SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------
INTACTA TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
Nevada 7371
58-2488071
(State or jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Idendification No.)
Code Number)
235 Peachtree Street, N.E. CT Corporation System
2215 North Tower 1633 Broadway
Atlanta, Georgia 30303 New York, New York 10019
(404) 880-9919 (212) 664-1666
(Address, including zip code, and (Name, address, including zip
telephone number, including area code, code, and telephone number,
of registrant's principal executive including area code, of agent
offices) for service)
---------------
Copies to:
Altaf S. Nazerali Randal R. Jones
235 Peachtree Street, N.E. Dorsey & Whitney LLP
2215 North Tower 1420 Fifth Avenue, Suite 3400
Atlanta Georgia 30303 Seattle, Washington 98101
(404) 880-9919 (206) 903-8800
---------------
Approximate date of proposed sale to the public: As soon as practicable after
this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities
Act, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
- ---------------
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
PROSPECTUS
Subject To Completion
May 11, 2000
8,841,000
INTACTA TECHNOLOGIES INC.
Common Stock
8,841,000
This is a public offering of 8,841,000 shares of the common stock of Intacta
Technologies Inc. All of the shares being offered, when sold, will be sold by
selling shareholders as listed in this prospectus on page 15. We will not
receive any of the proceeds from the sale of the shares.
Our common stock is currently traded on the Nasdaq Over-the-Counter Bulletin
Board under the symbol "ITAC." The last price of our common stock on the
Nasdaq Over-the-Counter Bulletin Board on April 18, 2000 was $4 1/8 per share
(high) and $3 per share (low).
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
Investing in the shares involves risks. See "Risk Factors" beginning on page
6.
- ---------------
The date of this prospectus is , 2000.
The information contained in this prospectus is not complete and may be
changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities, and we are not soliciting
an offer to buy these securities in any state where the offer or
sale is not permitted.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY...........................................................3
RISK FACTORS ................................................................6
FORWARD-LOOKING STATEMENTS..................................................12
USE OF PROCEEDS.............................................................13
DIVIDEND POLICY.............................................................13
CAPITALIZATION..............................................................14
DILUTION....................................................................15
SELLING SHAREHOLDERS........................................................15
SELECTED FINANCIAL DATA.....................................................17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATION.................................................18
BUSINESS....................................................................25
MANAGEMENT .................................................................34
RELATED PARTY TRANSACTIONS .................................................40
PRINCIPAL
SHAREHOLDERS................................................................41
DESCRIPTION OF CAPITAL
STOCK.......................................................................43
SHARES ELIGIBLE FOR FUTURE
SALE........................................................................46
PLAN OF DISTRIBUTION........................................................47
LEGAL MATTERS...............................................................49
EXPERTS ....................................................................49
WHERE YOU CAN FIND MORE INFORMATION.........................................49
INDEX TO FINANCIAL STATEMENTS............................................. F-1
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information and financial statements and notes thereto appearing elsewhere in
this prospectus.
Intacta
We provide software and hardware products for the secure electronic
transmission of documents and electronic document management and archiving
using our patented compression, error correction and encoding and
decoding technology.
Intacta Technologies Inc. was incorporated in Nevada in 1997 under the name
InfoImaging Technologies Inc. In August 1999, we changed our name to Intacta
Technologies Inc. The terms "Intacta," "our company," and "we" in this
prospectus refer to Intacta Technologies Inc., a Nevada corporation, Intacta
Delaware Inc., our wholly owned subsidiary incorporated in Delaware, and
Intacta Labs Ltd., our wholly owned subsidiary incorporated in Israel,
collectively.
On May 28, 1998, NASD Regulation, Inc. cleared West America Securities Corp.'s
request to submit a quote for our common stock on the Nasdaq Over-the-Counter
Bulletin Board. Our common stock has been quoted on the Nasdaq
Over-the-Counter Bulletin Board since that time.
The registration statement of which this prospectus forms a part is our first
public filing with the Securities and Exchange Commission.
Our head office address is 235 Peachtree Street, N.E., 2215 North Tower,
Atlanta, Georgia, 30303, and our telephone number is (404) 880-9919. We
maintain a World Wide Web site address at www.Intacta.com. Information on
our Web site is not part of this prospectus.
We have applied for registration of the trademarks "INTACTA TECHNOLOGIES,"
"INTACTA.MOBILECE," "INTACTA.COURIER," "INTACTA.BRIDGEWAY",
"INTACTA.SMARTFORM," "INTACTA.DOCMANAGER," "INTACTA.SMARTBAR," "INTACTA.CODE,"
and "INTACTA.COMPACTOR" in the United States. We have also applied for
registration of the "INTACTA.CODE" trademark in Japan. All other trademarks or
service marks appearing in this prospectus are trademarks or service marks of
the companies that use them.
- -3-
<PAGE>
The Offering
Common stock offered by selling shareholders .......... 8,841,000 shares
Common stock owned by the selling shareholders
after the offering .................................. zero shares (1)
Use of proceeds........................................ We will not receive
any proceeds from the
sale of the shares.
See "Use of Proceeds."
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(1) This number assumes that each shareholder will sell all of its shares
available for sale during the effectiveness of the registration statement
that includes this prospectus. Shareholders are not required to sell their
shares. See "Plan of Distribution."
Unless otherwise specifically stated, information throughout this prospectus
excludes 1,375,000 shares issuable upon the exercise of outstanding options
and 1,667,100 shares reserved for future issuance under our stock option plan.
- -4-
<PAGE>
Summary Financial Data
Years Ended
December 31, December 31, December 31, December 31,
1996 1997 1998 1999
Statement of Operations Data:
Net sales $ 1,019,600 $ 894,900 $ 137,800 $ 137,400
Loss from operations (1,958,400) (1,455,900) (2,914,500) (3,733,500)
Net loss (2,529,800) (2,199,700) (3,145,800) (3,617,600)
Basic and diluted
loss per common share (0.22) (0.19) (0.19) (0.20)
Book and diluted weighted
average common shares
outstanding 11,486,000 11,486,000 16,701,583 17,790,000
As of
December 31, 1999
Balance Sheet Data:
Cash and cash equivalents $ 917,400
Working capital 574,100
Total assets 1,570,900
Long-term obligations 0
Total shareholders' equity 841,500
- -5-
<PAGE>
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks described below and the other information in this prospectus before
deciding to invest in shares of our common stock.
Our limited operating history makes it difficult to predict how our business
will develop and our future operating results.
We commenced operations in October 1997. We discontinued production and sales
of all of our retail products in late 1997 and focused on the research and
development of new products based on our existing technology. Of our current
products, only one, Intacta.MobileCE, is commercially available. We have a
limited operating history, and we face many of the risks and uncertainties
encountered by early-stage companies in rapidly evolving markets.
These risks and uncertainties include:
- - no history of profitable operations;
- - uncertain market acceptance of our products;
- - our reliance on a limited number of products;
- - the risks that competition, technological change or evolving customer
preferences could adversely affect sales of our products;
- - the need to expand our sales and support capabilities;
- - our dependence on a limited number of key personnel, including our Executive
Vice President of Research and Development; and
- - the risk that our management will not be able to effectively manage growth
or any acquisition we may undertake.
Our limited operating history makes it difficult to predict how our business
will develop and our future operating results.
Our independent auditors have expressed substantial doubt about our ability to
continue as a going concern.
Primarily as a result of our recurring loses, our independent auditors
modified their opinion on our 1999 financial statements and in the two
preceding years to include an explanatory paragraph expressing substantial
doubt about our ability to continue as a going concern.
We have incurred net losses in each fiscal year since inception, we may incur
losses in the future and our losses may increase because of our plan to
increase operating expenses.
We have incurred net losses in each fiscal year since inception. In the year
ended December 31, 1998, we had a net loss of approximately $3.2 million. And
in the year ended December 31, 1999, we had a net loss of approximately $3.6
million. We have increased our operating expenses in recent periods and plan
further increases in the future. Our planned increases in operating expenses
may result in larger losses in future periods. As a result, we will need to
generate significantly greater revenues than we have to date to achieve and
maintain profitability. We cannot assure you that our revenues will increase.
Our business strategies may not be successful, and we may not be profitable in
any future period.
- -6-
<PAGE>
Our total revenues have declined each year since 1996 and our revenues may
continue to decline in the future.
Our total revenues have declined from $1,019,600 to $894,900 to $137,800 to
$137,400 in the years ended December 31, 1996, 1997, 1998 and 1999,
respectively. We expect revenues to increase in fiscal year 2000. We
anticipate that the increased revenues will come from the following sources:
- - New licensing arrangements that we are currently negotiating; and
- - Sales of our Intacta.MobileCE, Intacta.Courier, Intacta.Bridgeway and
Intacta.Compactor products, all of which we anticipate will be commercially
available by the fourth quarter of 2000.
Intense competition in the market for our products may result in price
reductions, lower gross margins or loss of our market share, any of which
could materially adversely affect our business, financial condition and
operating results.
The market for our software is intensely competitive, fragmented and rapidly
changing. We face competition from companies in two distinct markets, the
document management market and the electronic communication market. See
"Business Competition."
In addition, as we develop new products, particularly applications focused on
electronic communication, we may begin competing with companies with whom we
have not previously competed. It is also possible that new competitors will
enter the market or that our competitors will form alliances that may enable
them to rapidly increase their market share.
Some of our actual and potential competitors are larger, better established
companies and have greater technical, financial and marketing resources.
Increased competition may result in price reductions, lower gross margins or
loss of our market share, any of which could materially adversely affect our
business, financial condition and operating results.
Our future revenue growth could be impaired if we are unable to expand our
direct sales infrastructure.
Our future revenue growth will depend in large part on our ability to
successfully expand our direct sales force. We may not be able to successfully
manage the expansion of this function or to recruit and train additional
direct sales support personnel. There is presently a shortage of qualified
personnel to fill these positions. If we are unable to hire and retain
additional highly skilled direct sales personnel, we may not be able to
increase our license revenue to the extent necessary to achieve profitability.
If we are unable to hire highly trained consulting and customer support
personnel we may be unable to meet customer demands. We are not likely to be
able to increase our revenues as we plan if we fail to expand our direct sales
force. Even if we are successful in expanding our direct sales force
capability, the expansion may not result in revenue growth.
The loss of our Executive Vice President of Research and Development or other
key personnel or our failure to attract and retain additional personnel could
adversely affect our business, results of operations and financial condition.
Our success depends largely upon the continued service of our executive
officers and other key management, sales and marketing and technical
personnel. The loss of the services of one or more of our executive
officers or other key employees could have a material adverse effect on our
business, results of operations and financial condition. In particular, we
rely on Dr. Menachem Tassa, our Executive Vice President, Research and
Development and director. Dr. Tassa does not have an employment agreement with
us and, therefore, could terminate his employment with us at any time without
penalty. We have key man insurance on the life of Dr. Tassa in the amount of
$2,000,000. However, this insurance would not sufficiently compensate us for
the loss of services of Dr. Tassa.
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<PAGE>
Our future success also depends on our ability to attract and retain highly
qualified personnel. The competition for qualified personnel is intense, and
we may be unable to attract or retain highly qualified personnel in
the future. In addition, due to intense competition for qualified employees,
it may be necessary for us to increase the level of compensation paid to
existing and new employees to the degree that our operating expenses could be
materially increased.
We may be unable to adequately protect our proprietary rights and we may not
become aware of or have adequate remedies in the event of breaches or
unauthorized activities regarding our proprietary rights.
Our success depends in part on our ability to protect our proprietary software
and our other proprietary rights from copying, infringement or use by
unauthorized parties. To protect our proprietary rights we rely primarily
on a combination of copyright, trade secret and trademark laws,
confidentiality agreements with employees and third parties, and protective
contractual provisions such as those contained in license agreements with
consultants, vendors and customers, although we have not signed these types of
agreements in every case. Despite our efforts to protect our proprietary
rights, unauthorized parties may copy aspects of our products and obtain and
use information that we regard as proprietary. Other parties may breach
confidentiality agreements and other protective contracts we have entered
into. We may not become aware of, or have adequate remedies in the event of,
these types of breaches or unauthorized activities.
Claims by other companies that our products infringe their copyrights or
patents could adversely affect our ability to sell our products and increase
our costs.
If any of our products violates third-party proprietary rights, including
copyrights and patents, we may be required to reengineer our products or
obtain licenses from third parties to continue offering our products without
substantial reengineering. If a patent has been issued or is issued in the
future to a third party that prevents us from using technology included in our
products, we would need to obtain a license or reengineer our product to
function without infringing the patent. Any efforts to reengineer our products
or obtain licenses from third parties may not be successful and, in any case,
could substantially increase our costs, or force us to interrupt product sales
or delay product releases.
Our products and products we rely on may suffer from defects or errors and
these defects or errors could result in loss of revenues or delay in market
acceptance of our products, diversion of development resources, damage to our
reputation, increase service and warranty costs and liability claims.
Software products as complex as ours may contain errors or defects, especially
when first introduced or when new versions are released. Our new products and
product enhancements or new applications or features may not be free from
errors after commercial shipments have begun. Any errors that are discovered
after commercial release could result in loss of revenues or delay in market
acceptance, diversion of development resources, damage to our reputation,
increased service and warranty costs and liability claims.
In addition, third-party products we rely on, such as Microsoft platform
products, may contain defects or errors. Our electronic communications
products rely on these products to operate properly. Therefore, any defects
in these products could adversely affect the operation of and market for our
products, reduce our revenues, increase our costs and damage our reputation.
- -8-
<PAGE>
We expect to experience rapid growth which will place a strain on our
resources, and any failure to manage our growth effectively could impair our
ability to efficiently manage our business, to maintain and expand
important relationships with third parties and to attract customers, and could
cause us to incur higher operating costs and delays in the execution of our
business plan or in the reporting or tracing of our financial results.
We expect to experience rapid growth in our number of employees, the scope of
our operating and financial systems and the geographic area of our operations.
Specifically, we plan to hire approximately 29 people by the end of 2000. This
growth will result in an increase in the level of responsibility for both
existing and new management personnel. To manage our growth effectively, we
will be required to continue to implement and improve our operating and
financial systems and to expand, train and manage our employee base. Any
failure by us to properly manage our growth of these systems could impair our
ability to efficiently manage our business, to maintain and expand important
relationships with third parties and to attract customers, and could cause us
to incur higher operating costs and delays in the execution of our business
plan or in the reporting or tracing of our financial results.
If the market for the Windows CE operating system fails to develop fully or
develops more slowly than we expect, our business and operating results will
be materially harmed.
Windows CE is one of many operating systems developed for the intelligent
computing device, market, and the extent of its future acceptance is
uncertain. Because all of our revenue to date has been generated by software
products and services dependent on the Windows CE operating system, if the
market for Windows CE fails to develop fully or develops more slowly than we
expect, our business and operating results will be significantly harmed.
Market acceptance of Windows CE will depend on many factors, including:
- - Microsoft's development and support of the Windows CE market. As the
developer and primary promoter of Windows CE, if Microsoft were to decide to
discontinue or lessen its support of the Windows CE operating system,
potential customers could select competing operating systems, which
would reduce the demand for our Windows CE-based software products and
services. In addition, Microsoft has developed a version of its Windows NT
operating system for intelligent computing devices and could decide to shift
its support to this operating system to the detriment of Windows CE;
- - the ability of the Windows CE operating system to compete against existing
and emerging operating systems for the intelligent computing device market
including: VxWorks from WindRiver Systems Inc., pSOS from Integrated
Systems, Inc., VRTX from Mentor Graphics Corporation, JavaOS from Sun
Microsystems, Inc. and LINUX. In particular, in the market for palm-size
devices, Windows CE faces intense competition from PalmOS used on 3Com
Corporation's Palm devices and to date has had limited success in this
market. Windows CE may be unsuccessful in capturing a significant share of
these two segments of the intelligent computing device market, or in
maintaining its market share in those other segments of the intelligent
computing device market on which our business currently focuses, including
the markets for Internet-enabled television set-top boxes, handheld
industrial devices, consumer Internet appliances such as kiosk terminals and
vehicle navigational devices, and Windows-based terminals;
- - the acceptance by original equipment manufacturers and consumers of the mix
of features and functions offered by Windows CE; and
- - the willingness of software developers to continue to develop and expand the
applications that run on Windows CE. To the extent that software developers
write applications for competing operating systems that are more attractive
to intelligent computing devise end users than those available on Windows
CE, potential purchasers could select competing operating systems over
Windows CE.
- -9-
<PAGE>
If the market for intelligent computing devices fails to develop fully or
develops more slowly than we expect, our revenue will not grow as fast as
anticipated, if at all.
The market for intelligent computing devices is emerging, and the potential
size of this market and the timing of its development are not known. As a
result, our profit potential is uncertain and our revenue may not grow
as fast as we anticipate, if at all. We are dependent upon the broad
acceptance by businesses and consumers of a wide variety of Windows CE-based
intelligent computing devices, which will depend on many factors, including:
- - the development of content and applications for intelligent computing
devices;
- - the willingness of large numbers of businesses and consumers to use devices
such as handheld and palm-size personal computers and handheld industrial
data collectors to perform functions currently carried out manually or by
traditional personal computers, including inputting and sharing data,
communicating among users and connecting to the Internet; and
- - the evolution of industry standards that facilitate the distribution of
content over the Internet to these devices via wired and wireless
telecommunications systems, satellite or cable.
If Microsoft adds features to its Windows CE operating systems that directly
compete with software products and services we provide, our revenue could be
reduced and our profit margins could suffer.
As the developer of Windows CE, Microsoft could add features to its operating
system that directly compete with the software products and services we
provide to our customers. Such features could include, for example, faxing,
hardware-support packages and quality assurance tools. The ability of our
customers or potential customers to obtain software products and services
directly from Microsoft that compete with our software products and services
could harm our business. Even if the standard features of future Microsoft
operating system software were more limited than our offerings, a significant
number of our customers and potential customers might elect to accept more
limited functionality in lieu of purchasing additional software. Moreover, the
resulting competitive pressures could lead to price reductions for our
products and reduce our profit margins.
Unanticipated delays, or announcement of delays, by Microsoft of Windows CE
product releases could adversely affect our sales.
Unanticipated delays, or announcement of delays, in Microsoft's delivery
schedule for new versions of its Windows CE operating system could cause us to
delay our product introductions and impede our ability to complete customer
projects on a timely basis. These delays or announcements by Microsoft could
also cause our customers to delay or cancel their project development
activities or product introductions. Any resulting delays in, or cancellations
of, our planned product introductions or in our ability to commence or
complete customer projects may adversely affect our revenue and could cause
our quarterly operating results to fluctuate.
Our stock price may be adversely affected by sales of our common stock by
selling shareholders.
Upon effectiveness of this registration statement, selling shareholders who
own more than 48.5% of our common stock will be eligible to sell their common
stock in the secondary market. Large sales volumes by selling shareholders
could adversely affect the market price of our common stock.
Investors in our common shares may not be able to readily resell their shares,
if at all, due to low liquidity in our stock.
Our common shares trade only on the Nasdaq Over-the-Counter Bulletin Board and
therefore are subject to low liquidity. As a result, investors may not be able
to readily resell their shares, if at all.
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<PAGE>
We conduct the majority of our research and development in Israel, and
instability in Israel may adversely affect our research and development
activities.
Our principal research and development facility is located in Beer Sheva,
Israel at the headquarters of our wholly owned Israeli subsidiary, Intacta
Labs Ltd. Our research and development activities may be adversely affected by
economic, political and military conditions in Israel and the Middle East.
We will need to raise significant additional capital in the next 6 months to
meet operating expenses.
Our management anticipates that we will need to raise at least $2.5 million
during the next 6 months to meet operating expenses. Our success will depend
in part on our ability to obtain additional financing. We may not be able to
obtain additional financing on terms favorable to us, if at all. We are
currently negotiating the terms of a senior bridge note financing. We intend
to raise $1,500,000. In addition, we are negotiating with a financial advisor
to assist us in a private placement of our common stock to raise up to an
aggregate of $10,000,000. We cannot assure you that we will be successful in
completing the bridge note financing or private placement of common stock.
