOURS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED December 31, 1998
(With Cumulative Figures From Inception)
<TABLE>
<CAPTION>
From Inception,
January 1, 1998 March 26, 1997
To Dec. 31, 1998 To Dec. 31, 1998
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
Net Loss $(10,313) $(17,222)
Non-cash items included in net loss
Amortization 39 68
Depreciation 880 1,445
Adjustments to reconcile net loss to
cash used by operating activity
Accounts payable (5,329) 300
-------- --------
NET CASH PROVIDED BY
OPERATING ACTIVITIES (14,723) (15,409)
CASH FLOWS USED BY INVESTING ACTIVITIES
Organizational costs 0 195
Office furniture and equipment 3,333 6,155
-------- --------
NET CASH USED BY
INVESTING ACTIVITIES 3,333 6,350
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 834 1,434
Paid-in capital 40,886 46,286
Less offering costs (8,496) (10,633)
NET CASH PROVIDED BY
FINANCING ACTIVITIES 33,224 37,087
NET INCREASE IN CASH 15,168 $ 15,328
CASH AT BEGINNING OF PERIOD 160
CASH AT END OF PERIOD $ 15,328
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE> 79
FOREPLAY GOLF & TRAVEL TOURS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1998
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated on March 26, 1997 under the laws
of the state of Nevada. The business purpose of the Company is
to package group travel specializing in the golf and cruise
industry.
The Company will adopt accounting policies and procedures
based upon the nature of future transactions.
NOTE B ORGANIZATION COSTS
Organization costs were capitalized and amortized over 60
months.
NOTE C OFFERING COSTS
The offering costs were incurred by the Company in connection
with a public stock offering will be deducted from the net
offering proceeds of the stock offering.
NOTE D OFFICE EQUIPMENT
Office equipment is carried at cost. Expenditures for the
maintenance and repair are charged against operations.
Renewals and betterments that materially extend the life of
the asset are capitalized.
Depreciation of the equipment is provided for using the
straight-line method over the estimated useful lives for both
federal income tax and financial reporting.
NOTE E RELATED PARTY TRANSACTIONS
The Company has been advanced $300 by one of its officers and
stockholders. The Company has also retained her as a
consultant and has paid her $4,500.
NOTE F PUBLIC STOCK OFFERING
In May of 1998, the company completed the stock offering and
sold 834,400 of its common stock at $.05 per share. The net
proceeds of that
F-35
<PAGE> 80
offering will be used to package group travel specializing in
the golf and cruise industry.
NOTE G EARNING (LOSS) PER SHARE
Basic EPS is determined using net income divided by the
weighted average shares outstanding during the period. Diluted
EPS is computed by dividing net income by the weighted average
shares outstanding, assuming all dilutive potential common
shares were issued. Since the Company has no common shares
that are potentially issuable, such as stock options,
convertible preferred stock, and warrants, basic and diluted
earnings per share are the same.
F-36
<PAGE> 81
To the Board of Directors and Stockholders of Foreplay Golf & Travel Tours, Inc.
Las Vegas, Nevada
I have audited the accompanying balance sheet of Foreplay Golf & Travel
Tours, Inc. (a development stage company) as of December 31, 1997 and the
related statements of operations, cash flows and changes in stockholders' equity
for the period from March 26, 1997 (date of inception) to December 31, 1997.
These financial statements are the responsibility of Foreplay Golf & Travel
Tours, Inc.'s management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on 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.
I believe that my audit of the financial statements provide a reasonable basis
for my opinion.
In my opinion, the accompanying financial statements present fairly, in
all material respects, the financial position of Foreplay Golf & Travel Tours,
Inc. December 31, 1997 and the results of operations, cash flows and changes in
stockholders' equity for the period then ended in conformity with generally
accepted accounting principles.
David Coffey C.P.A.
May 16, 1998
F-37
<PAGE> 82
FOREPLAY GOLF & TRAVEL TOURS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
Cash $ 160
Organizational costs, less
accumulated amortization of $29 166
Offering costs 2,137
Office furniture and equipment,
less accumulated depreciation of $565 2,257
Total Assets $ 4,720
LIABILITIES & STOCKHOLDERS' EQUITY
Accounts payable:
Stockholder $ 5,012
Trade 617
Total Liabilities 5,629
Stockholders' Equity
Common stock, authorized 25,000,000 shares
at $.001 par value, issued and outstanding
600,000 shares 600
Paid-in capital 5,400
Deficit accumulated during the
development stage (6,909)
Total Stockholders' Equity (909)
Total Liabilities and Stockholders' Equity 4,720
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-38
<PAGE> 83
FOREPLAY GOLF & TRAVEL TOURS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS AND DEFICIT
ACCUMULATED DURING THE DEVELOPMENT STAGE
FOR THE PERIOD ENDED December 31, 1997
<TABLE>
<S> <C>
Income $ 0
Expenses
Amortization 29
Bank charges 152
Conferences 1,864
Consulting 3,000
Depreciation 565
Licenses and fees 85
Lodging 162
Meals 60
Office supplies 822
Publications 170
Total expenses 6,909
Net loss (6,909)
Retained earnings,
beginning of period 0
Deficit accumulated during
the development stage (6,909)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-39
<PAGE> 84
FOREPLAY GOLF & TRAVEL TOURS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY
PERIOD FROM March 26, 1997 (Date of Inception)
To December 31, 1997
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in
Shares Amount Capital Total
<S> <C> <C> <C> <C>
Balance, March 26, 1997 -- $ -- $ -- $ --
Issuance of common
stock for cash 600,000 600 5,400 6,000
Less net loss -- -- -- (6,909)
------- ------- ------- -------
Balance, December 31, 1997 600,000 $ 600 $ 5,400 $ (909)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-40
<PAGE> 85
FOREPLAY GOLF & TRAVEL TOURS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
From March 26, 1997 (Date of Inception)
To December 31, 1997
<TABLE>
<S> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
Net Loss (6,909)
Non-cash items included in net loss
Amortization 29
Depreciation 565
Adjustments to reconcile net loss to net
cash used by operating activity
Accounts payable 5,629
NET CASH USED BY
OPERATING ACTIVITIES (686)
CASH FLOWS USED BY INVESTING ACTIVITIES
Organizational costs 195
Offering costs 2,137
Office furniture and equipment 2,822
NET CASH USED BY
INVESTING ACTIVITIES 5,154
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 6,000
NET CASH PROVIDED BY
FINANCING ACTIVITIES 6,000
NET INCREASE IN CASH 160
CASH AT BEGINNING OF PERIOD --
CASH AT END OF PERIOD 160
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-41
<PAGE> 86
FOREPLAY GOLF & TRAVEL TOURS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1997
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated on March 26, 1997 under the laws
of the state of Nevada. The business purpose of the Company is
to package group travel specializing in the golf and cruise
industry.
The Company will adopt accounting policies and procedures
based upon the nature of future transactions.
NOTE B ORGANIZATION COSTS
Organization costs were capitalized and amortized over 60
months.
NOTE C OFFERING COSTS
The offering costs were incurred by the Company in connection
with a public stock offering will be deducted from the net
offering proceeds of the stock offering.
NOTE D OFFICE EQUIPMENT
Office equipment is carried at cost. Expenditures for the
maintenance and repair are charged against operations.
Renewals and betterments that materially extend the life of
the asset are capitalized.
Depreciation of the equipment is provided for using the
straight-line method over the estimated useful lives for both
federal income tax and financial reporting.
NOTE E RELATED PARTY TRANSACTIONS
The Company has been advanced $5,012 by one of its officers
and stockholders. These advances will be repaid out of the
offering proceeds without interest.
NOTE F SUBSEQUENT EVENTS - PUBLIC STOCK OFFERING
F-42
<PAGE> 87
In May of 1998, the company completed the stock offering and
sold 834,400 of its common stock at $.05 per share and
received net proceeds of $40,103 from the offering.
F-43
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION DATED AS OF OCTOBER 12, 1999 BY
AND AMONG FGT, GARY ULMER, ALADDIN SYSTEMS, INC. AND THE
SHAREHOLDERS OF ALADDIN SYSTEMS, INC.
<PAGE> 2
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (hereinafter the "Agreement")
is entered into effective as of this day of October 1999, by and among Foreplay
Golf & Travel Tours, Inc., a Nevada corporation (hereinafter "FGT"); Glen Ulmer,
the sole officer and director of FGT (hereinafter "Ulmer"); Aladdin Systems,
Inc., a Delaware corporation (hereinafter "Aladdin"), and the owners of the
outstanding shares of common stock of Aladdin (hereinafter the "Aladdin
Stockholders").
RECITALS:
WHEREAS, the Aladdin Stockholders own all of the issued and outstanding
common stock of Aladdin (the "Aladdin Common Stock"). FGT desires to acquire the
Aladdin Common Stock solely in exchange for voting common stock of FGT, making
Aladdin a wholly-owned subsidiary of FGT; and
WHEREAS, the Aladdin Stockholders (as set forth on Exhibit "A" to be
delivered on or before Closing) desire to acquire voting common stock of FGT in
exchange for the Aladdin Common Stock, as more fully set forth herein.
NOW THEREFORE, for the mutual consideration set out herein and other
good and valuable consideration, the legal sufficiency of which is hereby
acknowledged, the parties agree as follows:
AGREEMENT
1. Plan of Reorganization. It is hereby agreed that the Aladdin Common
Stock shall be acquired by FGT in exchange solely for FGT common voting stock
(the "FGT Shares"). It is the intention of the parties hereto that all of the
issued and outstanding shares of capital stock of Aladdin shall be acquired by
FGT in exchange solely for FGT common voting stock and that this entire
transaction qualify as a corporate reorganization under Section 368(a)(1)(B)
and/or Section 351 of the Internal Revenue Code of 1986, as amended, and related
or other applicable sections thereunder.
2. Exchange of Shares. FGT and Aladdin Stockholders agree that on the
Closing Date or at the Closing as hereinafter defined, the Aladdin Common Stock
shall be delivered at Closing to FGT in exchange for the FGT Shares, after
giving effect to a 2.2 to 1 reverse stock split (the "FGT Reverse Stock Split")
as to all presently outstanding shares of FGT common stock, as follows:
(a) At Closing, FGT shall, subject to the conditions set forth herein,
issue an aggregate of 7,441,628 shares of FGT common stock (after giving effect
to the FGT Reverse Stock Split) for immediate delivery to the Aladdin
Stockholders in
<PAGE> 3
exchange for 100% of the Aladdin Common Stock. The 7,441,628 shares does not
include any shares reserved for issuance upon exercise of options granted by FGT
to optionholders of Aladdin at Closing in exchange for existing Aladdin options
as set forth on Exhibit "A".
