UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
LASERLOCK TECHNOLOGIES, INC.
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(Exact name of Registrant as specified in its charter)
NEVADA 23-3023677
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(State or other jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
837 Lindy Lane, Bala Cynwyd, PA 19004
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(Address of Principal Executive offices)
Issuer's Telephone Number: (610) 909 - 1000
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Securities to be registered pursuant to section 12(b) of the Act:
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None
Securities to be registered pursuant to section 12(g) of the Act:
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Common Stock, $0.001 par value
(Title of Class)
DOCUMENTS INCORPORATED BY REFERENCE: See the Exhibit Index attached hereto.
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TABLE OF CONTENTS
PART I Page
Item 1. Description of Business 4
Item 2. Management's Discussion and Analysis or Plan of
Operation 15
Item 3. Description of Property 16
Item 4. Security Ownership of Certain Beneficial Owners
and Management 17
Item 5. Directors, Executive Officers, Promoters and
Control Persons 17
Item 6. Executive Compensation 18
Item 7. Certain Relationships and Related Transactions 18
Item 8. Description of Securities 19
PART II
Item 1. Market Price for Common Equity and Other Shareholder Matters 20
Item 2. Legal Proceedings 20
Item 3. Changes in and Disagreements with Accountants 21
Item 4. Recent Sales of Unregistered Securities 21
Item 5. Indemnification of Directors and Officers 22
PART F/S Financial Statements 23
PART III
Item 1. Index to Exhibits
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This Registration Statement contains forward-looking statements which
involve risks and uncertainties. When used in this Registration Statement, the
words "believes," "anticipates," "expects" and other such similar expressions
are intended to identify such forward-looking statements. Actual results of the
Company (as defined below) may differ significantly from the results discussed
in the forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those discussed in "Item 1. - Description of
Business - Risk Factors." Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. The
Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
An investment in LaserLock Technologies, Inc. (the "Company") is highly
speculative and involves a high degree of risk. Prospective investors should
consider the risk factors involved in an investment in the Company, including
the following: (a) the Company is a development stage company with limited
operating history, (b) the Company has not generated a profit, (c) there is
intense competition in the industry in which the Company operates and (d) the
uncertainty of future funding. Prospective investors should carefully read each
section of this registration statement which contain these and other risk
factors.
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PART I.
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ITEM 1. DESCRIPTION OF BUSINESS
ORGANIZATION AND CHARTER
LaserLock Technologies, Inc., Inc., (the "Company") was formed under the
laws of Nevada on November 10, 1999 to develop technologies which will both
allow for easy product and document authentication and prevent product and
document counterfeiting. The initial amount of authorized capital was $50,000
consisting of 40,000,000 shares of Common Stock, $0.001 par value, and
10,000,000 shares of preferred stock, $0.001 par value. A copy of the Company's
initial Articles of Incorporation is attached hereto and is incorporated by
reference. See Part III, Item 1.
LaserLock Technologies, Inc., Inc. recently filed a Form 15(c)211 with the
National Association of Securities Dealers (NASD) to allow its Common Stock to
trade on the OTC Pink Sheets. If and when the NASD approves the Company's Form
15(c)211, then the Company's Common Stock will began trading on the Pink Sheets
under an as of yet undetermined trading symbol. It is the Company's intention to
apply to trade on the OTC Bulletin Board once the Company is fully reporting
under The Securities Exchange Act of 1934 and any comments by the United States
Securities and Exchange Commission on this Form 10-Sb have been satisfied.
At inception, the Company issued 7,600,000 shares of its common stock.
Commencing in April of 2000, the Company sold 5,449,999 shares in an offering
done pursuant to Rule 504 as promulgated under Regulation D of the Securities
Act of 1934, as amended. In July of 2000 the Company issued options to purchase
1,135,000 shares of the Company's common stock, and made stock grants of
240,000. In October of 2000, the Company entered into a new employment contract
with its President, and pursuant to the new employment contract it has granted
him options to purchase a total 500,000 shares of it's common stock, 250,000
shares at $0.17 per share, and 250,000 shares at $0.35 per share.
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BUSINESS OF THE COMPANY
Background
LaserLock Technologies, Inc. was organized to utilize a technology
developed by its founder, Norman A. Gardner, which allows for non-intrusive
document and product authentication that can reduce losses caused by fraudulent
document reproduction and by product counterfeiting and/or diversion. The
Company's technology involves the utilization of an ink activating system which
is completely compatible with currently used printing systems, and the Company
believes it can be incorporated into existing manufacturing processes.
The Company intends to be involved in the business of product and document
authentication and security. It plans to develop and market a variety of
products -- proprietary technology which is invisible until viewed under the
light of a special activator which activates the ink momentarily for the purpose
of identifying counterfeit or diverted products. Sales are intended to be made
either through licensees or directly to end-users.
Anti-Counterfeiting and Anti-Diversion Technologies and Products
Recent developments in copying and printing technologies have made it even
easier to counterfeit a wide variety of documents. Currency, lottery tickets,
gift certificates, event and transportation tickets, casino fraud, travelers'
checks and the like are all susceptible to counterfeiting, and the Company
believes that losses from such counterfeiting have increased substantially with
improvements in technology. Counterfeiting has long caused losses to
manufacturers of brand name products, and the Company believes these losses have
also increased as the counterfeiting of labeling and packaging has become
easier.
The Company's document authentication technologies are useful to businesses
desiring to authenticate a wide variety of printed materials and products. These
include a technology with the ability to print invisibly in specific areas of a
document which can then be activated or revealed by use of an inexpensive laser
light when authentication is required. This is intended to be substantially
different than pen systems currently in the marketplace because it will not
result in a permanent mark on the merchandise which generally leads to the
disposal of the merchandise or its sale as a "second" rather than best quality
goods.
Other possible variations of the Company's technology involve multiple
color responses from a common laser, visible marks of one color that turn
another color with the laser or visible and invisible marks that turn into a
multicolored image. These technologies provide users with the ability to
authenticate products and detect counterfeit documents. Applications include the
authentication of documents having intrinsic value, such as currency, checks,
travelers' checks, gift certificates and event tickets, and the authentication
of product labeling and packaging. When applied to product labels and packaging,
such technologies can be used to detect counterfeit products whose labels and
packaging would not contain the authenticating marks invisibly printed on the
packaging or labels of the legitimate product, as well as to combat product
diversion (i.e., the sale of legitimate products through unauthorized
distribution channels or in unauthorized markets).
The Company believes that its technology could also be used in a manner
which permits manufacturers and distributors to track the movement of products
from production to ultimate consumption when coupled with proprietary software.
The Company intends to initially focus on the widespread problem of
counterfeiting in the apparel industry. The product would be incorporated into
traditional labels which are then sewn into a garment. This is accomplished
during the regular manufacturing process. The label can be viewed with the laser
to reveal the authenticity of the garment. This covert authenticating technology
is also intended to be marketed to manufacturers of compact discs to identify
CD's produced by that manufacturer. The Company believes that this technology
can provide CD manufacturers and publishers with a tool to combat the
significant losses sustained as a result of illegal pirating and counterfeiting
of data, music and video discs.
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Marketing
The marketing approach of the Company is to have sufficient flexibility in
its products and technologies so as to provide cost-effective solutions to a
wide variety of counterfeiting, diversion and copier fraud problems. As a
technology company, the Company intends to generate revenues primarily by
collecting license fees from market-specific manufacturers who incorporate the
Company's technologies into their manufacturing process and their products. The
Company also intends to license its technologies directly to end users.
The Company has identified a number of major markets for its technologies
and products, including security printers, manufacturers of labels and packaging
materials and distributors of brand name products. Within each market, key
potential users have been identified. Within North America, sales are intended
to be effected via direct selling by company personnel to create end user demand
and selling through licensee sales forces with support from company personnel.
The Company has determined that technical sales support by its personnel will be
of great importance to increasing its licensees' sales of products incorporating
the Company's technologies and, therefore, plans to be very committed to
providing such support.
As continued improvements in color copier and desktop publishing technology
make counterfeiting and fraud opportunities less expensive and the internet
makes these products more available, the Company intends to maintain an
interactive product development and enhancement program with the combined
efforts of marketing, applications engineering and research and development. The
Company's objective is to concentrate its efforts on developing market-ready
products with the most beneficial ratios of market potential to development time
and cost.
Manufacturing
The Company does not have manufacturing facilities. The Company intends to
subcontract the manufacture of its technology to third party manufacturers.
Applications of the Company's technology are expected to be effected mainly
through printing and coating. The inks are to be custom manufactured by the
Company. Because some of the processes that the Company intends to use in its
applications are based on relatively common manufacturing technologies, there
appears to be no technical or economic reason for the Company to invest capital
in its own manufacturing facilities at this stage.
The Company intends to establish a quality control program that includes
laboratory analysis of developed technologies. The Company intends to include as
part of this quality control program the placement of specially trained
technicians on site at third party production facilities to monitor the
manufacturing process, when or if warranted.
Regulation
The Company is not currently aware of any regulations affecting its products;
however, the Company's technology is dependant upon an ink based product.
Therefore, it is possible that the Company's products will be subject to
environmental regulations in the future.
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Patents
The Company has acquired the rights to a patent application in the United
States via its employment contract with its President, Norman A. Gardner. Patent
applications for the Company's technology (including improvements in the
technology) are intended to be filed in numerous other jurisdictions where
commercial usage is foreseen, including countries in Europe, Asia, the Pacific
Rim, and Canada. There can be no assurance, however, that such protection will
be obtained.
When a new product or process is developed, the developer may seek to
preserve for itself the economic benefit of the product or process by applying
for a patent in each jurisdiction in which the product or process is likely to
be exploited. Generally, for a patent to be granted, the product or process must
be new and be inventively different from what has been previously patented or
otherwise known anywhere in the world. Patents generally have a duration of 17
years from the date of grant or 20 years from the date of application depending
on the jurisdiction concerned, after which time any person is free to exploit
the product or process covered by a patent. A person who is the owner of a
patent has, within the jurisdiction in which the patent is granted, the
exclusive right to exploit the patent either directly or through licensees, and
is entitled to prevent any person from infringing on the patent.
The granting of a patent does not prevent a third party from seeking a
judicial determination that the patent is invalid. Such challenges to the
validity of a patent are not uncommon and are occasionally successful. There can
be no assurance that a challenge will not be filed to one or more of the
Company's patents , if granted, and that, if filed, such challenge(s) will not
be successful.
In the United States and Canada, the details of the product or process
which is sought to be patented are not publicly disclosed until a patent is
granted. However, in some other countries, patent applications are automatically
published at a specified time after filing.
Research and Development
The Company has been involved in research and development since its
inception, and intends to continue its research and development activities in
three areas. First, the Company plans to continue to refine its present product.
Second, the Company plans to seek to expand its technology into new areas of
implementation. Third, the Company plans to develop unique customer
applications. The Company intends, upon successful completion of this offering,
to hire several technicians and/or chemists.
The Company plans to spend between $50,000 and $60,000 in R&D over the next
twelve months.
Product Development
The Company has not yet made any sales of its products. The Company has
completed development and has working prototypes of both its inks and laser
detector.
The Company has also developed what it believes to be a proprietary trade
secret enabling it to offer its clients the ability to change the combination
lock on the system to prevent any breach of security by counterfeiters.
Management believes that the Company is the only company offering such a
protection to its product line.
The Company does not have manufacturing facilities. The Company has
determined that it would not be cost-effective to have its own manufacturing
facilities and it intends to subcontract the manufacture of its inks and
detection devices to third party manufacturers. Applications of the Company's
technology are expected to be effected mainly through printing and coating. The
inks are to be custom manufactured by the Company. Because some of the processes
that the Company intends to use in its applications are based on relatively
common manufacturing technologies, there appears to be no technical or economic
reason for the Company to invest capital in its own manufacturing facilities at
this stage.
The Company intends to establish a quality control program that entails
laboratory analysis of developed technologies. The Company intends to include as
part of this quality control program the placement of specially trained Company
technicians on site at third party production facilities to monitor the
manufacturing process, where warranted.
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Description of the Industry
Recent developments in copying and printing technologies have made it ever
easier to counterfeit a wide variety of documents. Lottery tickets, gift
certificates, event and transportation tickets, travelers' checks and the like
are all susceptible to counterfeiting, and the Company believes that losses from
such counterfeiting have increased substantially with improvements in
technology. Counterfeiting has long caused losses to manufacturers of brand name
products, and the Company believes these losses have also increased as the
counterfeiting of labeling and packaging has become easier.
The Company's document authentication technologies are useful to businesses
desiring to authenticate a wide variety of printed materials and products. These
include a technology with the ability to print invisibly on certain areas of a
document which can be activated or revealed by use of a special laser light when
authentication is required. This is intended to be different than pen systems
currently in the marketplace because it will not result in a permanent mark on
the merchandise, which generally leads to the disposal of the merchandise or its
sale as a "second" rather than best quality goods.
Other possible variations of the Company's technology involve multiple
color responses from a common laser, visible marks of one color that turn
another color with the laser or visible and invisible marks that turn into a
multicolored image. These technologies provide users with the ability to
authenticate documents and detect counterfeit documents. Applications include
the authentication of documents having intrinsic value, such as checks,
travelers' checks, gift certificates and event tickets, and the authentication
of product labeling and packaging. When applied to product labels and packaging,
such technologies can be used to detect counterfeit products whose labels and
packaging would not contain the authenticating marks invisibly printed on the
packaging or labels of the legitimate product, as well as to combat product
diversion (i.e., the sale of legitimate products through unauthorized
distribution channels or in unauthorized markets).
The Company believes that the technology could also be used in a manner
permiting manufacturers and distributors to track the movement of products from
production to ultimate consumption when coupled with proprietary software.
The Company intends to focus initially on the widespread problem of
counterfeiting in the apparel industry. The product would be used to print a
reactive label which is then sewn into a garment. The label can be viewed with
the laser to reveal the authenticity of the garment. This covert authenticating
technology is also intended to be marketed to manufacturers of compact discs to
identify CD's produced by that manufacturer. The Company believes that this
technology can provide CD manufacturers and publishers a tool with which to
combat the significant losses sustained as a result of illegal pirating and
counterfeiting of data, music and video discs.
Competition
In the area of document and product authentication and serialization, the
Company is aware of other technologies, both covert and overt surface-marking
techniques, requiring decoding elements or analytical methods to reveal the
relevant information. These technologies are offered by other companies for the
same anti-counterfeiting and anti-diversion purposes the Company markets its
covert technologies. These include, among others, biological DNA codes,
microtaggants, thermochronic, UV and infrared inks, as well as encryption, 2D
symbology and laser engraving. The Company is aware of at least twenty companies
which will be competing with it in these markets. The Company believes that it
has proprietary technologies which provide a unique and cost-effective solution
to the problem of counterfeiting and grey marketing. The Company is aware of a
limited number of competitors which are attempting different approaches to the
same problems which the Company's products address.
Other indirect competitors are marketing products utilizing the hologram
and copy void technologies. The hologram, which has been incorporated into
credit cards to foil counterfeiting, is considerably more costly than the
Company's technology. Copy void is a security device which has been developed to
indicate whether a document has been photocopied.
The Company has limited resources, and there can be no assurance that
businesses with greater resources than the Company will not enter the market and
compete with the Company.