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<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about our business and
industry. These forward-looking statements involve risks and uncertainties.
Our actual results could differ materially from those anticipated in such
forward-looking statements as a result of the factors more fully described in
"Risk Factors," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business" and elsewhere in this prospectus. We
undertake no obligation to update publicly any forward-looking statements for
any reason, even if new information becomes available or other events occur in
the future.
- -12-
<PAGE>
USE OF PROCEEDS
This prospectus is part of a registration statement that permits selling
shareholders to sell their shares. Because this prospectus is solely for the
purpose of selling shareholders, Intacta will not receive any proceeds from
the sale of stock being offered.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings to fund the development and
growth of our business and we do not anticipate paying any cash dividends in
the foreseeable future.
- -13-
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
December 31, 1999
Cash and cash equivalents $ 917,400
==========
Long-term obligations, less current portion 0
----------
Shareholders' equity:
Preferred stock, undesignated, $0.0001 par value;
50,000,000 shares authorized; no shares issued and
outstanding 0
Common stock, $0.0001 par value, 100,000,000 shares authorized,
17,909,000 issued and outstanding 1,791
Additional paid-in capital 19,710,553
Accumulated deficit (17,671,200)
Unamortized stock compensation (1,199,644)
----------
Total shareholders' equity 841,500
----------
Total capitalization $ 841,500
==========
- -14-
<PAGE>
DILUTION
This offering is for sales of stock by existing Intacta shareholders on a
continuous or delayed basis in the future. Sales of common stock by
shareholders will not result in any substantial change to the net tangible
book value per share before and after the distribution of shares by the
selling shareholders. There will be no change in net tangible book value per
share attributable to cash payments made by purchasers of the shares being
offered. Prospectus investors should be aware, however, that the price of
Intacta's shares may not bear any rational relationship to net tangible book
value per share.
SELLING SHAREHOLDERS
The following are the shareholders for whose accounts the shares are being
offered; the amount of securities owned by each selling shareholder prior to
this offering; the amount to be offered for each selling shareholder's
account; and the amount to be owned by each selling shareholder following
completion of the offering:
Percent of Common
Shares Owned
Number of Number of Number of
Shares Shares Shares After Before the After the
Name Owned Offered Sale (1) Offering Offering
Cybermind AG (2) 1,500,000 1,500,000 - 8.4% -
Gestibroker
Consulting &
Financial
Management S.A 117,000 117,000 - - -
MFC Merchant
Bank SA (3) 1,000,000 1,000,000 - 5.6% -
Zeljka Tepes 200,000 200,000 - 1.1% -
Value Invest
Ltd. (4) 830,000 830,000 - 4.6% -
Affaires
Financieres S.A. 750,000 750,000 - 4.2% -
Rahn & Bodmer 786,000 786,000 - 4.4% -
Finter Bank 800,000 800,000 - 4.5% -
Euroswiss
Securities 810,000 810,000 - 4.5% -
Mandate Management
Ltd. (5) 820,000 820,000 - 4.6% -
PreVision Overseas
Management
Ltd. (6) 50,000 50,000 - * -
Valor Invest
Limited (7) 538,000 538,000 - 3.0% -
Pensbreigh Holdings
Ltd. (8) 640,000 640,000 - 3.6% -
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*Less than 1%
(1) This table assumes that each shareholder will sell all of its shares
available for sale during the effectiveness of the registration statement that
includes this prospectus. Shareholders are not required to sell their shares.
See "Plan of Distribution." Other than described in footnotes (2) and (3)
below, no other selling shareholder has held any position or office or had any
material relationship with Intacta during the past three years.
(2) Includes 238,000 shares issued by us to Valor Invest in repayment of a
loan of U.S.$952,000 pursuant to a loan conversion at the rate of $4.00 per
share on June 30, 1999. Includes 300,000 shares purchased directly from Corsa
S.A. Holdings.
(3) MFC Merchant Bank is a wholly owned subsidiary of MFC Bancorp Ltd., a
public company traded on the Nasdaq National Market.
(4) Giovanni Trivella has sole voting and investment power over Value Invest
Ltd.
- -15-
<PAGE>
(5) Yechiel Sharabi, a director of Intacta, has sole voting and investment
power over Mandate Management Ltd.
(6) Janete Elisa Steinberg has sole voting and investment power over PreVision
Overseas Management Ltd.
(7) Steve Popovics has sole voting and investment power over Valor Invest
Limited.
(8) Pensbreigh Holdings Ltd. and Intacta are parties to a contract dated March
1, 1999 under which the services of our President, Chief Executive Officer and
a Director, Mr. Altaf S. Nazerali, provides his services to us. See
"Management Employment Contracts Altaf S. Nazerali." Mr. Nazerali is a
shareholder and officer of Pensbreigh Holdings Ltd.
- ---------------
On May 31, 1998, we entered into an exchange agreement with Corsa S.A.
Holdings. Under the exchange agreement, Corsa S.A. Holdings transferred 100%
of the outstanding shares of Intacta Delaware Inc. and 99% of the outstanding
shares of Intacta Labs Ltd. to us. In exchange, we issued 11,486,000 shares of
our common stock to Corsa S.A. Holdings. See "Related Party Transactions."
Corsa S.A. Holdings subsequently sold 7,486,000 of the 11,486,000 shares to
some of the selling shareholders above. Corsa S.A. Holdings is not a selling
shareholder under this registration statement.
- -16-
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data are qualified in their entirety by
reference to, and you should read them in conjunction with, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the audited financial statements and notes to such financial statements
included in this prospectus. We have derived the statements of operations
data from our audited financial statements that appear in this prospectus, and
these data are qualified by reference to the financial statements.
Years Ended
December 31, December 31, December 31, December 31,
1996 1997 1998 1999
Statement of Operations Data:
Net sales $ 1,019,600 $ 894,900 $ 137,800 $ 137,400
Operating Expenses:
Cost of products and
components 514,100 357,500 336,300 90,500
Research and
development 331,900 343,200 903,500 1,047,400
Sales and marketing 526,800 297,000 113,100 113,200
General and
administrative 1,605,200 1,353,100 1,699,400 2,619,800
--------- --------- --------- ---------
Total operating
expenses 2,978,000 2,350,800 3,052,300 3,870,900
--------- --------- --------- ---------
Loss from operations (1,958,400) (1,455,900) (2,914,500) (3,733,500)
Interest expense (578,700) (755,300) (210,000) 95,300
Taxes 7,300 11,500 (21,300) 20,600
--------- --------- --------- ---------
Net loss $(2,529,800) $(2,199,700) $(3,145,800) $(3,617,600)
========= ========= ========= =========
Basic and diluted net loss
per common share $ (0.22) $ (0.19) $ (0.19) $ (0.20)
========== ========== ========== =========
Basic and diluted weighted
average common shares
outstanding 11,486,000 11,486,000 16,701,583 17,790,000
=========== ========== ========== ==========
As of December 31,
1996 1997 1998 1999
Balance Sheet Data:
Cash and cash
equivalents $ 58,000 $ 169,100 $ 3,047,100 $ 917,400
Working capital
(deficiency) (5,773,200) (9,693,400) 1,924,200 574,100
Total assets 545,500 1,151,800 3,760,700 1,570,900
Long-term obligations 2,015,900 -- -- --
Total shareholders'
equity (deficiency) (5,677,800) (9,407,800) 2,268,600 841,500
- -17-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATION
Forward Looking Statements
Statements in this Form S-1, including those concerning our expectations of
future sales revenues, gross profits, research and development, sales and
marketing, and administrative expenses, product introductions and cash
requirements include forward-looking statements. As such, our actual results
may vary materially from our expectations. Factors which could cause our
actual results to differ from expectations include variations in the level
of orders, which can be affected by general economic conditions and in the
markets served by our customers, and international economic and political
climates. Additional factors would be the timing of future product releases,
difficulties or delays in product functionality or performance, our failure to
respond adequately to either changes in technology or customer preferences, or
to changes in our pricing or that of our competitors, our inability to manage
growth, from non-payment of accounts receivable and changes in budgeted costs.
All of the above factors constitute significant risks to our company. There
can be no assurance that our results of operations will not be adversely
affected by one or more of these factors.
Overview
Our company was incorporated in October, 1997 in the State of Nevada with the
intent that it would apply for listing on an exchange and by means of an
acquisition become a fully operational public company. Initially we
raised approximately $1 million to fund our activities, primarily to complete
our due diligence review of two target companies which have become our
wholly-owned subsidiaries, and to prepare all of the necessary documentation
associated with their acquisition.
We acquired both subsidiaries after successful negotiation with Corsa S. A.
Holdings, which we refer to as Corsa, which owned both subsidiaries. While an
agreement had been signed in October 1997, we did not complete the acquisition
until May 31, 1998. The parties agreed to an exchange of shares so that we
would acquire all of the common shares of Intacta Delaware Inc., a Delaware
corporation, which we refer to as Intacta Delaware and all of the common
shares of Intacta Labs Ltd., an Israeli corporation, which we refer to as
Intacta Labs, from Corsa for total consideration of $11,486,000, to be paid
through the issuance of 11,486,000 common shares of our capital stock from
treasury to Corsa, each share valued at $1.00. This valuation of the
subsidiaries equated to the approximate aggregate accumulated deficits of the
two companies to that date which we accepted and in turn Corsa agreed to
accept the per common share value of $1.00 which approximated the market
trading value at the time of our initial discussions and signing of the letter
of intent. We acquired both companies to acquire their core technology
developed by Intacta Labs and marketed through Intacta Delaware worldwide.
While Intacta Labs holds all of the patents and proprietary rights to the
technology, Intacta Delaware holds all of the marketing rights worldwide,
necessitating the acquisition of both companies.
In late 1997, with our concurrence, the previous management of our two
wholly-owned subsidiaries, decided to cease production of their current
products, primarily two versions of a fax storage and retrieval unit termed the
FaxPal, each version having different amounts of onboard memory. They also
decided to wind down all marketing efforts related to the FaxPal products, and
to begin development of new products based on our patented core technology. In
the past, Intacta Delaware had been successful in negotiating a licensing
arrangement for use of this proprietary technology. The terms of this
agreement provides for licensing royalties to be paid quarterly to
us based on the volume of the licensee's sales where our technology is
imbedded. This license provided royalty revenues in 1998 and 1999.
Our management currently is negotiating additional licensing arrangements to
build on this utilization of our core technology. At the same time, we are
intending shortly to launch our first two new products, Intacta.MobileCE and
Intacta.Courier developed by our Intacta Labs team and anticipate launching
other new products later in the current year. We plan to market both new
products directly to consumers as downloadable files from the internet as well
as to license their use by manufacturers in the future. We also plan on
selling some of our
- -18-
<PAGE>
other new products directly to consumers, again as downloadable products via
the Internet, and to license the software to manufacturers for inclusion in
their software products.
Our financial condition reported as at December 31, 1999 includes all amounts
for the parent company, Intacta Technologies Inc., and our two wholly-owned
subsidiary companies, Intacta Delaware, and Intacta Labs. Our reported
earnings from operations include the combined earnings of Intacta Technologies
Inc. and our two subsidiaries for the full 1999 year.
Because we had only approximately five million shares issued, the 11,486,000
new shares issued to Corsa represented a majority holding of our stock and
consequently Corsa obtained control of the parent and both subsidiaries. In
instances like this, accounting principles require that the transaction be
reflected in financial statements as a "reverse acquisition" where the
subsidiaries essentially acquire the parent. In this form of accounting, the
statements are created by aggregating the accounts of the two subsidiaries, as
would have been the case if Corsa had retained ownership, and then adding the
accounts of the parent for the relevant period when all three companies came
under common control. In this case, common control started immediately after
the completion of the acquisition, effectively June 1, 1998. Consequently, as
noted above the 1999 earnings include the accounts of all three companies for
the full year but for 1998, the earnings include the full year for the two
subsidiaries but only the earnings for our parent, Intacta Technologies Inc.
for the seven months following the date of acquisition. Also, according to
proper accounting practice to portray all three companies as if they were
operating as a single entity, transactions between the three companies have
been eliminated.
Results of Operations for the years ended December 31, 1999 and December
31,1998
Revenues
Our total revenues in 1999 were $137,400, virtually the same as those in 1998
of $137,800. The 1999 revenues include a small contribution for sales of our
discontinued FaxPal product group of only $9,500 and the sale of electronic
components held in inventory in Israel and related technical support fees
amounting to $54,500, these two sales aggregating $64,000, and royalty
revenues of $73,400. In 1999, FaxPal product sales revenues for the
year fell to only $9,500, a decline of approximately 90 per cent from those in
1998 when sales for the year were $89,300. We had experienced sales volume and
gross margin declines throughout 1997 and this led to our decision to
wind-down our marketing efforts for these existing products late in that year.
The
wind-down was effectively completed in the first quarter of 1998 and as a
result, our 1998 sales revenues were essentially earned all in the first
quarter and fell off significantly after that time. Our sales in 1999, without
the benefit of any marketing support therefore reflect only the small volume
of units sold and shipped either directly by us or through a reseller to end
customers in accordance with our policy to reflect sales revenues only upon
ultimate shipment to the end user. We do not anticipate initiating any further
promotional activity for the FaxPal unit and expect no future revenues to be
earned from sales of these products.
As noted above however, we earned other 1999 revenues through the sale of
computer chips we had on hand in conjunction with the development of one of
our new products, which will be a hardware unit. Revenues from this sale were
$54,500. No comparable revenue was generated in 1998. Finally, our 1999
revenues were enhanced significantly by royalties from an existing licensing
arrangement for use of our source code by another software company and yielded
$73,400, a 51 per cent gain over the 1998 level of $48,500. Revenues from this
licensing arrangement are recognized in our accounts at the time the licensee
reports the quarterly usage and remits payment. As previously stated, one of
our near-term objectives is to add new licensees to increase our royalty
revenues.
Operating Expenses
Our Operating expenses overall for 1999 were $3,870,900. This level is 27 per
cent higher than that incurred in the prior year, of $3,052,300. Operating
costs include costs of products and components, Research and development,
Sales and marketing, and General and administrative for all three companies
including depreciation. Our costs of products and components amounted to
$90,500 in 1999. This amount included both costs related to electronic
components sold and the write off of materials used in the production of
FaxPal products also held in
- -19-
<PAGE>
Israel and determined to no longer be useful. The original cost of the
discontinued FaxPal unit materials determined to no longer possess any resale
value amounted to $46,100 with the remainder of $44,400 representing the costs
related to the electronic components sold and other material costs. By
contrast, our 1998 costs, all related to the discontinued FaxPal product
group, aggregated $336,300. This 1998 amount included actual costs of FaxPal
products sold of $96,200, and a write down of all of the remaining inventoried
costs for the finished products on hand amounting to $240,100. This write off
reflects the decision made in 1998, following the decline in FaxPal
gross margins essentially to zero in the latter part of 1997, to no longer
manufacture and market the FaxPal product group. Since all product costs had
thereby been expensed in 1998, no costs of product were recorded for the 1999
sales.
Research and Development
Our 1999 Research and development expenditures, at $1,047,400, were 16 per
cent higher than those for 1998 of $903,500. In 1998, several research staff
were added early in the year and additional set-up expenditures on
equipment and staff costs were incurred as a result of our ramping up of
development efforts for new product applications. The cost level in the
current year represents the costs for the full year of our continuous
development activity, salaries for our staff and for office and other support
facilities. The salary costs represented 56 per cent of our total costs of our
Israeli operations this year, down from 72 per cent in 1998. The current
staffing level is expected to be maintained and the costs of operating this
facility to remain approximately constant also over the next year. The total
costs for both years include the impact of our stock compensation and
represents in 1999 $222,400 or 21 per cent of the total function costs, and
for 1998 the impact amounted to $129,700 or 14 per cent of the prior
year total cost amount. The determination of these costs is more fully
described in conjunction with our discussion of Administration costs below.
Sales and Marketing
Our Sales and marketing costs were $113,200 in 1999, virtually the same as
those in the prior year of $113,100. As noted above, we conducted no sales
efforts in 1999 but engaged design and marketing groups to assist
with our development of the new business strategy and to advise us regarding
the launch of our new software products. In contrast, our 1998 costs related
only to media and co-operative advertising programs promoting the
FaxPal products and were incurred essentially all in the first quarter. At
this time, we have a number of new product applications developed with two
ready for release shortly. We anticipate that new marketing staff will be
engaged in the near future to initiate product launching and manage our sales
and marketing functions and consequently salary and travel as well as
promotional costs will increase significantly in the future.
General and Administrative
General and administrative costs increased 54 per cent over the prior year's
amount of $1,699,400 to $2,619,400 in 1999, the increase brought about
primarily by our stock option compensation charge for the year, the
addition of several new executive staff and related office and travel
expenses, and for consulting and professional fees to support various
corporate projects. This group is providing overall management of the public
company as well as the subsidiaries, and is also managing several key
projects:
- - directing the development of our Company's new business strategy,
- - developing a new corporate identity with supporting documentation,
- - restructuring the corporate entities in line with the new business strategy,
- - generating interim financing and also additional financing options, and
- - identifying new technical and strategic partners.
Our General and administrative costs include salaries and fees for full-time
and contract staff, professional and other consulting fees incurred in support
of the design and research for our new strategy and corporate identity
development, costs for shareholder information and regulatory requirements as
well as the preparation of our Form S-1 filing with the Securities and
Exchange Commission, our stock option compensation annual charge and office
support and travel costs for the staff.
- -20-
The 54 per cent increase over the 1998 level reflects primarily the impact of
our stock option compensation. Other factors which caused the year over year
increase were associated with the increased activity related to the above
corporate redirections and includes increases primarily in consulting and
professional fees of 64 per cent to $449,000, coupled with higher salary costs
of $497,000, up 27 per cent over those of 1998 and higher travel of $230,000,
also up 27 per cent from last year's level.
We had granted stock options to a number of management and research staff as
part of our incentive compensation program. As a consequence, and in
accordance with the requirements of Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees and with the
requirements of SFAS No. 123, Accounting for Stock-Based Compensation, we
incurred total expense of $1,238,400 which reflects the difference in
fair market value of our common stock at the grant date, as compared to the
exercise price for those accounted for in accordance with APB No. 25, and the
fair value of the options issued at the grant date using the Black-Scholes
Option Pricing Model for those accounted for in accordance with SFAS No. 234.
By comparison, the expense recorded in 1998 amounted to $668,800. Of the total
1999 amount of $1,238,400, $222,400 was allocated to Research and development
as it relates to options granted to the technical staff and the remaining
$1,016,000 relates to options granted to directors, officers and others all
charged to Administration. The 1998 comparable total charge equaled $668,800,
of which $129,700 was allocated to Research and development and the remaining
amount of $539,100 was allocated to Administration.
Other Income (Expenses)
In 1999, we earned $104,000 in interest income from funds on deposit from a
financing completed in December 1998. No comparable interest revenues were
earned in 1998. Also, in 1999, we incurred interest costs of $8,700 in our
Israeli operation related to the inventory purchases made in the year. By
comparison, in 1998 we incurred $210,000. This interest expense was incurred
by Intacta Delaware and Intacta Labs for advances from their previous parent
company, Corsa which had been made in prior years to sustain their operations.
These advances were extinguished prior to the closing of our acquisition and
consequently we incurred no interest expense in 1998 after that date.
Net Losses
The 1999 Net Loss of $3,617,600 was 15 per cent higher than the 1998 figure of
$3,145,800.
Year Ended December 31, 1998 Compared To Year Ended December 31, 1997
Revenues
Consolidated revenues for the full year 1998 were only $137,800, down
significantly from the 1997 level of $894,900 when we were actively marketing
our FaxPal products. In the fourth quarter of 1997, management of
both Intacta Delaware and Intacta Labs recognized that the market potential
for its primary product, FaxPal, and other related products was proving less
than forecast and they decided to reduce marketing efforts and initiate
significant design revisions to its core applications. Consequently, during
all of 1998, the marketing and sales effort was reduced and without this
support, revenues declined significantly.