(b) Each consenting Aladdin Stockholder shall execute this Agreement or
a written consent to the exchange of their Aladdin Common Stock for FGT Shares.
(c) Unless otherwise agreed by FGT and Aladdin this transaction shall
close only in the event FGT is able to acquire at least 80% of the outstanding
Aladdin Common Stock; however, it is the intent of the parties to have FGT
acquire all of the Aladdin Common Stock.
(d) In the event that on or prior to the Closing Date, any
optionholders of Aladdin shall waive any options granted to them, such number of
waived options shall be added to the 7,441,628 FGT Shares to be delivered at
Closing and the exchange ratio set forth in subsection (a) above shall be
recalculated to reflect such additional number of FGT Shares to be issued to the
Aladdin Stockholders.
3. Pre-Closing Events. The Closing is subject to the completion of the
following:
(a) FGT shall have authorized 50,000,000 shares of $.001 par value
common stock and at Closing shall amend its Articles of Incorporation to
authorize 1,000,000 shares of $.001 par value preferred stock. The preferred
stock shall be subject to issuance in such series and with such rights,
preferences and designations as determined in the sole discretion of the board
of directors.
(b) At or about the time of Closing, FGT shall have received 2,000
shares for cancellation and shall have then effectuated the FGT Reverse Stock
Split at or about the Closing, and shall have 650,000 shares of its common stock
issued and outstanding and no other shares of capital stock issued or
outstanding and there shall be no outstanding options, warrants or other rights
to purchase FGT securities.
(c) FGT shall have no material assets and no liabilities contingent or
fixed except the proceeds of the FGT Financing (as defined herein).
4. Exchange of Securities. As of the Closing Date each of the following
shall occur:
(a) All shares of Aladdin Common Stock issued and outstanding on the
Closing Date shall be exchanged for the FGT Shares (up to an aggregate amount of
7,441,628 FGT Shares to be delivered at Closing). The exchange ratio shall be
1.580287 FGT Shares for each outstanding Aladdin share. All such outstanding
shares of Aladdin Common Stock shall be deemed, after Closing, to be owned by
FGT. The holders of such certificates previously evidencing shares of Aladdin
<PAGE> 4
Common Stock outstanding immediately prior to the Closing Date shall cease to
have any rights with respect to such shares of Aladdin Common Stock except as
otherwise provided herein or by law;
(b) Any shares of Aladdin Common Stock held in the treasury of Aladdin
immediately prior to the Closing Date shall automatically be canceled and
extinguished without any conversion thereof and no payment shall be made with
respect thereto;
(c) The 650,000 shares of FGT common stock previously issued and
outstanding prior to the Closing, after giving effect to the FGT Reverse Split,
will remain outstanding.
5. Other Events Occurring at Closing. At Closing, the following shall
be accomplished:
(a) FGT shall file an amendment to its Articles of Incorporation with
the Secretary of State of the State of Nevada in substantially the form attached
hereto as Exhibit "B" effecting an amendment to its Articles of Incorporation to
reflect (1) a name change, (2) authorize 1,000,000 shares of preferred stock,
(3) an increase in shares of authorized common stock to 50,000,000, and (4) to
put of record the FGT Reverse Stock Split as set forth in the attached Exhibit
"B".
(b) The resignation of the existing FGT sole officer and director and
appointment of new officers and directors as directed by Aladdin.
(c) FGT shall have completed a limited offering under Regulation D,
Rule 504, as promulgated by the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended, of 1,000,000 shares of its common stock
at $1.00 per share. The gross proceeds of this offering (the "FGT Financing")
shall be $1,000,000, which amount, less agreed upon costs, shall be delivered to
the control of new management of FGT at Closing in good funds. The FGT Financing
shall have been completed in compliance with all applicable state and federal
securities laws and the securities sold shall be delivered at Closing to the
investors in the FGT Financing.
(d) It is recognized by the parties hereto that Aladdin entered into an
agreement, including all amendments thereto (the "Baytree Agreement") dated July
14, 1999, with Baytree Capital Associates, LLC ("Baytree") wherein Baytree
agreed to identify a public company to be involved in a "reverse merger" with
Aladdin, and that FGT is the public company agreed to by Baytree and Aladdin.
Under said Baytree Agreement, at Closing of the transactions described herein,
FGT shall issue 50,000 shares of its common stock (after given effect to the FGT
Reverse Stock Split) to Baytree. These shares are deemed to be covered by the
defined term "FGT Shares" as set forth herein for purposes of all
representations and warranties of FGT and the legal opinion given on behalf of
FGT herein. Out of the proceeds of the FGT
<PAGE> 5
Financing (as further defined herein) there shall be paid at Closing, a
non-accountable expense allowance of $10,000 to Baytree and $20,000 in fees,
plus fees and costs of FGT's legal counsel not to exceed $35,000.00 (to be paid
from the proceeds of the FGT Financing). Furthermore, FGT recognizes and hereby
assumes, at Closing, the obligations of Aladdin set forth in the Baytree
Agreement.
(e) As of the Closing, FGT shall assume all unexercised stock options
issued by a Aladdin pursuant to Aladdin's current Incentive Stock Option Program
and shall issue to each holder of such options (an "Optionholder"), incentive
stock options in FGT, pursuant to an incentive stock option program (within the
meaning of Internal Revenue Code Section 422) to be adopted by FGT, in such
amount, at such exercise price and vesting schedule that each such Optionholder
has been granted by Aladdin.
For the purposes of Section, (a) the equivalent the number of FGT
options to be granted to an Optionholder shall be calculated by multiplying the
number of unexercised options such Optionholders currently hold by 1.580287, (b)
the equivalent exercise price shall be calculated by dividing the exercise price
of such Optionholders' current options by 1.580287 and (c) the vesting schedule
of the FGT options shall preserve such Optionholders' current vested option
exercise rights in an equivalent number of FGT options.
6. Delivery of Shares. On or as soon as practicable after the Closing
Date, Aladdin will use its best efforts to cause the Aladdin Stockholders to
surrender certificates for cancellation representing their shares of Aladdin
Common Stock, against delivery of certificates representing the FGT Shares for
which the shares of Aladdin Common Stock are to be exchanged at Closing.
7. Representations of Aladdin Stockholders. Each Aladdin Stockholder
hereby represents and warrants each only as to its own Aladdin Common Stock,
effective this date and the Closing Date as follows:
(a) Except as may be set forth in Exhibit "A", the Aladdin Common Stock
is free from claims, liens, or other encumbrances, and at the Closing Date said
Aladdin Stockholder will have good title and the unqualified right to transfer
and dispose of such Aladdin Common Stock.
(b) Said Aladdin Stockholder is the sole owner of the issued and
outstanding Aladdin Common Stock as set forth in Exhibit "A";
(c) Said Aladdin Stockholder has no present intent to sell or dispose
of the FGT Shares and is not under a binding obligation, formal commitment, or
existing plan to sell or otherwise dispose of the FGT Shares.
8. Representations of Aladdin. Aladdin hereby represents and warrants
as follows, which warranties and representations shall also be true as of the
Closing
<PAGE> 6
Date:
(a) Except as noted on Exhibit "A", the Aladdin Stockholders listed on
the attached Exhibit "A" are the sole record and beneficial owners of the issued
and outstanding common stock of Aladdin.
(b) Aladdin has no outstanding or authorized capital stock, warrants,
options or convertible securities other than as described in the Aladdin
Financial Statements or on Exhibit "A", attached hereto.
(c) The audited financial statements as of and for the periods ended
December 31, 1997 and 1998, which have been (or will be prior dissemination of
an Information Statement by FGT) delivered to FGT (hereinafter referred to as
the "Aladdin Financial Statements") fairly present the financial condition of
Aladdin as of the dates thereof and the results of its operations for the
periods covered. There are no material liabilities or obligations, either fixed
or contingent, not disclosed in the Aladdin Financial Statements or in any
exhibit thereto or notes thereto other than contracts or obligations in the
ordinary course of business; and no such contracts or obligations in the
ordinary course of business constitute liens or other liabilities which
materially alter the financial condition of Aladdin as reflected in the Aladdin
Financial Statements. Aladdin has good title to all assets shown on the Aladdin
Financial Statements subject only to dispositions and other transactions in the
ordinary course of business, the disclosures set forth therein and liens and
encumbrances of record. The Aladdin Financial Statements have been prepared in
accordance with generally accepted accounting principles consistently applied
(except as may be indicated therein or in the notes thereto).
(d) Since the date of the Aladdin Financial Statements, there have not
been any material adverse changes in the financial position of Aladdin except
changes arising in the ordinary course of business, which changes will in no
event materially and adversely affect the financial position of Aladdin.
(e) Aladdin is not a party to any material pending litigation or, to
its best knowledge, any governmental investigation or proceeding, not reflected
in the Aladdin Financial Statements, and to its best knowledge, no material
litigation, claims, assessments or any governmental proceedings are threatened
against Aladdin.
(f) Aladdin is in good standing in its jurisdiction of incorporation,
and is in good standing and duly qualified to do business in each jurisdiction
where required to be so qualified except where the failure to so qualify would
have no material negative impact on Aladdin.
(g) Aladdin has (or, by the Closing Date, will have filed) all material
tax, governmental and/or related forms and reports (or extensions thereof) due
or required to be filed and has (or will have) paid or made adequate provisions
for all
<PAGE> 7
taxes or assessments which have become due as of the Closing Date.
(h) Aladdin has not materially breached any material agreement to which
it is a party. Aladdin has previously given FGT copies or access thereto of all
material contracts, commitments and/or agreements to which Aladdin is a party
including all relationships or dealings with related parties or affiliates.
(i) Aladdin has no subsidiary corporations except Transaction Services,
Inc., a California corporation.
(j) Aladdin has made all material corporate financial records, minute
books, and other corporate documents and records available for review to present
management of FGT prior to the Closing Date, during reasonable business hours
and on reasonable notice.
(k) The execution of this Agreement does not materially violate or
breach any material agreement or contract to which Aladdin is a party and has
been duly authorized by all appropriate and necessary corporate action under
Delaware or other applicable law and Aladdin, to the extent required, has
obtained all necessary approvals or consents required by any agreement to which
Aladdin is a party.
(l) All disclosure information provided by Aladdin which is to be set
forth in disclosure documents of FGT or otherwise delivered to FGT by Aladdin
for use in connection with the transaction (the "Acquisition") described herein
is true, complete and accurate in all material respects.
9. Representations of FGT and Ulmer. FGT, and Ulmer to the best of his
knowledge, hereby jointly and severally represent and warrant as follows, each
of which representations and warranties shall continue to be true as of the
Closing Date:
(a) As of the Closing Date, the FGT Shares, to be issued and delivered
to the Aladdin Stockholders hereunder will, when so issued and delivered,
constitute, duly authorized, validly and legally issued shares of FGT common
stock, fully-paid and nonassessable. FGT shall have completed its reverse stock
split wherein each holder of FGT Shares shall have received 1 share of the FGT
Shares for each 2.2 FGT Shares previously held. The total number of FGT shares
of common stock outstanding as of the Closing Date shall be 650,000.