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Marketing Strategy
The marketing approach of the Company is to have sufficient flexibility in
its products and technologies so as to provide cost-effective solutions to a
wide variety of counterfeiting, diversion and copier fraud problems. As a
technology company, the Company intends to generate revenues primarily by
collecting license fees from market-specific manufacturers who incorporate the
Company's technologies into their manufacturing processes and their products.
The Company will also license its technologies directly to end users.
The Company has identified a number of major markets for its technologies
and products, including security printers, manufacturers of labels and packaging
materials, distributors of brand name products and manufacturers of products
sold to casinos. Within each market, key potential users have been identified.
Within North America, sales are intended to be effected via direct selling by
company personnel to create end user demand and selling through licensee sales
forces with support from company personnel. The Company has determined that
technical sales supported by its personnel will be of great importance to
increasing its licensees' sales of products incorporating the Company's
technologies and, therefore, plans to be very committed to providing such
support.
As continued improvements in color copier and desktop publishing technology
make counterfeiting and fraud opportunities less expensive and the internet
makes these products more readily available, the Company intends to maintain an
interactive product development and enhancement program with the combined
efforts of marketing, applications engineering and research and development. The
Company's objective is to concentrate its efforts on developing market-ready
products with the most beneficial ratios of market potential to development time
and cost.
The Company intends to utilize the extensive contacts of its President,
Norman A. Gardner, in the counterfeit prevention and detection industries to
effectuate initial sales.
Employees
The Company currently has a one year employment contract in place with its
President, Norman A. Gardner, for $75,000 per annum, which commenced January 1,
2000. On October 1, 2000, the Company entered into a new four year employment
agreement with Mr. Gardner wich will commence on January 1, 2001. Mr. Gardner's
compensation will be $90,000 per year under this new contract. In addition to
base salary the Company will from time to time pay Mr. Gardner incentive bonuses
and reasonable expenses incurred in connection with the performance of his
duties. Throughout the term of this employment agreement, the Company will
furnish Mr. Gardner with an automobile and automobile expenses and will
reimburse travel on Company business as well as reimburse Employees for the
expenses incurred in connection with the Company's operation. In addition other
Employees shall be entitled to health, life, accident or disability insurance
plans, any profit sharing or retirement plans and stock option plans the Company
makes available.
Outside Sales Agents / Independent Contractors
The Company has consulting contracts with nine outside sales agents and
independent contractors who are being compensated via cash, stock options, stock
grants, and for the sales agents, commissions on sales to various customers of
the Company. The Company's outside sales agents and independent contractors will
also receive payment for certain expenses.
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RISK FACTORS
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. The Company desires to take advantage of
certain "Safe Harbor" provisions of the Reform Act and is including this special
note to enable the Company to do so. This document contains forward-looking
statements that reflect the views of the Company's management with respect to
future events and financial performance. These forward-looking statements are
subject to uncertainties and other factors that could cause actual results to
differ materially from such statements. These uncertainties and other factors
include, but are not limited to, the words "anticipates", "believes",
"estimates'', "expects", "plans", "projects", "targets", and similar expressions
that identify forward-looking statements. Readers are cautioned not to place
undue reliance on these forward-looking statements which speak only as of the
date the statement was made. The Company undertakes no obligation to update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
Absence of Trading Market
No public market presently exists for any securities of the Company. There
is no assurance that any market will develop. The sale of the Shares offered by
this Memorandum are not being registered under the U.S. Securities Act of 1933,
as amended, (the "1933 Act") or under state securities laws. Instead, the Shares
are being offered in reliance upon an exemption from the registration
requirements of the 1933 Act pursuant to Regulation D and Rule 504 thereof, and
in reliance upon certain exemptions from the applicable securities laws of the
pertinent state of residence of each offeree. Although the Company believes that
such securities may be transferred by purchasers without subsequent registration
under the federal law requirements of the 1933 Act, applicable state securities
laws must be complied with, and registration under state laws may be required
for a transfer of Shares unless an exemption from such registration is
available. The Company is under no obligation to register any of the securities
under the 1933 Act or any state securities laws. The Company intends to apply
for trading on the National Quotation Bureau "Pink Sheets" market.
Penny Stock Rules.
The Company believes its Common Stock will be subject to the Penny Stock
Rules promulgated under the Securities Exchange Act of 1934 due to its price
being less than $5.00 per share. If the Company were to meet the requirements to
exempt its securities from application of the Penny Stock Rules, there can be no
assurance that such price will be maintained if a market develops and thus the
Penny Stock Rules may come into effect.
These rules regulate broker-dealer practices in connection with
transactions in "penny stocks." Penny stocks generally are equity securities
with a price of less than $5.00 (other than securities registered on certain
national securities exchanges or quoted on the NASDAQ system, provided that
current price and volume information with respect to transactions in such
securities is provided by the exchange or system). The Penny Stock Rules require
a broker-dealer, prior to a transaction in a penny stock not otherwise exempt
from the rules, to deliver a standardized risk disclosure document prepared by
the Commission that provides information about penny stocks and the nature and
level of risks in the penny stock market. The broker-dealer also must provide
the customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction, and
monthly account statements showing the market value of each penny stock held in
the customer's account. The bid and offer quotations, and the broker dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer's confirmation.
In addition, the Penny Stock Rules require that prior to a transaction in a
penny stock not otherwise exempt from such rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for the Company's securities. While the
Company's Common Stock remains subject to the Penny Stock Rules, investors may
find it more difficult to sell such securities.
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Need for Subsequent Funding; No Assurance of Future Offering
In order to finance expansion of our business operations, to attempt to
patent our technologies, and to implement our business plans, we may need to
raise more capital. Our ability to continue in business and effectively
implement its plans may depend upon its ability to raise additional funds. There
is no assurance that additional funding, if required, will be obtainable in
amounts or on terms favorable or acceptable to the Company. The capital
resources required to develop each new product are significant. The Company
believes combined cash on hand and cash generated from future operations, will
provide the Company with the financing required to conduct its business at least
through the second calendar quarter of 2001, but there is no guarantee that the
Company is correct, or that it will be able to raise additional capital, if
required..
Lack of Dividends
We have not paid any cash dividends since our inception and do not intend
to pay dividends in the foreseeable future. We intend to retain all earnings, if
any, for use in our business operations.
Risks Associated With Our Being A New Business.
Our operations are subject to all of the risks inherent in a new business
enterprise. We currently have no revenue, no operating history, and no salable
product. We are subject to the same types of risks that many new business face -
like shortages of cash, under-capitalization, and expenses of new product
development. We do not anticipate positive cash flow on a monthly basis until
early 2001 at the earliest, and even then we cannot give assurances that we will
be operating at break-even levels at that time or in the future. Various
problems, expenses, complications and delays may be encountered in connection
with our development both in terms of our products and our business. Future
growth beyond present capacity will require significant expenditures for
expansion, marketing, research and development. These expenses must either be
paid out of the proceeds of this or future offerings or out of our generated
revenues and profits, if any. The availability of funds from either of these
sources cannot be assured.
General Risks Of The Counterfeit Prevention Industry
The industry in which we intend to compete is subject to the traditional
risks faced by any business of adverse changes in general economic conditions,
the availability and expense of liability insurance, and adverse changes in
local markets. However, we will also be subject to industry specific risks such
as counterfeiters learning how to circumvent new and existing technologies;
evolving consumer preference and health-related concerns; federal, state and
local chemical processing controls; consumer product liability claims; risks of
product tampering.
Competition In Our Industry
In the area of document security and product authentication and
serialization, we are aware of other companies and other technologies, both
covert and overt surface marking techniques, which require decoding elements or
analytical methods to reveal the relevant information. These technologies are
offered by other companies for the same anti-counterfeiting and anti-diversion
purposes to which we plan to market our technologies.
Other competitors are marketing products utilizing the hologram and copy
void technologies. The hologram, which has been incorporated into credit cards
to foil counterfeiting, is considerably more costly than our technology.
Copy void is a security device which has been developed to indicate whether a
document has been photocopied.
It is anticipated that a significant number of companies of varying sizes,
which may ultimately include divisions or subsidiaries of larger companies, will
be vying for the same market segment as we are. A number of these competitors
may have substantially greater financial and other resources available to them.
There can be no assurance that we can compete successfully with such other
companies. Competitive pressures or other factors could cause us to lose market
share if it develops at all, or result in significant price erosion, either of
which would have a material adverse effect on our results of operations.
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Governmental Regulation Of Our Fields
Our operations may be subject to varying degrees of federal, state or local
laws and regulations. Operations such as those we intend to conduct may be
subject to federal, state and local laws and regulations controlling the
development of technologies related to privacy protection, to the protection of
the environment from materials that we may use in our inks, and advanced
algorithm formulations or encryption tactics that we may develope. Any of these
regulations may have a materially adverse effect upon our operations.
Technology Staffing And Labor Costs
We anticipate that staffing and labor costs will represent one of our
largest expenses. We will compete with other copy security prevention
technologies in attracting and retaining qualified or skilled personnel. A
shortage of trained personnel or general economic inflationary pressures may
require us to enhance our wage and benefits package in order to compete with
other employers. There can be no assurance that our labor costs will be
sustainable. Our failure to attract and retain qualified employees to control
our labor costs or to match increases in our labor expenses with corresponding
increases in revenues could have a material adverse effect on the business.
Rapidly Changing Market.
We believe that the market for our products is rapidly changing with
evolving industry standards. Our future success will depend in part upon our
ability to enhance our existing products and services and to introduce new
products and features to meet changing customer requirements and emerging
industry standards. There can be no assurance that we will successfully complete
the development of future products or that our current or future products will
achieve market acceptance. Any delay or failure of these products to achieve
market acceptance would adversely affect our business. In addition, there can be
no assurance that products or technologies developed by others will not render
our products or technologies non-competitive or obsolete.
Patents; Intellectual Property
Pursuant to an employment agreement with our president, Norman A.
Gardner, we have received all rights in a patent applied for in the United
States. There can be no assurance that this patent, or any other patents which
we may apply for in the future, will be granted. Until such time as a patent is
issued, we will not have the right to bring a patent infringement action against
a third party who makes a product or uses a process identical or similar to a
product or process based on our technology. Even if patents were granted, there
is no assurance that such patents would not be attacked by third parties or
that, if any such attack were made, it would not be successful. The costs
involved in defending a patent or prosecuting a patent infringement action could
be substantial. At present we do not have the resources to pursue such an
action.
We plan to rely on confidentiality, non-analysis and licensing agreements
to establish and protect our rights in any proprietary technologies. While we
intend to actively protect these rights, our technologies could possibly be
compromised through reverse engineering or other means. There can be no
assurance that we will be able to protect the basis of our technologies from
discovery by unauthorized third parties, thus adversely affecting our customer
and licensee relationships.
Prior Relationships Of Our President.
Norman A. Gardner, our President, founded Nocopi Technologies, Inc.
('NoCopi'), and served as its President and Chief Executive Officer from
October, 1985, until October, 1997, and as its Chairman of the Board under a
Memorandum of Agreement until March, 1998. Mr. Gardner then served until
September 27, 1999, as a senior advisor to Nocopi under an Amendment to the
Memorandum of Agreement.
We view Nocopi as one of our competitors in our marketplace in that the we
plan to develop and sell technology to prospects and clients that we believe is
completely different from, but competitive with, that sold by Nocopi to the same
or similar prospects and clients. The Agreement with Nocopi does not impose a
post-termination restrictive covenant upon Mr. Gardner, and Mr. Gardner has
assured us that he has not and will not, divulge, furnish, or make accessible to
anyone any confidences or secrets of Nocopi in violation of the Agreement.
12
<PAGE>
Possible Rule 144 Shares
A majority of the shares of Common Stock presently outstanding (7,600,000
shares, or 71.70%) were issued on the date of the company's inception or later
and are considered "restricted securities". If, and only if, a public market
develops, they may be publicly resold in compliance with Rule 144 adopted under
the Securities Act of 1933, as amended. Rule 144 provides, in part, that after
holding restricted securities for a period of one (1) year non-affiliated
shareholders (affiliates include officers, directors, and ten percent or greater
shareholders) may sell, during any three months, in a brokerage transaction, or
to a market maker, an amount equal to the greater of one percent (1%) of the
Company's outstanding Common Stock, or the average weekly trading volume, if
any, in the Common Stock during four calendar weeks preceding the filing of a
Form 144 relating to such sale. After two (2) years non-affiliated shareholders
(who have been non-affiliates for at least three months) may sell an unlimited
amount of the Company's outstanding Common Stock. Rule 144 also provides that
after holding restricted securities for a period of two (2) years, affiliates of
the company may sell every third month in a brokerage transaction, or to a
market maker, an amount equal to the greater of one percent (1%) of the
Company's outstanding Common Stock, or the average weekly trading volume, if
any, in the Common Stock during four calendar weeks preceding the filing of a
Form 144 relating to such sale. Such sales, if made under certain circumstances,
would depress the market price and render difficult the sale of the Company's
securities purchased hereunder. Certain of the outstanding shares will be
eligible for sale pursuant to Rule 144 in November, 2000.
Dependence on Key Personnel
We will be dependent on our current management for the foreseeable future.
The loss of the services of any member of these persons would have a material
adverse effect on our operations and prospects. Our success will be dependent to
a substantial degree on our President, Norman A. Gardner, and other key
management personnel. Mr. Gardner's continued involvement is particularly
critical to us. In the event Mr. Gardner were unavailable, it would have a
material adverse effect on our operations. At this time, we have one employment
agreement - an agreement with Mr. Norman A. Gardner, our President and
Secretary. We have not obtained "key man" insurance policies on Mr. Gardner. The
expansion of our business will be largely contingent on our ability to attract
and retain a highly qualified management team. There is no assurance that we can
find suitable management personnel or that we will have the financial resources
to attract or retain such people if found.
Indemnification
The Company's By-Laws include provisions that indemnify any director or
officer made a party to any action, suit or proceeding for negligence or
misconduct in the performance of his duties made in good faith, by reason of the
fact that s/he is or was a director, officer or employee of the Company against
reasonable expense including legal fees, actually or necessarily incurred by
him/her in connection with the defense of such action, suit or proceedings or in
connection with any appeal therein.
Dependence Upon Third Parties.
We intend to pursue a policy of licensing our technologies for
incorporation into products made and distributed by third parties. Although we
plan to negotiate guaranteed minimum royalties in our licensing arrangements,
our revenues will be substantially dependent on the sale of products
incorporating our technologies by third parties. We intend to provide technical
marketing support to our licensees. However, the successful marketing of such
products and, therefore, our revenues and operating income, depend substantially
on the marketing efforts of such third parties, over which we will have little,
if any, control.
Technical Obsolescence.
The value of our technology and any products derived from our technology
could be substantially reduced as new or modified techniques for combating
document and product counterfeiting and product diversion are developed and
become widely accepted. We can't guarantee that future technological
developments will not result in the obsolescence of our technologies.
Dependence Upon Marketing.
While we believe that our products hold unsatisfied market demand, our
ability to generate sales will depend upon developing and implementing a
marketing strategy. There can be no assurance that we can successfully develop,
promote and maintain an active market for our products.
13
<PAGE>
Management Of Growth.