Operating Expenses
Costs of Products and Components
Because of this change in direction, management realized mid-year that
inventory levels conceived to support a high sales forecast early in the year,
were too high and recorded a write-down equal to the total value of
the current inventory of these products, amounting to approximately $240,100.
As a consequence of this write-down, cost of products for 1998 totaled
$336,300, reflecting product costs of units sold in the year of $96,200, plus
the above reserve amount. By contrast, the 1997 cost of sales was $357,500,
all related to units sold.
- -21-
Research and Development
The 1998 Research and development costs of $903,500 were more than double the
$343,200 incurred in 1997, the increase due to the additional developmental
work performed to carry out the product revisions and to the impact of our
stock compensation plan. Costs in both years include salaries, the costs
associated with the stock compensation plan and office support as well as some
development software and other equipment. Several additions to staff were made
during 1998, the stock plan cost for the year of $129,700 and the costs of
computer equipment and software for these new staff members as well as
materials for hardware development work related to the new products, caused
overall costs to rise 163 per cent.
Sales and Marketing
Sales and marketing expenses are all incurred by Intacta Delaware. Sales and
marketing costs were only $113,100 in 1998, approximately 38 per cent of the
total incurred for 1997 of $297,000. The lower 1998 expenditures reflects our
decision to revise and reposition our products and to reduce marketing
efforts. Early in 1998, the sales staff was reduced and all were released by
year-end.
General and Administrative
General and administrative costs for 1998 were $1,699,400 representing an
increase of $346,300 or 26 per cent above the 1997 costs of $1,353,100.
General and administrative costs include primarily salaries and other
office costs, stock option compensation, professional and other consulting
service fees and travel. The higher overall costs in the current year reflect
the impact of our stock option compensation and the corporate costs of our
parent company, salaries and office costs and professional fees, consulting
support and travel costs related to the restructuring and acquisition of the
two subsidiary companies mid-year. These increases were offset to some degree
by savings from reduced staffing of Intacta Delaware, and general restraint
during the corporate restructuring.
In 1998, we granted 1,005,000 common stock options to key management and staff
pursuant to our adopting an incentive stock option plan. The options have an
exercise price of $1.50 per share. As the market value on December 31, 1998
was higher than the exercise price, in accordance with Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees and in
accordance with the requirements of SFAS No. 123, Accounting for Stock-Based
Compensation, we incurred a stock option compensation cost amounting to
$668,800 in 1998, of which $129,700 was allocated to Research and development
and the remainder of $539,100 to Administration. As the plan was adopted in
1998, no costs were incurred in 1997.
Net Losses
The 1998 net loss was $3,145,800 after provision for interest costs of
$210,000 incurred as a result of loans from Corsa prior to the acquisition,
other costs of $19,600 and state taxes of $1,700 for the year. The 1997 net
loss of $2,199,700 was $946,100 or 43 per cent lower than that for 1998
primarily due to the large swing in the loss from operations which amounted to
$1,458,600 between the two years, offset by an interest charge of
approximately $755,300.
Liquidity and Capital Resources
At December 31, 1999, we had completed our restructuring and business
planning, and were negotiating additional licensing arrangements which we
expect will provide revenues in year 2000. We have successfully
completed development of two of our new software products, Intacta.MobileCE
and Intacta.Courier and our Intacta Labs staff have provided considerable
design customization for potential licensees of our core technology. We
anticipate further additions to staff to support several of these potential
licensing commitments and to expand our marketing force in the near future.
As a result of the above activities during 1999, our cash position at the
beginning of the year of $3,047,100
was reduced by our net loss of $3,617,600 and by capital expenditures of
$18,600. The impact of these cash.
- -22-
<PAGE>
expenditures was reduced to a considerable degree by the net change in our
working capital and other items, both cash and non-cash, principally the stock
compensation charge of $1,238,400, from year to year so that we closed the
year with cash of $917,400, a reduction of $2,129,700.
While the losses in prior years have approximated the current year level of
$3,617,600, due to the change in ownership and associated reverse merger
accounting, and the refocus of our business away from its predecessor
FaxPal products and to the development of new software applications, we don't
consider that comparisons between years would be meaningful as an indication
of future trends for both sources of funds and their use in operations.
In addition to the use of funds described above, on June 30, 1999, we issued
238,000 common shares at a price of $4.00 per share to raise $952,100, but
applied all of these funds to repay advances from a shareholder. No
other new funds were raised. Because our cash position has fallen
significantly, we anticipate that our current cash on hand will not be
adequate to meet all of our near term requirements associated with the planned
additions to staff and introduction of new products and are planning to raise
additional funds through the issue of equity sufficient to sustain our product
development activities and the ramping up of the Sales and marketing function
for the remainder of the year as a minimum. Our management anticipates that we
will need to raise at least $2.5 million during the next six months to meet
our operating expenses. We are currently negotiating the terms of a senior
bridge note financing. We intend to raise $1,500,000. In addition, we are
negotiating with a financial advisor to assist us in a private placement of
our common stock to raise up to an aggregate of $10,000,000. We cannot be
assured that we will be successful in completing the bridge note financing or
private placement of the common stock.
Our independent auditors have expressed substantial doubt about our ability to
continue as a going concern. Primarily as a result of our recurring losses,
our independent auditors modified their opinion on our 1999 financial
statements and in the two preceding years to include an explanatory paragraph
expressing substantial doubt about our ability to continue as a going concern.
Year 2000 Issues
Even though the date is now past January 1, 2000 and we have not experienced
any immediate adverse impact from the transition to the Year 2000, we cannot
provide assurance that our suppliers and customers have not been affected in a
manner that is not yet apparent. In addition, computer programs that were date
sensitive to the Year 2000 may not process the Year 2000 as a leap year and
any negative consequential effects remain unknown. As a result, we will
continue to monitor our Year 2000 compliance and the Year 2000 compliance of
our suppliers and customers.
Recent Accounting Pronouncements
In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained For Internal Use," which is effective for
fiscal years beginning after December 15, 1998. SOP No. 98-1 provides guidance
on accounting for the costs of computer software developed or obtained for
internal use and defines specific criteria that determine when such costs are
required to be expensed, and when such costs may be capitalized. The adoption
of this standard has not had a material effect on our capitalization policy,
results of operations, financial position or cash flows.
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. SFAS No.
133 require companies to recognize all derivatives contracts as either assets
or liabilities in the balance sheet and to measure them at fair value. If
conditions under SFAS No. 133 are met, a derivative may be specifically
designated as a hedge, the objective of which is to match the
timing of gain or loss recognition on the hedging derivative with the
recognition of
- - the changes in the fair value of the hedged assets or liability that are
attributable to the hedged risk, or.
- -23-
<PAGE>
- - the earnings effect of the hedged forecasted transaction.
For a derivative not designated as a hedging instrument, the gain or loss is
recognized in income in the period of change. SFAS No. 133 is effective for
all fiscal quarters of fiscal years beginning after June 15, 2000.
Historically, we have not entered into derivatives contracts either to hedge
existing risks or for speculative purposes. Accordingly, we do not expect
adoption of the new standard on January 1, 2001 to affect its financial
statements.
In February 1998, the FASB issued SFAS No. 132, Employer's Disclosures about
Pensions and Other Postretirement Benefits, which standardizes the disclosure
requirements for pension and other postretirement benefits. The adoption of
SFAS No. 132 did not have a material impact on our current disclosures.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. This statement established standards for
the way companies report information about operating segments in its financial
statements. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The disclosures
prescribed by SFAS No. 131 did not have a material impact on our financial
statements as we operate as one business segment.
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income.
SFAS No. 130 establishes standards for reporting comprehensive income and its
components in a financial statement that is displayed with the same prominence
as other financial statements. Comprehensive income, as defined, includes all
changes in equity during the period from non-owner sources. Examples of items
to be included in comprehensive income, which are excluded from net income,
include foreign currency translation adjustments and unrealized gain/loss on
available-for-sale securities. The disclosure prescribed by SFAS No. 130 did
not have a material impact on us.
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<PAGE>
BUSINESS
Overview
We develop and market products to
- - enable businesses to manage the production, distribution and storage of
content over Internet and paper-based media. Our technology also permits the
seamless exchange of data between electronic and paper media.
- - reduce bandwidth and archiving requirements for content. Transmission time
and storage requirements of some types of large files and formats are
significantly reduced using our compression and error correction techniques
that offer advantages over other widely used methods such as TIFF and
ZIP compression.
- - secure the management, authentication and archiving of sensitive business
information. Our technology and products apply equally to electronic and
paper-based formats. We have developed specific products that have
applications in registration forms that can then be sent electronically or via
fax.
- - improve the performance and convenience of mobile wired and wireless
telecommunications and applications. These include the emerging category of
information and Internet devices such as palm/handheld computers, smart cell
phones, etc. Our compression technology lowers bandwidth requirements; our
security technology protects transmission and our error-correction technology
improves the integrity of content transmission under less than desirable
environments.
- - enhance hardware and software server products that integrate our proprietary
compression and error correction techniques.
- - increase user's satisfaction by improving convenience and time-savings. Our
technology allows users to compress/decompress and encode/decode
multiple-files containing different file formats with a single mouse click.
Our products include:
- - Intacta.Courier, a software application that is installed in a personal
computer, or network server, to enable a personal computer or network server
to send and receive standard and color faxes, send faxes via email and send
faxes with file attachments. Intacta.Courier incorporates our compression and
encoding technology. It also provides the capability of automatic file
conversion between Windows CE-based mobile communications and Windows
95/98/NT-based enterprises.
- - Our Intacta.Bridgeway product is a hardware version of Intacta.Courier. It
can either stand alone or be integrated into an existing server environment.
Additionally Intacta.Bridgeway integrates several functions that allow it to
operate as an independent remote server.
- - Intacta.MobileCE is a software application that operates with Windows
CE-powered intelligent computing devices to enable the devices to send and
receive faxes, send faxes via email and send faxes with file attachments.
Each of these products provides our unique compression, encoding, decoding and
security features to local area network, wide area network and Internet faxes
and electronic messaging. Intacta.MobileCE and our document management
solutions are the only products we are currently marketing. When these
products are used together, they provide end-to-end solutions between the
mobile workers and a business. We intend to begin marketing Intacta.Courier
and Intacta.Bridgeway in the third and fourth quarters of this year.
- -25-
<PAGE>
Industry Background
Document Management
Historically businesses relied solely on paper-based document management
systems. Today's computer-based business environment has altered the
historical business model, allowing businesses to manage, authenticate,
archive and transmit documents electronically. Many businesses have recognized
the cost savings of implementing an electronic document management system.
Electronic document management involves the application of imaging
and related technologies, to effectively convert unstructured paper-based
information into structured electronic data. Eliminating or reducing reliance
on paper in document management, authentication and archiving allows
information to be controlled, distributed, and utilized in an efficient,
cost-effective manner.
Our document management solution benefits businesses by providing a
comprehensive, cost-effective document management system.
Electronic Communications
The increasingly widespread use of electronic communications, including the
Internet, is enabling networks of businesses and consumers to collaborate,
access information and conduct business and personal interactions more
effectively. To be successful in the electronic communications market, we
believe that a solution provider must adequately address the issues of data
integrity, security, authentication, bandwidth, storage and archiving, unified
messaging and multicast requirements for both electronic and paper-based data.
Our technology provides the building blocks for creating a range of solutions
in the electronic communications market from streamlined applications for
small businesses to highly complex systems for large businesses. Our
technology is highly adaptable and customizable for incorporation into most
electronic software or hardware applications and into most non-electronic
printable media. With this inherent flexibility and scalability, our products
solve a variety of content management problems for businesses.
Solution
We provide a solution by providing products that enable electronic conversion
of documents. Our technology permits 100% of content and format to be easily
and efficiently exchanged between paper and electronic forms. This unique
technology provides the "missing link" between paper-based document
management, electronic document management and electronic communication of
both paper-based and electronic documents. We believe our solution delivers
the following benefits:
- - Savings in storage space since our compression techniques have the ability
to compress, for example, a 50-page document as one or two equivalent pages
depending on the graphic content of the original document.
- - We can transmit the original data in binary form either through fax or
e-mail, permitting the recipient to edit and view the original document with
its
original formatting.
- - The transmitted documents can be encoded such that only the authorized or
intended recipient will be able to view the data.
- - Reduction in bandwidth usage, and transmission time resulting in significant
savings in telecommunications time for users. For example, a fifty-page
document can be sent as a single page via fax protocol, or significantly
compressed if sent by other electronic means, including e-mail.
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<PAGE>
Technology and Products
Technology
Our solution is based on our technology which compresses digital files
comprising text, video, graphics (including color) or sound into a
two-dimensional graphical grid, which we call an Intacta.Code. Our patented
technology applies encoding and error correction applications to the digital
file creating a secure, damage resistant graphical representation of the
original digital file. The key features of our patented technology are:
- - Compression. The compression capability of our patented technology decreases
the amount of bandwidth required to transmit information (in the form of an
Intacta.Code) via a network, facsimile or the Internet. Our compression rates
exceed the current capabilities of standard tagged information file format, or
TIFF, and ZIP methods, enabling faster and more effective management of large
databases and complex files. The compression not only increases the data
density of the Intacta.Code image, but also improves the performance of the
error correction algorithm. For fax-based communications, our technology
reduces transmission costs by enabling documents of up to 110 kilobytes of
digital data (approximately 100 pages) to be sent as a single page fax
transmission.
- - Encoding and Decoding. The encoding and decoding capabilities of our
patented technology enable users to create an encoded Intacta.Code. Users can
decode an Intacta.Code by viewing it with our special viewer or by printing it
using a standard printer equipped with our special viewer.
- - Security. The security capability of our technology enables users to
protect information contained within an Intacta.Code. The security features
include the ability to restrict access to an Intacta.Code to particular users
only and the ability to verify the sender and contents of an Intacta.Code
containing sensitive information. Protection can also be layered such that a
reader would require a separate and distinct password to access successive
layers of information.
Products
Our solution, which is based on our patented technology, includes the
following products:
Intelligent computing devices. We intend to market a broad range of software
products that provide a variety of faxing functions to devices we call
intelligent computing devices, or intelligent computing devices, to
enhance the functionality of those devices. Intelligent computing devices are
an emerging class of products with sophisticated processing power that are
designed for specific computing and communications applications. These
devices are described as "intelligent" to distinguish them from rudimentary
single-purpose computing devices with only limited functionality. Examples of
intelligent computing devices include - television "set-top boxes," which sit
on top of television sets and provide users with advanced cable TV access
services, sophisticated video gaming features and Internet access;
- - handheld and palm-size personal computers;
- - gaming systems;
- - handheld industrial data collectors;
- - consumer "Internet appliances" such as kiosk terminals and navigational
devices in cars and trucks; and
- - terminals.
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<PAGE>
Compared to traditional computers intelligent computing devices are often less
expensive and more adaptable in terms of their size, weight and shape, while
still providing sophisticated computing and communications capabilities,
including Internet connectivity.
Intacta.MobileCE. Intacta.MobileCE is a communications software suite
developed to respond to the Enterprise need for robust communications software
that is bundled with intelligent computing devices to enable intelligent
computing devices to send and receive faxes, send faxes via email and send
faxes with file attachments. It is designed for use on any Windows CE-powered
system, with sufficient error correction capabilities for wireless and
satellite transmission. Intacta's unique compression process saves bandwidth
and transmission time, reduces communication costs and enhances the value of
mobile systems. Files, faxes and e-mail can be received, viewed, and printed.
A complementary product conversely allows desktop systems to open and read
files sent from a palm-top computer. Intacta.MobileCE provides our unique
compression, encoding, decoding and security features to intelligent computing
devices. Intacta.MobileCE is the only product we currently market for use with
intelligent computing devices.
Intacta.MobileCE is currently being evaluated by several U.S. and Japanese
manufacturers of Windows CE devices for integration into future products. We
cannot assure you that these evaluations will result in these manufacturers
integrating Intacta.MobileCE into any of their Windows CE devices. We also
intend to launch a version of Intacta.MobileCE for retail customers in the
third or fourth quarter of 2000. We are currently evaluating conversion of
Intacta.MoblileCE to Palm OS and EPOC OS-based systems.
Intacta.Courier. Intacta.Courier is a software application that is installed
in a personal computer, or network server, to enable the personal computer to
send and receive faxes, send faxes via email and send faxes with file
attachments. Intacta.Courier provides our unique compression, encoding,
decoding and security features to local area network, wide area network and
Internet faxes. We are currently Beta-testing Intacta.Courier and anticipate
that it will be commercially available in the fourth quarter of 2000. We are
developing a module to Intacta.Courier, called Intacta.Smartbar Fax Delivery
Solution, which we anticipate will be commercially available concurrently
with Intacta.Courier. Intacta.Smartbar Fax Delivery Solution allows users to
embed digital information containing the identity and addressing information
of the sender and recipient of a fax into the cover sheet of the fax. If a
user employs Intacta.Smartbar when sending a fax, the recipient can utilize
the information in the Intacta.SmartBar to:
- - automatically add the sender's contact information to his address book,
- - reply to the sender by fax without creating a fax cover sheet,
- - reply to the sender by email without addressing the email,
- - incorporate automatic sender determined encryption and automatic recipient
determined decryption, and add additional macros for custom applications.
Intacta.Bridgeway. Intacta.Bridgeway is a hardware platform that supports all
common protocols in commercial and residential networks. It embeds all the
functionality of Intacta.Courier and our patented compression and encryption
technology. Intacta.Bridgeway incorporates our softmodem module that permits
fax communication between two Intacta.Bridgeway units at 33.6kps.
Intacta.Bridgeway provides a wide degree of customization for both vertical
and horizontal markets. Once installed and configured, the sending and
receiving processes are totally transparent to the user's operation. Examples
of applications include:
- - creates a unique and efficient network that allows any of the 100 million
legacy fax devices to connect to local and wide-area networks;
- - provides color faxing capability and the ability to produce original quality
documents by connecting to a color printer either directly or on a server;
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<PAGE>
- - functions as a mini document server which compresses and routes outgoing
documents using Intacta's proprietary technology, for cost efficiencies of up
to 90 percent;
- - enables legacy fax and multi-functional peripherals to send and receive
faxes via email and sends faxes with file attachments;
- - creates low-cost, secure closed-communications network with a unique
encoding/decoding dynamic link library for a specific customer's network;
- - enables remote polling for various applications where each unit has its own
unique Internet protocol address.
We are currently developing Intacta.Bridgeway and anticipate that it will be
commercially available in the fourth quarter of 2000.
Both Intacta.Courier and Intacta.Bridgeway allow seamless file conversion
between Windows CE-based intelligent computing devices and Windows
95/98/NT-based businesses. The combination of our Intacta.MobileCE and
Intacta.Courier products form an end-to-end solution for businesses with mobile
workforces.
Custom Designed Products. We are currently developing the following products
which we intend to market to large enterprises: Intacta.Compactor;
Intacta.Docmanager; Intacta.Smartform; and Intacta.Smartbar.
Each of these products will be custom designed for each business purchaser.
Intacta.Compactor. Intacta.Compactor is a software application that decreases
the need for data storage space and data transmission time by providing
compression capabilities for document management systems. Our
Intacta.Compactor compression technology provides the user with a choice of
lossy and lossless compression. Generally, lossy compression applies to image
and audio files where it is not imperative that 100% of the original
content is retrievable. Users can choose what level of picture or sound
quality is acceptable. Lossless compression dictates that 100% of the original
content is retrievable. Intacta.Compactor provides the following features to
document management systems:
- - unique compression and security features of our patented technology,
- - lossless compression efficiency that can be up to 40% more effective than
standard TIFF 4-file compression,
- - adjustable lossy compression up to 300%
- - easily customizable, and
- - can be used with any language.
We anticipate that we will begin marketing Intacta.Compactor by the fourth
quarter of 2000.