(b) FGT has the corporate power and authority to enter into this
Agreement and to perform its respective obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action, including
the board of directors and shareholders of FGT. The execution and performance of
this Agreement will not constitute a material breach of any agreement,
indenture, mortgage, license or other instrument or document to which FGT is a
party or by
<PAGE> 8
which its assets and properties are bound, and will not violate any judgment,
decree, order, writ, rule, statute, or regulation applicable to FGT or its
properties. The execution and performance of this Agreement will not violate or
conflict with any provision of the Articles of Incorporation or by-laws of FGT.
(c) FGT has delivered to Aladdin a true and complete copy of its
audited financial statements for the years ended December 31, 1996, 1997, and
1998 and unaudited financial statements as of June 30, 1999, (the "FGT Financial
Statements"). The FGT Financial Statements are complete, accurate and fairly
present the financial condition of FGT as of the dates thereof and the results
of its operations for the periods then ended. There are no material liabilities
or obligations either fixed or contingent not reflected therein. The FGT
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and fairly present the financial position of
FGT as of the dates thereof and the results of its operations and changes in
financial position for the periods then ended.
(d) Since June 30, 1999, there have not been any material adverse
changes in the financial condition of FGT except with regard to disbursements to
pay reasonable and ordinary expenses in connection with maintaining its
corporate status and pursuing the matters contemplated in this Agreement and the
disposition of FGT's remaining assets and the payment of all liabilities. Prior
to Closing, all accounts payable and other liabilities of FGT shall be paid and
satisfied in full and FGT shall, at Closing, have no obligations, debts, claims
or liabilities of any nature either contingent or fixed.
(e) FGT is not a party to or the subject of any pending litigation,
claims, decrees, orders, stipulations or governmental investigation or
proceeding not reflected in the FGT Financial Statements or otherwise disclosed
herein, and there are no lawsuits, claims, assessments, investigations, or
similar matters, to the best knowledge of Ulmer, threatened or contemplated
against or affecting FGT, its management or its properties.
(f) FGT is duly organized, validly existing and in good standing under
the laws of the State of Nevada; has the corporate power to own its property and
to carry on its business as now being conducted and is duly qualified to do
business in any jurisdiction where so required except where the failure to so
qualify would have no material negative impact on it.
(g) FGT has filed all federal, state, county and local income, excise,
property and other tax, governmental and/or related returns, forms, or reports,
which are due or required to be filed by it prior to the date hereof, except
where the failure to do so would have no material adverse impact on FGT, and has
paid or made adequate provision in the FGT Financial Statements for the payment
of all taxes, fees, or assessments which have or may become due pursuant to such
returns or
<PAGE> 9
pursuant to any assessments received. FGT is not delinquent or obligated for any
tax, penalty, interest, delinquency or charge.
(h) There are no existing options, calls, warrants, preemptive rights
or commitments of any character relating to the issued or unissued capital stock
or other securities of FGT, except as contemplated in this Agreement.
(i) The corporate financial records, minute books, and other documents
and records of FGT have been made available to Aladdin prior to the Closing and
shall be delivered to new management of FGT at Closing.
(j) FGT has not breached, nor is there any pending, or to the knowledge
of management, any threatened claim that FGT has breached, any of the terms or
conditions of any agreements, contracts or commitments to which it is a party or
by which it or its assets are is bound. The execution and performance hereof
will not violate any provisions of applicable law or any agreement to which FGT
is subject. FGT hereby represents that it has no business operations or material
assets and it is not a party to any material contract or commitment other than
appointment documents with its transfer agent, and that it has disclosed to
Aladdin all relationships or dealings with related parties or affiliates.
(k) FGT common stock is currently approved for quotation on the OTC
Bulletin Board under the symbol "FPLA" and there are no stop orders in effect
with respect thereto. FGT has provided Aladdin with copies of all correspondence
between FGT and NASDAQ and FGT and NASD. FGT has not been informed, and has no
reason to believe, that its common stock will be delisted by the NASD, except
that in the future it must comply with the NASD's "Eligibility Rule" put in
effect January 4, 1999.
(l) All information regarding FGT which has been provided to Aladdin or
otherwise disclosed in connection with the transactions contemplated herein, is
true, complete and accurate in all material respects. FGT has provided to
Aladdin all material information regarding FGT. FGT and Ulmer specifically
disclaim any responsibility regarding disclosures as to Aladdin, its business or
its financial condition.
(m) As of Closing, the outstanding capitalization of FGT shall consist
of 10,050,000 shares of common stock giving effect to all matters contemplated
herein.
(n) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not (a) constitute a
violation (with or without the giving of notice or lapse of time, or both) of
any provision of law or any judgment, decree, order, regulation or rule of any
court or other governmental authority applicable to FGT, (b) require any
consent, approval or authorization of, or declaration, filing or registration
with, any person, except for compliance with applicable securities laws and the
filing of all documents necessary
<PAGE> 10
to consummate the transaction with any governmental entity, (c) result in a
default (with or without the giving of notice or lapse of time, or both) under,
acceleration or termination of, or the creation in any party of the right to
accelerate, terminate, modify or cancel, any agreement, lease, note or other
restriction, encumbrance, obligation or liability to which FGT is a party or by
which either is bound or to which any of their assets are subject, (d) result in
the creation of any material lien or encumbrance upon the assets of FGT or the
funds being delivered in connection herewith, or (e) conflict with or result in
a breach of or constitute a default under any provision of the charter documents
of FGT.
10. Closing. The Closing of the transactions contemplated herein shall
take place on such date (the "Closing") as mutually determined by the parties
hereto when all conditions precedent have been met and all required documents
have been delivered, which Closing is expected to take place within two weeks of
approval of the Company's application for registration of 1,000,000 shares of
common stock with the Nevada Securities Division, but no later than September
30, 1999, unless extended by mutual consent of all parties hereto. The "Closing
Date" of the transactions described herein (the "Acquisition"), shall be that
date on which all conditions set forth herein have been met and the FGT Shares
are issued in exchange for the Aladdin Common Stock.
11. Conditions Precedent to the Obligations of Aladdin. All obligations
of Aladdin under this Agreement are subject to the fulfillment, prior to or as
of the Closing and/or the Closing Date, as indicated below, of each of the
following conditions:
(a) The representations and warranties by or on behalf of Ulmer and FGT
contained in this Agreement or in any certificate or document delivered pursuant
to the provisions hereof shall be true in all material respects at and as of the
Closing and Closing Date as though such representations and warranties were made
at and as of such time.
(b) FGT shall have performed and complied with all covenants,
agreements, and conditions set forth in, and shall have executed and delivered
all documents required by this Agreement to be performed or complied with or
executed and delivered by it prior to or at the Closing.
(c) On or before the Closing, the board of directors, and shareholders
representing a majority interest the outstanding common stock of FGT, shall have
approved in accordance with applicable state corporation law the execution and
delivery of this Agreement and the consummation of the transactions contemplated
herein.
(d) On or before the Closing Date, FGT shall have delivered to Aladdin
certified copies of resolutions of the board of directors and shareholders of
FGT approving and authorizing the execution, delivery and performance of this
<PAGE> 11
Agreement and authorizing all of the necessary and proper action to enable FGT
to comply with the terms of this Agreement including the election of Aladdin's
nominees to the Board of Directors of FGT and all matters outlined herein.
(e) The Acquisition shall be permitted by applicable law and FGT shall
have sufficient shares of its capital stock authorized to complete the
Acquisition.
(f) At Closing, the existing sole officer and director of FGT shall
have resigned in writing from all positions as director and officer of FGT
effective upon the election and appointment of the Aladdin nominees.
(g) At the Closing, all instruments and documents delivered to Aladdin
and Aladdin Stockholders pursuant to the provisions hereof shall be reasonably
satisfactory to legal counsel for Aladdin.
(h) The shares of restricted FGT capital stock to be issued to Aladdin
Stockholders and in the FGT Financing at Closing will be validly issued,
nonassessable and fully-paid under Nevada corporation law and will be issued in
compliance with all federal, state and applicable corporation and securities
laws.
(i) Aladdin and Aladdin Stockholders shall have received the advice of
their tax advisor, if deemed necessary by them, as to all tax aspects of the
Acquisition.
(j) Aladdin shall have received all necessary and required approvals
and consents from required parties and its shareholders.
(k) FGT shall have completed the FGT Financing for an aggregate amount
of $1,000,000 in compliance with all applicable laws.
(l) At the Closing, FGT shall have delivered to Aladdin an opinion of
its counsel dated as of the Closing to the effect that:
(i) FGT is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
(ii) This Agreement has been duly authorized, executed and delivered by
FGT and is a valid and binding obligation of FGT enforceable in accordance with
its terms;
(iii) FGT through its board of directors and stockholders has taken all
corporate action necessary for performance under this Agreement;
(iv) The documents executed and delivered by FGT to Aladdin and Aladdin
Stockholders hereunder are valid duly executed and delivered, and binding in
accordance with their terms and vest in Aladdin Stockholders, as the case may
be, all right, title and interest in and to the FGT Shares to be issued pursuant
to the terms hereof, and the FGT Shares when issued will be duly and validly
issued, fully-paid
<PAGE> 12
and nonassessable;
(v) FGT has the corporate power to execute, deliver and perform under
this Agreement;
(vi) The execution, delivery and performance of this Agreement and the,
consummation of the transactions contemplated hereby will not (a) to the best of
such counsel's knowledge, constitute a violation (with or without the giving of
notice or lapse of time, or both) of any provision of law or any judgment,
decree, order, regulation or rule of any court or other governmental authority
applicable to FGT, (b) require any consent, approval or authorization of, or
declaration, filing or registration with, any person, except for compliance with
applicable securities laws and the filing of all documents necessary to
consummate the transaction with any governmental entity, (c) to the best of such
counsel's knowledge result in a default (with or without the giving of notice or
lapse of time, or both) under, acceleration or termination of, or the creation
in any party of the right to accelerate, terminate, modify or cancel, any
agreement, lease, note or other restriction, encumbrance, obligation or
liability to which FGT is a party or by which either is bound or to which any of
their assets are subject, (d) result in the creation of any material lien or
encumbrance upon the assets of FGT or the funds being delivered in connection
herewith, or (e) conflict with or result in a breach of or constitute a default
under any provision of the charter documents of FGT
(vii) Legal counsel for FGT is not aware of any liabilities, claims or
lawsuits involving FGT; and
12. Conditions Precedent to the Obligations of FGT. All obligations of
FGT under this Agreement are subject to the fulfillment, prior to or at the
Closing, of each of the following conditions:
(a) The representations and warranties by Aladdin and Aladdin
Stockholders contained in this Agreement or in any certificate or document
delivered pursuant to the provisions hereof shall be true in all material
respects at and as of the Closing as though such representations and warranties
were made at and as of such time.