If we is successful in increasing demand for our products, of which there
can be no assurance, our growth could create certain additional risks. Rapid
growth can be expected to place a substantial burden on our management resources
and financial controls. Our ability to manage growth effectively will require us
to continue to implement and refine our operational, financial and information
management systems and to train, motivate and manage our employees. Our ability
to attract and retain qualified personnel will have a significant effect on our
ability to establish and maintain our position in our various markets, and our
failure to manage our growth effectively could have material adverse effects on
our results of operations.
Risks Associated With The Company's Ability To Continue As A Going Concern.
The Company has no operating history, nor sales, has incurred operating
losses since inception and requires additional capital to continue its
operations and to implement its business plans. Although the Company intends to
raise money, implement sales, and become profitable, if the Company fails to
achieve any one of these goals, then it is unlikely that the Company will be
successful, and very likely that the Company will become insolvent or otherwise
forced to close its doors. If this occurs, it will have a material adverse
affect on the Company and any results of operations.
Lack Of Diversification.
The Company's proposed operations, even if successful, will in all
likelihood result in the Company's engaging in a business which is concentrated
in only one industry. Consequently, the Company's activities will be limited to
the anti-counterfeiting industry. The Company's inability to diversify its
activities into a number of areas may subject the Company to economic
fluctuations within a particular business or industry and, therefore, increase
the risks associated with the Company's operations.
14
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with
LaserLock's financial statements and the Notes thereto contained elsewhere in
this registration statement. This registration statement contains
forward-looking statements that involve risks and uncertainties. LaserLock's
actual results may differ significantly from the result discussed in the forward
looking statements. Factors that might cause such a difference are discussed in
"Risk Factors."
Overview
LaserLock has applied for patents for its technology for laser activated
ink technologies which may be used as part of an anti-counterfeiting protection
process. We believe that our laser and ink combination products are ready for
commercial production and we have been soliciting orders for our products
although we have not yet entered into any contracts.
From its inception in 1999, LaserLock has been engaged primarily in
activities devoted towards obtaining the patent rights to the technology,
general business operations, research and development, negotiating licenses and
agreements with potential customers, creating a sales and management
infrastructiure by hiring consultants and independent contractors , and
obtaining financing. There have been no revenues from sales to date.
Results of Operations
It is difficult for LaserLock to forecast its revenue or earnings
accurately. We believe that period-to-period comparisons of our operating
results may not be meaningful.
As a result of our extremely limited operating history, we do not
have historical financial data for a significant number of periods on which to
base planned operating expenses. Our expense levels are based upon our
expectations concerning future revenue. Thus, quarterly revenue and results of
operation are difficult to project.
Liquidity and Capital Resources
LaserLock has incurred negative cash flows from operation since its
inception. We expect to continue to expend substantial sums to create inventory
and to begin marketing and sales.
Our future capital requirements and the adequacy of available funds will
depend on numerous factors, including the successful commercialization of our
existing products, the cost of contract manufacturing, cost of filing,
prosecuting, defending and enforcing current and any future patent claims and
other intellectual property rights, competing technological and market
developments, and the development of strategic alliances for the development and
marketing of our products. In the event LaserLock's plans change or its
assumptions change or prove to be inaccurate or the funds available prove to be
insufficient to fund operations at the planned level (due to further
unanticipated expenses, delays, problems or otherwise), LaserLock could be
required to obtain additional funds through equity or debt financing, strategic
alliances with corporate partners and others, or through other sources in order
to bring its products through to commercialization. The terms and prices of any
equity or debt financing may be significantly more favorable than those of the
shares sold in the offering. LaserLock does not have any material committed
sources of additional financing, and there can be no assurance that additional
funding, if necessary, will be available on acceptable terms, if at all. If
adequate funds are not available, we may be required to further delay,
scale-back, or eliminate certain aspects of our operations or attempt to obtain
funds through arrangements with collaborative partners or others that may
require us to relinquish rights to certain of our technologies, product
candidates, products, or potential markets. If adequate funds are not available,
LaserLock's business, financial condition, and results of operations will be
materially and adversely affected.
The actual research and development and related activities of LaserLock may
vary significantly from current plans depending on numerous factors, including
changes in the costs of such activities from current estimates, the results of
LaserLock's research and development programs, the results of clinical studies,
the timing of regulatory submissions, technological advances, determinations as
to commercial potential and the status of competitive products. The focus and
direction of LaserLock's operations will also be dependent upon the
establishment of collaborative arrangements with other companies, and other
factors.
Until required for operations, LaserLock's policy is to invest its cash
reserves in bank deposits, certificates of deposit, commercial paper, corporate
notes, U.S. government instruments or other investment-grade quality
instruments.
15
<PAGE>
There can be no assurance that LaserLock will be able to commercialize its
technologies, or that profitability will ever be achieved. LaserLock expects
that its operating results will fluctuate significantly from quarter to quarter
in the future and will depend on a number of factors, most of which are outside
LaserLock's control.
Item 3. DESCRIPTION OF PROPERTY
The Company's offices are presently located in 1000 sq. ft. of office space
in the home of its president, Norman A. Gardner, at 837 Lindy Lane, Bala Cynwyd,
PA 19004. The Company pays no rent for the use of this space.
The Company has been assigned the rights to a patent application submitted
by its President, Norman A. Gardner. The Company believes that the granting of
its patent application will enhance the Company's successful competition in the
market place, but that even if not granted, the Company will be able to compete
effectively in the market place by utilizing non-competition and confidentiality
terms in contracts it will enter into with any employees, and non-disclosure and
non-analysis agreements given to every potential supplier and customer of the
Company.
16
<PAGE>
Item 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
regarding the beneficial ownership of Common Stock as of June 30, 2000, by (i)
each Director of the Company, (ii) each executive officer of the Company, (iii)
all directors and executive officers as a group, and (iv) each person known to
the Company to be the beneficial owner of more than 5% of its outstanding shares
of Common Stock.
<TABLE>
<CAPTION>
Shares Beneficially Owned
-------------------------
Percentage
Directors and Executive Officers Shares Held Owned (1)
- -------------------------------- ----------- ---------
<S> <C> <C>
Norman Gardner 4,278,000 32.25%
President
837 Lindy Lane
Bala Cynwyd, PA 19004
Michael J. Prevot 100,000 0.75%
419 Buena Vista Ave.
San Mateo, CA 94403
Directors and Officers as a Group 4,378,000 34.00%
<FN>
(1) Percentage of ownership is based on 13,289,999 shares of Common Stock
issued and outstanding as of September 30, 2000.
</FN>
</TABLE>
Item 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The Board of Directors of the Company is comprised of only one class of
director. Each director is elected to hold office until the next annual meeting
of shareholders and until his successor has been elected and qualified.
Officers are elected annually by the Board of Directors and hold office until
successors are duly elected and qualified. The following is a brief account of
the business experience of each director and executive officer of the Company.
The position(s) held by each Officer and Director of the Company are shown
on the following table. Each Director was elected in November, 1999, and will
serve for one year or until the next annual meeting of the Company's
Shareholders and until a successor is elected and has qualified.
<TABLE>
<CAPTION>
Age Position
<S> <C> <C>
Norman A. Gardner 58 President, Secretary, and Director
Michael J. Prevot 45 Vice- President of Sales
and Marketing, Director
</TABLE>
NORMAN A. GARDNER
Norman A. Gardner has been the President of the Company since inception.
From 1974 to 1985 Mr. Gardner served as President of Polymark Management, Ltd.,
a Canadian public relations firm. In 1982, Mr. Gardner founded Nocopi
Technologies, Inc. of West Conshohocken, PA, a publicly traded company. He
served as President and Chief Executive Officer of Nocopi from 1985 until 1997,
and as Chairman of its board until March, 1998. Mr. Gardner received his
B.A. in English from McGill University in 1963.
MICHAEL J. PREVOT
Michael Prevot has been the Vice-President of Sales of the Company since
inception. From 1985 to 1999, Mr. Prevot has served as President of Vista
Security Papers, a San Francisco based company which sells security products.
Mr. Prevot studied business at the College of San Mateo in 1974-1975, and at
Skyline College in 1975-1976.
17
<PAGE>
Item 6. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid during the period
ended December 31, 1999, to the Company's Chief Executive Officer and each of
the Company's officers and directors. No person received compensation equal to
or exceeding $100,000 during 1999.
<TABLE>
<CAPTION>
Annual Compensation Awards Payouts
------------------------------ ------------------------- ---------
Other All
Annual Restricted Securities Other
compen- Stock Underlying LTIP Compen-
sation Award(s) Options/SAR Payouts sation
Name and Principal Position Year Salary ($) Bonus ($) ($) ($) (#) ($) ($)
- ---------- ---- ---------- --------- ------- ----------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Norman Gardner(1)
President, 2000 62,500(3) -0- 13,000(3) -0- -0- -0- -0-
Director 1999 -0- -0- -0- -0- -0- -0- -0-
Michael Prevot
Vice President of Marketing, 2000 -0- -0- -0- -0- -0- -0- -0-
Director 1999 -0- -0- -0- -0- -0- -0- -0-
</TABLE>
---------------------------------------------
1. On October 1, 2000 the Company entered into a new employment agreement with
its President, Norman Gardner, which provides compensation of $90,000
annually, commencing January 1, 2001, and the grant of 500,000 options to
purchase the Company's common stock, 250,000 shares at $0.17 per share, and
250,000 shares at $0.35 per share.
2. Company car, insurance, repairs and expenses.
3. Computed as funds expended as of the date of this filing.
Item 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
There have been no material transactions, series of similar transactions,
or currently proposed transactions, to which the Company or any of its
subsidiaries was or is to be a party, in which the amount involved exceeds
$60,000 and in which any director or executive officer, or any security holder
who is known to the Company to own of record or beneficially more than five
percent of the Company's Common Stock, or any member of the immediate family of
any of the foregoing persons, had a material interest.
18
<PAGE>
CERTAIN BUSINESS RELATIONSHIPS
There have been no material transactions, series of similar transactions,
currently proposed transactions, or series of similar transactions, to which the
Company or any of its subsidiaries was or is to be a party, in which the amount
involved exceeds $60,000 and in which any director or executive officer, or any
security holder who is known to the Company to own of record or beneficially
more than five percent of the Company's Common Stock, or any member of the
immediate family of any of the foregoing persons, had a material interest.
Item 8. DESCRIPTION OF SECURITIES
The Company's authorized capital consists of 40,000,000 shares of common
stock, $0.001 par value per share, of which 13,289,999 are issued and
outstanding, and 10,000,000 shares of preferred stock, $0.001 par value per
share, of which no shares have been issued. Each holder of record of Common
Stock is entitled to one vote for each share held on all matters properly
submitted to the shareholders for their vote. Cumulative voting is not
authorized by the Articles of Incorporation.
Holders of outstanding Common Stock are entitled to those dividends
declared by the Board of Directors out of legally available funds, and, in the
event of liquidation, dissolution or winding up of the affairs of the Company,
holders are entitled to receive ratably the net assets of the Company available
to the shareholders. Holders of outstanding Common Stock have no preemptive,
conversion or redemptive rights. To the extent that additional shares of Common
Stock are issued, the relative interests of the then existing shareholders may
be diluted.
TRANSFER AGENT
The Company uses Interwest Transfer Co., Inc. whose mailing address is 1981
E. Murray Holladay Rd., P.O.B. 17136, Salt Lake City, UT 84117 to act as its
transfer agent for its Common Stock. The Company plans to act as transfer agent
for all of its other securities, if and when issued.
INTEREST OF NAMED EXPERTS AND COUNSEL
The financial statements of the Company as of and for the period ended
December 31, 1999, included in this Registration Statement, have been audited by
Smart & Associates, LLP, as indicated in their report with respect thereto and
are included herein in reliance upon authority of said firm as experts in
accounting and auditing.
Jay Hait, Esq., special securities counsel to the Company, is the holder of
100,000 shares of the Company's common stock, and has options to purchase an
additional 30,000 shares for $0.17 per share, and an additional 100,000 shares
for $0.35 per share.
19
<PAGE>
PART II
Item 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
Market for Common Stock
The Company's Common Stock is not currently quoted. Currently, there are
13,289,999 shares of the Company's common stock issued and outstanding, which
are held by 69 shareholders. Additionally there are options held by 13
consultants and other independent contractors to purchase a total of 1,135,000
shares of the Company's common stock. The Company does not have any plans at
this time to offer more of its common shares for sale. In November 2000,
3,222,000 shares of the Company's common stock will become eligible to be sold
pursuant to Rule 144 of the Securities Act.
Dividends
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain all available funds and any
future earnings of its business for use in the operation of its business and
does not anticipate paying any cash dividends in the foreseeable future. The
declaration, payment and amount of future dividends, if any, will depend upon
the future earnings, results of operations, financial position and capital
requirements of the Company, among other factors, and will be at the sole
discretion of the Board of Directors.
Item 2. LEGAL PROCEEDINGS
The are no material legal proceedings pending or, to the Company's
knowledge, threatened against the Company.
20
<PAGE>
Item 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
There have been no changes in, and no disagreements with, the Company's
independent accountants.
Item 4. RECENT SALES OF UNREGISTERED SECURITIES
At inception in November of 1999, the Company issued 7,600,000 common
shares to its founders in reliance upon section 4(2) of the Securities Act of
1933 in exchange for assets and services valued at $$62,700.
From April, 2000, to September 2000, the Company issued a total of
5,449,999 shares of its common stock at $0.17 per share, for a total
consideration of $926,500, in an offering done pursuant to Rule 504 as
promulgated under Regulation D of the Securities Act of 1933, and registered in
the State of New Jersey. No commission was paid on these sales.
From July, 2000, to September, 2000 the Company issued 240,000 shares of
Common Stock to non-employee consultants, for services valued at $36,550,
pursuant to Rule 701 promulgated under Section 3(b) of the Securities Act of
1933. The Company relied on the following facts in determining that Rule 701 was
available: (a) the shares were issued pursuant to a written agreement between
the consultants and the Company, (b) the consultants rendered bonafide services
not in connection with the offer or sale of securities in capital raising
transactions, (c) the shares were issued pursuant to a written contract relating
to the issuance of shares paid as compensation for services rendered, and (d)
the amount of shares offered and sold in reliance on Rule 701 did not exceed
$500,000 and all securities sold in the last 12 months have not exceeded
$5,000,000.
21
<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws, grants indemnification to the Company's officers and
directors, present and former, for expenses incurred by them in connection with
any proceeding that they are involved in by reason of their being or having been
an officer or director of the Company. The person being indemnified must have
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Company.
Insofar as indemnification for liability arising under the Securities Act
may be permitted to directors or officers the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director or officer of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director or officer in connection with the securities being registered, the
Company will, unless in the opinion of its legal counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
22
<PAGE>
PART F/S
FINANCIAL STATEMENTS.
LASERLOCK TECHNOLOGIES, INC.
(A Development Stage Company)
Financial Statements and
Independent Auditors' Report
December 31, 1999 and June 30, 2000
<PAGE>
LASERLOCK TECHNOLOGIES, INC.
(A Development Stage Company)
Table of Contents
December 31, 1999 and June 30, 2000
----------
Pages
Independent Auditors' Report 1
Financial Statements:
Balance Sheets 2
Statements of Operations 3
Statements of Changes in Stockholders' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6-10
<PAGE>
Independent Auditors' Report
To the Board of Directors of
LaserLock Technologies, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheet of LaserLock Technologies, Inc.