Intacta.Docmanager. Intacta.Docmanager is a software application that
decreases the need for data storage space by converting paper documents to
digital documents for document management systems. Intacta.Docmanager
converts paper documents to digital documents without optical character
recognition, and reconverts the digital documents to paper documents without
optical character recognition on an as-needed basis. Intacta.Compactor
provides the following features to document management systems:
- - document authentication,
- - safeguards against falsification,
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<PAGE>
- - compression efficiency that can be up to 40% more effective than standard
TIFF 4-file compression,
- - 100% accurate file recovery, and
- - can be used with any language.
We are currently seeking strategic industry partners to commercialize
Intacta.Docmanager.
Intacta.Smartform. Intacta.Smartform is a software application that simplifies
and improves product registration between a business and its customers by
automating the generation, processing and storing of product
registration information. Intacta.Smartform is easily customizable and can be
used with any language. We have signed an initial licensing agreement with
DataLode Inc., a provider of registration services to Hewlett-Packard.
Intacta.Smartbar. Intacta.Smartbar virtually creates a document within a
document, or sub-document. The software application compresses and encodes
information contained in financial, legal and personal identification
documents and provides digital authentication and verification of that
information at a later time. Intacta.Smartbar creates a encrypted printed code
of the information that can be read with full accuracy by most standard
scanners. Intacta.Smartbar can create documents within documents of various
sizes and densities to best fit a user's needs. Further benefits include
multi-level security in which a level can be read only by those with
appropriate clearance. All Intacta.Smartbar technology can be transmitted via
any media. In addition, Intacta.Smartbar can be used with any language. We are
integrating Intacta.Smartbar into our Intacta.Courier and Intacta.Bridgeway
applications and discussing with other developers the use of this module in
third party applications for embedding digital information in various forms
and security applications, e.g., insurance, health, secured documents such as
checks and bonds. Versions of Intacta.Smartbar have been licensed for use in
Japan's Ministry of Health and other applications.
Customers and Markets
Our large regional and international business customers are described below:
DataLode Inc. In July 1999, we signed a license agreement for our
Intacta.Smartform module with DataLode Inc. DataLode has a contract with
Hewlett-Packard and others to provide warranty registration services
for products in Europe and North America. DataLode has agreed to utilize our
Intacta.Smartform to eliminate manual data entry and the need for optical
character recognition. This is anticipated to lower their cost, assure 100%
data accuracy and increase the overall efficiency of their operations.
Nippon Telegraph and Telephone Corporation. Our communications software has
been selected by NTT Electronics Corporation, a subsidiary of Nippon Telegraph
and Telephone Corporation of Japan, for NTT Electronics Corporation's new
mobile communications technology, RZ SSB, a digitally enhanced narrow band
radio communications system. NTT Electronics Corporation has developed a new
mobile radio technology that delivers transmission of data, telephone, fax,
and video under mobile conditions.
Systems Nakashima Co., Ltd. In April 2000, we entered into an agreement to
license our Intacta.Code technology to Systems Nakashima Co., Ltd. Under the
agreement, Systems Nakashima has agreed to pay us a royalty fee in exchange
for the right to license the technology to newspaper publishers in Japan.
Systems Nakashima has licensed the technology to Fujitsu, who has announced
that the Yomiuri Shimbun will be the first Japanese newspaper to adopt the
program.
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<PAGE>
Sales and Marketing
We plan to market and sell our products through a direct sales force and
through our Web site. We plan to locate our direct sales force in the United
States, Canada, Europe, the Middle East and Asia Pacific.
One of our key objectives is to create sales teams with a regional presence to
establish and build strong relationships with original equipment manufacturers
and systems integrators and to increase our responsiveness to customers and
local market opportunities.
Our marketing efforts are directed at promoting our products, creating market
awareness and generating leads. Our marketing activities include online
demonstrations, print and online advertising campaigns and attendance at
industry trade shows events and trade conferences. We plan to use the Internet
extensively to increase awareness of Intacta and communicate with potential
customers, existing customers and others. Through our Web site, we plan to
provide online access to our customer messages and information regarding
products, respond to customer inquiries, conduct direct online sales of our
products and generate sales leads for our direct sales force.
As of March 31, 2000, we employed a total of 3 people on our sales and
marketing team.
Strategic Relationships
We plan to implement arrangements with third parties through which we will
grant the third parties the right to sell and implement our products.
Specifically, we seek to reach agreements with the following types of third
parties:
- - Solution Providers. We plan to grant solution providers the right to market
and resell our products and to provide education, implementation and
customization for the solutions they sell as well as for sales
made through our direct sales team.
- - Systems Integrators. We plan to grant systems integrators the right to
provide implementation, customization and training services to customers who
have purchased solutions through our direct sales team.
To date, we have not entered into any arrangements with third party solution
providers or systems integrators.
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Research and Development
Our research and development team is responsible for the design, development
and release of our products.
Our Vice President of Research and Development works closely with our sales
and marketing department as well as with our customers and potential customers
to better understand customer and market needs.
During 1999, a substantial majority of our research and development scientists
and engineers were involved in the development of Windows CE-based products
and providing custom solutions for our customers. These members of our
research and development team have accumulated detailed knowledge of the
Windows CE environment.
As of March 31, 2000, we employed a total of 12 scientists and engineers on
our research and development team. Our research and development team is
located at our facilities in Beer Sheva, Israel.
Competition
We believe that no one competitor of our technology dominates the marketplace.
Two dimensional bar coding technology, a technology that evolved from
conventional barcodes, is a competitive technology to our technology which
embeds digital information on paper or other printable surfaces. Historically,
the primary markets of two dimensional bar coding were applications such as
shipment tracking and inventory control. However, two dimensional bar coding
technology requires that end-users must purchase specific scanner devices from
a manufacturer. A manufacturers' primary objective is to sell its hardware
scanners, not its technology. There are approximately 20, 2-dimensional
barcode technology companies of which we believe only one, DataGlyph by Xerox,
directly competes with our technology. We believe the other 19 products do not
compete with ours because none of them offers a full range of functions and
capabilities within its technology as we provide in ours. DataGlyph by Xerox
has a significant market advantage due to its large distribution systems, its
mature operations, partner relationships and substantial financial resources.
Our competitor in the Windows CE mobile market is bsquare Corp.'s product,
bFAX-PRO 5.0. Our product, Intacta.MobileCE, and bFAX-PRO 5.0 offer the mobile
user the ability to send and receive faxes. The products differ in that
bFAX-PRO 5.0 offers internet faxing and our product offers fax by e-mail.
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<PAGE>
Intellectual Property
Our success is dependent upon our ability to protect our intellectual property
rights. We rely principally on a combination of copyright, trademarks, trade
secret and patent laws, non-disclosure agreements and other contractual
provisions to establish and maintain our proprietary rights. We hold patents
in Israel, the United States, Canada, Europe, Australia and South Africa,
related to our technology we use in our products in the areas of producing,
authenticating, transmitting, receiving, reading, and storing compressed
information.
As part of our confidentiality and operating procedures, we generally enter
into nondisclosure and confidentiality agreements with each of our key
employees and consultants and limit access to and distribution of
our core technology, documentation and other proprietary information. To
protect ourselves against any loss of essential information held by key
personnel, we have entered into provisions with our research and development
employees with regard to ownership of technological developments. We have
implemented a secure document control system with appropriate safeguards and
backups. Our source code for software and hardware products is
maintained in a lock-box at the offices of our Israeli law firm and is
accessible only by members of our board of directors. Through our committee of
the board of directors and our Intellectual Property Policy, we will continue
to pursue the development of strong patent portfolio and trade marking of our
products.
Policing the unauthorized use of our technology is difficult. We will use all
viable and cost-permissive methods for defending and prosecuting any suspected
violators of our technology.
Employees
As of March 31, 2000, we employ a total of 24 employees, including 12 in
research and development and 12 in general, administrative and marketing
functions on a part and full-time basis. We plan to hire 29 additional
employees in sales, marketing, and administration over the next fiscal year
and plan to hire additional research and development employees on an as-needed
basis. If the need arises for additional research and development employees
and we are unable to hire qualified employees in a timely manner, we may
outsource non-critical research and development projects to third parties.
Facilities
Our principal administrative and marketing facilities are located in Atlanta,
Georgia and consist of approximately 2,200 square feet of office space held
under a lease that expires November 8, 2000. Our principal research and
development facility is located in Beer Sheva, Israel and consists of
approximately 3,000 square feet of office space held under a lease that
expires September 1, 2000.
Legal Proceedings
We are not currently party to any pending legal proceedings.
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<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table sets forth information, as of March 31, 2000, regarding
the executive officers and directors of the Corporation:
Name Age Position
Yehoshua Sagi (1)(2)(4) 61 Chairman of the Board; Director
Altaf S. Nazerali (1)(2)(4) 46 President; Chief Executive Officer;
Director
Noel Bambrough (3)(4) 61 Executive Vice President; Chief Operating
Officer; Director
Menachem Tassa (3)(4) 57 Executive Vice President, Research and
Development; Director
Ross Wilmot 55 Vice President, Finance; Director
Marco Genoni 52 Vice President, Marketing
Yechiel Y. Sharabi (1)(2)(4) 66 Director
Amnon Shai 65 Director
- ---------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
(3) Member of Intellectual Property Committee.
(4) Member of Executive Committee.
Yehoshua Sagi has served as Chairman of the Board and Director of Intacta
since May 29, 1998. He was elected as a member of the Israeli Knesset in 1988
and as the Mayor of Bat-Yam, Israel in 1993. He continues to serve in those
capacities through to present. He previously headed Israeli Military
Intelligence, and was President of Tadiran Systems.
Altaf S. Nazerali has served as President, Chief Executive Officer and
Director of Intacta since its incorporation in December 1997. In addition, Mr.
Nazerali serves in the following capacities of other companies:
- - Chief Executive Officer (from November 1995 to present), President and
Director (each from October 1995 to present) of Multivision Communications
Corp, the operator of MMDS TV systems in Bolivia.;
- - Director of CTF Technologies, Inc. (from April 1998 to present), a company
engaged in the servicing of electronic refueling technology in Brazil;
- - Chief Executive Officer and President of Canbras Communications Corp. (from
November 1994 to October 1995), an operator of pay television and telephone
systems in Brazil; and
- - Director of Imagis Technologies (from July 7, 1998 to present), a technology
company that develops and markets biometric and imaging software to law
enforcement, gaming and security sectors.
Noel Bambrough has served as Executive Vice President, Chief Operating Officer
and Director of Intacta since April 1, 1999. From November 1998 through April
1999, Mr. Bambrough served as Consultant to Hunt Power Corporation, a
Texas-based utility company. Mr. Bambrough was responsible for developing a
Business
Plan for the launch of telephone, internet and cable television service to a
mixed residential and industrial development owned by Hunt's real estate
subsidiary. From April 1995 through November 1998, Mr. Bambrough was Executive
Vice-President and Chief Operating Officer of Triax Telecommunications Company
L.L.C. From July 1993 to April
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1995, he served as Senior Vice-President of Shaw Communications, Inc., a major
cable TV corporation. In January 1993, Mr. Bambrough was appointed Interim CEO
of Microcell Telecommunications, Inc., a PCS service provider, and served
until July 1993. Mr. Bambrough continues to serve as a member of the Board of
Directors of Microcell. From 1984 until its acquisition by Shaw
Communications in January 1993, Mr. Bambrough served as President and
CEO of Cablecasting Ltd.
Menachem Tassa has served as Vice President, Research and Development and
Director of Intacta since May 29, 1998. He is General Manager of Intacta Labs
Ltd., our research and development subsidiary based in Beer Sheva, Israel. Dr.
Tassa has three PhDs in applied mathematics, physics and chemistry. He has
been with us and our predecessors since 1994. Between 1990 and 1992, he was a
telecom consultant. Prior to 1990, he occupied various senior scientific
positions with the Israeli government.
Ross Wilmot is a chartered accountant providing financial management services
since August 1991 to public companies. He has special expertise in
international operations and high tech start-ups, and has completed
numerous business valuations and acquisitions in this sector. He is also
experienced in public company reporting practices in both the United States
and Canada. He has served as Vice President, Finance and Director of Intacta
since its incorporation in December, 1997.
Marco Genoni has served as Vice President, Marketing of Intacta since
September 30, 1998. Since 1997, he has served as President and Managing
Partner of Premier Stratatech Inc., a private marketing and consulting
company specializing in high technology products. From 1994 to 1997, he served
as President and Chief Executive Officer of Memotec Communications Inc., a
public company that produces and sells telecommunications and network products
for medium and large enterprises. Dr. Genoni received his Masters of Science
in Physics from the Swiss Institute of Technology in 1971 and his Ph.D. in
Chemistry from the University of Basle (Switzerland) in 1974.
Amnon Shai has served as a Director of Intacta since May 29, 1998. Mr. Amnon
Shai was Minister-Counselor for Commercial Affairs in the Israeli Embassy in
Paris from 1995 to 1998. From 1993 to 1995 he was Director of the European
Division, Foreign Trade Administration at the Ministry of Industry and Trade.
He completed his Masters in Business Administration at Columbia University in
New York in 1969. He graduated from the Hebrew University in Jerusalem,
majored in Political Science and Economics.
Yechiel Y. Sharabi has served as a Director of Intacta from May 29, 1998 to
December 9, 1998. He rejoined the Board effective September 1, 1999. He was
managing director of Mandate Management Ltd. from 1991 to 1998. Mr. Sharabi
earned his Masters in Public Administration in New Haven University of
Connecticut in 1996. He graduated with a Bachelor of Arts in General History
from the University of Tel Aviv.
Each director is elected for a period of one year at our annual meeting of
shareholders and serves until the next annual meeting or until his successor
is duly elected and qualified. The executive officers serve at the discretion
of the board. There are no family relationships among any of the directors and
executive officers of the
Corporation.
Board Committees
On September 9, 1998, our board of directors established an audit committee,
compensation committee, and executive committee. Our board created the
intellectual property committee on September 21, 1999.
Audit Committee. The audit committee of the board of directors reviews our
internal accounting procedures and consults with and reviews the services
provided by our independent auditors. Messrs. Nazerali, Sagi and Sharabi are
members of this committee.
Compensation Committee. The compensation committee of the board of directors
reviews and recommends to the board of directors the compensation and benefits
of all our executive officers and establishes and reviews general policies
relating to compensation and benefits of our employees. Messrs. Nazerali, Sagi
and
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<PAGE>
Sharabi are members of this committee. Except as described in "Related Party
Transactions," no interlocking relationships exist between our board of
directors or compensation committee and the board of directors or
compensation committee of any other company, nor has any interlocking
relationship existed in the past.
Intellectual Property Committee. The intellectual property committee of the
board of directors establishes, amends and maintains guidelines of Intacta
regarding the handling of intellectual property matters. Messrs. Bambrough and
Tassa are members of this committee. In addition, the secretary of Intacta,
Ms. Sandra Buschau, serves on this committee.
Executive Committee. The executive committee of the board of directors manages
our day-to-day affairs and decides strategic direction. Messrs. Bambrough,
Nazerali, Sagi, Sharabi and Tassa are members of this committee.
Director Compensation
We do not currently pay any cash compensation to directors for serving on our
board, but we do reimburse directors for out-of-pocket expenses for attending
board and committee meetings. We do not provide additional compensation for
committee participation or special assignments of the board of directors. Of
our directors, only Messrs. Sagi, Shai and Sharabi received stock options for
their participation on our board. Messrs. Sagi, Shai and Sharabi each received
options to purchase 50,000 shares at a price of $1.50 per share.
Executive Compensation
The following table sets forth the compensation paid to our chief executive
officer and one other most highly compensated executive officer for the years
indicated. No other executive officer of Intacta earned a salary and bonus for
such fiscal year in excess of $100,000.
Summary Compensation Table
Annual Long Term
Compensation Compensation
Securities All Other
Name and Principal Position Salary Underlying Compensation
/Option
SARs (#)
Altaf S. Nazerali $25,000 (1) 150,000 --
President and CEO $100,000 (2)
Menachem Tassa $120,000 (1) 150,000 --
Vice President, $120,000 (2)
Research and Development
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(1) Compensation in 1998
(2) Compensation in 1999. This compensation is paid directly to Mr. Nazerali
from Pensbreigh Holdings Ltd. from the monthly consulting fee we pay to
Pensbreigh. See "Employment Contracts Altaf S. Nazerali."
Employment Contacts
Altaf S. Nazerali
We entered into a Consulting Agreement with Pensbreigh Holdings Ltd., an
independent contractor engaged in the business of providing various corporate
and consulting services to businesses, of which Mr. Nazerali is a shareholder
and officer ("Pensbreigh"), dated as of March 1, 1999. Under the agreement,
Pensbreigh provides
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<PAGE>
the services of Mr. Nazerali and others to us. During the initial term of the
agreement, we agreed to pay Pensbreigh a monthly fee of US$16,666.00.
Beginning in October 1999, this fee has been accrued and not paid. Mr.
Nazerali is not an employee of Intacta and is therefore not entitled to any
benefit plans to which regular employees are entitled.
Marco Genoni
We entered into a letter agreement with Mr. Genoni, dated as of September 30,
1998, governing Dr. Genoni's services to us as Vice-President of Marketing, on
a contracting basis. Under the letter agreement, Dr. Genoni is paid a monthly
fee of US$5,000. In addition to the monthly fee, we granted Dr. Genoni options
to purchase 30,000 shares of common stock of Intacta at U.S.$1.50 per share.
Under the letter agreement, we and Dr. Genoni also agreed to a bonus structure
as follows:
- - 20% of any sales made by first reseller, including value added resellers
("VARs") and original equipment manufacturers ("OEMs"), during first year of
employment;
- - 15% of any sales made by any reseller during first year of employment;
- - 10% of any sales made by any reseller during second year of employment;
- - 5% of any sales made by any reseller during third, fourth and fifth years
year of employment;
Noel Bambrough
On March 31, 1999, we entered into an employment agreement with Noel
Bambrough, governing Mr. Bambrough's services to Intacta as Executive Vice
President and Chief Operating Officer. Commencing April 1, 1999 through the
closing of our next round of financing, we will pay Mr. Bambrough U.S. $12,500
per month. Commencing on the first full month of employment after the closing
of our next round of financing, we will pay Mr. Bambrough U.S. $20,833 per
month in base salary. After the closing of our next round of financing, Mr.
Bambrough will also be eligible for a bonus not to exceed $U.S. 100,000 per
year based on the achievement of specific agreed upon business goals and
targets. Under the agreement, we granted Mr. Bambrough an option to
purchase 200,000 shares of common stock at a price of U.S. $4.00. In addition,
subject to board of directors' approval, we must issue a minimum of 10% of any
future option pools to Mr. Bambrough.
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<PAGE>
Option Grants in Last Fiscal Year
We did not grant any stock options to our chief executive officer or other
most highly compensated executive officer during the fiscal year ended
December 31, 1999.
Option Exercises and Fiscal Year-End Values
The following table sets forth for our chief executive officer and one other
most highly compensated executive officer, the number of shares acquired upon
exercise of stock options during the fiscal year ended December 31, 1999 and
the number of shares subject to exercisable and unexercisable stock options
held at December 31, 1999.
Aggregated Option Exercises in Last Fiscal Year
And Fiscal Year-End Option Values
Number of Securities Value of Unexercised In-
Underlying Unexercised the-Money Options at
Options at December 31, December 31, 1998
1998
Shares
Acquired on Value
Name Exercised Realized ExercisableUnexercisableExercisableUnexercisable
Altaf S.
Nazerali - - - 150,000 - $423,000
Menachem
Tassa - - - 150,000 - $423,000
Stock Option Plan
On June 1, 1998, our board of directors approved the creation of the 1998
Stock Option Plan. Under the plan, the board of directors may grant incentive
and non-qualified options to acquire up to a total of 1,667,100 common shares
to our directors, officers, employees and consultants. To date, our board has
granted options to acquire 1,375,000 common shares.