(b) Aladdin shall have performed and complied with, in all material
respects, all covenants, agreements, and conditions required by this Agreement
to be performed or complied with by it prior to or at the Closing;
(c) Aladdin shall deliver on behalf of the Aladdin Stockholders a
letter commonly known as an "Investment Letter," signed by each of said
shareholders, in substantially the form attached hereto as Exhibit "C",
acknowledging that the FGT Shares are being acquired for investment purposes.
(d) Aladdin shall deliver an opinion of its legal counsel to the effect
that:
<PAGE> 13
(i) Aladdin is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation and is duly
qualified to do business in any jurisdiction where so required except where the
failure to so qualify would have no material adverse impact on Aladdin;
(ii) This Agreement has been duly authorized, executed and delivered by
Aladdin.
(iii) The documents executed and delivered by Aladdin and Aladdin
Stockholders to FGT hereunder are valid and binding in accordance with their
terms and vest in FGT all right, title and interest in and to the Aladdin Common
Stock, which stock is duly and validly issued, fully-paid and nonassessable.
13. Indemnification. For a period of one year from the Closing, FGT and
Ulmer agree to jointly and severally indemnify and hold harmless Aladdin, and
Aladdin agrees to indemnify and hold harmless FGT and Ulmer, at all times after
the date of this Agreement against and in respect of any liability, damage or
deficiency, all actions, suits, proceedings, demands, assessments, judgments,
costs and expenses including attorney's fees incident to any of the foregoing,
resulting from any material misrepresentations made by an indemnifying party to
an indemnified party, an indemnifying party's breach of covenant or warranty or
an indemnifying party's nonfulfillment of any agreement hereunder, or from any
material misrepresentation in or omission from any certificate furnished or to
be furnished hereunder.
To the extent there is a material breach in this Agreement pursuant to
which Aladdin is entitled to indemnification, Aladdin shall be entitled to issue
to the Aladdin Stockholders additional shares of FGT common stock based on its
fair market value at the time in an amount equal to any claim or liability which
may arise, all in addition to any other remedies which may be available.
14. Nature and Survival of Representations. All representations,
warranties and covenants made by any party in this Agreement shall survive the
Closing and the consummation of the transactions contemplated hereby for one
year from the Closing. All of the parties hereto are executing and carrying out
the provisions of this Agreement in reliance solely on the representations,
warranties and covenants and agreements contained in this Agreement and not upon
any investigation upon which it might have made or any representation, warranty,
agreement, promise or information, written or oral, made by the other party or
any other person other than as specifically set forth herein.
15. Documents at Closing. At the Closing, the following documents shall
be delivered:
(a) Aladdin will deliver, or will cause to be delivered, to FGT the following:
<PAGE> 14
(i) a certificate executed by the President and Secretary of Aladdin to
the effect that all representations and warranties made by Aladdin under this
Agreement are true and correct as of the Closing, the same as though originally
given to FGT on said date;
(ii) a certificate from the jurisdiction of incorporation of Aladdin
dated at or about the Closing to the effect that Aladdin is in good standing
under the laws of said jurisdiction;
(iii) Investment Letters in the form attached hereto as Exhibit "C"
executed by each Aladdin Stockholder;
(iv) such other instruments, documents and certificates, if any, as are
required to be delivered pursuant to the provisions of this Agreement;
(v) certified copies of resolutions adopted by the shareholders and
directors of Aladdin authorizing this transaction; and
(vi) all other items, the delivery of which is a condition precedent to
the obligations of FGT as set forth herein.
(vii) the legal opinion required by Section 12(d) hereof.
(b) FGT will deliver or cause to be delivered to Aladdin:
(i) stock certificates representing the FGT Shares to be issued as a
part of the stock exchange as described herein;
(ii) a certificate of the President of FGT, to the effect that all
representations and warranties of FGT made under this Agreement are true and
correct as of the Closing, the same as though originally given to Aladdin on
said date;
(iii) certified copies of resolutions adopted by FGT's board of
directors and FGT's Stockholders authorizing the Acquisition and all related
matters described herein;
(iv) certificate from the jurisdiction of incorporation of FGT dated at
or about the Closing Date that FGT is in good standing under the laws of said
state;
(v) opinion of FGT's counsel as described in Section 11(l) above;
(vi) such other instruments and documents as are required to be
delivered pursuant to the provisions of this Agreement;
(vii) resignation of the existing officer and director of FGT;
<PAGE> 15
(viii) all corporate and financial records of FGT; and
(ix) all other items, the delivery of which is a condition precedent to
the obligations of Aladdin, as set forth in Section 12 hereof, including net
cash proceeds of the FGT Financing.
16. Finder's Fees. FGT, represents and warrants to Aladdin, and Aladdin
represents and warrants to FGT that neither of them, or any party acting on
their behalf, has incurred any liabilities, either express or implied, to any
"broker" of "finder" or similar person in connection with this Agreement or any
of the transactions contemplated hereby other than the arrangements described in
Section 5(d) hereof. In this regard, FGT, on the one hand, and Aladdin on the
other hand, will indemnify and hold the other harmless from any claim, loss,
cost or expense whatsoever (including reasonable fees and disbursements of
counsel) from or relating to any such express or implied liability other than as
disclosed herein. It is recognized by the parties hereto that there is an
obligation on behalf of Aladdin to pay a $50,000 finders fee at Closing.
17. Miscellaneous.
(a) Further Assurances. At any time, and from time to time, after the
Closing Date, each party will execute such additional instruments and take such
action as may be reasonably requested by the other party to confirm or perfect
title to any property transferred hereunder or otherwise to carry out the intent
and purposes of this Agreement.
(b) Waiver. Any failure on the part of any party hereto to comply with
any of its obligations, agreements or conditions hereunder may be waived in
writing by the party to whom such compliance is owed.
(c) Amendment. This Agreement may be amended only in writing as agreed
to by all parties hereto.
(d) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person or sent by
prepaid first class registered or certified mail, return receipt requested.
(e) Headings. The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
<PAGE> 16
(g) Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Nevada.
(h) Binding Effect. This Agreement shall be binding upon the parties
hereto and inure to the benefit of the parties, their respective heirs,
administrators, executors, successors and assigns.
(i) Entire Agreement. This Agreement and the attached Exhibits
constitute the entire agreement of the parties covering everything agreed upon
or understood in the transaction. There are no oral promises, conditions,
representations, understandings, interpretations or terms of any kind as
conditions or inducements to the execution hereof.
(j) Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
FOREPLAY GOLF & TRAVEL TOURS, INC.
/s/Glen Ulmer
-----------------------------------
By: Glen Ulmer, President
/s/Glen Ulmer
-----------------------------------
Glen Ulmer, individually
ALADDIN SYSTEMS, INC.
/s/Jonathan Kahn
-----------------------------------
By: Jonathan Kahn, CEO
STOCKHOLDERS OF ALADDIN
SYSTEMS, INC.
/s/Benna Lovato
-----------------------------------
Benna Lovato
/s/Jonathan Kahn
-----------------------------------
Jonathan Kahn
/s/Marco Gonzalez
-----------------------------------
Marco Gonzalez
<PAGE> 17
/s/David Schargel
-----------------------------------
David Schargel
/s/Leonard Rosenthol
-----------------------------------
Leonard Rosenthol
/s/Darryl Lovato
-----------------------------------
Darryl Lovato
<PAGE> 18
EXHIBIT "A"
TO AGREEMENT AND PLAN OF REORGANIZATION
<TABLE>
<CAPTION>
NAME AND ADDRESS ALADDIN SHARES FGT SHARES
- ---------------- -------------- ----------
<S> <C> <C>
MARCO A. GONZALEZ 430,743 680,680
2527 Q Street NW #306
Washington, DC 20007
LEONARD ROSENTHOL 130,680 206,500
636 Pine St. #3
Philadelphia, PA 19106
JONATHAN KAHN 1,067,078 1,686,280
608 Seacliff Drive
Aptos, CA 95003
DARRYL LOVATO 1,033,558 1,633,300
827 Loma Prieta Drive
Aptos, CA 95003
BENNA LOVATO 1,033,558 1,633,300
827 Loma Prieta Drive
Aptos, CA 95003
DAVID SCHARGEL 1,013,469 1,601,568
2608 SE 35th Place
Portland, OR 97202-1512
--------- ---------
TOTAL 4,709,086 7,441,628
</TABLE>
<PAGE> 19
EXHIBIT "B"
TO AGREEMENT AND PLAN OF REORGANIZATION
Form of Amendment to Articles of Incorporation
CERTIFICATE OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
FOREPLAY GOLF & TRAVEL TOURS, INC.
Pursuant to the applicable provisions of the Nevada Business
Corporations Act, Foreplay Golf & Travel Tours, Inc. (the "Corporation") adopts
the following Articles of Amendment to its Articles of Incorporation:
FIRST: The present name of the Corporation is Foreplay Golf & Travel
Tours, Inc.
SECOND: The following amendments to its Articles of Incorporation were
adopted by the board of directors and by majority consent of shareholders of the
Corporation in the manner prescribed by applicable law.
(1) The Article entitled ARTICLE I - NAME, is amended to read as
follows:
ARTICLE I - NAME
The name of the corporation shall be: Aladdin Systems Holdings, Inc.
(2) The Article entitled ARTICLE IV - STOCK, is amended to read as
follows:
ARTICLE IV - STOCK
Common. The aggregate number of common shares which this Corporation
shall have authority to issue is 50,000,000 shares of Common Stock having a par
value of $.001 per share. All common stock of the Corporation shall be of the
same class, common, and shall have the same rights and preferences. Fully-paid
common stock of this Corporation shall not be liable to any further call or
assessment.
Preferred. The Corporation shall be authorized to issue 1,000,000
shares of
<PAGE> 20
Preferred Stock having a par value of $.001 per share and with such rights,
preferences and designations determined by the board of directors.
THIRD: The Corporation has effectuated, effective with the commencement
of business on Tuesday, October 26, 1999, a 2.2 to 1 reverse stock split as to
its shares of common stock outstanding as of the opening of business on October
25, 1999, which decreases the outstanding shares as of that date from 1,434,400
shares to 650,000 shares. The forward split shall not change the number of
shares of Common Stock authorized for issuance by the Corporation.
FOURTH: The number of shares of the Corporation outstanding and
entitled to vote at the time of the adoption of said amendment was 1,434,400.