(a development stage Company) as of December 31, 1999, and the related
statements of operations, changes in stockholders' equity and cash flows for the
period November 10, 1999 (date of inception) to December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of LaserLock Technologies, Inc. (a
development stage Company) as of December 31, 1999, and the results of its
operations and its cash flows for the period November 10, 1999 (date of
inception) to December 31, 1999 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in note 2 to the
financial statements, the Company's losses from development stage activities
raise substantial doubt about its ability to continue as a going concern.
Management's actions in regard to this matter are also described in note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Smart & Associates, LLP
Philadelphia, Pennsylvania
January 6, 2000, except for Notes 2, 5, 7 and 8
of which the date is November 3, 2000
<PAGE>
<TABLE>
<CAPTION>
LASERLOCK TECHNOLOGIES, INC.
(A Development Stage Corporation)
Balance Sheets
December 31, 1999 and June 30, 2000
---------
June 30,
December 31, 2000
1999 (unaudited)
------------------ ------------------
ASSETS
Current assets:
<S> <C> <C>
Cash $ 55,230 $ 555,182
Prepaid expenses 3,500 7,924
------------------ ------------------
Total assets $ 58,730 $ 563,106
================== ==================
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses and total liabilities $ 6,000 $ 18,786
------------------ ------------------
Commitments - -
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; 10,000,000 shares authorized,
no shares issued and outstanding - -
Common stock, $.001 par value, 40,000,000 shares
authorized, 7,600,000 shares and 11,234,705 (unaudited)
issued and outstanding 7,600 11,235
Additional paid-in capital 99,243 697,173
Deficit accumulated during the development stage (54,113) (164,088)
------------------ ------------------
Total stockholders' equity 52,730 544,320
------------------ ------------------
Total liabilities and stockholders' equity $ 58,730 $ 563,106
================== ==================
The accompanying notes are an integral part of these financial statements.
2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LASERLOCK TECHNOLOGIES, INC.
(A Development Stage Corporation)
Statements of Operations
For the period November 10, 1999 (date of inception) to Decermber 31, 1999,
the six months ended June 30, 2000
and the period November 10, 1999 (date of inception) to June 30, 2000
(Unaudited)
----------------------------------------------
November 10, November 10,
1999 (date of Six months 1999 (date of
inception) to ended inception) to
December 31, 1999 June 30, 2000 June 30, 2000
--------------------- -------------------- ----------------
<S> <C> <C> <C>
Revenues $ - $ - $ -
--------------------- -------------------- ----------------
Expenses:
Officer payroll - 37,500 37,500
Payroll taxes - 2,925 2,925
Consulting services - 8,700 8,700
Materials 3,443 26,686 30,129
Office supplies 4,593 6,550 11,143
Organization costs 37,045 - 37,045
Research and development - 10,282 10,282
Telephone 1,221 4,160 5,381
Travel 7,811 19,742 27,553
--------------------- -------------------- ----------------
Total expenses 54,113 116,545 170,658
--------------------- -------------------- ----------------
Operating loss (54,113) (116,545) (170,658)
Interest income - 6,570 6,570
--------------------- -------------------- ----------------
Net loss $ (54,113) $ (109,975) $ (164,088)
Basic weighted average common shares
outstanding 6,273,654 8,778,283
===================== ==================== ================
Basic net loss per common share $ (0.009) $ (0.013)
===================== ==================== ================
The accompanying notes are an integral part of these financial statements.
3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LASERLOCK TECHNOLOGIES, INC.
(A Development Stage Company)
Changes in Stockholders' Equity
For the period November 10, 1999 (date of inception) to December 31, 1999,
the six months ended June 30, 2000 and the period November 10, 1999
(date of inception) to June 30, 2000
----------
Deficit
Common Stock accumulated
--------------------------- Additional during the
Number Paid-In development
of Shares Amount Capital stage Total
------------- ------------ ------------- ------------- ----------
Issuance of 4,278,000 shares on November 10, 1999
<S> <C> <C> <C> <C> <C>
(at $.005 per share) $ 4,278,000 $ 4,278 $ 16,595 $ - $ 20,873
Issuance of 1,232,000 shares of common stock in exchange
for services rendered on November 10, 1999
(at $.03 per share) 1,232,000 1,232 35,728 - 36,960
Issuance of 2,090,000 shares of common stock
on December 13, 1999 (at $.17 per share) 2,090,000 2,090 60,610 - 62,700
Stock issuance costs - - (13,690) - (13,690)
Net loss - - - (54,113) (54,113)
------------- ------------ ------------- ------------- ----------
Balance December 31, 1999 7,600,000 7,600 99,243 (54,113) 52,730
Issuance of 3,634,705 shares of common stock
on May 3, 2000 (at $.17 per share) (unaudited) 3,634,705 3,635 614,265 - 617,900
Stock issuance costs (unaudited) - (16,335) - (16,335)
Net loss (unaudited) - - - (109,975) (109,975)
------------- ------------ ------------- ------------- ----------
Balance, June 30, 2000 (unaudited) 11,234,705 $ 11,235 $ 697,173 $ (164,088) $ 544,320
============= ============ ============= ============= ==========
The accompanying notes are an integral part of these financial statements.
4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LASERLOCK TECHNOLOGIES, INC.
(A Development Stage Corporation)
Statements of Cash Flows
For the period November 10, 1999 (date of inception) to December 31, 1999,
the six months ended June 30, 2000 and the period November 10,
1999 (date of inception) to June 30, 2000
-----------
(Unaudited)
----------------------------------
November 10, November 10,
1999 (date of Six months 1999 (date of
inception) to ended inception) to
December June 30, June 30, 2000
31, 1999 2000
------------ ----------- -------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net loss $ (54,113) $ (109,975) $(164,088)
Adjustments to reconcile net loss to net cash
used in operating activities:
Stock issued in exchange for services 36,960 - 36,960
Changes in assets and liabilities
(Increase) in prepaid expenses (3,500) (4,424) (7,924)
Increase in accounts payable 6,000 12,786 18,786
------------ ----------- -------------
Net cash used in operating activities (14,653) (101,613) (116,266)
------------ ----------- -------------
Cash flows from financing activities:
Proceeds from issuance of common stock 83,573 617,900 701,473
Stock issuance costs (13,690) (16,335) (30,025)
------------ ----------- -------------
Net cash provided by financing activities 69,883 601,565 671,448
------------ ----------- -------------
Net increase in cash 55,230 499,952 555,182
Cash at beginning of period - 55,230 -
------------ ----------- -------------
Cash at end of period $ 55,230 $ 555,182 $ 555,182
============ =========== =============
The accompanying notes are an integral part of these financial statements.
5
</TABLE>
<PAGE>
LASERLOCK TECHNOLOGIES, INC.
(A Development Stage Company)
Note to Financial Statements
December 31, 1999 and June 30, 2000
1. Nature of Activities and Summary of Significant Accounting Policies:
Nature of Activities:
The Company is a development stage enterprise incorporated in
the state of Nevada on November 10, 1999. Since inception,
substantially all of the efforts of the Company have been
devoted to developing technologies for the prevention of
product and document counterfeiting. The Company is in the
development stage of raising capital, financial planning,
establishing sources of supply, and acquiring property, plant
and equipment. The Company anticipates establishing markets
for its technologies in North America and Europe.
Use of Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these
estimates.
Interim Financial Data (unaudited):
The unaudited financial information as of and for the six
months ended June 30, 2000 and for the period November 10,
1999 (date of inception) through June 30, 2000 has been
prepared on the same basis as the audited financial statements
and, in the opinion of the Company's management, reflects all
adjustments necessary for a fair presentation of the financial
position and the results of operations for such interim
periods in accordance with generally accepted accounting
principles. The results of operations for the interim periods
are not necessarily indicative of results for the full year.
Cash Concentration:
The Company maintains its cash balances in a financial
institution located in Bryn Mawr, Pennsylvania. Balances up to
$100,000 are insured by the FDIC.
6
<PAGE>
LASERLOCK TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to Financial Statements, continued
December 31, 1999 and June 30, 2000
-----------
1. Nature of Activities and Summary of Significant
Accounting Policies, continued:
Revenue Recognition
The Company will recognize revenue from the sale of
counterfeiting prevention technology and related licensing
fees as earned.
Net Loss Per Share
The Company has adopted the provisions of Statement of
Financial Accounting Standards No. 128, Earnings Per Share
("SFAS 128"). Basic net loss per share is computed on the
weighted average number of shares of common stock outstanding
during each period. Diluted net loss per share is not
presented as the Company has reported a loss from operations
for the year ended December 31, 1999.
Income Taxes
Federal income taxes are provided for the tax effects of
transactions reported in the financial statements and consist
of taxes currently due plus deferred taxes related to
differences between the bases of assets and liabilities for
financial and income tax reporting. Deferred tax assets and
liabilities represent the future tax return consequences of
those differences, which will either be taxable or deductible
when the assets and liabilities are recovered or settled.
Deferred taxes are also recognized for operating losses that
are available to offset future income taxes.
For state income tax purposes, the Company is domiciled in
Nevada, which does not tax the income of such companies.
Accordingly, no provision for state income taxes is included
in the accompanying financial statements.
Stock-Based Compensation:
The Company has adopted Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," which allows an entity to use a fair
value-based method for valuing stock-based compensation cost
at the grant date based on the fair value of the award.
Compensation is then recognized over the service period, which
is usually the vesting period. Alternatively, the statement
permits entities to elect accounting for employee stock
options and similar instruments under Accounting Principles
Board Opinion ("APB") 25, "Accounting for Stock Issued to
Employees" and its related interpretations using the intrinsic
value method. Entities that elect to account for stock options
using APB 25 are required to make pro forma disclosures of net
income, as if the fair value-based method of accounting
defined in SFAS No. 123 had been applied.
Stock issued to non-employees for services rendered is based
on the fair value of (1) the service or (2) the Company's
stock, whatever is more readily determinable at the time of
issue.
7
<PAGE>
1. Nature of Activities and Summary of Significant
Accounting Policies, continued:
Start-Up and Organization Costs:
In accordance with AICPA Statement of Position 98-5 "Reporting
on the Costs of Start-up Activities", the costs of start-up
activities and organization costs are expensed as incurred.
Research and Development Costs:
Research and development costs are expensed when incurred.
2. Realization of Assets:
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company has incurred
losses from activities during the development stage. This condition
raises substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
As part of its development stage activities, the Company sold
approximately 2.1 million shares to private investors in December 1999
providing net proceeds of approximately $63,000. Additionally,
subsequent to December 31, 1999, management raised approximately
$926,500 of capital by selling approximately 5.45 million shares of its
common stock pursuant to Rule 504 of Regulation D of the Securities Act
of 1933. Management believes the Company can meet all of its obligations
as they become due and continue as a going concern.
3. Income Taxes:
At December 31, 1999, the Company had a net operating loss ("NOL") that
approximated $54,100. Consequently, the Company had NOL carryforwards
available for federal income tax purposes, which expire in 2014, and no
provision has been made for federal income taxes in the accompanying
financial statements.
The following table reconciles the US statutory rate to the Company's
effective rate:
US statutory rate 34%
Creation of valuation allowance
For NOL carryforwards (34)
---------
Effective tax rate -%
8
<PAGE>
3. Income Taxes, continued:
The primary components of the Company's 1999 deferred tax assets and
the related valuation allowance are as follows:
Gross deferred tax asset for NOL carryforwards $18,400
Valuation allowance for NOL carryforwards (18,400)
---------
Net deferred income tax asset $ -
======
Management has determined that the realization of the NOL benefits is
not assured and has created a valuation allowance for the entire amount
of such benefits.
4. Capital Stock Issued for Services
In 1999, the Company issued 1,232,000 shares of common stock to
non-employee consultants for consulting services rendered. The value of
the common stock, based on the selling price of the stock at the date
of issuance, was $36,960, which has been included in organization
costs.
5. Stock Option Plan:
During 1999, the Board of Directors (the "Board") of the Company
adopted, with the approval of stockholders, a Stock Option Plan. In
2000, the Board superseded that plan and created a new Stock Option
Plan (the "Plan"), pursuant to which it is authorized to grant options
to purchase up to 1.5 million shares of common stock to the Company's
key employees, officers, directors, consultants, and other agents and
advisors. The Plan is intended to permit stock options granted to
employees under the Plan to qualify as incentive stock options under
Section 422 of the Internal Revenue Code of 1986, as amended
("Incentive Stock Options"). All options granted under the plan which
are not intended to qualify as Incentive Stock Options are deemed to
be non-qualified ("Non-Statutory Stock Options").
The Plan will be administered by a committee of the Board of Directors
("Stock Option Committee") 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 Incentive 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 (determined at the
time of grant) of stock for which an employee may exercise Incentive
Stock Options under all plans of the Company shall not exceed $1O0,000
per calendar year. If any employee shall have the right to exercise
any Options in excess of $100,000 during any calendar year, the
options in excess of $100,000 shall be deemed to be Non-Statutory
Stock Options. The Stock Option Committee will determine the rights
and terms of all Non-Statutory Options, including price, duration,
transferability, and limitations on exercise.
9
<PAGE>
6. Fair Value of Financial Instruments:
The Company's financial instruments include cash and accounts payable
for which the carrying amount approximates fair value due to the short
maturity of the instruments.
7. Related Party Transactions:
Effective January 1, 2000, the Company entered into a one year
employment agreement with its President, providing for an annual
salary of $75,000. In October, 2000, the Company entered into a new
four-year employment agreement with its President, effective January
1, 2001. The agreement provides for annual compensation of $90,000 and
payment of certain fringe benefits, including use of an automobile.
Additionally, the agreement provides for the issuance of non-statutory
options (not covered by the Stock Option Plan discussed in Note 5) to
purchase 250,000 shares of common stock at $0.17 per shares and
250,000 shares of at $0.17 per shares and
During 1999, the Company paid approximately $10,000 to one of its
stockholders for legal services rendered in connection with issuance of
the Company's common stock. The amount has been included as a reduction
of additional paid-in capital.
8. Commitments:
In June 2000, the Company entered into commission agreements with two
of its sales representatives. Under the terms of the contracts,
expiring on December 30, 2001, the representatives are entitled to
commissions based on certain percentages of sales, as defined in the
agreements which may be renewed annually. However, the commission from
sales will be paid over 4-year terms at defined percentages.
The Company entered into a consulting agreement with one of its
minority stockholders to manage the Company's sales force effective
June 2000. The contract, which expires in May 2001, provides for
monthly payments of $5,000.
9. Subsequent Events:
Subsequent to June 30, 2000, the Company issued 240,000 shares of its
common stock, and stock options for the purchase of 1,135,000 shares
of common stock in exchange for certain consulting services provided
by non-employee consultants. The value of the common stock will be
based on the fair market value of the services or the selling price of
the stock at the date of issuance, whichever is more readily
determinable. The value of the options will be determined in
accordance with the provisions of SAFS No. 123.
10
<PAGE>
PART IV
ITEM 1. EXHIBIT INDEX.
Exhibit
Number Description
------- -----------
2.1 Articles of Incorporation
2.2 By-laws
3.1 Incentive Stock Option Plan and Form of Option
3.2 Form of Option Given to Outside Consultants in Exchange for Services
6.1 Employment Agreement with Norman Gardner
10.1 Consent of Accountant
27.1 Financial Data Schedule
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, there unto duly authorized.
LaserLock Technologies, Inc.