The plan is intended to retain the services of our valued key employees and
consultants and others that the plan administrator may select to:
- - encourage our employees and consultants to acquire a greater proprietary
interest in Intacta;
- - serve as an aid and inducement in the hiring of new employees; and
- - provide an equity incentive to consultants and others selected by the plan
administrator.
The primary difference between "incentive stock options" and non-qualified
options is the tax treatment of the option holder. If a holder complies with
Internal Revenue Service rules regarding incentive stock options, a holder of
an incentive stock can defer recognition of income for tax purposes until the
shares underlying the options are sold. A holder of a non-qualified option
generally recognizes income on the date of exercise. Incentive stock
options may be granted to any individual who, at the time the option is
granted, is an employee of Intacta or any related corporation. Non-qualified
stock options may be granted to employees and to others at the discretion of
the
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<PAGE>
plan administrator. The plan administrator fixes the exercise price for
options in the exercise of its sole discretion, except that the exercise price
for an incentive stock option must be at least the fair market value per share
of the common stock at the date of grant (as determined by the plan
administrator in good faith), or in the case of greater-than ten percent
shareholders, at least one hundred ten percent of the fair market value per
share. The exercise price may be paid in cash or, with the approval of the
plan administrator, by other means, including withholding of option shares or
delivery of previously held shares. Options granted under the plan vest over a
three-year period, with one-third becoming exercisable at the end of each of
the three years following the date of grant. The plan administrator may
accelerate the vesting of options in its sole discretion.
Options are non-transferable except by will or the laws of descent and
distribution or subject to a qualified domestic relations order. With some
exceptions, vested but unexercised options terminate upon the earlier of:
- - the expiration of the option term specified by the plan administrator at the
date of grant (generally 10 years; or, with respect to incentive stock options
granted to greater-than ten percent shareholders, a maximum of five years);
- - the expiration of 30 days from the date of an employee optionee's
termination of employment with us or any related corporation "for cause" as
defined in the plan;
- - the expiration of 90 days from the date of an employee optionee's
termination of employment with us or any related corporation for any reason
whatsoever other than for cause, death or disability (unless, in the case of
non-qualified stock options, extended by the plan administrator); or
- - the expiration of one year from the date of death or disability (as defined
in the plan) of the optionee.
If an employee optionee's employment is terminated by death, any option held
by the optionee is exercisable only by the person or persons to whom such
optionee's rights under the option pass by the optionee's will or by the laws
of descent and distribution of the state or county of the employee optionee's
domicile at the time of death. Unless accelerated in accordance with the plan,
unvested options terminate immediately upon termination of employment of the
optionee by us for any reason, including death or disability, and upon a
change of relationship between the optionee and us, such as from employee to
consultant. The plan administrator may amend or modify the plan, except that
no amendment with respect to an outstanding option may be made over the
objection of the holder of the option (other than those provisions triggering
acceleration of vesting of outstanding options).
Indemnification of Directors, Officers and Others
Our articles of incorporation provide that we shall have the right to
indemnify any person for any liability or expenses incurred by that person by
reason of the fact that he was a director, officer, employee or agent and has
the right to advance or pay the expenses of directors and officers in
defending civil or criminal suit or proceeding to the full extent provided by
the Private Corporation Law of Nevada.
Our bylaws provide that to the fullest extent permitted by law we may
indemnify our directors, officers and others who were or are a party or are
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding.
We do not maintain directors' and officers' liability insurance as of the date
of this prospectus.
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<PAGE>
RELATED PARTY TRANSACTIONS
On May 31, 1998, we entered into an exchange agreement with Corsa S.A.
Holdings, an entity organized under the laws of Luxembourg. Corsa owned 69% of
our common stock upon closing of the exchange agreement. Corsa is 90%
controlled by Mr. Arie Halpern and 10% controlled by Shira Advising,
Communication and Investment Ltd., an Israeli corporation controlled by
Yechiel Y. Sharabi, one of our directors, and Hadassa Y. Sharabi, Mr.
Sharabi's wife. Under the exchange agreement, Corsa transferred 100% of the
outstanding shares of Intacta Delaware Inc. and 99% of the outstanding shares
of Intacta Labs Ltd. to us. In exchange, we issued 11,486,00 shares of common
stock to Corsa. Corsa subsequently sold 7,486,000 shares of its common stock
to some of the selling shareholders whose shares we are registering for resale
under this prospectus, resulting in a decrease of Corsa's ownership to 22.3%.
Under the exchange agreement, we agreed with Corsa that our board of directors
would be increased from three to seven persons, of which Corsa had the right
to appoint five directors (consisting of Yechiel Y. Sharabi, Amnon Shai,
Joshua Sagui, Marc Nehamkin and Menachem Tassa) and we maintained the right to
appoint two directors (consisting of Altaf Nazerali and Ross Wilmot). Under
the exchange agreement, we agreed to do the following:
- - enter into a Shareholders' Agreement governing the election of directors;
- - implement an equity incentive plan; and
- - raise an additional $5,000,000 gross through the sale of common stock
following the closing date of the exchange agreement.
We raised an additional $5,000,000 gross through the sale of one million
shares of common stock to MFC Merchant Bank SA in December of 1998 for a total
of $4,000,000 and the conversion into shares of common stock of advances made
to us by Valor Invest Limited for approximately $1,000,000. We are registering
for resale shares of our common stock by MFC Merchant Bank and Valor Invest
Limited under this prospectus.
Through a series of loans, Valor Invest Limited loaned Intacta a total of
$952,100. On June 30, 1999, Intacta issued 238,000 shares of common stock on a
private placement basis to Valor Invest Limited in repayment of the $952,100,
pursuant to a loan conversion at the rate of $4.00 per share.
During 1999 and 1998, the Company received administrative, consulting,
management and marketing services from several organizations that are owned by
directors or shareholders of the Company. These services aggregated
approximately $346,300 and $294,200 for the year ended December 31, 1999 and
1998, respectively of which $226,300 and $229,500 have been included in
research and development expenses and $120,000 and $64,700 have been included
in general and administrative expenses. There were no similar related party
transactions for the year ended December 31, 1997.
Included in the above amounts, Intacta paid approximately $94,000 to
International Portfolio Management in connection with administrative services
provided to Intacta. Altaf S. Nazerali, President, Chief Executive Officer
and a director of Intacta, is the sole shareholder of International Portfolio
Management. Ross Wilmot, Vice President, Finance and a director of Intacta, is
the Vice President, Finance of International Portfolio Management. Sandra W.
Buschau, the Secretary of Intacta, is a Vice President of International
Portfolio Management.
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<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information concerning the beneficial ownership
of our outstanding common stock as of March 31, 2000 for:
- - each person or group that we know owns beneficially more than 5% of our
common stock;
- - each of our directors and executive officers individually; and
- - all directors and executive officers as a group.
Rule 13d-3 under the Securities Exchange Act defines the term, "beneficial
ownership." Under this rule, the term includes shares over which the indicated
beneficial owner exercises voting and/or investment power. The rules also deem
common stock subject to options currently exercisable, or exercisable within
60 days, to be outstanding for purposes of computing the percentage ownership
of the person holding the options but do not deem such stock to be outstanding
for purposes of computing the percentage ownership of any other person. The
applicable percentage of ownership for each shareholder is based on 17,909,000
shares of common stock outstanding as of March 31, 2000, together with
applicable options for that shareholder. Except as otherwise indicated, we
believe the beneficial owners of the common stock listed below, based on
information furnished by them, have sole voting and investment power over the
number of shares listed opposite their names. The information provided in the
table below assumes no exercise of the underwriters' over-allotment option.
Percent of
Shares Outstanding
Name and Address Number of Shares Before After
of Beneficial Owner Beneficially Owned Offering Offering
Yehoshua Sagi - - -
65 Ben-Gurion Street
Bat-Yam 59372, Israel
Altaf S. Nazerali (1) 192,000 1% 1%
555 Palisade Drive
North Vancouver, B.C. V7R 2H9
Canada
Noel Bambrough - - -
670 Tuxedo Place N.W.
Atlanta, GA 30342
USA
Menachem Tassa - - -
26 Habani St., #16
Jerusalem 96264, Israel
Ross Wilmot - - -
13548 19th Avenue
South Surrey, B.C. V4A 6B4
Canada
Marco Genoni - - -
4346 Westmount Avenue
Montreal, QC H3Y 1W5
Canada
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<PAGE>
Percent of
Percent of
Shares Outstanding
Name and Address Number of Shares Before After
of Beneficial Owner Beneficially Owned Offering Offering
Yechiel Y. Sharabi 400,000 2.3% 2.3%
Ha'techiya 12
Holon 58401, Israel
Amon Shai - - -
20 Amzallag St.
Tel Aviv 65148, Israel
Corsa S.A. Holdings (2) 4,000,000 22.3% 22.3%
Rue Notre Dame
Luxembourg
Grand Duchy of Luxembourg
Cybermind AG(3) 1,500,000 8.4% -
MFC Merchant Bank SA 1,000,000 5.6% -
All Officers and Directors
as a Group (7 Persons) 592,000 3.3% 3.3%
- ---------------
(1) All of these shares are held indirectly by Mr. Nazerali through his
partial ownership of Pensbreigh Holdings Ltd.
(2) Corsa S.A. Holdings is a Luxembourg holding company 90% controlled by Mr.
Arie Halpern and 10% controlled by Shira Advising, Communication and
Investments Ltd., a company controlled by Mr. Yechiel Y. Sharabi. Mr. Halpern
and Shira Advising, Communication and Investments Ltd. (a company controlled
by Mr. Sharabi) have shared voting and investment power over Corsa S.A.
Holdings.
(3) Cybermind AG is a selling shareholder whose shares are being registered
for resale on the registration statement of which this prospectus forms
a part. We are registering all 1,500,000 shares held by Cybermind AG; however,
Cybermind AG may sell any, all or none of its shares. Carsten Dujesiefken has
sole voting and investment power over Cybermind AG.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
We are authorized to issue 100,000,000 shares of common stock, $0.0001 par
value per share, and 50,000,000 shares of preferred stock, $0.0001 par value
per share. The following is only a summary of provisions of the common stock
and the preferred stock. It is not complete and may not contain all the
information you should consider before investing in the common stock. You
should carefully read our articles of incorporation and bylaws,
which are included as an exhibit to the registration statement containing this
prospectus.
Common Stock
As of March 31, 2000, we were authorized to issue 100,000,000 shares of common
stock, of which 17,909,000 shares were issued and outstanding held of record
by 45 shareholders. This public offering consists solely of shares of common
stock being resold by selling shareholders. Therefore, this offering will not
affect the total number of shares of common stock issued and outstanding.
Holders of shares of common stock are entitled to one vote per share on all
matters to be voted on by the shareholders. Subject to preferences of any
outstanding preferred stock, the holders of shares of common stock are
entitled to receive any dividends the board of directors declares out of funds
legally available for the payment of dividends. Upon the liquidation,
dissolution or winding up of Intacta, the holders of shares of common stock
are entitled to share all of our assets remaining after payment of liabilities
and after giving effect to the liquidation preferences of any outstanding
preferred stock. All outstanding shares of common stock are fully paid and
nonassessable.
Preferred Stock
Our articles of incorporation grant our board of directors the authority to
issue up to 50,000,000 shares of preferred stock. Nevada law provides our
board of directors the authority to determine the price, rights, preferences,
privileges and restrictions, including voting rights of those shares without
any further vote or action by the shareholders.
Market Price of and Dividends on our Common Stock and Related Stockholder
Materials
High Bid Low Bid
1999
4th Quarter 3 7/16 1 3/4
3rd Quarter 3.8 1 7/8
2nd Quarter 4 3/16 3
1st Quarter 4 15/32 3 13/16
1998
4th Quarter 4 3/4 3 7/8
3rd Quarter 5 1/2 4
2nd Quarter (2) 5 3/4 4
1. Source of trading information: Bloomberg.
2. Quotations commenced on the Nasdaq Over-the-Counter Bulletin Board on May
28, 1998.
These over-the-counter market quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not necessarily represent
actual transactions.
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<PAGE>
The price of our common stock on the Nasdaq OTCBB on April 18, 2000 was $4 1/8
(high) and $3 (low).
We have never paid dividends on our common shares. We do not anticipate paying
any dividends in the foreseeable future.
Anti-takeover Effects of Charter and Bylaws Provisions and the Nevada Business
Corporation Act
Nevada law provides that any agreement providing for the merger, consolidation
or sale of all or substantially all of the assets of a corporation be approved
by the owners of at least the majority of the outstanding shares of that
corporation, unless a different vote is provided for in our articles of
incorporation. Our articles of incorporation do not provide for a
super-majority voting requirement in order to approve any such transactions.
Nevada law also gives appraisal rights for some mergers, plans of
reorganization, or exchanges or sales of all or substantially all of the
assets of a corporation. Under Nevada law, a shareholder does not have the
right to dissent with respect to:
- - a sale of assets or reorganization, or
- - any plan of merger or any plan of exchange, if the shares held by the
shareholder are part of a class of shares which are listed on a national
securities exchange or the Nasdaq National Market Systems, or are held of
record by note less than 2,000 shareholders, and the shareholder is not
required to accept for his shares any consideration other than shares of a
corporation that, immediately after the effective time of the merger or
exchange, will be part of a class of shares which are listed on a national
securities exchange or the Nasdaq National Market System, or are held of
record by not less than 2,000 holders.
The Nevada Private Corporation Law also has three provisions designed to deter
take-over attempts:
Control Share Acquisition Program. Under Nevada law, when a person has
acquired or offers to acquire one-fifth, one-third or a majority of the stock
of a corporation, a shareholders meeting must be held after delivery of
an "offerors" statement, at the offerors expense, so that the shareholders of
the corporation can vote on whether the shares proposed to be acquired can
exercise voting rights. Except as otherwise provided in a corporation's
article of incorporation, the approval of the majority of the outstanding
stock not held by the offerors is required so that the stock held by the
offerors will have voting rights. The control share acquisition provisions are
applicable to any acquisition of a controlling interest, unless the articles
of incorporation or by-laws of a corporation in effect on the tenth day
following the acquisition of a controlling interest by an acquiring person
provides that the control share acquisition provisions do not apply. We have
not elected out of the control share acquisition provisions of Nevada
law.
Combination Moratorium Provision. Nevada law provides that a corporation may
not engage in any "combinations," which is broadly defined to include mergers,
sales and leases of assets, issuances of securities and similar transactions
with an "interested stockholder," which is defined as the beneficial owner of
10% or more of the voting power of the corporation, and affiliates of their
associates for three years after an interested shareholder's date of acquiring
the shares, unless the combination or the purchase of the shares by the
interested shareholder is first approved by the board of directors. After the
initial three-year period, any combination must still be approved by a
majority of the voting power not beneficially owned by the interested
shareholder or the interested shareholders affiliates or associates, unless
the aggregate amount of cash and the market value of the consideration other
than cash that could be received by shareholders as a result of the
combination is at least equal to the highest of the highest bid per share of
each class or series of shares, including the common shares, on the date of
the announcement of the combination or on the date the interested shareholder
acquired the shares, or for holders of preferred stock, the highest
liquidation value of the preferred stock.
Other Provisions. Under Nevada law, the selection of a period for achieving
corporate goals is the responsibility of the directors. In addition, the
directors and officers, in exercising their respective powers with a
view to the interest of the corporation may consider the interest of the
corporation's employees, suppliers, credits
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<PAGE>
and customers, the economy of the state and the nation, the interest of the
economy and of society and the long-term, as well as short-term, interests of
the corporation and its shareholders, including the possibility that those
interest may be best served by the continued independence of the corporation.
The directors may also resist any change or potential change of control of the
corporation if the directors, by majority vote of a quorum, determine that a
change or potential change is opposed to or not in the best interest of the
corporation "upon consideration of the interest of the corporation's
shareholders," or for one of the other reasons described above. The directors
may also take action to protect the interests of the corporation's
shareholders.
Transfer Agent and Registrar
The registrant and transfer agent for our shares of common stock is Corporate
Stock Transfer, Republic Plaza, 370 17 th Street, Suite 2350, Denver,
Colorado, 80202-4614.
- -45-
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
There are 17,909,000 shares of common stock outstanding, 5,185,000 of which
are freely tradable and 8,841,000 of which are restricted securities that may
be offered by the selling shareholders under this prospectus as described
below.
Subject to the registration statement being declared and remaining effective,
all of the selling shareholder shares that may be offered under the
registration statement will be immediately tradable without restriction or
further registration under the Securities Act.
No prediction can be made as to the effect, if any, that sales of shares of
common stock by the selling shareholders, or even the availability of such
shares for sale will have on the market prices prevailing from time to
time. The possibility that substantial amounts of common stock may be sold in
the public market may adversely affect prevailing market prices for the common
stock and could impair our ability to raise capital through the sale of
its equity securities.
- -46-
<PAGE>
PLAN OF DISTRIBUTION
We are registering the shares on behalf of the selling shareholders. When we
refer to selling shareholders, we intend to include donees and pledgees
selling shares received from a named selling shareholder after the date of
this prospectus. All costs, expenses and fees in connection with the
registration of the shares offered under this registration statement will be
borne by us. Brokerage commissions and similar selling expenses, if any,
attributable to the sale of shares will be borne by the selling shareholders.
Sales of shares may be effected by selling shareholders from time to time in
one or more types of transactions (which may include block transactions) in
the over-the-counter market, in negotiated transactions, through put or call
options transactions relating to the shares, through short sales of shares, or
a combination of such methods of sale, at market prices prevailing at the time
of sale, or at negotiated prices. Such transactions may or may not involve
brokers or dealers. The selling shareholders have advised us that they have
not entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their securities, nor is
there an underwriter or coordinating broker acting in connection with the
proposed sale of shares by the selling shareholders.
The selling shareholders may effect such transactions by selling shares
directly to purchasers or to or through broker-dealers, which may act as
agents or principals. Such broker-dealers may receive compensation in
the form of discounts, concessions, or commissions from the selling
shareholders and/or purchasers of shares for whom such broker-dealers may act
as agents or to whom they sell as principal, or both (which compensation as to
a particular broker-dealer might be in excess of customary commissions).
The selling shareholders and any broker-dealers that act in connection with
the sale of shares might be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act, and any commissions received by such
broker-dealers and any profit on the resale of shares sold by them while
acting as principals might be deemed to be underwriting discounts or
commissions under the Securities Act. We have agreed to indemnify
each selling shareholder against some liabilities arising under the Securities
Act. The selling shareholders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the shares
against some liabilities arising under the Securities Act.
Because selling shareholders may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, the selling shareholders will
be subject to the prospectus delivery requirements of the Securities
Act. We have informed the selling shareholders that the anti-manipulative
provisions of Regulation M promulgated under the Exchange Act may apply to
their sales in the market.
Selling shareholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of such
Rule.
Upon being notified by a selling shareholder that any material arrangement has
been entered into with a broker-dealer for the sale of Shares through a block
trade, special offering, exchange distribution or secondary distribution or a
purchase by a broker or dealer, we will file a supplement to this prospectus,
if required, under Rule 424(b) of the Act, disclosing
- - the name of each selling shareholder and of the participating broker-
dealer(s),
- - the number of shares involved,
- - the price at which the shares were sold,
- - the commissions paid or discounts or concessions allowed to the broker-
dealer(s), where applicable,
- - that the broker-dealer(s) did not conduct any investigation to verify
information set out or incorporated by reference in this prospectus; and
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<PAGE>
- - other facts material to the transaction.
In addition, upon being notified by a selling shareholder that a donee or
pledgee intends to sell more than 500 shares, we will file a supplement to
this prospectus.
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<PAGE>
LEGAL MATTERS
McDonald Carano Wilson McCune Bergin Frankovich & Hicks LLP has acted as
special counsel on matters of Nevada law with respect to the legality of the
shares offered by this prospectus.
EXPERTS
The consolidated financial statements of Intacta Technologies Inc. and
subsidiaries included in this prospectus and in the registration statement
have been audited by BDO Seidman, LLP, independent certified public
accountants, to the extent and for the periods set forth in their report
(which contains an explanatory paragraph regarding our ability to continue as
a going concern), appearing in this prospectus and in the registration
statement, and is included in reliance upon such report given upon the
authority of said firm as experts in accounting and auditing.