FIFTH: The number of shares voted for such amendments was 810,925
(56.5%) and no shares were voted against such amendment.
DATED this day of October, 1999.
FOREPLAY GOLF & TRAVEL TOURS, INC.
By: /s/Pam Jowett
---------------------------------
Pam Jowett, President/Secretary
VERIFICATION
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
The undersigned being first duly sworn, deposes and states: that the
undersigned is the President of Foreplay Golf & Travel Tours, Inc., that the
undersigned has read the Certificate of Amendment and knows the contents thereof
and that the same contains a truthful statement of the Amendment duly adopted by
the board of directors and stockholders of the Corporation.
/s/Pam Jowett
---------------------------------
Pam Jowett, President
<PAGE> 21
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
Before me the undersigned Notary Public in and for the said County and
State, personally appeared the President and Secretary of Foreplay Golf & Travel
Tours, Inc., a Nevada corporation, and signed the foregoing Articles of
Amendment as her own free and voluntary acts and deeds pursuant to a corporate
resolution for the uses and purposes set forth.
IN WITNESS WHEREOF, I have set my hand and seal this day of October,
1999.
---------------------------------
NOTARY PUBLIC
Notary Seal:
<PAGE> 22
EXHIBIT "C"
TO AGREEMENT AND PLAN OF REORGANIZATION
Form of Investment Letter
TO THE BOARD OF DIRECTORS OF FOREPLAY GOLF & TRAVEL TOURS, INC. ("CORPORATION")
The undersigned hereby represents to the Corporation, that (1) the shares
of the Corporation's common stock (the "Securities") which are being acquired by
the undersigned are being acquired for his own account and for investment and
not with a view to the public resale or distribution thereof; (2) the
undersigned will not sell, transfer or otherwise dispose of the securities
except in compliance with the Securities Act of 1933, as amended (the "Act");
and (3) he is aware that the Securities are "restricted securities" as that term
is defined in Rule 144 or the General Rules and Regulations under the Act.
The undersigned acknowledges that he has been afforded access to disclosure
documents and information regarding the Corporation as requested by the
undersigned.
The undersigned further acknowledges that he has had an opportunity to ask
questions of and receive answers from duly designated representatives of the
Corporation concerning the terms and conditions pursuant to which the Securities
are being purchased. The undersigned acknowledges that he has been afforded an
opportunity to examine such documents and other information which he has
requested for the purpose of verifying the information set forth in the
documents referred to above.
The undersigned acknowledges and understands that the Securities are
unregistered and must be held indefinitely unless they are subsequently
registered under the Act or an exemption from such registration is available.
The undersigned further acknowledges that he is fully aware of the
applicable limitations on the resale of the Securities. These restrictions for
the most part are set forth in Rule 144. The Rule permits sales of "restricted
securities" upon compliance with the requirements of such Rule. If the Rule is
available to the undersigned, the undersigned may make only routine sales of
securities, in limited amounts, in accordance with the terms and conditions of
that Rule.
The Company is the only person which may register its Securities under the
Act and it currently is not contemplating registering any of its Securities.
Furthermore,
<PAGE> 23
the Company has not made any representations, warranties or covenants to the
undersigned regarding registration of the Securities or compliance with any
exemption under the Act.
By reason of my knowledge and experience in financial and business matters
in general, and investments in particular, I am capable of evaluating the merits
and risks of an investment by me in the Securities.
I am capable of bearing the economic risks of an investment in the
Securities. I fully understand the speculative nature of the Securities.
My present financial condition is such that I am under no present or
contemplated future need to dispose of any portion of the Securities to satisfy
any existing or contemplated undertaking, need, or indebtedness.
Any and all certificates representing the Securities, and any and all
securities issued in replacement thereof or in exchange therefor, shall bear the
following legend, which the undersigned has read and understands:
The shares represented by this Certificate have not been registered under the
Securities Act of 1933 (the "Act") and are "restricted securities" as that term
is defined in Rule 144 under the Act. The shares may not be offered for sale,
sold or otherwise transferred except pursuant to an effective registration
statement under the Act or pursuant to an exemption from registration under the
Act, the availability of which is to be established to the satisfaction of the
Company.
The undersigned further agrees that the Corporation shall have the right to
issue stop-transfer instructions to its transfer agent and acknowledges that the
Corporation has informed the undersigned of its intention to issue such
instructions.
Very truly yours,
---------------------------------
Date: , 1999
-----------------
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION OF THE REGISTRANT
<PAGE> 2
ARTICLES OF INCORPORATION
OF
FOREPLAY GOLF & TRAVEL TOURS, INC.
FIRST. The name of the corporation is:
FOREPLAY GOLF & TRAVEL TOURS, INC.
SECOND. It's registered office in the State of Nevada is located at
7604 Delaware Bay Drive, Las Vegas, Nevada 89128, that this Corporation may
maintain an office, or offices, in such other place within or without the State
of Nevada as may be from time to time designated by the By-Laws of said
Corporation, and that this Corporation may conduct all Corporation business of
every kind and nature, including the holding of all meetings of Directors and
Stockholders, outside the State of Nevada as well as within the State of Nevada.
THIRD. The objects for which this Corporation is formed are: To engage
in any lawful activity, including, but not limited to the following:
(A) Shall have such rights, privileges and powers as may be
conferred upon corporations by any existing law.
(B) May at any time exercise such rights, privileges and
powers, when not inconsistent with the purposes and objects for which this
corporation is organized.
(C) Shall have power to have succession by it's corporate name
for the period limited in it's certificate or articles of incorporation, and
when no period is limited, perpetually, or until dissolved and it's affairs
wound up according to law.
(D) Shall have the power to effect litigation in it's own
behalf and interest in any court of law.
(E) Shall have power to make contracts.
<PAGE> 3
(F) Shall have power to hold, purchase and convey real and
personal estate and mortgage or leased any such real and personal estate with
it's franchises. The power to hold real and legality of the document.
(G) Shall have power to appoint such officers and agents as
the affairs of the corporation shall require, and to allow them suitable
compensation.
(H) Shall have power to make By-laws not inconsistent with the
constitution or laws of the United States, or of the State of Nevada, for the
management, regulation and government of it's affairs and property, the transfer
of it's stock, the transaction of it's business, and the calling and holding of
meetings of it's stockholders.
(I) Shall have power to dissolve itself.
(J) Shall have power to adopt and use a common seal or stamp,
and alter the same. The use of seal or stamp by the corporation on any corporate
documents is not necessary. The corporation may use a seal or stamp, if it
desires, but such use or nonuse shall not in any way affect the legality of the
document.
(K) Shall have power to borrow money and contract debts when
necessary for the transaction of it's business, or for the exercise of it's
corporate rights, privileges or franchises, or for any other lawful purpose of
it's incorporation; to issue bonds, promissory notes, bills of exchange,
debentures, and other obligations and evidences of indebtedness, payable at a
specified event or events, whether secured by mortgage, pledge or otherwise, or
unsecured, or for money borrowed, or in payment for property purchased or
acquired, or for any other lawful object.
(L) Shall have power to guarantee, purchase, hold, sell,
assign, transfer, mortgage, pledge or otherwise dispose of the shares of the
capital stock of, or any bonds, securities or evidences of the indebtedness
created by, any other corporation or corporations of the State of Nevada, or any
other state or government, and, while owners of such stock, bonds, securities or
evidences of
<PAGE> 4
indebtedness, to exercise all the rights, powers and privileges of ownership,
including the right to vote, if any.
(M) Shall have power to purchase, hold, sell and transfer
shares of it's own capital stock and us therefor it's capital, capital surplus,
surplus, or other property or fund.
(N) Shall have power to conduct business, have one or more
offices, and hold, purchase mortgage and convey real and personal property in
the State of Nevada, and in any of the several states, territories, possessions
and dependencies of the United States, the District of Columbia, and foreign
countries.
(O) Shall have power to do all and everything necessary and
proper for the accomplishment of the objects enumerated in it's certificate or
articles of incorporation, or any amendment thereof, or necessary or incidental
to the protection and benefit of the corporation, and, in general to carry on
any lawful business necessary or incidental to the attainment of the objects of
the corporation, whether or not such business is similar in nature to the
objects set forth in the certificate or articles of incorporation of the
corporation, or any amendment thereof.
(P) Shall have power to make donations for the public welfare
or for charitable scientific or educational purposes.
(Q) Shall have power to enter into partnerships, general or
limited, or joint ventures in connection with any lawful activities.
FOURTH. The aggregate number of shares the corporation shall have
authority to issue shall be TWENTY FIVE MILLION (25,000,000) shares of common
stock, par value one mil ($.001) per share, each share of common stock having
equal rights and preferences, voting privileges and preferences.
FIFTH. The governing board of this corporation shall be known as
directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided by the By-Laws of this
Corporation,
<PAGE> 5
providing that the number of directors shall not be reduced to fewer than one
(1).
The name and post office address of the first Board of
Directors shall be one (1) in number and listed as follows:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
Leisa C. Stilwell 7604 Delaware Bay Drive
Las Vegas, Nevada 89128
</TABLE>
SIXTH. The capital stock, after the amount of the subscription price,
or par value, has been paid in, shall not subject to assessment to pay the debts
of the corporation.
SEVENTH. The name and post office address of the Incorporator signing
the Articles of Incorporation is as follows:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
Leisa C. Stilwell 7604 Delaware Bay Drive
Las Vegas, Nevada 89128
</TABLE>
EIGHTH. The resident agent for this corporation shall be:
LEISA C. STILWELL
The address of said agent, and the registered or statutory address of this
corporation in the state of Nevada shall be:
7604 Delaware Bay Drive
Las Vegas, Nevada 89128
NINTH. The corporation is to have perpetual existence.
TENTH. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
Subject to the By-Laws, if any, adopted by the stockholders, to make,
alter or amend the By-Laws of the Corporation.
To fix the amount to be reserved as working capital over and above it's
capital stock paid in; to authorize and cause to be executed, mortgages and
liens upon the
<PAGE> 6
real and personal property of this Corporation.
By resolution passed by a majority of the whole Board to designate one
(1) or more committees, each committee to consist of one (1) or more of the
Directors of the Corporation, which, to the extent provided in the resolution,
or in the By-Laws of the Corporation, shall have and may exercise the powers of
the Board of Directors in the management of the business and affairs of the
Corporation. Such committee, or committees shall have such name, or names as may
be stated in the By-Laws of the Corporation, or as may be determined from time
to time by resolution adopted by the Board of Directors.
When and as authorized by the affirmative vote of the stockholder
holding stock entitling them to exercise at lease a majority of the voting power
given at a stockholders meeting called for that purpose, or when authorized by
the written consent of the holders of at least a majority of the voting stock
issued and outstanding, the Board of Directors shall have power and authority at
any meeting to sell, lease or exchange all of the property and assets of the
Corporation, including it's goodwill and it's franchises, upon such terms and
conditions as it's Board of Directors deems expedient and for the best interests
of the Corporation.