(Registrant)
Date: November 9, 2000 By: /S/Norman Gardner
Norman Gardner
President
In accordance with the requirements of the Securities Exchange Act of 1934,
this Disclosure Statement has been signed by the following persons in the
capacities and on the dates stated.
Signature Title Date
President and November 9, 2000
/S/Norman Gardner------ a Director
Norman Gardner
Director November 9, 2000
/S/Michael Prevot-------
Michael Prevot
<PAGE>
EX-2.1
ARTICLES OF INCORPORATION
FILED C28190-99 ARTICLES OF INCORPORATION
NOV 10 1999 OF
LASERLOCK TECHNOLOGIES, INC.
I, the person hereinafter named as incorporator, for the purpose of
associating to establish a corporation, under the provisions and subject to the
requirements of Title 7, Chapter 78 of Nevada Revised Statutes, and the acts
amendatory thereof, and hereinafter sometimes referred to as The General
Corporation Law of the State of Nevada, do hereby adopt and make the following
Articles of Incorporation.
FIRST: The name of the corporation (hereinafter called the Corporation) is
LaserLock Technologies, Inc.
SECOND: The name of the Corporation's residnt agent in the State of Nevada is
CSC Services of Nevada, Inc. and the street address of the said
resident agent where process may be served on the Corporation is 502
East John St., Carson City, 89706. The mailing address and the street
address of the said resident agent are identical.
THIRD: The number of shares the Corporation is authorized to issue is Fifty
Million (50,000,000), of which Forty Million (40,000,000) are to be
Common shares and Ten Million (10,000,000) are to be Preferred shares,
all of which have a par value of $0.001 each.
FOURTH: The governing board of the Corporation shall be styled as a "Board of
Directors", and any member of said Board shall be styled as a
"Director." The number of members constituting the first Board of
Directors of the Corporation is one; and the name and the post office
box or street address, either residence or business , of said member
is as follows:
NAME ADDRESS
----------------- ------------------------------
Norman Gardner 529 Righters Mill Road
Penn Valley, PA 19072
The number of directors of the Corporation may be increased or decreased in
the manner provided in the Bylaws of the Corporation provided, that the number
of directors shall be less than one. In the interim between elections of
directors by stockholders entitled to vote, all vacancies, including vacancies
caused by an increase in the number of directors and including vacancies
resulting from the removal of directors by the stockholders entitled to vote
which are not filled by said stockholders, may be filled by the remaining
directors, though less than a quorum.
<PAGE>
FIFTH: The name and the post office box or street address, either residenc or
business, of the incorporator signing these Artcles of incorporation
are as follows:
NAME ADDRESS
----------------- ------------------------------
Sara M. Weisser Schneider Harrison Segal & Lewis LLP
1600 Market Street, Suite 3600
Philadelphia, PA 19103
SIXTH: The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by the General Corporation
Law of the State of Nevada, as the same may be amended and
supplemented.
SEVENTH: The Corporation shall, to the fullest extent permitted by the General
Corporation Law of the State of Nevada, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have power
to indemnify under said Law from and against any and all of the
expenses, liabilities, or other matters referred to in or covered by
said Law, and the indemnification provided for herein shall not be
deemed exclusive of any other rights to which those indemnified may be
entitled under any Bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a
director, officer, employee, or agent and shall inure to the benefit
of the heirs, executors, and administrators of such a person.
EIGHTH: The Corporation reserves the right to amend, alter, change, or repeal
any provision contained in these Articles of Incorporation in the
manner now or hereafter prescribed by statute, and all rights
conferred upon stockholders herein are granted subject to this
reservation.
IN WITNESS WHEREOF, I do hereby execute these Articles of Incorporation on
the 9th day of November, 1999.
/s/Sara M. Weisser
------------------
Sara M. Weisser, Incorporator
<PAGE>
EX-2.2
BYLAWS
OF
LASERLOCK TECHNOLOGIES
ARTICLE I
OFFICES
The principal office of the Corporation in the State of Nevada shall be
located at 837 Lindy Lane, Bala Cynwyd Pennsylvania. The Corporation may have
such other offices, either within or without the State of Nevada, as the Board
of Directors may designate or as the business of the Corporation may require
from time to time.
ARTICLE II
SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the shareholders shall be held
on the first day in the month of July in each year, beginning with the year
2001, at the hour of one o'clock p.m., for the purpose of electing Directors and
for the transaction of such other business as may come before the meeting. If
the day fixed for the annual meeting shall be a legal holiday, such meeting
shall be held on the next business day. If the election of Directors shall not
be held on the day designated herein for any annual meeting of the shareholders,
or at any adjournment thereof, the Board of Directors shall cause the election
to be held at a special meeting of the shareholders as soon thereafter as soon
as conveniently may be.
SECTION 2. Special Meetings. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the President or by the Board of Directors, and shall be called by the President
at the request of the holders of not less than fifty percent (50%) of all the
outstanding shares of the Corporation entitled to vote at the meeting.
SECTION 3. Place of Meeting. The Board of Directors may designate any place,
either within or without the State of Nevada, unless otherwise prescribed by
statute, as the place of meeting for any annual meeting or for any special
meeting. A waiver of notice signed by all shareholders entitled to vote at a
meeting may designate any place, either within or without the State of Nevada,
unless otherwise prescribed by statute, as the place for the holding of such
meeting. If no designation is made, the place of the meeting will be the
principal office of the Corporation.
SECTION 4. Notice of Meeting. Written notice stating the place, day and hour of
the meeting and, in case of a special meeting, the purpose or purposes for which
the meeting is called, shall unless otherwise prescribed by statute, be
delivered not less than ten (10) days nor more than sixty (60) days before the
date of the meeting, to each shareholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail, addressed to the shareholder at his/her address as it
appears on the stock transfer books of the Corporation, with postage thereon
prepaid.
SECTION 5. Closing of Transfer Books or Fixing of Record. For the purpose of
determining shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or shareholders entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors of the Corporation may provide
that the stock transfer books shall be closed for a stated period, but not to
exceed in any case fifty (50) days. If the stock transfer books shall be closed
for the purpose of determining shareholders entitled to notice of or to vote at
a meeting of shareholders, such books shall be closed for at least ten (10) days
immediately preceding such meeting. In lieu of closing the stock transfer books,
the Board of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than fifty
(50) days and, in case of a meeting of shareholders, not less than ten (10) days
prior to the date on which the particular action requiring such determination of
shareholders is to be taken. If the stock transfer books are not closed and no
record date is fixed for determination of shareholders entitled to notice of or
to vote at a meeting of shareholders, or shareholders entitled to receive
payment of a dividend, the date on which notice of the meeting is mailed or the
date on which the resolution of the Board of Directors declaring such dividend
is adopted, as the case may be, shall be the record date for such determination
of shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
SECTION 6. Voting Lists. The officer or agent having charge of the stock
transfer books for shares of the Corporation shall make a complete list of the
shareholders entitled to vote at each meeting of shareholders or at any
adjournment thereof, arranged in alphabetical order, with the address of and the
number of shares held by each. Such list shall be produced and kept open at the
time and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting for the purposes thereof.
SECTION 7. Quorum. A majority of the outstanding shares of the Corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than a majority of the outstanding shares
are represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. The shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
SECTION 8. Proxies. At all meetings of shareholders, a shareholder may vote in
person or by proxy executed in writing by the shareholder by his/her duly
authorized attorney-in-fact. Such proxy shall be filed with the secretary of the
Corporation before or at the time of the meeting.
SECTION 9. Voting of Shares. Each outstanding share entitled to vote shall be
entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders.
SECTION 10. Voting of Shares by Certain Holders. Shares standing in the name of
another corporation may be voted by such officer, agent or proxy as the Bylaws
of such corporation may prescribe or, in the absence of such provision, as the
Board of Directors of such corporation may determine. Shares held by an
administrator, executor, guardian or conservator may be voted by him, either in
person or by proxy, without a transfer of such shares into his name. Shares
standing in the name of a trustee may be voted by him, either in person or by
proxy, but no trustee shall be entitled to vote shares held by him without a
transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver, and the
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 to do so be contained
in an appropriate order of the court by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such shares
until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the Corporation shall not be voted,
directly or indirectly, at any meeting, and shall not be counted in determining
the total number of outstanding shares at any given time.
SECTION 11. Informal Action by Shareholders. Unless otherwise provided by law,
any action required to be taken at a meeting of the shareholders, or any other
action which may be taken at a meeting of the shareholders, may be taken without
a meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the shareholders entitled to vote with respect to the subject
matter thereof.
ARTCLE III
BOARD OF DIRECTORS
SECTION 1. General Powers. The Board of Directors shall be responsible for the
control and management of the affairs, property and interests of the Corporation
and may exercise all powers of the Corporation, except as are in the Articles of
Incorporation or by statute expressly conferred upon or reserved to the
shareholders.
SECTION 2. Number, Tenure and Qualifications. The number of directors of the
Corporation shall be fixed by the Board of Directors, but in no event shall be
less than one (1). Each director shall hold office until the next annual meeting
of shareholders and until his/her successor shall have been elected and
qualified.
SECTION 3. Regular Meetings. A regular meeting of the Board of Directors shall
be held without other notice than this Bylaw immediately after, and at the same
place as, the annual meeting of shareholders. The Board of Directors may
provide, by resolution, the time and place for the holding of additional regular
meetings without notice other than such resolution.
SECTION 4. Special Meetings. Special meetings of the Board of Directors may be
called by or at the request of the President or any two directors. The person or
persons authorized to call special meetings of the Board of Directors may fix
the place for holding any special meeting of the Board of Directors called by
them.
SECTION 5. Notice. Notice of any special meeting shall be given at least one (1)
day previous thereto by written notice delivered personally or mailed to each
director at his business address, or by telegram. If mailed, such notice shall
be deemed to be delivered when deposited in the United States mail so addressed,
with postage thereon prepaid. If notice be given by telegram, such notice shall
be deemed to be delivered when the notice be given to the telegraph company. Any
directors may waive notice of any meeting. The attendance of a director at a
meeting shall constitute a waiver 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 6. Quorum. A majority of the number of directors fixed by Section 2 of
this Article shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, but if less than such majority is present at
a meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice.
SECTION 7. Telephonic Meeting. A meeting of the Board of Directors may be had by
means of a telephone conference or similar communications equipment by which all
persons participating in the meeting can hear each other, and the participation
in a meeting under such circumstances shall constitute presence at the meeting.
SECTION 8. Manner of Acting. The act of the majority of the directors present at
a meeting at which a quorum is present shall be the act of the Board of
Directors.
SECTION 9. Action Without a Meeting. Any action that may be taken by the Board
of Directors at a meeting may be taken without a meeting if a consent in
writing, setting forth the action so to be taken, shall be signed before such
action by all of the directors.
SECTION 10. Vacancies. Any vacancy occurring in the Board of Directors may be
filled by the affirmative vote of a majority of the remaining directors though
less than a quorum of the Board of Directors, unless otherwise provided by law.
A director elected to fill a vacancy shall be elected for the unexpired term of
his/her predecessor in office. Any directorship to be filled by reason of an
increase in the number of directors may be filled by election by the Board of
Directors for a term of office continuing only until the next election of
directors by the shareholders.
SECTION 11. Resignation. Any director may resign at any time by giving written
notice to the Board of Directors, the President or the Secretary of the
Corporation. Unless otherwise specified in such written notice such resignation
shall take effect upon receipt thereof by the Board of Directors or such
officer, and the acceptance of such resignation shall not be necessary to make
it effective.
SECTION 12. Removal. Any director may be removed with or without cause at any
time by the affirmative vote of shareholders holding of record in the aggregate
at least a majority of the outstanding shares of stock of the Corporation at a
special meeting of the shareholders called for that purpose, and may be removed
for cause by action of the Board.
SECTION 13. Compensation. By resolution of the Board of Directors, each director
may be paid for his/her expenses, if any, of attendance at each meeting of the
Board of Directors, and may be paid a stated salary as director or a fixed sum
for attendance at each meeting of the Board of Directors or both. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
SECTION 14. Contracts. No contract or other transaction between this Corporation
and any other corporation shall be impaired, affected or invalidated, nor shall
any director be liable in any way by reason of the fact that one or more of the
directors of this Corporation is or are interested in, or is a director or
officer, or are directors or officers of such other corporations, provided that
such facts are disclosed or made known to the Board of Directors, prior to their
authorizing such transaction. Any director, personally and individually, may be
a party to or may be interested in any contract or transaction of this
Corporation, and no directors shall be liable in any way by reason of such
interest, provided that the fact of such interest be disclosed or made known to
the Board of Directors prior to their authorization of such contract or
transaction, and provided that the Board of Directors shall authorize, approve
or ratify such contract or transaction by the vote (not counting the vote of any
such Director) of a majority of a quorum, notwithstanding the presence of any
such director at the meeting at which such action is taken. Such director or
directors may be counted in determining the presence of a quorum at such
meeting. This Section shall not be construed to impair, invalidate or in any way
affect any contract or other transaction which would otherwise be valid under
the law (common, statutory or otherwise) applicable thereto.
SECTION 15. Committees. The Board of Directors, by resolution adopted by a
majority of the entire Board, may from time to time designate from among its
members an executive committee and such other committees, and alternate members
thereof, as they may deem desirable, with such powers and authority (to the
extent permitted by law) as may be provided in such resolution. Each such
committee shall serve at the pleasure of the Board.
SECTION 16. 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 presumed to have assented to the action taken unless his/her
dissent shall be entered into the minutes of the meeting or unless he/she shall
file written dissent to such action with the person acting as the Secretary of
the meeting before the adjournment thereof, or shall forward such dissent by
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
OFFICERS
SECTION 1. Number. The officers of the Corporation shall be a President, one or
more Vice Presidents, a Secretary, and a Treasurer, each of whom shall be
elected by the Board of Directors. Such other officers and assistant officers as
may be deemed necessary may be elected or appointed by the Board of Directors,
including a Chairman of the Board. In its discretion, the Board of Directors may
leave unfilled for any such period as it may determine any office except those
of President and Secretary. Any two or more offices may be held by the same
person. Officers may be directors or shareholders of the Corporation.
SECTION 2. Election and Term of Office. The officers of the Corporation to be
elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after each annual
meeting of the shareholders. If the election of officers shall not be held at
such meeting, such election shall be held as soon thereafter as conveniently may
be. Each officer shall hold office until his/her successor shall have been duly
elected and shall have qualified, or until his/her death, or until he/she shall
resign or shall have been removed in the manner hereinafter provided.
SECTION 3. Resignation. Any officer may resign at any time by giving written
notice of such resignation to the Board of Directors, or to the President or the
Secretary of the Corporation. Unless otherwise specified in such written notice,
such resignation shall take effect upon receipt thereof by the Board of
Directors or by such officer, and the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 4. Removal. Any officer or agent may be removed by the Board of
Directors whenever, in its judgment, the best interests of the Corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights, and such appointment shall
be terminable at will.
SECTION 5. Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or otherwise, may be filled by the Board of Directors
for the unexpired portion of the term.