The combined financial statements of Intacta Delaware Inc. and Intacta Labs,
Ltd. included in this prospectus and in the registration statement have been
audited by Meredith, Cardozo, Lanz & Chiu, LLP, independent certified public
accountants, to the extent and for the period set forth in their report (which
contains an explanatory paragraph regarding our ability to continue as a going
concern), appearing in this prospectus and in the registration statement, and
is included in reliance upon such report given upon the authority of said firm
as experts in accounting and auditing.
The financial statements of Intacta Labs, Ltd. have been audited by Penini &
Penini, independent certified public accountants in Israel, to the extent and
for the periods set forth in their report (which contains an explanatory
paragraph regarding our ability to continue as a going concern), appearing in
this prospectus and in the registration statement, and is included in reliance
upon such report given upon the authority of said firm as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 covering the shares being sold in this offering. We have
not included in this prospectus some information contained in the registration
statement, and you should refer to the registration statement, including
exhibits and schedules filed with the registration statement, for further
information. You may review a copy of the registration statement from the
public reference section of the Securities and Exchange Commission in Room
1024, Judiciary Plaza, 450 5 th Street, N.W., Washington, D.C. 20549; and at
the SEC's Regional Office located at: 7 World Trade Center, Suite 1300,
New York, New York 10048 and 1400 Citicorp Center, 500 West Madison Street,
Chicago, IL 60661. You may also obtain copies of such materials at prescribed
rates from the public reference section at the Commission, Room 1024,
Judiciary Plaza, 450 5 th Street, N.W., Washington, D.C. 20549. In addition,
the Securities and Exchange Commission maintains a Web site on the Internet at
the address http://www.sec.gov that contains reports, proxy information
statements and other information regarding registrants that file
electronically with the Securities and Exchange Commission.
- -49-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Intacta Technologies Inc.
Financial Statements
Page
Audited Consolidated Financial Statements F-2
Reports of Independent Accountants F-5
Consolidated Balance Sheets for the periods ended December 31,
1999 and December 31, 1998 F-10
Consolidated Statements of Operations for the periods ended
December 31, 1999, December 31, 1998 and December 31, 1997 F-12
Consolidated Statements of Stockholders' Equity (Deficit) for
the years ended December 31, 1999, December 31, 1998 and
December 31, 1997 F-13
Consolidated Statements of Cash Flows for the periods ended
December 31, 1999, December 31, 1998 and December 31, 1997 F-14
Notes to Consolidated Financial Statements F-15
F-1
<PAGE>
Intacta Technologies Inc. and Subsidiaries
(fka InfoImaging
Technologies, Inc.)
Consolidated Financial Statements
Years Ended December 31, 1999, 1998 and
F-2
<PAGE>
Intacta Technologies Inc. and Subsidiaries
(fka InfoImaging
Technologies, Inc.)
Consolidated Financial Statements
Years Ended December 31, 1999, 1998 and 1997
F-3
<PAGE>
Intacta Technologies Inc. and Subsidiaries
(fka InfoImaging Technologies, Inc.)
Contents
Report of Independent Certified Public Accountants 2
Consolidated Financial Statements
Consolidated balance sheets 4
Consolidated statements of operations 5
Consolidated statements of stockholders' equity 6
Consolidated statements of cash flows 7
Notes to consolidated financial statements 8-22
F-4
<PAGE>
Report of Independent Certified Public Accountants
To The Board of Directors and Shareholders of
Intacta Technologies Inc.
We have audited the accompanying consolidated balance sheets of Intacta
Technologies Inc. and subsidiaries as of December 31, 1999 and 1998 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits. We did not audit
the financial statements of one foreign subsidiary, whose statements reflect
total assets of $640,600 and $801,500 as of December 31, 1999 and 1998,
respectively and total revenues of $54,400 and $0 for the years then ended.
Those statements were audited by other auditors whose report dated April 12,
2000 has been furnished to us and included explanatory paragraphs that
discussed conditions that raised substantial doubt about the foreign
subsidiary's ability to continue as a going concern. Our opinion, insofar as
it relates to the amounts included for such subsidiary, is based solely on the
report of the other auditors. The combined statements of operations,
stockholders' equity and cash flows of Intacta Delaware Inc. and Intacta Labs,
Ltd., the predecessor entities, for the year ended December 31, 1997, were
audited by Meredith, Cardozo, Lanz & Chiu LLP (MCLC), whose practice has been
combined with our Firm and whose report dated February 20, 1998 included an
explanatory paragraph that discussed conditions that raised substantial doubt
about the Company's ability to continue as a going concern. MCLC did not audit
the financial statements of Intacta Labs, Ltd., whose statements reflected
total revenues of $26,100 for the year ended December 31, 1997. Those
statements were audited by other auditors whose report dated February 12,
1998 was furnished to MCLC and included an explanatory paragraph that
discussed conditions that raised substantial doubt about Intacta Labs, Ltd's
ability to continue as a going concern, and whose opinion, insofar as it
related to the amounts included for Intacta Labs, Ltd., was based solely on
the report of the other auditors.
We conducted our audit in accordance with generally accepted auditing
standards. These standards require that we plan and perform our 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
presentation of the financial statements. We believe our audits, and the
reports of other auditors, provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Intacta Technologies Inc. and
subsidiaries as of December 31, 1999 and 1998, and the consolidated results of
their operations and cash flows for the years then ended, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company has suffered recurring losses from
operations and, at December 31, 1999, has an accumulated deficit that raises
substantial doubt about its ability to continue as a going concern.
Management's plans in regards to these matters are also described in Note 1.
The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
The 1998 financial statements have been restated for the correction on an
error as described in Note 7.
/s/ BDO Seidman, LLP
April 14, 2000
F-5
<PAGE>
Auditors' Report to the Shareholders
of
Fontech Ltd.
We have audited the attached financial statements of Fontech Ltd. (hereafter -
the company) as of December 31, 1999 and 1998 and the statements of income
(loss), changes in the capital and cash flows for each of the two years in
the period ended on those dates. These financial statements are the
responsibility of the company's board of directors and management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generall accepted auditing
standards in Israel, including those prescribed by the Auditor (Mode of
performance) Regulations, 1973 which are substantially similar to United
States generally accepted auditing standards. These standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement
either due to error or due to intentional misrepresentation. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosure in the financial statements. The audit also includes assessing the
accounting principles used and significant estimates made by the board of
directors and the management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a fair basis for
our opinion.
In our opinion, the aforementioned financial statements present fairly,
in all material respects, the financial position of the company as of December
31, 1999 and 1998 and the results of its operations, changes in its
shareholders' equity and its cash flows for each of the years ended on those
dates, in conformity with generally accepted accounting principles on the
basis of historical cost in nominal Israeli currency. As applicable to the
Company's financial statements, accounting principles generally accepted in
Israel and in United States are substantially identical in all material
respects.
Pursuant to section 211 of the Companies Ordinance (New Version), 1983, we
hereby state that we have received all the information and explanations which
we have requested and our opinion on the financial statements is given based
on the best of the information and the explanations which we have received and
as reflected in the books of the company.
Without qualifying our opinion, we would like to draw your attention to Note
14 regarding the doubtfulness of the company existing as a "going concern".
The Company's existence is dependent upon its ability to obtain additional
financial support until profitability is achieved. The accompanying financial
statements do not include any adjustments to the financial statements that
might be necessary should the company be unable to continue as a going
concern.
/s/ Penini & Penini, CPA (ISR)
April 12, 2000
F-6
<PAGE>
Auditors' Report to the Shareholders
of
Fontech Ltd.
We have audited the attached financial statements of Fontech Ltd. (hereafter -
the company) as of December 31, 1998 and 1997 and the statements of income
(loss), changes in the capital and cash flows for each of the two years in the
period ended on those dates. These financial statements are the
responsibility of the company's board of directors and management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards in Israel, including those prescribed by the Auditors (Mode of
performance) Regulations, 1973 which are substantially similar to United
States generally accepted auditing standards. These standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement
either due to error or to intentional misrepresentation. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. The audit also includes assessing the accounting
principles used and significant estimates made by the board of directors and
the management, as well as evaluating the overall financial statement
presentation. We belive that our audits provide a fair basis for our opinion.
In our opinion, the aforementioned financial statement present fairly, in
all material respects, the financial position of the company as of December
31, 1998 and 1997 and the results of its operations, changes in its
shareholders' equity and its cash flows for each of the years ended on those
dates, in conformity with generally accepted accounting principles on the
basis of historical cost in nominal Israeli currency. As applicable to the
Company's financial statements, accounting principles generally accepted in
Israel and in United States are substantially identical in all material
respects.
Pursuant to section 211 of the Companies Ordinance (New Version), 1983, we
hereby state that we have received all the information and explanations which
we have requested and our opinion on the financial statements is given based
on the best of the information and the explanations which we have received and
as reflected in the books of the company.
Without qualifying our opinion, we would like to draw your attention to Note
15 regarding the doubtfulness of the company existing as a "going concern".
The Company's existence is dependent upon its ability to obtain additional
financial support until profitability is achieved. The accompanying financial
statements do not include any adjustments to the financial statements that
might be necessary should the company be unable to continue as going concern.
/s/ Penini & Penini, CPA (ISR)
March 16, 1999
F-7
<PAGE>
Report of Independent Certified Public Accountants
To The Board of Directors and Shareholders of
ITI InfoImaging Technologies, Inc.
We have audited the combined balance sheets of ITI InfoImaging Technologies,
Inc. and Fontech Ltd. as of December 31, 1997 and the related combined
statements of operations, shareholders' deficiency and cash flows for the
year then ended. These financial statements are the responsibility of the
Companies' management. Our responsibility is to express an opinion on these
financial statements based on our audit. We did not audit the financial
statement of Fontech Ltd. whose statements reflect total assets of $261,000 as
of December 31, 1997 and total revenues of $26,100 for the year then ended.
Those statements were audited by other auditors whose report dated February
12, 1998 has been furnished to us and included an explanatory paragraph that
discussed conditions that raised substantial doubt about Fontech Ltd.'s
ability to continue as a going concern, and our opinion, insofar as it related
to the amounts included for Fontech Ltd., was based solely on the report of
other auditors.
We conducted our audit in accordance with generally accepted auditing
standards. These standards require that we plan and perform our 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 presentation
of the financial statements. We believe our audit, and the report of other
auditors, provides a reasonable basis for our opinion.
In our opinion, based in our audit and the report of other auditors, the
combined financial statements referred to above present fairly, in all
material respects, the combined financial position of ITI InfoImaging
Technologies, Inc. and Fontech Ltd. as of December 31, 1997 and the
combined results of their operations and cash flows for the year then ended,
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
companies will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's recurring losses from operations and net
capital deficiency raise substantial doubt about its ability to continue as a
going concern. Management's plans regarding those matters are also described
in Note 1. The combined financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Meredith, Cardozo, Lanz & Chiu, LLP
San Jose, California
February 20, 1998
F-8
<PAGE>
Auditors' Report to the Shareholders
of
Fontech Ltd.
We have audited the attached financial statements of Fontech Ltd. (hereafter -
the company) as of December 31, 1997 and 1996 and the statements of income
(loss), changes in site capital and cash flows for each of the two years in
the period ended on those dates. These financial statements are the
responsibility of the company's board of directors and management. Our
responsibility is to express an opinion on those financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards in Israel, including those prescribed by the Auditors (Mode of
performance) Regulations, 1973 which are substantially similar to United
States generally accepted auditing standards. These standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement
either due to error or to intentional misrepresentation. 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 the board of directors and
the management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a fair basis for our
opinion.
In our opinion, the aforementioned financial statements present fairly,
in all material respects, the financial position of the company as of December
31, 1997 and 1996 and the results of its operations, changes in its
shareholders' equity and its cash flows for each of the years ended on those
dates, in conformity with generally accepted accounting principles on the
basis of historical cost in nominal Israeli currency. As applicable to the
Company's financial statements, accounting principles generally accepted in
Israel and in United States are substantially identical in all material
respects.
Pursuant to section 211 of the Companies Ordinance (New Version), 1983, we
hereby state that we have received all the Information and explanations which
we have requested and our opinion on the financial statements is given based
on best of the information and the explanations which we have received and as
reflected in the books of the Company.
Without qualifying our opinion, we would like to draw your attention to Note
15 regarding the doubtfulness of the company existing as a "going concern".
The Company's existence is dependent upon its ability to obtain additional
financial support until profitability is achieved, the accompanying financial
statements do not include any adjustments to the financial statements that
might be necessary should the company be unable to continue as a going
concern.
/s/ Penini & Penini, CPA (ISR)
February 12, 1998
F-9
<PAGE>
December 31, 1999 1998
As Restated
(Note 7)
Assets
Current
Cash and cash equivalents $ 917,400 $3,047,100
Accounts receivable, less allowance for
doubtful accounts of $18,400 in 1998 31,700 11,400
Inventories 278,600 298,700
Related party and employee receivables 45,000 44,400
Other 30,800 14,700
--------- ---------
Total current assets 1,303,500 3,416,300
Property and equipment, net 156,100 231,700
Other assets, net 111,300 112,700
--------- ---------
$1,570,900 $3,760,700
========= =========
F-10
<PAGE>
Intacta Technologies Inc.
(fka InfoImaging Technologies, Inc.)
Consolidated Balance Sheets
December 31, 1999 1998
As Restated
(Note 7)
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 472,400 $ 82,900
Accounts payable - related parties 90,200 10,900
Advances from shareholder 89,000 1,321,000
Accrued expenses 77,800 77,300
---------- ----------
Total current liabilities 729,400 1,492,100
---------- ----------
Commitments
Stockholders' equity
Preferred stock, $.0001 par value; 50,000,000
shares authorized; no shares issued and
out standing - -
Common stock, $.0001 par value; 100,000,000
shares authorized; 17,909,000 and 17,671,000
shares issued and outstanding, respectively 1,791 1,767
Additional paid-in capital 19,710,553 18,492,199
Deficit (17,671,200) (14,053,600)
Unamortized stock compensation ( 1,199,644) ( 2,171,766)
---------- ----------
Total stockholders' equity 841,500 2,268,600
---------- ----------
$ 1,570,900 $3,760,700
========== ==========
See accompanying notes to consolidated financial statements.
F-11
<PAGE>
Intacta Technologies Inc.
(fka InfoImaging Technologies, Inc.)
Consolidated Statements of Operations
Years ended December 31, 1999 1998 1997
As Restated
(Note 7)
Revenues
Products and components $ 64,000 $ 89,300 $ 894,900
Royalties from licensing
arrangements 73,400 48,500 -
---------- ---------- ----------
Total Revenues 137,400 137,800 894,900
---------- ---------- ----------
Operating expenses
Cost of products and components 90,500 336,300 357,500
Research and development (including
non-cash compensation expense of
$222,400, $129,700 and $0 in 1999,
1998 and 1997 respectively) 1,047,400 903,500 343,200
Sales and marketing 113,200 113,100 297,000
General and administrative
(including non-cash compensation
expense of $1,016,000, $539,100 and
$0 in 1999, 1998 and 1997
respectively) 2,619,800 1,699,400 1,353,100
---------- ---------- ----------
Total operating expenses 3,870,900 3,052,300 2,350,800
---------- ---------- ----------
Loss from operations (3,733,500) (2,914,500) (1,455,900)
---------- ---------- ----------
Other income (expense)
Interest income 104,000 - -
Interest (expense) (8,700) (210,000) -
Interest expense - stockholder - - (755,300)
Other 21,400 (19,600) 13,100
---------- ---------- ----------
Total other income (expense) 116,700 (229,600) (742,200)
---------- ---------- ----------
Loss before provision for income
taxes (3,616,800) (3,144,100) (2,198,100)
Provision for income taxes 800 1,700 1,600
---------- ---------- ----------
Net loss $(3,617,600) $(3,145,800) $(2,199,700)
========== ========== ==========
Basic and diluted loss per
common share $ (0.20) $ (0.19) $ (0.19)
========== ========== ==========
Basic and diluted weighted
average common shares
outstanding 17,790,000 16,701,583 11,486,000
========== ========== ==========
See accompanying notes to consolidated financial statements.
F-12
<PAGE>
Intacta Technologies Inc.
(fka InfoImaging Technologies, Inc.)
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
Additional Unamortized
Common Stock Paid-in Stock
Shares Amount Capital Compensation Deficit Total
<S> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1996 11,486,000 $ 1,149 $ 1,498,851 -- $(8,708,100) $(7,208,100)
Net loss -- -- -- -- (2,199,700) (2,199,700)
- ----------------------------------------------------------------------------------------------
Balance,
December 31, 1997 11,486,000 1,149 1,498,851 -- (10,907,800) (9,407,800)
Contributed capital -- -- 183,600 -- -- 183,600
Contributed captal from
principal stockholder for
retirement of debt -- -- 8,929,800 -- -- 8,929,800
Common stock issued in
connection with reverse
acquisition 5,185,000 518 1,439,482 -- -- 1,440,000
Issuance of common stock
in Private Placement,
net of issuance costs of
$400,000 1,000,000 100 3,599,900 -- -- 3,600,000
Stock options granted
(Note 7) -- -- 2,840,566 (2,840,566) -- --
Amortization of stock
options as restated
(Note 7) -- -- -- 668,800 -- 668,800
Net loss - As Restated
(Note 7) -- -- -- -- (3,145,800) (3,145,800)
- -----------------------------------------------------------------------------------------------
Balance,
December 31, 1998 17,671,000 1,767 18,492,199 (2,171,766) (14,053,600) 2,268,600
As Restated (Note 7)
Conversion of debt to
equity - stockholder 238,000 24 952,076 -- -- 952,100
Stock options granted -- -- 266,278 (266,278) -- --
Amortization of stock
options -- -- -- 1,238,400 -- 1,238,400
Net loss -- -- -- -- (3,617,600) (3,617,600)
- -----------------------------------------------------------------------------------------------
Balance,
December 31, 1999 17,909,000 $ 1,791 $19,710,553 $ (1,199,644)$(17,671,200) 841,500
===============================================================================================
</TABLE>
F-13
<PAGE>
Intacta Technologies Inc.
(fka InfoImaging Technologies, Inc.)
Consolidated Statements of Cash Flows
Years ended December 31, 1999 1998 1997
As Restated
(Note 7)
Operating activities
Net loss $(3,617,600) $(3,145,800) $(2,199,700)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Non-cash compensation expense 1,238,400 668,800 -
Depreciation and amortization 94,200 92,100 89,200
Provision for bad debts - - 54,400
Write-down of inventory 46,100 240,100 -
Write-down of other assets - 49,000 -
Changes in operating assets and
liabilities:
Accounts receivable (20,300) 184,400 (105,300)
Inventories (26,000) (64,100) 71,600
Related party and
employee receivables (600) (35,100) 58,600
Other current assets (16,100) 2,600 (11,200)
Accounts payable 468,800 (168,000) 17,100
Accrued interest on advances
from shareholder - - 568,300
Accrued expenses 500 (112,700) (17,200)
Deferred revenue - (51,300) (223,900)
---------- ---------- ----------
Cash used in operating
activities (1,832,600) (2,340,000) (1,698,100)
---------- ---------- ----------
Investing activities
Cash acquired in purchase
of business - 1,440,000 -
Capital expenditures (18,600) (191,900) (22,900)
Other assets 1,400 (8,000) (70,400)
---------- ---------- ----------
Cash provided by (used in)
investing activities (17,200) 1,240,100 (93,300)
---------- ---------- ----------
Financing activities
Contributed capital - 183,600 -
Net proceeds from private
placement - 3,600,000 -
Advances from shareholder - 3,062,000 2,064,100
Repayment of shareholder advances (279,900) (2,731,000) -
Repayment of notes payable - (136,700) (161,900)
---------- ---------- ----------
Cash provided by (used in)
financing activities (279,900) 3,977,900 1,902,200
---------- ---------- ----------
Net increase (decrease) in cash
and cash equivalents (2,129,700) 2,878,000 110,800
Cash and cash equivalents,
beginning of year 3,047,100 169,100 58,300
---------- ---------- ----------
Cash and cash equivalents,
end of year $ 917,400 $ 3,047,100 $ 169,100
========== ========== ==========
See accompanying notes to consolidated financial statements.