ELEVENTH. No shareholder shall be entitled as a matter of right to
subscribe for or receive additional shares of any class of stock of the
Corporation, whether now or hereafter authorized, or any bonds, debentures or
securities convertible into stock, but such additional shares of stock or other
securities convertible into stock may be issued or disposed of by the Board of
Directors to such persons and on such terms as in it's discretion it shall deem
advisable.
TWELFTH. No director or officer of the Corporation shall be personally
liable to the Corporation or any of it's stockholders for damages for breach of
fiduciary duty as a director or officer involving any act or omission of any
such director or officer, provided however, that the foregoing provision shall
not
<PAGE> 7
eliminate or limit the liability of a director or officer (i) for acts or
omissions which involve intentional misconduct, fraud or a knowing violation of
law, or (ii) the payment of dividends in violation of Section 78.300 of the
Nevada Revised Statutes. Any repeal or modification of this Articles by the
stockholders of the Corporation shall be prospective only and shall not
adversely affect any limitation on the personal liability of a director or
officer of the Corporation for acts or omissions to such repeal or modification.
THIRTEENTH: This Corporation reserves the right to amend, alter, change
or repeal any provision contained in the Articles of Incorporation, in the
manner now or hereafter prescribed by statute or by the Articles of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
I, UNDERSIGNED, being the Incorporator herein before named for the
purpose of forming a Corporation pursuant to the General Corporation Law of the
State of Nevada, do make and file these Articles of Incorporation, hereby
declaring and certifying that the facts herein stated are true, and accordingly
have hereunto set my hand this 26th day of March, 1997.
/s/ Leisa C. Stilwell
------------------------------
Leisa C. Stilwell
STATE OF UTAH )
: ss.
COUNTY OF CLARK )
On this 26th day of March, 1997, Las Vegas, Nevada, before me, the
undersigned Notary Public in and for Las Vegas, State of Nevada personally
appeared Leisa C. Stilwell, known to me to be the person whose name is
subscribed
<PAGE> 8
to the foregoing document and acknowledged to me that he executed the same
/s/ Sandra Mohn
---------------------------------
Notary Public
I, Leisa C. Stilwell, hereby accept as Resident Agent for the previously named
Corporation.
March 26, 1997 /s/ Leisa C. Stilwell
---------------------------------
Leisa C. Stilwell
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF THE REGISTRANT.
<PAGE> 2
CERTIFICATE OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
FOREPLAY GOLF & TRAVEL TOURS, INC.
Pursuant to the applicable provisions of the Nevada Business
Corporations Act, Foreplay Golf & Travel Tours, Inc. (the "Corporation") adopts
the following Articles of Amendment to its Articles of Incorporation:
FIRST: The present name of the Corporation is Foreplay Golf & Travel
Tours, Inc.
SECOND: The following amendments to its Articles of Incorporation were
adopted by the board of directors and by majority consent of shareholders of the
Corporation in the manner prescribed by applicable law.
(1) The Article entitled ARTICLE I - NAME, is amended to read as
follows:
ARTICLE I - NAME
The name of the corporation shall be: Aladdin Systems Holdings, Inc.
(2) The Article entitled ARTICLE IV - STOCK, is amended to read as
follows:
ARTICLE IV - STOCK
Common. The aggregate number of common shares which this Corporation
shall have authority to issue is 50,000,000 shares of Common Stock having a par
value of $.001 per share. All common stock of the Corporation shall be of the
same class, common, and shall have the same rights and preferences. Fully-paid
common stock of this Corporation shall not be liable to any further call or
assessment.
Preferred. The Corporation shall be authorized to issue 1,000,000
shares of Preferred Stock having a par value of $.001 per share and with such
rights, preferences and designations determined by the board of directors.
THIRD: The Corporation has effectuated, effective with the commencement
of business on Tuesday, October 26, 1999, a 2.2 to 1 reverse stock split as to
its shares
<PAGE> 3
of common stock outstanding as of the opening of business on October 25, 1999,
which decreases the outstanding shares as of that date from 1,434,400 shares to
650,000 shares. The forward split shall not change the number of shares of
Common Stock authorized for issuance by the Corporation.
FOURTH: The number of shares of the Corporation outstanding and
entitled to vote at the time of the adoption of said amendment was 1,434,400.
FIFTH: The number of shares voted for such amendments was 810,925
(56.5%) and no shares were voted against such amendment.
DATED this day of October, 1999.
FOREPLAY GOLF & TRAVEL TOURS, INC.
By: /s/Pam Jowett
---------------------------
Pam Jowett, President/Secretary
VERIFICATION
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
The undersigned being first duly sworn, deposes and states: that the
undersigned is the President of Foreplay Golf & Travel Tours, Inc., that the
undersigned has read the Certificate of Amendment and knows the contents thereof
and that the same contains a truthful statement of the Amendment duly adopted by
the board of directors and stockholders of the Corporation.
/s/Pam Jowett
---------------------------
Pam Jowett, President
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
Before me the undersigned Notary Public in and for the said County and
State, personally appeared the President and Secretary of Foreplay Golf & Travel
<PAGE> 4
Tours, Inc., a Nevada corporation, and signed the foregoing Articles of
Amendment as her own free and voluntary acts and deeds pursuant to a corporate
resolution for the uses and purposes set forth.
IN WITNESS WHEREOF, I have set my hand and seal this day of October,
1999.
/s/
---------------------------
NOTARY PUBLIC
Notary Seal:
<PAGE> 1
EXHIBIT 3.3
BY-LAWS OF REGISTRANT
<PAGE> 2
BYLAWS
OF
FOREPLAY GOLF & TRAVEL TOURS, INC.
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE. The principal office of the Corporation
shall be located in the City of Las Vegas, Nevada, Clark County, State of
Nevada.
SECTION 2. OTHER OFFICES. In addition to the principle office at 7604
Delaware Bay Drive, Las Vegas, Nevada, other offices may also be maintained at
such other place or places, either within or without the State of Nevada, as may
be designated from time to time by the Board of Directors, where any and all
business of the Corporation may be transacted, and where meetings of the
stockholders and of the Directors may be held with the same effect as though
done or held at said principal office.
ARTICLE II
MEETING OF THE STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. The annual meeting of the shareholder,
commencing, with the year 1997, shall be held at the registered office of the
corporation, or at such other place as may be specified or fixed in the notice
of said meetings in the month of or the month preceding the due date of annual
list of the officers and directors of the corporation at such time as the
shareholders shall decide, for the election of directors and for the transaction
of such other business as may properly come before said meeting.
SECTION 2. NOTICE OF ANNUAL MEETING. The Secretary shall mail, in the
manner provided in Section 5 of Article II of these Bylaws, or deliver a written
or printed notice of each annual meeting to each stockholder of record entitled
to
<PAGE> 3
vote thereat, or may notify by telegram, at least ten and not more than sixty
(60) days before the date of such meeting.
SECTION 3. PLACE OF MEETINGS. The Board of Directors may designate any
place either within or without the State of Nevada as the place of meeting for
annual meeting or for any special meeting called by the Board of Directors. A
waiver of notice signed by all stockholders may designate any place either
within or without the State of Nevada, as the place for holding of such meeting.
If no designation is made or if a special meeting be otherwise called, the place
of meeting shall be the principal office of the Corporation in the State of
Nevada, except as otherwise provided in Section 6, Article II of these By-laws,
entitled "Meeting of All Stockholders".
SECTION 4. SPECIAL MEETINGS. Special meetings of the stockholders shall
be held at the principal office of the Corporation or it such other place as
shall be specified or fixed in a notice hereof. Such meetings of the
stockholders may be called at any time by the President or Secretary, or by a
majority of the Board of Directors then in office, and shall be called by the
President with or without Board approval on the written request of the holders
of record of at least fifty percent (50%) of the number of shares of the
Corporation then outstanding and entitled to vote, which written request shall
state the object of such meeting.
SECTION 5. NOTICE OF MEETING. Written or printed notice stating the
place, day and hour of the meeting and, in case of special meetings the purpose
for which the meeting is called, shall be delivered not less than ten (10) nor
more than sixty (60) days before the date of the meeting, either personally or
by mail, by or at the direction of the President or the Secretary to each
stockholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail,
addressed to the stockholder at his/her address as it appears on the records of
the Corporation, with postage prepaid.
<PAGE> 4
Any stockholder may at any time, by duly signed statement in writing to
that effect, waive any statutory or other notice of any meeting, whether such
statement by signed before or after such meeting.
SECTION 6. MEETING OF ALL STOCKHOLDERS. If all stockholders shall meet
at any time and place, either within or without the State of Nevada, and consent
to file holding of the meeting at such time and place, such meeting shall be
valid without call or notice and at such meeting any corporate action may be
taken.
SECTION 7. QUORUM. At all stockholder's meeting, the presence in person
or by proxy of the holders of a majority of the outstanding stock entitled to
vote shall be necessary to constitute a quorum for the transaction of business.
but a lesser number may adjourn to some future time not less than seven (7) nor
more than twenty-one (21) days later, and the Secretary shall thereupon give at
least three (3) days notice by mail to each stockholders entitled to vote who is
absent from such meeting.
SECTION 8. MODE OF VOTING. At all meetings of the stockholders the
voting may be voice vote, but any qualified voter may demand a stock vote
whereupon such stock vote shall be taken by ballot, each of which shall state
the name or the stockholder voting and the number of shares voted by him/her
and, if such ballot be cast by proxy, it shall also state the name of such
proxy, provided, however, that the mode of voting prescribed by statute for any
particular case shall be in such case followed.
SECTION 9. PROXIES. At any meeting of the stockholders, any stockholder
may be represented and vote by proxy or proxies appointed by an instrument in
writing. In the event any such instrument in writing shall designate two or more
persons to act as proxies, a majority of such persons present at the meeting, or
if only one shall be present, then that one shall have and may exercise all of
the powers conferred by such written instrument upon all of the persons so
designated unless
<PAGE> 5
the instrument shall otherwise provide. No such proxy shall be valid after the
expiration of six (6) months from the date of its execution, unless coupled with
an interest, or unless the person executing it specified therein the length of
time for which it is to continue in force, which in no case shall exceed seven
(7) years from the date of its execution. Subject to the above, any proxy duly
executed is not revoked and continues in full force and effect until any
instrument revoking it or duly executed proxy bearing a later date is filed with
the Secretary of the Corporation. At no time shall any proxy be valid which
shall be filed less than ten (10) hours before the commencement of the meeting.