SECTION 6. President. The President shall be the principal executive officer of
the Corporation and, subject to the control of the Board of Directors, shall in
general supervise and control all of the business and affairs of the
Corporation. He/she shall, when present, preside at all meetings of the
shareholders and of the Board of Directors, unless there is a Chairman of the
Board, in which case the Chairman will preside. The President may sign, with the
Secretary or any other proper officer of the Corporation thereunto authorized by
the Board of Directors, certificates for shares of the Corporation, any deeds,
mortgages, bonds, contracts, or other instruments which the Board of Directors
has authorized to be executed, except in cases where the 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, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
SECTION 7. Vice President. In the absence of the President or in event of
his/her death, inability or refusal to act, the Vice President shall perform the
duties of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. The Vice President shall
perform such other duties as from time to time may be assigned by the President
or by the Board of Directors. If there is more than one Vice President, each
Vice President shall succeed to the duties of the President in order of rank as
determined by the Board of Directors. If no such rank has been determined, then
each Vice President shall succeed to the duties of the President in order of
date of election, the earliest date having first rank.
SECTION 8. Secretary. The Secretary shall: (a) keep the minutes of the
proceedings of the shareholders and of the Board of Directors in one or more
minute book provided for that purpose; (b) see that all notices are duly given
in accordance with the provisions of these Bylaws or as required by law; (c) be
custodian of the corporate records and of the seal of the Corporation and see
that the seal of the Corporation is affixed to all documents, the execution of
which on behalf of the Corporation under its seal is duly authorized; (d) keep a
register of the post office address of each shareholder which shall be furnished
to the Secretary by such shareholder; (e) sign with the president certificates
for shares of the Corporation, the issuance of which shall have been authorized
by resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the Corporation; and (g) in general perform all duties
incident to the office of the Secretary and such other duties as from time to
time may be assigned by the President or by the Board of Directors.
SECTION 9. Treasurer. The Treasurer shall: (a) have charge and custody of and be
responsible for all funds and securities of the Corporation; (b) receive and
give receipts for moneys due and payable to the Corporation from any source
whatsoever, and deposit all such moneys in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with the provisions of Article VI of these Bylaws; and (c) in general perform
all of the duties incident to the office of Treasurer and such other duties as
from time to time may be assigned to him by the President or by the Board of
Directors.
SECTION 10. Salaries. The salaries of the officers shall be fixed from time to
time by the Board of Directors, and no officer shall be prevented from receiving
such salary by reason of the fact that he/she is also a director of the
corporation.
SECTION 11. Sureties and Bonds. In case the Board of Directors shall so require
any officer, employee or agent of the Corporation shall execute to the
Corporation a bond in such sum, and with such surety or sureties as the Board of
Directors may direct, conditioned upon the faithful performance of his/her
duties to the Corporation, including responsibility for negligence for the
accounting for all property, funds or securities of the Corporation which may
come into his/her hands.
SECTION 12. Shares of Stock of Other Corporations. Whenever the Corporation is
the holder of shares of stock of any other corporation, any right of power of
the Corporation as such shareholder (including the attendance, acting and voting
at shareholders' meetings and execution of waivers, consents, proxies or other
instruments) may be exercised on behalf of the Corporation by the President, any
Vice President or such other person as the Board of directors may authorize.
ARTICLE V
INDEMNITY
The Corporation shall indemnify its directors, officers and employees as
follows:
Every director, officer, or employee of the Corporation shall be indemnified by
the Corporation against all expenses and liabilities, including counsel fees,
reasonably incurred by or imposed upon him/her in connection with any proceeding
to which he/she may be made a party, or in which he/she may become involved, by
reason of being or having been a director, officer, employee or agent of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of the Corporation, partnership, joint
venture, trust or enterprise, or any settlement thereof, whether or not he/she
is a director, officer, employee or agent at the time such expenses are
incurred, except in such cases wherein the director, officer, employee or agent
is adjudged guilty of willful misfeasance or malfeasance in the performance of
his/her duties; provided that in the event of a settlement the indemnification
herein shall apply only when the Board of Directors approves such settlement and
reimbursement as being for the best interests of the Corporation.
The Corporation shall provide to any person who is or was a director, officer,
employee or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of the corporation,
partnership, joint venture, trust or enterprise, the indemnity against expenses
of a suit, litigation or other proceedings which is specifically permissible
under applicable law.
The Board of Directors may, in its discretion, direct the purchase of liability
insurance by way of implementing the provisions of this Article.
ARTICLE VI
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 evidences of indebtedness shall be issued in its name unless authorized by a
resolution of the Board of Directors. Such authority may be general or confined
to specific instances.
SECTION 3. Checks, Drafts, etc. All checks, drafts or other orders for the
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
resolution of the Board of Directors.
SECTION 4. Deposits. All funds of the Corporation not otherwise employed 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 VII
SHARES OF STOCK
SECTION 1. Certificates for Shares. Certificates representing shares of the
Corporation shall be in such a form as shall be determined by the Board of
Directors. Such certificates shall be signed by the President and by the
Secretary or by such other officers authorized by law and by the Board of
Directors to do so, and sealed with the corporate seal. All certificates for
shares shall be consecutively numbered or otherwise identified. The name and
address of the person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered on the stock transfer
books of the Corporation. All certificates surrendered to the Corporation for
transfer shall be canceled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
canceled, except that in the case of a lost, destroyed or mutilated certificate,
a new one may be issued therefor upon such terms and indemnity to the
Corporation as the Board of Directors may prescribe.
SECTION 2. Transfer of Shares. Transfer of shares of the Corporation shall be
made only on the stock transfer books of the Corporation by the holder of record
thereof or by his/her legal representative, who shall furnish proper evidence of
authority to transfer, or by his/her attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the Corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the Corporation shall be deemed by the
Corporation to be the owner thereof for all purposes. Provided, however, that
upon any action undertaken by the shareholders to elect S Corporation status
pursuant to Section 1362 of the Internal Revenue Code and upon any shareholders'
agreement thereto restricting the transfer of said shares so as to disqualify
said S Corporation status, said restriction on transfer shall be made a part of
the Bylaws so long as said agreement is in force and effect.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the Corporation shall begin on the first day of January and
end on the thirty first day of December of each year.
ARTICLE IX
DIVIDENDS
The Board of Directors may from time to time declare, and the corporation may
pay, dividends on its outstanding shares in the manner and upon the terms and
conditions as it deems appropriate.
ARTICLE X
CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be circular in
form and shall have inscribed thereon the name of the Corporation and the state
of incorporation and the words "Corporate Seal".
ARTICLE XI
WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be given to
any shareholder or director of the Corporation under the provisions of these
Bylaws or under the provisions of the Articles of Incorporation or under the
provisions of the applicable Business Corporation Act, a waiver thereof 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 XII
AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be adopted
by the Board of Directors at any regular or special meeting of the Board of
Directors.
The above Bylaws are certified to have been adopted by the Board of Directors of
the Corporation on October 15, 2000.
/s/Norman Gardner
President and Secretary
<PAGE>
EX-3.1
LASERLOCK TECHNOLOGIES, INC.
STOCK OPTION PLAN
LaserLock Technologies, Inc., a corporation organized and existing under
the laws of the State of Nevada (hereinafter referred to as the "Company"),
hereby adopts the following Stock Option Plan for certain of Its employees and
outside consultants:
1. PURPOSE.
-------
This Stock Option Plan (herein referred to as the "Plan") is intended to
advance the interests of the Company by providing employees with an opportunity
to acquire a proprietary interest in the Company and an additional incentive to
promote its success and to encourage them to remain in the employ of the
Company. The Plan is intended to permit stock options granted to employees under
the Plan to qualify as incentive stock options, herein referred to as "Incentive
Stock Options", under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"). All options granted under the plan which
are not intended to qualify as Incentive Stock Options shall herein be referred
to as "Non- Statutory Options". All options granted under the Plan, including
Incentive Stock Options, and Non-Statutory Options are referred to as "Options".
2. ADMINISTRATION OF PLAN.
------------------------
The Plan shall be administered by a Stock Option Committee (the
"Committee") consisting of directors of the Company who shall be appointed by
its Board of Directors. The Committee may adopt rules and regulations from time
to time for carrying out the Plan. The interpretation and construction of any
provision of the Plan by the Committee shall be final and conclusive, The
Committee may consult with counsel, who may be counsel to the Company, and shall
not incur any liability for any action taken in good faith in reliance upon the
advice of counsel.
3. ELIGIBILITY.
------------
All employees of the Company and all outside consultants providing services
to the Company shall be eligible to have options granted to them. The Committee
shall grant Options only to employees of the Company and Company outside
consultants of the Company who perform services of major importance in the
management, operation end development of the business of the Company, and it
shall determine the number of shares to be allocated to each Option. The Company
shall effect the grant of Options under the Plan in accordance with
determinations made by the Committee pursuant to the provisions of the Plan by
execution and delivery of written Instruments in a form approved by the
Committee. All persons to whom Incentive Stock Options are granted must be
employees of the Company.
<PAGE>
4. STOCK.
-----
The Company has authorized the Committee to appropriate and to grant
Options for and to issue and sell for the purpose of the Plan an aggregate of
1,500,000 shares of the common stock of the Company. Options to purchase any
shares issued pursuant to the Plan that, for any reason expire or are terminated
unexercised may be reissued under the Plan. The Company shall not be required to
Issue or deliver any certificate for shares of its stock purchased upon the
exercise of any part of an Option before (i)completion of any registration or
other qualification of such shares under any state or federal law or ruling or
regulation of any governmental regulatory body that the Company shall, in its
sole discretion, determine is necessary or advisable, or (ii) the Board of
Directors shall have been advised by counsel that the issuance of such shares is
exempted from any such registration or qualification of such shares. In this
regard the Committee shall be able to require the execution of an 'investment
letter' in standard form prior to the Issuance of any shares purchased upon the
exercise of any part of an Option. Before the granting of any Option hereunder,
Optionee must agree that no share of stock transferred to him pursuant to this
Plan may be disposed of by him within two (2) years from the date of the
granting of the Option nor within one (1) year after the transfer of such share
to said Optionee or such Option will not be qualified as an Incentive Stock
Option.
5. TAX CHARACTER OF OPTIONS.
---------------------------
The Committee shall have discretion to designate whether Options shall be
Incentive Stock Options or Non-Statutory Options. Subject to the limitations
described in Sections 4,11, 16 and 17, all Options granted to employees of
Company shall be Incentive Stock Options, unless the Committee determines
otherwise.
6. PRICE.
------
Except as to Options to which the provisions of paragraph 16 and 17 apply,
the purchase price of each share of stock covered by an Option granted hereunder
shall be equal to the fair market value per share of the Company's common stock
on the date the Option Is granted. As to Options to which the provisions of
paragraph 16 apply the purchase price of each share of stock covered by such
Option granted hereunder shall be at least one hundred ten percent (110%) of the
fair market value per share of the Company's common stock on the date the Option
is granted. If the stock is traded in the over-the-counter market, such fair
market value shall be deemed to be the mean between the asked and the bid prices
on such day as reported by the NASD. If the stock is traded on an exchange, such
fair market value shall be deemed to be the mean of the high and low prices at
which it is quoted or traded on such day on the exchange on which it generally
has the greatest trading volume. If the stock is not traded on either an
over-the-counter market or on an exchange, the fair market value shall be set by
the Committee in good faith based upon all relevant facts and circumstances
pursuant to any and all regulations issued by the internal Revenue Service.
<PAGE>
7. DURATION AND EXERCISE OF OPTIONS.
------------------------------------
A. Except as to Options to which the provisions of paragraph 16 and 17
hereof apply, the Option period shall be ten (10) years or less from the date
the Option is granted, and as to Options to which the provisions of paragraph 16
apply, the Option period shall be five (5) years or less from the date the
Option is granted, except that either such period shall be reduced with respect
to any Option as outlined below in the event of death or termination of
employment or retirement of the Optionee; provided that the Committee may, in
the case of merger, consolidation, dissolution or liquidation, accelerate the
expiration date and the dates on which any part of the Option shall be
exercisable for all of the shares covered thereby, but the effectiveness of such
acceleration, and any exercise of the Option pursuant thereto in excess of the
number of shares for which it would have been exercisable in the absence of such
acceleration, shall be conditioned upon the consummation of the merger,
consolidation, dissolution or liquidation.
B. The exercise of any Option and delivery of the optioned shares shall be
contingent upon receipt by the Company of the full purchase price in cash.
C. No Incentive Stock Option may be exercised more than thirty (30) days
after termination of employment of the Optionee except as hereinafter provided.
D. Except as otherwise provided herein, or unless otherwise determined by
the Committee, every Option granted hereunder shall, upon its grant, be
immediately exercisable. The Committee shall have the right to set any vesting
schedule or delay of exercisability it deems appropriate.
E. Incentive Stock Options granted under the Plan may be exercised, if
otherwise timely, (I) within three (3) months after retirement, other than
retirement by reason of disability, of the Optionee at or after the age of
sixty-five (65) years, if such retirement occurs on or after one year following
the grant of any incentive Stock Option hereunder, and (ii) within three (3)
months after retirement occurring at any age by reason of disability. In any
such case, the Incentive Stock Option may not be exercised for more than the
number of shares, if any, as to which if was exercisable by the Optionee
immediately before such retirement; provided that if such retirement was by
reason of disability, said Option shall in any case be exercisable for at least
fifty percent (50%) of the shares covered thereby; and provided further that if
such retirement occurred when or after the Optionee attained the age of
sixty-five (65) years, said Option shall be exercisable for all of the shares
covered thereby.
F. If an Optionee shall die while employed by the Company or within three
(3) months after retirement, such incentive Stock Option may be exercised (to
the extent that the Optionee would have been entitled to do so at the date of
this death) by the legatees, personal representative or distributees of the
Optionee during the balance of the term thereof or within one year of the date
of the Optionee's death, whichever is shorter.
G. if Optionee is at the time of exercise, a person who is regularly
required to report his ownership and changes of ownership of the common stock of
the Company to the Securities and Exchange Commission and is subject to short
swing profit liability under the provisions of Section 16(b) of the Securities
Exchange Act of 1934 as the same, or any replacement rule, now exists, or may,
from time to time, be amended, then the Optionee may only exercise Options and
Release Rights during the period beginning on the third business day and ending
on the twelfth business day following the release for publication of quarterly
or annual summary statements of sales and earnings. This condition shall be
deemed to be satisfied if the specified financial data appears (I) on a wire
service, (ii) in a financial news service, (iii) in a newspaper of general
circulation, or (iv) is otherwise made publicly available, and shall remain in
effect so long as it does not violate the law or any rule or regulation adopted
by appropriate governmental authority,
- 6 -
H. Options may be exercised in whole or in part, but only with respect to
whole shares of stock. The Committee shall have the right to set any minimum
amount on the number of shares which must be exercised at any one time as it
deems appropriate.
8. NON-TRANSFERABILITY OF OPTIONS.
-------------------------------
An Incentive Stock Option, by its terms, shall not be transferable
otherwise than by will or by the laws of descent and distribution, and an
Incentive Stock Option may be exercised during the lifetime of the Optionee only
by him.
9. EFFECT OF STOCK DIVIDENDS, ETC.
----------------------------------
The Committee shall make appropriate adjustments in the price of the shares
and the number allotted or subject to allotment if there are any changes in the
common stock of the Company by reason of stock dividends, stock splits, reverse
stock splits, recapitalizations, mergers or consolidations.