F-14
<PAGE>
Intacta Technologies Inc.
(fka InfoImaging Technologies, Inc.)
Notes to Consolidated Financial Statements
1. Summary of Significant
Accounting Policies
The Company
Intacta Technologies Inc. (formerly InfoImaging Technologies, Inc.), (the
"Company"), a Nevada corporation, was incorporated in October 1997.
On May 31, 1998, the Company completed the acquisition of 100% of the
outstanding common stock of Intacta Delaware Inc.(formerly ITI InfoImaging
Technologies, Inc.) (Intacta), a Delaware corporation, and Intacta Labs Ltd.
(formerly Fontech Ltd.) (Intacta Labs) in exchange for 11,486,000 shares of
the Company's $.0001 par value common stock valued at $1. The valuation of
Intacta and Intacta Labs equated to the approximate aggregate accumulated
deficits of the two companies to that date. The two companies agreed to accept
the per common stock value which approximated the market trading value at
the time of the initial discussions and signing of the letter of intent. For
accounting purposes, the acquisition has been treated as the acquisition
of the Company by Intacta and Intacta Labs, with the combined entity
of Intacta and Intacta Labs, companies under common control, as the
acquirer (reverse acquisition). As such, in conjunction with the
acquisition, the historical financial statements of the acquirer replaced
the historical financial statements of the Company. Since the Company
prior to the reverse acquisition was a public shell corporation with no
significant operations, pro forma information giving effect to the
acquisition is not presented. All shares and per share data prior to the
acquisition have been restated to reflect the stock issuance as a
recapitalization of Intacta. The shares held by the shareholders of the
Company prior to the acquisition (5,185,000 shares) have been recognized
as if they were issued in connection with the acquisition of the Company by
Intacta. As the former shareholder of Intacta and Intacta Labs received
approximately 69% of the shares in the Company immediately after the
acquisition, the financial statements for periods prior to the
recapitalization are those of Intacta and Intacta Labs.
Intacta was incorporated in September 1994. The Company ceased production
and marketing of its advanced compression and imaging technology products
used for transmitting and storing information to begin development of new
products based on the Company's patented core technology. The Company has
certain licensing arrangements in place to third parties for the use of this
proprietary technology.
F-15
<PAGE>
Intacta Technologies Inc.
(fka InfoImaging Technologies, Inc.)
Notes to Consolidated Financial Statements
Intacta Labs, an Israeli corporation, began operations in June 1992. The
Company conducts product research, development and manufacturing in the high
tech area of Beer Sheva, Israel, and is currently conducting research into
even greater time and cost savings techniques for easily transmitting and
storing data in secure formats.
Consolidation and Combination
The accompanying consolidated financial statements for the years ended
December 31, 1999 and 1998 include the amounts of the Company and its wholly
owned subsidiaries. The financial statements are combined in accordance with
Accounting Research Bulletin No. 51 for the year ended December 31, 1997 and
include the amounts of Intacta and Intacta Labs, companies under common
control. All intercompany accounts and transactions have been eliminated in
the consolidated and combined financial statements. All references to
December 31, 1999 and 1998 reflect consolidated financial statements while
references to December 31, 1997 reflect combined financial statements.
Basis of Presentation
The accompanying consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown in the
consolidated financial statements, the Company has a deficit of $17,671,200 as
of December 31, 1999, and incurred losses of $3,617,600, $3,145,800 and
$2,199,700 for the years ended December 31, 1999, 1998 and 1997, respectively.
These losses were caused by the realization in 1997 that the market potential
for the Company's primary product and other related products was less
than forecasted. During 1998 and 1999 the Company's marketing and sales
efforts were reduced and the Company focused its efforts on design revisions
to its core applications without the benefit of cash flow from operations. As
a result, the Company has absorbed significant cash in its day to day
operations and expects to continue to absorb cash in its operations during
2000.
These conditions give rise to substantial doubt about the Company's
ability to continue as a going concern. The Company's continuation as
a going concern is dependent upon its ability to obtain additional
financing as may be required and ultimately to attain profitability. The
Company is actively marketing its new products, which it believes will
F-16
<PAGE>
Intacta Technologies Inc.
(fka InfoImaging Technologies, Inc.)
Notes to Consolidated Financial Statements
ultimately lead to profitable operations, and is seeking to raise additional
funds through the issuance of equity sufficient to sustain product development
activities, marketing functions and ultimately to enable the Company to
increase revenues. If this plan materializes as expected, the Company
anticipates viability for the year 2000 and beyond, though there can be no
assurance that the Company will be successful in these efforts. The financial
statements do not include any adjustments relating to the recoverability and
classification of assets or the amount and classification of liabilities that
might be necessary should the Company be unable to continue as a going
concern.
Cash and Cash Equivalents
For purposes of the consolidated and combined statements of cash flows, the
Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of cost (first in, first out) or
market.
Property and Equipment
Property and equipment is stated at cost, net of accumulated depreciation and
amortization. Depreciation is provided using the straight line method over the
estimated useful lives of the assets, generally ranging from three to seven
years. Leasehold improvements are amortized using the straight-line method
over the lesser of the lease term or the estimated useful lives of the related
asset, generally three to seven years.
Other Assets
Other assets, consisting principally of patents, are amortized on a
straight-line basis over the estimated useful life of the patents, generally
ten years.
As of December 31, 1999 and 1998, accumulated amortization aggregated
approximately $66,600 and $55,500, respectively.
Long Lived Assets
Long-lived assets, such as patents and property and equipment, are
F-17
<PAGE>
Intacta Technologies Inc.
(fka InfoImaging Technologies, Inc.)
Notes to Consolidated Financial Statements
evaluated for impairment when events or changes in circumstances indicate that
the carrying amount of the assets may not be recoverable through the estimated
undiscounted future cash flows resulting from the use of these assets. When
any such impairment exists, the related assets will be written down to fair
value.
Software Development Costs
In accordance with Statement of Financial Accounting Standards (SFAS) No. 86,
Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed, costs related to the research and development of new products and
enhancements to existing products are expensed as incurred until technological
feasibility of the product has been established, at which time such costs are
capitalized, subject to expected recoverabilty. To date, the Company has not
had a general release of any of its new products nor has it received overall
market acceptance. Therefore, the Company has not capitalized any software
development costs related to its products, since the time period between
technological feasibility and the general release of a market accepted
product is not significant.
Revenue Recognition
The Company's revenue recognition policies are in compliance with generally
accepted accounting principles including Statement of Position (SOP) 97-2,
Software Revenue Recognition. As such, the Company recognizes product revenue
upon shipment if persuasive evidence of an arrangement exists, delivery has
occurred, the fees are fixed and determinable and collectibility is probable.
During 1997 and 1998, a majority of revenues were derived from the shipment of
product, a portion of which was sold through resellers and distributors.
Appropriate reserves were considered to effectively defer revenue recognition
when material amounts of inventory had not been sold through to the end user.
Generally, the right of return of these products was of short duration (90
days). No provision for estimated product returns was necessary based on
historical experience.
Maintenance and support arrangements and other post-delivery obligations are
insignificant to the Company's revenues.
License revenues are recognized based on actual sales of the licensed software
by the customer/licensee and therefore are not recognized as revenue until
reported by the customer/licensee. This is the time at
F-18
<PAGE>
Intacta Technologies Inc.
(fka InfoImaging Technologies, Inc.)
Notes to Consolidated Financial Statements
which the Company believes that revenue recognition in accordance with SOP
97-2, as described above, has occurred. Support revenue is not integral to the
functionality of the licensed software and is billed and recognized as
incurred.
Advertising Costs
The cost of advertising is expensed as incurred. Advertising costs for the
years ended December 31, 1998 and 1997 were approximately $48,100 and
$261,000, respectively. There were no advertising costs during the year ended
December 31, 1999.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes,
which requires an asset and liability approach. This approach results in the
recognition of deferred tax assets (future tax benefits) and liabilities for
the expected future tax consequences of temporary differences between the book
carrying amounts and the tax basis of assets and liabilities. The deferred tax
assets and liabilities represent the future tax return consequences of those
differences, which will either be deductible or taxable when the assets and
liabilities are recovered or settled. Future tax benefits are subject to a
valuation allowance when management believes it is more likely than not that
the deferred tax assets will not be realized.
Loss Per Share
Basic earnings per share is computed using the weighted-average number of
common shares outstanding during the period. Diluted earnings per share is
computed using the weighted-average number of common and potentially dilutive
common shares outstanding during the period, if dilutive.
As a result of losses incurred during the years ended December 31, 1999 and
1998, 1,375,000 and 1,005,000 stock options, respectively were antidilutive
and accordingly, were excluded from the computation of loss per share. There
were no common equivalent shares outstanding during the year ended December
31, 1997.
F-19
<PAGE>
Intacta Technologies Inc.
(fka InfoImaging Technologies, Inc.)
Notes to Consolidated Financial Statements
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Impact of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument, including certain derivative instruments imbedded in other
contracts, be recorded in the balance sheet as either an asset or liability
measured at its fair value. The statement also requires that changes in the
derivative's fair value be recognized in earnings unless specific hedge
accounting criteria are met. SFAS No. 137 delayed the effective date of SFAS
No. 133 to fiscal years beginning after June 15, 2000. The Company expects
that the adoption of SFAS No. 133 will not have a material impact on its
financial position or results of operations.
Foreign Currency
The Company has designated the U.S. dollar as its functional currency for
Intacta Labs, a foreign subsidiary. Financial statements of this subsidiary
are translated into U.S. dollars for consolidation purposes using current
rates of exchange for monetary assets and liabilities and historical rates of
exchange for non-monetary assets and related elements of expense. Sales and
other expenses are translated at rates that approximate the rates in effect on
the translation dates. Immaterial translation gains and losses are included in
the consolidated and combined statement of operations.
Fair Values of Financial Instruments
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash and cash equivalents
The carrying amount reported in the consolidated and combined
F-20
<PAGE>
Intacta Technologies Inc.
(fka InfoImaging Technologies, Inc.)
Notes to Consolidated Financial Statements
balance sheets for cash and cash equivalents approximate fair values.
Short term debt:
The fair value of short term debt approximates cost because of the short
period of time to maturity.
As of December 31, 1999 and 1998, the fair values of the Company's financial
instruments approximate their historical carrying amounts.
Reclassifications
Certain 1998 and 1997 amounts have been reclassified to conform to the 1999
presentation.
2. Inventories
As of December 31, 1999 and 1998, inventories were comprised of:
1999 1998
Components $ 233,600 $ 181,000
Work in process 45,000 59,100
Finished products - 58,600
---------- ----------
$ 278,600 $ 298,700
========== ==========
Inventories at December 31, 1999 and 1998 relate substantially to computer
chips and boards appropriately capitalized in accordance with SFAS No. 2,
Accounting for Research and Development Costs which allows for the
capitalization of materials if they have alternative future uses. The Company
believes this to be the case in regards to these inventories.
During 1999 and 1998, the Company wrote-off approximately $46,100 and
$240,100, respectively, of its inventory due to reduced sales and
obsolescence, which is included in cost of products and components.
F-21
<PAGE>
1998.Intacta Technologies Inc.
(fka InfoImaging Technologies, Inc.)
Notes to Consolidated Financial Statements
3. Property and Equipment
As of December 31, 1999 and 1998, property and equipment was comprised of:
1999 1998
Equipment $ 459,300 $ 405,800
Furniture and fixtures 48,100 58,900
Vehicles 14,100 38,200
---------- ----------
521,500 502,900
Less accumulated depreciation (365,400) (271,200)
---------- ----------
$ 156,100 $ 231,700
========== ==========
4. Advances from Shareholder
Advances from shareholder represent non-interest bearing cash advances for
operating expenses that are due upon demand. During the year ended December
31, 1999, the Company converted $952,100 of such debt into 238,000 shares of
common stock. During the year ended December 31, 1998, the Company received
additional paid-in capital in exchange for the retirement of $8,929,800 of
debt. The 1998 debt included accrued interest of approximately $1,200,000.
5. Accrued Expenses As of December 31, 1999 and 1998, accrued expenses were
comprised of:
1999 1998
Salaries and related expenses $ 32,900 $ 45,500
Severance 27,800 23,300
Vacation 16,900 6,800
Other 200 1,700
---------- ----------
$ 77,800 $ 77,300
========== ==========
6. Commitments
Leases
The Company leases its facilities and certain equipment under operating
leases, which expire through August 2000. The facility leases require the
Company to pay certain maintenance and operating expenses, such as utilities,
property taxes, and insurance costs. Rent expense related to these operating
leases was $135,709 and $111,400 and $120,500 for the years ended December 31,
1999, 1998 and 1997, respectively.
F-22
<PAGE>
Intacta Technologies Inc.
(fka InfoImaging Technologies, Inc.)
Notes to Consolidated Financial Statements
7. Stock Option Plan and Restatement of 1998 Financial Statements In June
1998, the Company adopted its 1998 Incentive Stock Option Plan (ISO) and
Non-qualified Stock Option Plan (NSO) (collectively the "Plan") that provides
for the granting of stock options to employees, directors, officers, outside
consultants and other third parties. Options vest over a maximum of five years
and expire in a maximum of ten years. The Company has reserved 1,667,100
shares of its common stock for issuance under the Plan.
The Plan indicates that the options shall be granted at prices of at least
100% of the fair market value of the common shares on the date of the grant
or, in the case of greater than ten percent shareholders, of at least 110% of
the fair market value. Notwithstanding the foregoing, a majority of the
options were actually issued at a discount from fair market value. As options
were originally reported in error to have been granted at fair market value in
1998, the Company has restated its 1998 financial statements to properly
reflect compensation expense that results from options being granted at a
discount. The fair market value of options granted in 1998 was improperly
reported to be $1.50 per share while actual fair market values ranged from
$4.00 - $4.28 per share. The effect of the restatement on 1998 operating
results is to increase operating expenses, loss from operations, net loss and
deficit by $668,800 and to increase basic and diluted loss per share by
$(0.04) as follows:
As Reported As Restated
Operating expenses $ 2,383,500 $ 3,052,300
Loss from operations $(2,245,700) $(2,914,500)
Net loss $(2,477,000) $(3,145,800)
Basic and diluted loss
per common share $ (0.15) $ (0.19)
F-23
<PAGE>
Intacta Technologies Inc.
(fka InfoImaging Technologies, Inc.)
Notes to Consolidated Financial Statements
A summary of stock option transactions for the above plan follows:
Weighted
average
Number of exercise
shares price
Outstanding at
December 31, 1997 - -
Granted 1,005,000 $1.50
---------- ----------
Outstanding at
December 31, 1998 1,005,000 1.50
Granted 370,000 3.49
---------- ----------
Outstanding at
December 31, 1999 1,375,000 $2.03
========== ==========
Weighted
average
Number of exercise
Options exercisable shares price
December 31, 1997 410,000 $1.50
========== ==========
Required disclosures for options outstanding at December 31, 1999 are as
follows:
Number Weighted
outstanding at average Weighted
December 31, remaining average
1999 contractual exercise
Exercise price life price
$ 1.50 1,080,000 1.01 $1.18
$ 4.00 295,000 2.05 $0.85
- -----------------------------------------------------------------------------
$ 1.50 4.00 1,375,000 1.33 $2.03
=============================================================================
The weighted average fair value of all options, calculated using the
Black-Scholes Option Pricing Model, granted during 1999 and 1998 is $0.42 and
$2.21 per share, respectively.
The Company applies both Accounting Principles Board Opinion No. 25 (APB No.
25), Accounting for Stock Issued to Employees and related interpretations and
SFAS No. 123, Accounting for Stock-Based Compensation in accounting for its
stock option plans. Options granted to employees and directors are accounted
for under APB No. 25 and
F-24
<PAGE>
Intacta Technologies Inc.
(fka InfoImaging Technologies, Inc.)
Notes to Consolidated Financial Statements
compensation expense is recognized for the intrinsic value of the options
granted. Options granted to all others are accounted for in accordance with
SFAS No. 123 and compensation expense is recognized for the fair value of the
options granted. SFAS No. 123 also requires that the Company provide pro forma
information regarding the net loss as if the compensation cost for the
Company's Plan had been determined in accordance with the fair market value
method for all options. The Company estimates the fair value of all stock
options at the grant date using the Black Scholes option pricing model with
the following weighted average assumptions for 1999 and 1998 (years in which
options were granted): Dividend yield of 0 in both years; expected volatility
of 40% in both years; risk-free interest rate of 5.23% in 1999 and 5.47% in
1998; and an expected life of 2.61 years in 1999 and 2.55 years in 1998.
Under the accounting provisions of SFAS No. 123, the Company's net loss and
basic and diluted loss per common share would have been adjusted to the pro
forma amounts indicated below:
Years ended December 31, 1999 1998 1997
Net loss, as reported $(3,617,600) $(3,145,800) $(2,199,700)
Pro forma (3,736,400) (3,183,000) (2,199,700)
---------- ---------- ----------
Basic and diluted loss per share,
as reported $ (0.20) $ (0.19) $ (0.19)
Pro forma (0.21) (0.19) (0.19)
========== ========== ==========
8. Related Party Transactions
During 1999 and 1998, the Company received administrative, consulting,
management and marketing services from several organizations that are owned by
directors or shareholders of the Company. These services aggregated
approximately $346,300 and $294,200 for the years ended December 31, 1999 and
1998, respectively of which $226,300 and $229,500 have been included in
research and development expenses and $120,000 and $64,700 have been included
in general and administrative expenses. There were no similar related party
transactions for the year ended December 31, 1997.
F-25
<PAGE>
9. Income Taxes
For the years ended December 31, 1999, 1998 and 1997, the provision for income
taxes consists of current minimum state taxes.
The following table summarizes the differences between the income tax expense
and the amount computed by applying the Federal income tax rate of 34% in
1999, 1998 and 1997 to loss before income taxes:
Years Ending December 31, 1999 1998 1997
As Restated
(Note 7)
Federal income tax benefit
at statutory rate $(1,229,700) $(1,069,000) $ (747,300)
State income tax benefit,
net of federal tax benefit (210,900) (183,300) (128,100)
Foreign operations not
subject to taxes 316,700 277,000 179,100
Tax benefits not currently
recognizable (4,600) 90,100 122,400
Change in valuation
allowance 1,129,300 886,900 575,500
---------- ---------- ----------
$ 800 $ 1,700 $ 1,600
========== ========== ==========
As of December 31, 1999 and 1998, deferred tax assets (liabilities) comprised
the following:
1999 1998
Net operating loss
carryforward $ 4,602,500 $ 3,965,000
Stock option compensation
not currently deductible 764,800 268,200
Accumulated depreciation
and amortization and
other 13,300 10,300
---------- ----------
Total deferred tax assets 5,380,600 4,243,500
---------- ----------
Reserves not currently
deductible (204,000) (193,500)
Other, net - (2,700)
---------- ----------
Total deferred tax liabilities (204,000) (196,200)
F-26
<PAGE>
Intacta Technologies Inc.
(fka InfoImaging Technologies, Inc.)
Notes to Consolidated Financial Statements
Net deferred tax asset 5,176,600 4,047,300
Valuation allowance (5,176,600) (4,047,300)
---------- ----------
$ -- $ --
========== ==========
The Company has net operating loss carryforwards available to reduce future
taxable income, if any, of approximately $12,399,300, $5,892,400 and
$3,760,000 for Federal, California state and foreign tax purposes,
respectively. The benefits from these carryforwards expire through 2014. As of
December 31, 1999, management believes it cannot be determined that it is more
likely than not that these carryforwards and its other deferred tax assets
will be realized, and accordingly, fully reserved for these deferred tax
assets.