SECTION 10. VOTING LISTS. The officer or agent in charge of the
transfer books or shares of the corporation shall make. at least three (3) days
before each meeting or stockholders, a complete list of the stockholders
entitled to vote at such meeting, arranged in alphabetical order with the
number of shares held by each, which list for a period of two (2) days prior of
such meeting shall be kept on file at the registered office of the corporation
and shall be subject to inspection by any stockholder at any time during the
whole time of the meeting. The original share ledger or transfer bank, or
duplicate thereof, kept in this state, shall be prima facie evidence as to who
are the stockholders entitled to examine such list or share ledger or transfer
book or to vote at any meeting of stockholders.
SECTION 11. CLOSING TRANSFER BOOKS OR FIXING RECORD DATE. For the
purpose of determining stockholders entitled to notice or to vote for any
meeting of stockholders, the Board of Directors of the Corporation provide that
the stock transfer books be closed for a stated period but not to exceed in any
case sixty (60) days before such determination. If the stock transfer books be
closed for the purpose of determining stockholders entitled to notice of a
meeting of stockholders. such books shall be closed for it least fifteen (15)
days immediately preceding such meeting. In lieu of closing the stock Transfer
books, the Board of Directors may fix
<PAGE> 6
in advance a date in any case to be not more than sixty (60) days, not less
than ten (10) days, prior to the date on which the particular action, requiring
such determination of stockholders, is to be taken. If the stock transfer books
are not closed and no record date is fixed for determination of stockholders
entitled to notice of meeting of stockholders, or stockholders entitled to
receive payment of a dividend, the date on which notice of the meeting is mailed
or the date on which the resolution of the Board of Directors declaring such
dividend is adopted, as the case may be, shall be the record of date for such
determinations of shareholders.
SECTION 12. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the
name of another corporation, domestic or foreign, may be voted by such officer,
agent or proxy as the Bylaws of such corporation may prescribe, or. in the
absence of such provisions. the Board of Directors of such corporation may
determine.
Shares standing in the name of deceased person may be voted by his/her
administrator or executor, either in person or by proxy. Shares standing in the
name of the guardian, conservator or trustee may be voted by such fiduciary
either in person or by proxy, but no guardian, conservator, or trustee shall be
entitled as such fiduciary, to vote shares held by him without a transfer of
such shares into his/her name.
Shares standing in the name of a receiver shall be voted by such
receiver and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority so to do
be contained in an appropriate order of the court at which such receiver was
appointed.
A stockholder whose shares are pledged shall be entitled to vote such
shares until shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to this corporation shall not be
voted, directly
<PAGE> 7
or indirectly, at any meeting and shall not be counted in determining the total
number of outstanding shares at any time, but shares of its own stock held by
it in a fiduciary capacity may be voted and shall be counted in determining the
total number of of outstanding shares at any given time.
SECTION 13. INFORMAL ACTION BY STOCKHOLDERS. Any action is required
to be taken at a meeting of the stockholders or any other action which may be
taken at a meeting of the stockholders except the election of directors may be
taken without a meeting if a consent in writing setting forth the action so
taken shall be signed by all of the stockholders entitled to vote with respect
to the subject matter thereof.
SECTION 14. VOTING OF SHARES. Each outstanding share entitled to vote
shall be entitled to one (1) vote upon each matter submitted to vote at a
meeting of stockholders.
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS. The Board of Directors shall have the
control and general management of the affairs and business of the Corporation.
Such directors shall in all cases act as Board, regularly convened by a
majority, and they may adopt such rules and regulations for the conduct of their
meetings and the management of the Corporation, as they may deem proper, not
inconsistent with these Bylaws, Articles of Incorporation and the laws of the
State of Nevada. The Board of Directors shall further have the right to delegate
certain other powers to the Executive Committee as provided in these Bylaws.
SECTION 2. NUMBER OF DIRECTORS. The affairs and business of this
Corporation shall be managed by a Board of Directors consisting of not less than
one (1) or more than seven (7), until changed by amendment to these Bylaws
adopted by the shareholders amending this Section 2, Article III, and except as
authorized by the
<PAGE> 8
Nevada Revised Statutes, there shall in no event be less than one (1) Director.
SECTION 3. ELECTION. The Directors of the Corporation shall be elected
at the annual meeting of the stockholders except as hereinafter otherwise
provided for the filling of vacancies. Each Director shall hold office for a
term of one (1) year and until his successor shall have duly chosen and shall
have qualified, or until his death, or until he shall resign or shall have been
removed in the manner hereinafter provided.
SECTION 4. VACANCIES IN THE BOARD. Any vacancy in the Board of
Directors occurring during the year through death. resignation, removal or other
cause, including vacancies caused by an increase in the number of directors,
shall be filled for the unexpired portion they constitute a quorum at any
special meeting of the Board called for that purpose, or at any regular meeting
thereof; provided, however, that in the event the remaining directors do not
represent a quorum of the number set forth in Section 2 hereof, a majority of
such remaining directors may elect directors to fill any vacancies.
SECTION 5. DIRECTORS MEETINGS. Annual meeting of the Board of Directors
shall be held each year immediately following the annual meeting of the
stockholders. Other regular meetings of the Board of Directors shall from time
to time by resolution be prescribed. No further notice of such annual or regular
meeting of the Board of Directors need be given.
SECTION 6. SPECIAL MEETINGS Special meetings of the Board of Directors
may be called by or at the request of the President or any Director. The person
or persons authorized to call meetings of the Board of Directors may fix any
place, either within or without the State of Nevada, as the place for holding
any special meeting of the Board of Directors called by them.
SECTION 7. NOTICE. Notice of any special meeting shall be given at
least twenty-four (24) hours previous thereto by written notice if personally
delivered, or
<PAGE> 9
five (5) days previous thereto if mailed to each Director at his business
address or by telegram. If mailed, such notice shall be deemed to have been
delivered to the telegraph company. Any Director may waive notice of any
meeting. The attendance of a Director at any meeting shall constitute a waive of
notice of such meeting, except where a Director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
SECTION 8. CHAIRMAN. At all meetings of the Board of Directors, the
President shall serve as Chairman, or in the absence of the President, the
Directors present shall choose by majority vote a Director to preside as
Chairman.
SECTION 9. QUORUM AND MANNER OF ACTING. A majority of Directors, whose
number is designated in Section 2 herein, shall constitute a quorum for the
transaction of business at any meeting and the act of a majority of the
Directors present at any meeting at which a quorum is present shall be the act
of the Board of Directors. In the absence of a quorum, the majority of the
Directors present may adjourn any meeting from time to time until a quorum be
had. Notice of any adjourned meeting need not be given. The Directors shall act
only as a Board and the individual Directors shall have no power as such.
SECTION 10. REMOVAL OF DIRECTORS. Any one or more of the Directors may
be removed either with or without cause at any time by the vote or written
consent of the stockholders representing not less than two-thirds (2/3) of the
issued and outstanding capital stock entitled to voting power.
SECTION 11. VOTING. At all meetings of the Board of Directors, each
Director is to have one (1) vote, irrespective of the number of shares of stock
that he may hold.
SECTION 12. COMPENSATION. By resolution of the Board of Directors, the
Directors may be paid their expenses, if any, of attendance of each meeting of
the Board, and may be paid a fixed sum for attendance at meetings or a stated
salary of
<PAGE> 10
Directors. No such payment shall preclude any Director from serving the
Corporation in any other capacity and receiving compensation therefor.
SECTION 13. PRESUMPTION OF ASSENT. A Director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken, shall be conclusively presumed to have assented to the action
unless his/her dissent shall be entered in the minutes of the meeting or unless
he/she shall file his/her written dissent to such action with the person acting
as the Secretary of the meeting before the adjournment thereof or shall file
forward such dissent by certified or registered mail to the Secretary of the
Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a Director who voted in favor of such action.
ARTICLE IV
EXECUTIVE COMMITTEE
SECTION 1. NUMBER AND ELECTION. The Board of Directors may, in its
discretion, appoint from its membership an Executive Committee of one (1) or
more Directors, each to serve at the pleasure of the Board of Directors.
SECTION 2. AUTHORITY. The Executive Committee is authorized to take any
action which the Board of Directors could take, except that the Executive
Committee shall not have the power either to issue or authorize the issuance of
shares of capital stock, to amend the Bylaws, or a resolution of the Board of
Directors. Any authorized action taken by the Executive Committee shall be as
effective as if it had been taken by full Board of Directors.
SECTION 3. REGULAR MEETINGS. Regular meetings of the Executive
Committee may be held within or without the State of Nevada at such time and
place as the Executive Committee may provide from time to time.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Executive
Committee may be called by or at the request of the President or any member of
the
<PAGE> 11
Executive Committee.
SECTION 5. NOTICE. Notice of any special meeting shall be given at
least one (1) day previous thereto by written notice, telephone, telegram or in
person. Neither the business to be transacted, nor the purpose of a regular of a
regular or special meeting of the Executive Committee need be specified in the
notice of waiver of notice of such meeting. A member may waive notice of any
meeting of the Executive Committee. The attendance of a member at any meeting
shall constitute a waiver of notice of such meeting, except where a member
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened.
SECTION 6. QUORUM. A majority of the members of the Executive Committee
shall constitute a quorum for the transaction of business at any meeting of the
Executive Committee; provided that if fewer than a majority of the members are
present at said meeting a majority of the members present may adjourn the
meeting from time to time without further notice.
SECTION 7. MANNER OF ACTING. The act of of the majority of the members
present at a meeting at which a quorum is present shall be the act of the
Executive Committee, and said Committee shall keep regular minutes of it's
proceedings which shall at all times be open for inspection by the Board of
Directors.
SECTION 8. PRESUMPTION OF ASSENT. A member of the Executive Committee
who is present at a meeting of the Executive Committee at which action on any
corporate matter is taken, shall be conclusively presumed to have assented to
the action taken unless his/her dissent shall be entered in the minutes of the
meeting or unless he/she shall file his written dissent to such action with the
person acting as Secretary of the meeting before the adjournment thereof, or
shall forward such dissent by certified or registered mail to the Secretary of
the Corporation immediately after the adjournment of the meeting. Such right to
<PAGE> 12
dissent shall not apply to a member of the Executive Committee who voted in
favor of such action.
ARTICLE V
OFFICERS
SECTION 1. NUMBER. The officers of the Corporation shall be a
President, Vice President, a Treasurer and a Secretary and such other or
subordinate officers as the Board of Directors may from time to time elect. One
(1) person may hold the office and perform the duties of one or more of said
officers. No officer need to a member of the Board of Directors.
SECTION 2. ELECTION, TERM OF OFFICE, QUALIFICATIONS. The officers of
the Corporation shall be chosen by the Board of Directors and they shall be
elected annually at the meeting of the Board of Directors held immediately after
each annual meeting of the stockholders except as hereinafter otherwise provided
for filling vacancies. Each officer shall hold his/her office until his/her
successor has been duly chosen and has qualified, or until his/her death, or
until he/she resigns or has been removed in the manner hereinafter provided.