10. REORGANIZATION.
--------------
If (a) the Company is merged or consolidated with another corporation and
the Company is not the surviving corporation, (b) all or substantially all of
the property is acquired by another corporation, or (o) the Company is
reorganized, then the Company, or the corporation assuming the obligations of
the Company, shall by action of its Board of Directors either:
(i) make equitable provisions so that the excess of the aggregate fair
market value of the shares subject to the Stock Options over the option price of
such shares immediately after the merger, consolidation or reorganization of the
Company, is equivalent to the excess of the aggregate fair market value of the
- 7 -
shares subject to such Stock Options over the option price of such shares
immediately before such merger, consolidation or reorganization of the Company,
or
(ii) give written notice to the employee that the Options shall be
terminated if they are not exorcised within a prescribed period after the date
of such notice.
11. LIMITATIONS ON INCENTIVE STOCK OPTIONS.
------------------------------------------
The aggregate fair market value (determined at the time of grant) of stock
for which an employee may exercise Incentive Stock Options under all plans of
the Company shall not exceed $1O0,000 per calendar year. If any employee shall
have the right to exercise any Options in excess of $100,000 during any calendar
year, the options in excess of $100,000 shall be deemed not to be Incentive
Stock Options.
12 EXPIRATION AND TERMINATION OF THE PLAN.
-------------------------------------------
Options may be granted under the Plan at any time until the Plan is
terminated by the Board of Directors of the Company or until such earlier date
when termination of the Plan shall be required by applicable low. If not sooner
terminated, the Plan shall terminate automatically on that date which is ten
years from the earlier of the date on which the Plan was originally approved by
the shareholders of the Company or the date on which this' Plan was adopted.
- 8 -
13. AMENDMENTS.
----------
The Board of Directors of the Company may from time to time make such
changes in and additions to the Plan as it may deem proper; provided that no
change shall be made that increases (except pursuant to Section 9) the total
number of shares covered by the Plan or effects any change in who may receive
Options under the Plan or materially Increases the benefits accruing to
Optionees hereunder unless such change Is authorized by the holders of the
common stock of the Company. Notwithstanding the foregoing, the Board of
Directors of the Company may amend the Plan, without stockholder approval, to
the extent necessary to cause Incentive Stock Options granted under the Plan to
meet the requirements of Section 422 of the Internal Revenue Code.
14. INTERPRETATION.
--------------
The terms of this Plan concerning Incentive Stock Options are subject to
all present and future regulations and rulings of the Secretary of the Treasury
or his delegate relating to the qualification of Incentive Stock Options under
Section 422 of the Internal Revenue Code. If any provision of the Plan conflicts
with any such regulation or ruling, then that provision of the Plan shall be
void and of no effect.
15. EFFECTIVE DATE OF THE PLAN.
------------------------------
This Plan shall become effective April 1, 2000, having been approved by
shareholders and adopted by the Board of Directors.
16. TEN PERCENT OR GREATER SHAREHOLDERS.
-------------------------------------
Anything to the contrary contained herein notwithstanding, no incentive
Stock Option shall be granted hereunder to any individual, if at the time such
Incentive Stock
- 9 -
Option is granted, such individual owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of Company or
its parent or subsidiary corporations, unless at the time such option is granted
the option price is at least one hundred ten percent (110%) of the fair market
value of the stock subject to the option and such option by its terms is not
exercisable after the expiration of five (5) years or less from the date of such
option is granted. Any option which does not comply with the terms of this
paragraph shall be deemed not to be an Incentive Stock Option.
17. Non-Statutory Options
----------------------
The Committee shall have the right to determine, subject to approval of the
Board of Directors, the rights and terms of all Non-Statutory Options, including
price, duration, transferability and limitations on exercise.
LASERLOCK TECHNOLOGIES, INC.
By:
----/s/Norman Gardner-----------------
Norman Gardner, President
LASERLOCK TECHNOLOGIES, INC.
STOCK OPTION AGREEMENT
[FORM]
This LaserLock Technologies, Inc. Stock Option Agreement (the "Agreement"),
by and between LaserLock Technologies, Inc., a Nevada corporation (the
"Company"), and _______________ ("Optionee"), is made effective as of this day
of ______________, 200__.
RECITALS
1. Pursuant to the LaserLock Technologies, Inc. 2000 Stock Option Plan (the
"Plan"), the Board of Directors of the Company (the "Board") has authorized the
grant of an option to purchase common stock of the Company ("Common Stock") to
Optionee, effective on the date indicated above, thereby allowing Optionee to
acquire a proprietary interest in the Company in order that Optionee will have
further incentive for continuing his or her employment by, and increasing his or
her efforts on behalf of, the Company or an Affiliate of the Company.
2. The Company desires to issue a stock option to Optionee and Optionee
desires to accept such stock option on the terms and conditions set forth below.
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
AGREEMENT
1. Option Grant. The Company hereby grants to the Optionee, as a
-------------
separate incentive and not in lieu of any fees or other compensation for his or
her services, an option to purchase, on the terms and conditions hereinafter set
forth, all or any part of an aggregate of ____________________
(________________) shares of authorized but unissued shares of Common Stock, at
the Purchase Price set forth in paragraph 2 of this Agreement.
2. Purchase Price. The Purchase Price per share (the "Option Price")
---------------
shall be $_________, which is not less than ___________________________ percent
(___%) of the fair market value per share of Common Stock on the date hereof.
The Option Price shall be payable in the manner provided in paragraph 9 below.
3. Adjustment. The number and class of shares specified in paragraph 1
----------
above, and the Option Price, are subject to appropriate adjustment in the event
of certain changes in the capital structure of the Company such as stock splits,
recapitalizations and other events which alter the per share value of Common
Stock or the rights of holders thereof. In connection with (i) any merger,
consolidation, acquisition, separation, or reorganization in which more than
fifty percent (50%) of the shares of the Company outstanding immediately before
such event are converted into cash or into another security, (ii) any
dissolution or liquidation of the Company or any partial liquidation involving
fifty percent (50%) or more of the assets of the Company, (iii) any sale of more
than fifty percent (50%) of the Company's assets, or (iv) any like occurrence in
which the Company is involved, the Company may, in its absolute discretion, do
one or more of the following upon ten days' prior written notice to the
Optionee: (a) accelerate any vesting schedule to which this option is subject;
(b) cancel this option upon payment to the Optionee in cash, to the extent this
option is then exercisable, of any amount which, in the absolute discretion of
the Company, is determined to be equivalent to any excess of the market value
(at the effective time of such event) of the consideration that the Optionee
would have received if this option had been exercised before the effective time
over the Option Price; (c) shorten the period during which this option is
exercisable (provided that this option shall remain exercisable, to the extent
otherwise exercisable, for at least ten days after the date the notice is
given); or (d) arrange that new option rights be substituted for the option
rights granted under this option, or that the Company's obligations under this
option be assumed, by an employer corporation other than the Company or by a
parent or subsidiary of such employer corporation. The actions described in this
paragraph 3 may be taken without regard to any resulting tax consequence to the
Optionee.
[OPTIONAL FOUR YEAR VESTING]
4. Option Exercise. Commencing on the date one (1) year after the date
---------------
of this Agreement the right to exercise this option will accrue as to one-fourth
( ) of the number of shares subject to this option. Thereafter, the right to
exercise the remainder of this option will accrue in twelve (12) equal quarterly
installments. Shares entitled to be, but not, purchased as of any accrual date
may be purchased at any subsequent time, subject to paragraphs 5 and 6 below.
The number of shares which may be purchased as of any such anniversary date will
be rounded up to the nearest whole number. No partial exercise of the option may
be for an aggregate exercise price of less than One Hundred Dollars ($100). In
order to exercise any part of this option, Optionee must agree to be bound by
the Company's Shareholder Buy-Sell Agreement, if any, existing at the time of
the exercise of this Option.
5. Termination of Option. The right to exercise this option will lapse
---------------------
in four (4) equal installments of the number of shares subject to this option on
each of the sixth, seventh, eighth, and ninth anniversaries of the effective
date of this Agreement. Notwithstanding any other provision of this Agreement,
this option may not be exercised after, and will completely expire on, the close
of business on the date ten (10) years after the effective date of this
Agreement, unless terminated sooner pursuant to paragraph 6 below.
6. Termination of Employment. In the event of termination of
---------------------------
Optionee's employment with the Company for any reason, this option will
terminate three (3) months after the date of the termination of Optionee's
employment, unless terminated earlier pursuant to paragraph 5 above. However,
(i) if termination is due to the death of Optionee, the Optionee's estate or a
legal representative thereof, may at any time within and including six (6)
months after the date of death of Optionee, exercise the option to the extent it
was exercisable at the date of termination; or (ii) if termination is due to
Optionee's "disability" (as determined in accordance with Section 22(e)(3) of
the Internal Revenue Code), Optionee may, at any time, within one (1) year
following the date of this Agreement, exercise the option to the extent it was
exercisable at the date of termination. If the Optionee or his or her legal
representative fails to exercise the option within the time periods specified in
this paragraph 6, the option shall expire. The Optionee or his or her legal
representative may, on or before the close of business on the earlier of the
date for exercise set forth in paragraph 5 or the dates specified in paragraph 4
above, exercise the option only to the extent Optionee could have exercised the
option on the date of such termination of employment pursuant to paragraphs 4
and 5 above.
7. Repurchase Option of Company. Pursuant to Section 6.1.8 of the
-------------------------------
Plan, in the event of termination of Optionee's employment with the Company for
any reason, the Company shall have an option to repurchase ("Repurchase Option")
any Common Stock owned by the Optionee or his or her heirs, legal
representatives, successors or assigns at the time of termination, or acquired
thereafter by any of them at any time, by way of an option granted hereunder.
The Repurchase Option must be exercised, if at all, by the Company within ninety
(90) days after the date of termination upon notice ("Repurchase Notice") to the
Optionee or his or her heirs, legal representatives, successors or assigns, in
conformance with paragraph 13 below. The purchase price to be paid for the
shares subject to the Repurchase Option shall be the average trading price for
the shares of common stock of the Company over a thirty (30) day period prior to
the delivery of the Repurchase Notice. Any shares issued pursuant to an exercise
of an option hereunder shall contain the following legend condition in addition
to any other applicable legend condition:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO REPURCHASE
PROVISIONS IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND
THE SHAREHOLDER, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE
COMPANY.
2
8. Transferability. This option will be exercisable during Optionee's
---------------
lifetime only by Optionee. Except as otherwise set forth in the Plan, this
option will be non-transferable.
9. Method of Exercise. Subject to paragraph 10 below, this option may
-------------------
be exercised by the person then entitled to do so as to any shares which may
then be purchased by delivering to the Company an exercise notice in the form
attached hereto as Exhibit A and:
----------
(a) full payment of the Option Price thereof (and the amount of any
tax the Company is required by law to withhold by reason of such exercise) in
the form of:
(i) cash or readily available funds; or
(ii) delivery of Optionee's promisory note (the "Note")
substantially in the form attached hereto as Exhibit B in the amount of the
---------
aggregate Option Price of the exercised shares together with the execution and
delivery by the Optionee of the Security Agreement attached hereto as Exhibit C;
---------
or
(iii) a written request to Net Exercise, as defined in this
paragraph 9(a)(iii). In lieu of exercising this Option via cash payment or
promissory note, Optionee may elect to receive shares equal to the value of this
Option (or portion thereof being canceled) by surrender of Options at the
principal office of the Company together with notice of election to exercise by
means of a Net Exercise in which event the Company shall issue to Optionee a
number of shares of the Company computed using the following formula:
X = Y (A-B)
--------
A
where X is the number of shares of stock to be issued to Optionee; Y is the
number of shares purchasable under this Option; A is the fair market value of
the stock determined in accordance with Section 6.1.12 of the Plan; and B is the
Option Price as adjusted to the date of such calculation.
(b) payment of any withholding or employment taxes, if any.
The Company will issue a certificate representing the shares so purchased within
a reasonable time after its receipt of such notice of exercise, payment of the
Option Price and withholding or employment taxes, and execution of any other
appropriate documentation, with appropriate certificate legends.
10. Securities Laws. The issuance of shares of Common Stock upon the
----------------
exercise of the option will be subject to compliance by the Company and the
person exercising the option with all applicable requirements of federal and
state securities and other laws relating thereto. No person may exercise the
option at any time when, in the opinion of counsel to the Company, such exercise
is permitted under applicable federal or state securities laws. Nothing herein
will be construed to require the Company to register or qualify any securities
under applicable federal or state securities laws, or take any action to secure
an exemption from such registration and qualification for the issuance of any
securities upon the exercise of this option.
11. No Rights as Shareholder. Neither Optionee nor any person claiming
------------------------
under or through Optionee will be, or have any of the rights or privileges of, a
shareholder of the Company in respect of any of the shares issuable upon the
exercise of the option, unless and until this option is properly and lawfully
exercised.
12. No Right to Continued Employment. Nothing in this Agreement will
----------------------------------
be construed as granting Optionee any right to continued employment. EXCEPT AS
THE COMPANY AND OPTIONEE WILL HAVE OTHERWISE AGREED IN WRITING, OPTIONEE'S
EMPLOYMENT WILL BE TERMINABLE BY THE COMPANY, AT WILL, WITH OR WITHOUT CAUSE FOR
ANY REASON OR NO REASON. Except as otherwise provided in the Plan, the Board in
its sole discretion will determine whether any leave of absence or interruption
in service (including an interruption during military service) will be deemed a
termination of employment for the purpose of this Agreement.
3
13. Notices. Any notice to be given to the Company under the terms of
-------
this Agreement will be addressed to the Company, in care of its Secretary, at
its executive offices, or at such other address as the Company may hereafter
designate in writing. Any notice to be given to Optionee will be in writing and
delivered or mailed by registered or certified mail, return receipt requested,
postage prepaid, addressed to Optionee at the address set forth beneath
Optionee's signature in writing. Any such notice will be deemed to have been
duly given where deposited in a United States post office in compliance with the
foregoing.
14. Non-Transferrable. Except as otherwise provided in the Plan or in
-----------------
this Agreement, the option herein granted and the rights and privileges
conferred hereby will not be transferred, assigned, pledged or hypothecated in
any way (whether by operation of law or otherwise). Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of this option, or of
any right or upon any attempted sale under any execution, attachment or similar
process upon the rights and privileges conferred hereby, this option will
immediately become null and void.
15. Successor. Subject to the limitation on the transferability of the
---------
option contained herein, this Agreement will be binding upon and inure to the
benefit of the heirs, legal representatives, successors and assigns of the
parties hereto.
16. Nevada Law. This Agreement will be governed by and construed
---------------
in accordance with the laws of the State of Nevada.
17. Type of Option. The option granted in this Agreement:
----------------
[ ] Is intended to be an Incentive Stock Option ("ISO") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as
amended.
[ ] Is a non-qualified Option and is not intended to be an ISO.
18. Plan Provisions Incorporated by Reference. A copy of the Plan is
-------------------------------------------
attached hereto as Exhibit "A" and incorporated herein by this reference. In the
case of conflict between any provision in this Agreement and any provision in
the Plan or a Shareholder Buy-Sell Agreement, if any, the terms of this
Agreement shall prevail. In the case of conflict between any provision in the
Plan and a provision in a Shareholders Buy-Sell Agreement, if any, the terms of
the Plan shall prevail.
19. Term. Capitalized terms used herein, except as otherwise
----
indicated, shall have the same meaning as those terms have under the Plan.
4
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year written below.
COMPANY: LASERLOCK TECHNOLOGIES, INC.