SECTION 3. REMOVALS. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors at any time whenever
in its judgment the best interests of the Corporation would be served thereby,
and such removal shall be without prejudice to the contract rights, if any, or
the person so removed.
SECTION 4. VACANCIES. All vacancies in any of office shall be filled by
the Board of Directors without undue delay, at any regular meeting, or at a
meeting specially called for the purpose.
SECTION 5. PRESIDENT. The President shall be the Chief Executive
Officer of the Corporation and shall have general supervision over the business
of the Corporation and over its several officers, subject, however, to the
control of the
<PAGE> 13
Board of Directors. He/she may sign, with the Treasurer of with the Secretary or
any other proper officer of the Corporation thereunto authorized by the Board of
Directors, certificates for shares of the capital stock of the Corporation; may
sign and execute in the name of the Corporation deeds, mortgages, bonds,
contracts or other instruments authorized by the Board of Directors, except in
cases where signing and execution thereof shall be expressly delegated by the
Board of Directors or by these Bylaws to some other officer or agent of the
Corporation; and in general shall perform all duties incident to the duties of
the President, and such other duties as from time to time may be assigned to
him/her by the Board of Directors.
SECTION 6. VICE PRESIDENT. The Vice President shall in the absence or
incapacity of the President, or as ordered by the Board of Directors, perform
the duties of the President, or such other duties or functions as may be given
to him by the Board of Directors from time to time.
SECTION 7. TREASURER. The Treasurer shall have the care and custody of
all the funds and securities of the Corporation and deposit the same in the name
of the Corporation in such bank or trust company as the Board of Directors may
designate; he may sign or countersign all checks, drafts and orders for the
payment of money and may pay out and dispose of same under the direction of the
Board of Directors, and may sign or countersign all notes or other obligations
of indebtedness of the Corporation; he/she shall at all reasonable times exhibit
the books and accounts to any director or stockholder of the Corporation under
application at the office of the Company during business hours; and he/she
shall, in general, perform all duties as from time to time may be assigned to
him/her by the President or by the Board of Directors. The Board of Directors
may at its discretion require that each officer authorized to disburse the funds
of the Corporation be bonded in such amount as it may deem adequate.
SECTION 8. SECRETARY. The Secretary shall keep the minutes of the
<PAGE> 14
meetings of the Board of Directors and also the minutes of the meetings of the
stockholders; he/she shall attend to the giving and serving of all notices of
the Corporation and shall affix the seal of Corporation to all certificates of
stock, when signed and countersigned by the duly authorized officers; he/she may
sign certificates for shares of stock of the Corporation; he/she may sign or
countersign all checks, drafts and orders for the payment of money; he/she shall
have charge of the certificate book and such other books and papers as the Board
may direct; he/she shall keep a stock book containing the names alphabetically
arranged, of all persons who are stockholders of the Corporation, showing their
places of residence, the number of shares held by them respectively the time
when they respectively became the owners thereof, and the amount paid thereof;
and he/she shall 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/her
by the President or by the Board of Directors.
SECTION 9. OTHER OFFICERS. The Board of Directors may authorize and
empower other persons or other officers appointed by it to perform the duties
and functions of the officers specifically designated above by special
resolution in each case.
SECTION 10. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The
Assistant Treasurers shall respectively as may be required by the Board of
Directors, give bonds for the faithful discharge of their duties in such sums
and with such sureties as the Board of Directors shall determine. The Assistant
Secretaries as thereunto authorized by the Board of Directors may sign with the
President or Vice President certificates for shares of the capital stock of the
Corporation, issued of which shall have been authorized by resolution of the
Board of Directors. The Assistant Treasurers and Assistant Secretaries, shall in
general, perform such duties as may be assigned to them by the Treasurer or the
Secretary respectively, or by the
<PAGE> 15
President or by the Board of Directors.
ARTICLE VI
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Except as hereinafter stated otherwise. the Corporation shall indemnify
all of its officers and directors, past, present and future. against any and
all expenses incurred by them and each of them including but not limited to
legal fees, judgments and penalties which may be incurred, rendered or levied in
any legal action brought against any or all of them for or on account of any act
or omission alleged to have been committed while acting within the scope of
their duties as officers or directors of this Corporation.
ARTICLE VII
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The Board of Directors may authorize any officer
or officers, agent or agents to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the
Corporation and no evidence of indebtedness shall be issued in its name unless
authorized by the Board of Directors or approved by loan committee appointed by
the Board of Directors and charged with the duty of supervising investments.
Such authority may be general or confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. A check, draft or other orders for
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such officer or officers, agent or agents of
the Corporation and in such manner as shall from time to time be determined by
resolutions of the Board of Directors.
SECTION 4. DEPOSITS. All funds of the Corporation not otherwise
employed
<PAGE> 16
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board of Directors may
select.
ARTICLE VIII
CAPITAL STOCK
SECTION 1. CERTIFICATE FOR SHARES. Certificates for shares of stocks of
the Corporation shall be in such form as shall be approved by the incorporators
or by the Board of Directors. The certificates shall be numbered in the order of
their issue, shall be signed by the President or Vice President and by the
Secretary or the Treasurer. or by such other person or officer as may be
designed by the Board of Directors; and seal of the Corporation shall be affixed
thereto, which said signatures of the duly designated officers and of the seal
of the Corporation. Every certificate authenticated by a facsimile of such
signatures and seal must be countersigned by a Transfer Agent to be appointed by
the Board of Directors, before issuance.
SECTION 2. TRANSFER OF STOCK. Shares of the stock of the Corporation
may be transferred by the delivery of the certificate accompanied either by an
assignment in writing on the back of the certificate or by written power of
attorney to sell, assign, and transfer the same on the books of the Corporation,
signed by the person appearing by the certificate to the owner of the shares
represented thereby, together with all necessary federal and state transfer tax
stamps affixed and shall be transferable on the books of the Corporation upon
surrender thereof so signed or endorsed. The person registered on the books of
the Corporation as the owner of any shares of stock shall be entitled to all
rights of ownership with respect to such shares.
SECTION 3. REGULATIONS. The Board of Directors may make such rules and
regulations as it may deem expedient not inconsistent with the Bylaws or with
the Articles of Incorporation, concerning the issue, transfer and registration
of the certificates for shares of stock of the Corporation. It may appoint a
transfer agent
<PAGE> 17
or registrar of transfers, or both, and it may require all certificates to bear
the signature of either or both.
SECTION 4. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificated of stock to be lost or destroyed. When authorizing such issue
of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issue thereof, require the owner
of such lost or destroyed certificate or certificates, or his/her legal
representative, to advertise the same in such manner as it shall require and/or
give the Corporation a bond in such sum as it may direct as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost or destroyed.
ARTICLE IX
DIVIDENDS
SECTION 1. The Corporation shall be entitled to treat the holder of any
share or shares of stock as the holder in fact thereof and, accordingly, shall
not be bound to recognize any equitable or other claim to or interest in such
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as expressly provided by the laws of Nevada.
SECTION 2. Dividends on the capital stock of the Corporation, subject
to the provisions of the Articles of Incorporation, if any, may be declared by
the Board of Directors at any regular or special meeting, pursuant to law.
SECTION 3. The Board of Directors may close the transfer books in its
discretion for a period not exceeding fifteen (15) days preceding the date fixed
for holding any meeting, annual or special of the stockholders, or the day
appointed for the payment of a dividend.
<PAGE> 18
SECTION 4. Before payment of any dividend or making any distribution of
profits, there may be set aside out of funds of the Corporation available for
dividends, such sum or sums as the Directors may from time to time, in their
absolute discretion think proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for any such other purpose as the Directors shall think
conducive to the interest of the Corporation, and the Directors may modify or
abolish any such reserve in the manner in which it was created.
ARTICLE X
SEAL
The Board of Directors shall provide a Corporate Seal which shall be in
the form of a circle and shall bear the full name of the Corporation, the year
of its incorporation and the words "Corporate Seal, State of Nevada".
ARTICLE XI
FISCAL YEAR
The fiscal year of the corporation shall end on the 31st day of
December of each year.
ARTICLE XII
WAIVER OF NOTICE
Whenever any notice whatever is required to be given under the
provisions of these Bylaws, or under the laws of the State of Nevada, or under
the provisions of the Articles of Incorporation, a waiver in writing signed by
the person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice.
ARTICLE XIII
AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be
<PAGE> 19
adopted at any regular or special meeting of the stockholders by a vote of the
stockholders owning a majority of the shares and entitled to vote thereat. These
Bylaws may also be altered, amended or repealed and new Bylaws may be adopted an
any regular or special meeting of the Board of Directors of the Corporation (if
notice of such alteration or repeal be contained in the notice of such special
meeting) by a majority vote of the Directors present at the meeting at which a
quorum is present, but any such amendment shall not be inconsistent with or
contrary to the provision of any amendment adopted by the stockholders.
KNOW ALL MEN BY THESE PRESENTS that the undersigned, being the
Secretary of FOREPLAY GOLF & TRAVEL TOURS, INC., a Nevada corporation hereby
acknowledges that the above and foregoing Bylaws were duly adopted as the Bylaws
of said Corporation on 31st, day of March, 1997.
IN WITNESS WHEREOF, I hereunto subscribe my name this 31st day of
March, 1997.
/s/ Leissa C. Stilwell
- ----------------------------------------
LEISSA C. STILWELL, PRESIDENT, SECRETARY,
TREASURER & DIRECTOR
<PAGE> 1
Exhibit 4.1
Sample Stock Certificate of the Registrant
<PAGE> 2
SAMPLE
2502
ALADDIN SYSTEMS
HOLDINGS, INC. LOGO
This CUSIP 01072Q 10 3
certifies SEE REVERSE FOR
that CERTAIN DEFINITIONS
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF
Aladdin Systems Holdings, Inc.
transferable on the books of the corporation in person or by duly authorized
attorney upon surrender of this certificate properly endorsed. This certificate
and the shares represented hereby are subject to the laws of the State of
Nevada, and to the Certificate of Incorporation and Bylaws of the Corporation,
as now or hereafter amended. This certificate is not valid unless countersigned
by the Transfer Agent.
WITNESS the facsimile seal of the Corporation and the signature of its duly
authorized officers.
DATED
/s/ Jonathan Kahn ALADDIN SYSTEMS HOLDINGS, INC. /s/ Benna Lovato
CHAIRMAN CORPORATE SEAL SECRETARY
NEVADA
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
Aladdin Systems, Inc., a Delaware corporation
Transaction Services, Inc., a California corporation