By:________________________________
Title:_____________________________
OPTIONEE: ___________________________________
(print name)
-----------------------------------
(signature)
Address:___________________________
-----------------------------------
5
<PAGE>
EX-3.2
STOCK OPTION
VOID AFTER 3:30 P.M. OPTION FOR PURCHASE OF SHARES
______________, 2000 OF
LASERLOCK, INC.
(A Nevada Corporation)
Option for _____________ Shares Option Number 100__
THIS CERTIFIES that ___________________________________________ (hereinafter
called the "Holder"), for value received and subject to the provisions set forth
herein, is entitled to purchase from LASERLOCK, INC. (hereinafter called the
"Corporation") the number of fully paid and non-assessable shares of common
Stock (no par value per share) ("Shares") of the Corporation from issuance
through a period ending five years from the date of issuance, at a price of $
______ per Share, subject to certain adjustments, however, as to the number of
Shares purchasable and the purchase price, all as more fully set forth in the
STATEMENT OF OPTION RIGHTS available from the Company. This Option may be
exercised by the Holder hereof (but only on the conditions set forth herein and
in the STATEMENT OF OPTION RIGHTS) as to the whole or any lesser number of whole
Shares covered hereby, upon surrender of this Option with the subscription form
attached duly executed, to the Corporation at its principal office, 837 Lindy
Lane, Bala Cynwyd, PA 19004, or such other address as the Corporation may have
at the time of exercise, or may designate by notice in writing to the registered
holder hereof, at any time within the exercise period, accompanied by payment of
said purchase price (such surrender and payment being hereinafter referred to as
the exercise of this Option). If this Option is exercised in respect of less
than all of the Shares covered hereby, the Holder shall be entitled to receive a
new Option covering the number of Shares in respect of which this Option shall
not have been exercised.
The number of Shares which will be received upon the exercise of this Option is
subject to modification and adjustment upon the happening of certain events
specified in the STATEMENT OF OPTION RIGHTS provided, however, that as more
particularly set forth herein, the Corporation shall not be required to issue
any fractional Shares in connection with the exercise of this warrant.
This Option is issued subject to the condition, and every Holder hereof, by
accepting the same, agrees with any subsequent Holder hereof and with the
Corporation that this Option and all rights hereunder are issued and shall be
held subject to all of the terms, conditions, limitations and provisions set
forth in the STATEMENT OF OPTION RIGHTS, the terms and provisions of which are
incorporated herein by reference.
This Option does not confer upon the Holder hereof any rights whatsoever as a
stockholder of the Corporation. Upon the exercise of this Option, the
subscription form annexed hereto must be duly executed and the accompanying
instructions for registration of Shares filled in.
IN WITNESS WHEREOF, the Corporation has caused this Option to be issued and
authenticated by the signatures of its President and its Secretary and its
corporate seal to be affixed hereon.
LASERLOCK, INC.
By:
NORMAN GARDNER
President
ATTEST:
Secretary
<PAGE>
FORM OF EXERCISE
(To be executed by the registered Holder desiring to exercise the right to
purchase Shares evidenced by the within Option.)
The undersigned hereby exercises the right to purchase
Shares evidenced by the within Option according to the terms and
conditions thereof and herewith makes payment of the purchase price in full.
Kindly issue all Shares in accordance with the instructions given below.
Instructions for registration of Shares:
Name (Please print in block letters)
Signature Date
Street
City
State Zip Code
<PAGE>
STATEMENT OF OPTION RIGHTS
1. Exercise of option
A option may be exercised by surrendering it at the principal office of
the corporation or its transfer agent, Interwest Transfer Co., 1981 E. Murray
Holladay Rd., P.O.B. 17136, Salt Lake City, Utah 84117, or such other address as
the Corporation may designate by notice in writing to the registered Holder
hereof, with the subscription form attached to this Option duly executed, and by
paying in full lawful money of the United States, the purchase price for each
share of the Corporation as to which the Option is exercised and any applicable
taxes. As soon as practicable after the exercise of any Option, the Corporation
shall issue to or upon the order of the Holder of such Option a certificate or
certificates for the number of fully paid and non-assessable full Shares to
which he is entitled, registered in such name or names as may be directed by
him, and shall deliver such certificate or certificates to or upon the order of
such Holder. Each person in whose name any certificate for Shares is issued
shall, for all purposes, be deemed to have become the holder of record of such
Shares on the date on which the Option was surrendered and payment of the
purchase price and any applicable taxes, was made, irrespective of the date of
delivery of such certificate, except that, if the date of such surrender and
payment is a date when the stock transfer books of the Corporation are closed,
such person shall be deemed to have become the Holder of such Shares at the
close of business on the next preceding date on which the stock transfer books
are open.
2. Fractional Shares
The Corporation shall not be required to issue fractional Shares upon
exercise of Options. If, by reason of any change made in the number of Shares
purchasable upon the exercise of Options pursuant to the terms hereof, the
Holder of any Option would be entitled, upon the exercise of any rights,
evidenced thereby, to receive a fractional interest in a Share, such Holder
shall only be entitled to receive from the Corporation an amount in cash equal
to the current market value of such fractional interest.
3. Adjustments of Number of Shares Purchasable
(a) In case the Corporation shall, while this Option remains in force,
effect a recapitalization of such character that the Shares covered hereby shall
be changed into or become exchangeable for a larger or smaller number of Shares,
then thereafter, the number of Shares of the Corporation which the Holder hereof
shall be entitled to purchase hereunder, shall be increased or decreased, as the
case may be, in direct proportion to the increase or decrease in the number of
Shares of the Corporation, by reason of such recapitalization, and the purchase
price hereunder, per Share, of such recapitalized Shares shall in the case of an
increase in the number of Shares be proportionately reduced, and in the case of
a decrease in the number of Shares be proportionately increased.
(b) In case the Corporation shall, at any time prior to the exercise of
a Option, consolidate or merge with, or shall transfer its property as an
entirety to, or substantially as an entirety to, any other corporation, the
Holder of a Option who thereafter exercises the same as herein provided shall be
entitled to receive, for the purchase price per Share stated in the Option, that
number of shares or other securities or property of the corporation resulting
from such consolidation or merger or transfer to which each Share deliverable
upon exercise of the Option would have been entitled, upon such consolidation or
merger or transfer, had the Holder of such Option exercised his right to
purchase and had said Share been issued and outstanding, and had such Holder
been the holder of record of such Share at the time of such event.
(c) In case the Corporation shall at any time prior to the exercise of
a option make any distribution of its assets to holders of its Common Stock by
liquidating or partial liquidating dividend or by way of return of capital, or
other than as a dividend payable out of earnings or any surplus legally
available for dividends under the laws of the State of Nevada, then the Holder
of a option who thereafter exercises the same as herein provided after the date
of record for the determination of those holders of Common Stock entitled to
such distribution of assets, shall be entitled to receive for the purchase
price, in addition to each Share, the amount of such assets (or at the option of
the Corporation a sum equal to the value thereof at the time of such
distribution to holders of Common Stock as such value is determined by the Board
of Directors of the Corporation in good faith) which would have been payable to
such Holder had he been the holder of record of such Share receivable upon
exercise of such Option on the record date for the determination of those
entitled to such distribution.
(d) In case of the dissolution, liquidation or winding-up of the
Corporation, all rights under the Options shall terminate on a date fixed by the
Corporation, such date so fixed to be not earlier than the date of the
commencement of the proceedings for such dissolution, liquidation or winding-up
and not later than thirty days after such commencement date. In any such case of
termination of purchase rights the Corporation shall give notice of such
termination date to the registered Holder hereof.
4. Notice of Adjustment
Upon any adjustment of the purchase price and/or any increase or decrease
in the number of Shares purchasable upon the exercise of this option, then, and
in each case, the Corporation, within 30 days thereafter, shall give written
notice thereof, by first class mail, postage prepaid, addressed to the
registered Holder of this Option at the address of such Holder as shown on the
books of the Corporation which notice shall state the adjusted purchase price
and/or the increased or decreased number of shares purchasable upon the exercise
of this Option, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based.
5. Title to Option
Transfers as provided above may be made at the principal office of the
Corporation by the Holder in person or by duly authorized attorney, upon
surrender of this Option properly endorsed. Until transfer hereof on the books
of the Corporation, the Corporation may treat the registered Holder as the owner
hereof for all purposes, any other claims of any other persons to the contrary
notwithstanding. Upon receipt by the Corporation of evidence reasonably
satisfactory to it, and upon reimbursement to the Corporation of all reasonable
expenses incidental thereto, and surrender and cancellation of this Option if
mutilated, the Corporation will make and deliver a new option of like tenor, in
lieu of this Option.
6. Option Holder Has No Rights as Stockholder
The Holder of this option shall not, by reason of the ownership or
possession of the option, have any rights whatsoever as a stockholder of the
Corporation or any rights whatsoever except the rights stated in this STATEMENT
OF OPTION RIGHTS.
No provisions of this Option and no right or option granted or
conferred hereunder shall in any way limit, affect or abridge the exercise by
the Corporation of any of its corporate rights or powers to recapitalize, amend
its Certificate of Incorporation, reorganize, consolidate, or merge with or into
another corporation, or transfer all or any part of its property or assets, or
the exercise of any other of the corporate rights and powers of the Corporation.
7. Reservation of Shares
The Corporation shall at all times reserve and keep available, out of
its authorized and unissued capital stock, solely for the purpose of providing
for the exercise of the Options then outstanding and in effect, such number of
shares of Common Stock as shall, from time to time be sufficient for the
exercise of the Options. The Corporation shall, from time to time, in accordance
with the laws of the State of Nevada, increase the authorized amount of its
capital stock if at any time the number of shares of Common Stock remaining
unissued and unreserved for other purposes shall not be sufficient to permit the
exercise of all Options then outstanding and in effect.
<PAGE>
EX-6.1
Employment Agreement with Norman Gardner
AGREEMENT dated this _13_ day of October, 2000, between LaserLock
Technologies, Inc., a Pennsylvania corporation (hereinafter the "Company")
having its principal place of business 837 Lindy Lane, Bala Cynwyd, PA 19004,
and Norman A. Gardner (hereinafter the "Employee").
WHEREAS, the Company desires to acquire the continued services of Employee
because of his special knowledge and skills; and,
WHEREAS, Employee desires to continue be employed by the Company upon the
end of the period of his current employment contract;
NOW, THEREFORE, in consideration of the foregoing, ten dollars paid in
hand, and other good and valuable consideration, receipt and sufficiency of
which is hereby acknowledged, the following is agreed:
1. DUTIES.
The Company hereby employs Norman Gardner as President, having such powers
and duties commensurate with that position as set forth from time to time by the
Board of Directors (the "Board") in the By-Laws of the Company. Employee shall
devote substantially all of his time and best efforts to the Business of the
Company. During the term of this Agreement, Employee shall not become employed
by any other Company actively involved in the fields of anti counterfeiting and
anti diversion activating systems, and all inventions developed by Employee
during the term of this Agreement relating to such fields, whether or not
patentable, shall belong to Company.
2. COMPENSATION.
As compensation for his services to the Company, in whatever capacity
rendered, the Company shall pay to Employee monthly $7,500(US) per month
commencing January 1, 2001, and on the first day of each succeeding month until
December 31, 2004. This salary shall be paid over the term of this Agreement
which is four years. On a percentage basis this increase shall be equal to the
percentage of increase in the consumer price index for the Philadelphia
Metropolitan Area.
In addition, Employee shall be entitled to the following: 1) company paid
life insurance equal to twice Employee's annual salary; 2) medical insurance
coverage, including major medical and dental coverages equivalent to that
provided to other key employees of the Company; 3) such disability coverage as
is maintained on other key employees, 4) a leased automobile suitable for
conducting the business of the Company, 5) non-statutory options to purchase
250,000 shares of the Company's common stock at $0.17 per share and 250,000
shares of the Company's common stock at $0.35 per share, all of which shall vest
upon the execution of this contract, and, 6) the Company will reimburse Employee
for Employee's disbursements in use of the vehicle for Company's business.
Employee shall be entitled to four weeks of vacation per year, five sick
days and three personal days, all of which shall be accumulated if not taken. No
cash compensation shall be paid for sick or personal days not taken.
Additionally, Employee shall be entitled to all holidays provided to other key
employees of the Company.
3. EXPENSES
The Employee may incur reasonable expenses for promoting the business of
the Company, including expenses for travel, entertainment and similar items. The
Company will reimburse the Employee for all such expenses upon the presentation
by the Employee, from time to time, of an itemized account justifying such
expenditures. Such reimbursement shall be provided within 10 working days of
such presentation by Employee. To facilitate Employee's performance the Company
will issue to Employee a company credit card, when available.
4. RESERVED
5. NOTICE
Any notice required to be given pursuant to the provisions of this
Agreement shall be in writing and by registered mail, and mailed to the parties
at the following addresses:
COMPANY: c/o Jay Hait, Esq. 318 Briarcliffe Rd., Teaneck, NJ 07666
EMPLOYEE: at his last known residence.
6. RESERVED
7. TERMINATION
This Agreement may be terminated in any one of the following manners:
1. The death of Employee; 2. The failure of the Company, as evidenced by filing
under the Bankruptcy Act for liquidation, or the making of an assignment for the
benefit of creditors; or, 3. An uncured material breach of this Agreement or the
Assignment and Non- Disclosure Agreement executed between the Company and the
Employee; provided however that before either Agreement may be terminated for
material breach, the non-breaching party shall give prior written notice and
shall provide the party in breach with at least twenty (20) business days in
which to cure.
8. APPLICABLE LAW
This Agreement shall be governed by the laws of the State of Pennsylvania
and shall be enforceable only in a court of competent jurisdiction in the State
of Pennsylvania If any provision of this Agreement is declared void, such
provision shall be deemed severed from this Agreement, which shall otherwise
remain in full force and effect.
9. BINDING EFFECT
This Agreement shall have binding effect upon the parties hereto, when
approved by the Board, and upon their respective personal representatives, legal
representatives, successors and assigns. Any waiver of any breach of this
Agreement shall be made in writing and shall be applicable only to such breach
and shall not be construed to waive any subsequent or prior breach other than
the specific breach so waived.
10. SUPERSEDES EARLIER AGREEMENTS
This Agreement supersedes all earlier agreements between the Employee and
the Company with respect to Employee's employment by the Company. Before the end
of this Agreement, Company and Employee shall endeavor in good faith to
negotiate an employment agreement for the period commencing January 1, 2001,
appropriate for a senior executive in Employee's position.
IN WITNESS WHEREOF, the parties have executed this Agreement the date first
written above.
LASERLOCK TECHNOLOGIES, INC.
By:___/s/Michael J. Prevot________
Michael J. Prevot, Director
--Norman Gardner--------
Norman Gardner
<PAGE>
EX-10.1
Accountant's Consent
Consent of Independent Accountants
We consent to the inclusion in this registration statement on Form 10-SB of our
report dated January 6, 2000, except for notes 2, 5, 7 and 8 of which the date
is November 3, 2000 on our audit of the financial statements of LaerLock
Technologies, Inc. as of December 31, 1999 and for the period November 10, 1999
(date of inception) to December 31, 1999.
We also consent to the reference of our firm as independent accountants.
/s/ Smart & Associates, LLP
Philadelphia, PA
November 8, 2000
<PAGE>