10. Employee Profit Sharing Plan
The Company has a profit sharing plan covering all eligible employees meeting
certain age and service requirements. Under the profit sharing plan, the Board
of Directors, at their election, can authorize contributions up to a maximum
of 3% of eligible participants' total compensation. For the years ended
December 31, 1998 and 1997, the Company contributed $2,500 and $9,800,
respectively. The Company made no contributions for the year ended December
31, 1999.
11. Major Customers and Export Sales
Major Customers
During 1999, two customers accounted for approximately 53% and 40% of net
sales.
During 1998, four customers accounted for approximately 27%, 26%, 15% and 12%
of net sales. The customer with 27% of net sales had an accounts receivable
balance of $7,200 as of December 31, 1998, while the other major customers had
no outstanding balance.
During 1997, two customers accounted for approximately 14% and 11% of net
sales, with accounts receivable of $5,400 and $28,800 as of December 31, 1997,
respectively.
F-27
<PAGE>
Intacta Technologies Inc.
(fka InfoImaging Technologies, Inc.)
Notes to Consolidated Financial Statements
Geographic Segments
The following table presents sales and other financial information of Intacta
Labs, located in Israel, for the years ended December 31, 1999, 1998 and 1997:
Years ended December 31, 1999 1998 1997
Sales to unaffiliated customers $ 54,400 $ - $ 26,100
========== ========== ==========
Inter-area sales to affiliates $ - $ 49,900 $ 714,100
========== ========== ==========
Operating losses $ (783,000) $ (601,600) $ (272,900)
========== ========== ==========
Long-lived assets (gross) $ 363,700 $ 325,200 $ 185,500
========== ========== ==========
Export Sales
Years ended December 31, 1999 1998 1997
Far East $ - $ 78,400 $ 92,100
Africa/Middle East - - 25,700
Other 54,400 - 12,900
---------- ---------- ----------
$ 54,400 $ 78,400 $ 130,700
========== ========== ==========
F-28
<PAGE>
Intacta Technologies Inc.
(fka InfoImaging Technologies, Inc.)
Notes to Consolidated Financial Statements
12. Concentration of Credit Risk
Financial instruments, which potentially subject the Company to concentration
of credit risk, consist principally of cash and cash equivalents and trade
receivables. The Company places its cash and cash equivalents with high
quality financial institutions and, by policy, limits the amounts of credit
exposure to any one financial institution.
As of December 31, 1999 the Company's accounts receivable are limited.
However, the Company believes any risk of accounting loss is significantly
reduced due to provisions considered at the date of sale for returns and
allowances and ongoing credit evaluations of its customers' financial
condition as deemed necessary. The Company generally does not require cash
collateral or other security to support customer receivables.
13. Statement of Cash Flows
Cash was paid during the years ended December 31, 1999, 1998 and 1997 for:
1999 1998 1997
Income taxes $ 800 $ 1,700 $ 1,600
========== ========== ==========
Interest $ - $ 68,300 $ 52,100
========== ========== ==========
During the years ended December 31, 1999 and 1998, the Company's non-cash
financing activities included increases of additional paid-in capital in
exchange for the retirement of debt in the amount of approximately $952,100
and $8,929,800, respectively. There were no non-cash activities in the year
ended December 31, 1997.
14. Subsequent Events
In February 2000, the Company filed a registration statement on Form S-1 with
the Securities and Exchange Commission (SEC) under the Securities Act of 1933
to register 8,874,000 common shares. The related prospectus is solely for the
purpose of selling shareholders and thus the Company will not receive any
proceeds from the sale of stock being offered. The registration is currently
being reviewed by the SEC and there can be no assurances as to if and when the
registration may become effective.
<PAGE>
8,841,000 Shares To Be Sold
by Current Shareholders
Common Stock
PROSPECTUS
, 2000
Dealer Prospectus Delivery Obligation:
Until , 2000 (25 days after the date of this prospectus), all dealers
that buy, sell or trade these shares of common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealers' obligation to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Amount
Securities and Exchange Commission Registration Fee $ 5,646
Legal Fees and Expenses 50,000
Accounting Fees and Expenses 10,000
Printing and Engraving Expenses 3,000
Miscellaneous Expenses 5,000
Total 73,646
Item 14. Indemnification of Directors and Officers.
Under Nevada Revised Statutes Section 78.7502 and 78.751, our articles of
incorporation and bylaws provide for the indemnification of our officers and
directors. Mandatory indemnification is required for present and former
directors. However, the director must have conducted himself in good faith and
reasonably believes that his conduct was in, or not opposed to, our best
interests. In a criminal action he must not have had a reasonable cause to
believe his conduct was unlawful. Advances for expenses may be made if the
director affirms in writing that he believes he has met the standards and that
he will personally repay the expense if it is determined he did not meet
the standards. We provide permissive indemnification for officers, employees
or agents. Our Board must approve such indemnification and the standards and
limitations are the same as for a director.
We will not indemnify a director or officer adjudged liable due to his
negligence or willful misconduct toward us, adjudged liable to us, or if he
improperly received personal benefit. Indemnification in a derivative
action is limited to reasonable expenses incurred in connection with the
proceeding. Also, we are authorized to purchase insurance on behalf of an
individual for liabilities incurred whether or not we would have the power or
obligation to indemnify him under our bylaws.
Item 15. Recent Sales of Unregistered Securities.
On November 8, 1997, we issued 4,000,000 common shares on a private placement
basis to seventeen institutional investors for an aggregate offering price of
$600,000 in cash. We issued an additional 60,000 common shares to two agents,
West America and Christopher Dieterich, as payment for commissions and fees in
connection with the offering.
On December 19, 1997, we issued 975,000 common shares on a private placement
basis to eight institutional investors for an aggregate offering price of
$390,000 in cash.
On April 30, 1998, we issued 117,000 common shares on a private placement
basis to Gestibroker Consulting for an aggregate offering price of $351,000 in
cash.
On May 12, 1998, we issued 33,000 common shares on a private placement basis
to Francis Pizzulli for an aggregate offering price of $99,000 in cash.
On May 31, 1998, under an Exchange Agreement between us and Corsa S.A.
Holdings ("Corsa"), we issued 11,486,000 common shares on a private placement
basis to Corsa in exchange for the transfer of 100% of the outstanding shares
of Intacta Delaware Inc. and 99% of the outstanding shares of Intacta Labs
Ltd.
<PAGE>
On December 31, 1998, we issued 1,000,000 common shares on a private placement
basis to MFC Merchant Bank S.A. for an aggregate offering price of $4,000,000
in cash. Under an Agency Agreement dated October 23, 1998, we paid $400,000 to
Barons Financial Services (U.K.) Ltd., the agent for the offering.
On June 30, 1999, we issued 238,000 shares of common stock on a private
placement basis to Valor Invest Limited in repayment of a loan of $952,100
pursuant to a loan conversion at the rate of $4.00 per share.
With the exception of the May 12, 1998 offer and sale of securities, we relied
on the exclusion from registration provided by Regulation S under the
Securities Act of 1933, as amended (the "Securities Act") in connection with
the offer and sale of securities in the above transactions. In connection with
the May 12, 1998 offer and sale of securities to Francis Pizzulli, we relied
on the exemption from registration provided by Regulation D under the
Securities Act.
Item 16. Exhibits and Financial Statement Schedules.
Exhibits
Exhibit No. Description
3.1| Articles of Amendment and Articles of Incorporation of Intacta
Technologies Inc.
3.2| Bylaws of Intacta Technologies Inc.
4.1| Specimen Stock Certificate
5.1 Opinion of McDonald Carano Wilson McCune Bergin Frankovich & Hicks
LLP
10.1+ Licensing Agreement dated July 19, 1999, between registrant and
DataLode Inc.
10.2+ International Distributor Agreement dated September 20, 1997,
between registrant and Orbit Company, Ltd.
10.3 International Distributor Agreement dated June 28, 1996, between
registrant and Rexton Corporation
10.4+ License Agreement dated May 31, 1997, between registrant and
Brother Industries, Ltd.
10.5+ License Agreement dated April 29, 1997, between registrant and
Brother Industries, Ltd.
10.6+ Authorized OEM Agreement dated August 6, 1996, between registrant
and SmithMicro Software, Inc.
10.7| Sublease Agreement dated September 16, 1999 between Outdoor West,
Inc. and registrant
10.8| Tenancy Agreement dated August 31, 1999 between Mrs. Hana Kimchi
and Fontech Ltd. (English translation of original Hebrew agreement)
10.9| Shareholders Agreement dated May 31, 1998, among registrant, Valor
Invest, Ltd. and Corsa SA Holdings
10.10| 1998 Stock Option Plan
10.11| Consulting Agreement dated October 1, 1998, between registrant and
Pensbreigh Holdings Ltd.
10.12| Letter Agreement dated September 30, 1998, between registrant and
Marco Genoni
10.13| Agreement dated March 31, 1999, between registrant and Noel R.
Bambrough
10.14| Exchange Agreement dated May 31, 1998 between registrant and Corsa
S.A. Holdings.
II-2
<PAGE>
Exhibit No. Description
10.15| Consulting Agreement dated March 1, 1999 between registrant and
Pensbreigh Holdings Ltd.
21.1| List of subsidiaries of registrant
23.1 Consent of BDO Seidman, LLP
23.2 Consent of Meredith, Cardozo, Lanz and Chiu, LLP
23.3 Consent of Penini and Penini, CPA
23.4 Consent of McDonald Carano Wilson McCune Bergin Frankovich & Hicks
LLP (included in Exhibit 5.1)
24.1| Power of Attorney (included on signature page)
27.1 Financial Data Schedule
+ Confidential treatment has been requested as to certain portions of this
exhibit. Omitted portions have been filed separately with the Securities and
Exchange Commission.
| Previously filed.
Financial Statement Schedules.
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions, are inapplicable or not material, or the information
called for thereby is otherwise included in the financial statements and
therefore has been omitted.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question 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.
The undersigned registrant hereby undertakes to provide to the underwriter at
the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names by the underwriter to permit prompt
delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(3) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be a part of this Registration
Statement as of the time it was declared effective.
(4) For the purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of
Vancouver, province of British Columbia, on May 10, 2000.
Intacta Technologies Inc.
By: /s/ Altaf S. Nazerali
---------------------
Altaf S. Nazerali
President, Chief Executive Officer and Director
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Altaf S. Nazerali President, Chief Executive May 10, 2000
- --------------------- Officer and Director
Altaf S. Nazerali
* Vice President, Finance and May 10, 2000
- --------------------- Director
Ross Wilmot
* Director May 10, 2000
- ---------------------
Yehoshua Sagi
* Executive Vice President, May 10, 2000
- --------------------- Chief Operating Officer
Noel Bambrough and Director
* Executive Vice President, May 10, 2000
- --------------------- Research and Development
Menachem Tassa and Director
* Director May 10, 2000
- ---------------------
Yechiel Y. Sharabi
* Director May 10, 2000
- ---------------------
Amnon Shai
* By: /s/ Altaf S. Nazerali
---------------------
Altaf S. Nazerali
Attorney-in-Fact
<PAGE>
Exhibit Index
Exhibit No. Description
3.1| Articles of Amendment and Articles of Incorporation of Intacta
Technologies Inc.
3.2| Bylaws of Intacta Technologies Inc.
4.1| Specimen Stock Certificate
5.1 Opinion of McDonald Carano Wilson McCune Bergin Frankovich & Hicks
LLP
10.1+ Licensing Agreement dated July 19, 1999, between registrant and
DataLode Inc.
10.2+ International Distributor Agreement dated September 20, 1997,
between registrant and Orbit Company, Ltd.
10.3 International Distributor Agreement dated June 28, 1996, between
registrant and Rexton Corporation
10.4+ License Agreement dated May 31, 1997, between registrant and
Brother Industries, Ltd.
10.5+ License Agreement dated April 29, 1997, between registrant and
Brother Industries, Ltd.
10.6+ Authorized OEM Agreement dated August 6, 1996, between registrant
and SmithMicro Software, Inc.
10.7| Sublease Agreement dated September 16, 1999 between Outdoor West,
Inc. and registrant
10.8| Tenancy Agreement dated August 31, 1999 between Mrs. Hana Kimchi
and Fontech Ltd. (English translation of original Hebrew
agreement)
10.9| Shareholders Agreement dated May 31, 1998, among registrant, Valor
Invest, Ltd. and Corsa SA Holdings
10.10| 1998 Stock Option Plan
10.11| Consulting Agreement dated October 1, 1998, between registrant and
Pensbreigh Holdings Ltd.
10.12| Letter Agreement dated September 30, 1998, between registrant and
Marco Genoni
10.13| Agreement dated March 31, 1999, between registrant and Noel R.
Bambrough
10.14| Exchange Agreement dated May 31, 1998 between registrant and Corsa
S.A. Holdings
10.15| Consulting Agreement dated March 1, 1999 between registrant and
Pensbreigh Holdings Ltd.
21.1| List of subsidiaries of registrant
23.1 Consent of BDO Seidman, LLP
23.2 Consent of Meredith, Cardozo, Lanz and Chiu, LLP
23.3 Consent of Penini and Penini, CPA
23.4 Consent of McDonald Carano Wilson McCune Bergin Frankovich & Hicks
LLP (included in Exhibit 5.1)
24.1| Power of Attorney (included on signature page)
27.1 Financial Data Schedule
+ Confidential treatment has been requested as to certain portions of this
exhibit. Omitted portions have been filed separately with the Securities and
Exchange Commission.
<PAGE>
| Previously filed.
MCDONALD CARANO WILSON MCCUNE
BERGIN FRANKOVICH & HICKS LLP
ATTORNEYS AT LAW
May 10, 2000
Board of Directors
Intacta Technologies Inc.
235 Peachtree Street N.E.
2215 North Tower
Atlanta, Georgia 30303
Ladies and Gentlemen:
We have acted as special Nevada counsel on matters of Nevada law to Intacta
Technologies, Inc., a Nevada corporation (the "Company"), in connection with a
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, (Registration No.
333-304400) (the "Registration Statement") relating to the sale by various
selling shareholders of the Company as identified in greater detail in the
Registration Statement of 8,841,000 shares (the "Shares") of the common stock,
par value $0.0001 per share, of the Company. In our capacity as your special
Nevada counsel on matters of Nevada law, we are familiar with the proceedings
taken and proposed to be taken by the Company in connection with the
authorization, issuance, and sale of the Shares.
It is our opinion that the Shares have been duly authorized and are legally
and validly issued, fully paid and non-assessable.
Our opinion expressed above is limited to the laws of the State of Nevada.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us in the Registration
Statement, including the prospectus constituting a part thereof, and any
amendments thereto.
Sincerely,
MCDONALD CARANO WILSON MCCUNE
BERGIN FRANKOVICH & HICKS LLP
By: /s/ A.J. Hicks
-------------------------
A Partner
LICENSING AGREEMENT
This agreement made and entered into this 19th day of July, 1999 (the
"Agreement") by and between InfoImaging Technologies Inc., a Delaware
corporation, with offices located at 7026 Koll Center Parkway, Suite 201,
Pleasanton, CA 94566, hereinafter called "ITI" and DataLode Inc., a
California corporation organized and existing under the laws of California
with principal offices at 25 Simms, San Rafael, CA, hereinafter called
"DataLode".
WHEREAS, ITI owns certain patented and Proprietary Technology (Software)
related to, compression, error correction, encoding and decoding of data on
printed and electronic mediums.
WHEREAS, ITI has developed Products based on such Software that ITI
wishes to market
WHEREAS, DataLode is in the business of providing solution in the area of
customer relationships such as product registration
WHEREAS, DataLode wishes to integrate some of ITI's applications and
products into its own product and solution offerings.
NOW, THEREFORE, the parties have agreed as follows:
Article 1. DEFINITIONS
1.1 "Software" shall mean all dynamic library links ("DLLs") or other
executable files or components required to accomplish ITI's encoding and
decoding functionality.
1.2 "Products" means products, which ITI developed, develops and will
develop
1.3 "SRF" means the Smart Registration Form (SRF) Product that ITI which
may originate from the Proprietary Technologies of compression, encoding,
decoding, error correction and other third party software included in the
Products.
1.4 "Proprietary Technology" shall mean U.S. Patent No. 5,313,564, copyrights
in the Software and any trade secrets and know how related to the Software and
the Products.
<PAGE>
Article 2. LICENSE
2.1 ITI hereby grants to DataLode the worldwide, non-exclusive, perpetual
and royalty-bearing right and license to incorporate the SRF and modifications
thereof in DataLode's products and solution offerings, and to use, reproduce,
display, market and distribute the SRF and modifications thereof, as part of
the DataLode's products.
Article 3. MARKETING
3.1 DataLode will use commercially reasonable efforts to develop a demand for
the SRF by promoting and extending the sale of its products together with the
SRF.
Article 4. DELIVERY OF SOFTWARE AND TECHNICAL SUPPORT
4.1 ITI shall deliver to DataLode one copy, for all Windows 3.x, 95 & 98
operating systems as existing at the date of execution of this license
agreement, of the SRF Software upon execution of this Agreement. Furthermore,
ITI agrees to deliver to DataLode an SRF Software based on Macintosh 7.55
operatins system by September 10, 1999. ITI shall deliver all subsequent
releases of this version upon release by ITI.
4.2 ITI will provide, at no cost to DataLode, reasonable technical support to
DataLode personnel in the form of phone, e-mail and fax support during ITI's
regular business hours.
4.3 ITI will provide maintenance support for Software during the period this
license agreement is in effect. ITI will notify DataLode of, and ITI will
send to DataLode on DataLode's request, all available software releases
related to the Software. These potentially could include maintenance
releases, corrections, modifications and changes or work-arounds.
4.4 ITI shall provide (*) man-days of such maintenance support, free of any
charge to DataLode during any twelve months period. For any additional day of
maintenance support requested by DataLode, ITI will charge daily fees of
US$(*) per man-day or $(*) per man-hour.
4.5 During the period this license agreement is in effect, any maintenance
support related to bug fixing will be provided by ITI free of charge to
DataLode.
Article 5. ROYALTIES
5.1 As consideration for the license grants contained herein and subject to
other conditions and terms hereof, DataLode shall pay to ITI a per unit
royalty of US$(*) for each single use of the SRF by DataLode or by any third
party using DataLode's product.
*** Confidential portion omitted pursuant to a request for confidential
treatment and filed separately with the Commission.
<PAGE>
or solution offering that incorporates the SRF. A single use is defined as
receiving and scanning the SRF into a readable and data accessible format.
5.2 Notwithstanding anything to the contrary herein, DataLode shall have no
obligation to pay any royalty under section 5.1 for any maintenance,
replacement, support and demonstration copies of the SRF, provided, however,
distribution of demonstration copies of SRF or modification thereof are
consistent with reasonable and customary industry practices.
Article 6. ACCOUNTING
6.1 Within thirty (30) days after each calendar quarter DataLode shall send to
ITI a report signed by an officer of DataLode setting forth the
appropriate royalties due to ITI pursuant to Section 5.1 herein. The amount
declared in this report must be paid to ITI within thirty (30) days after each
calendar quarter.
6.2 DataLode agrees that it will maintain separate records of its sales of the
SRF. DataLode further agrees that it will provide to ITI, at DataLode's cost
and not later than 90 days after the end of DataLode's fiscal year, a
certified statement regarding the use of ITI's SRF by DataLode and/or by
DataLode's customers. Furthermore, DataLode agrees to allow an ITI financial
auditor access to records of DataLode's SRF usage, including client billing.
Such access will be granted during DataLode's normal business hours once a
year.
Article 7. WARRANTIES, DISCLAIMER, AND INDEMNIFICATION
7.1 EXCEPT AS OTHERWISE SET FORTH HEREIN, ITI'S PRODUCT IS SOLD AND
LICENSED "AS IS". ALL WARRANTIES, EITHER EXPRESSED OR IMPLIED ARE DISCLAIMED
AS TO THE SOFTWARE AND ITS QUALITY, PERFORMANCE, MERCHANTABILITY OR FITNESS
FOR ANY BUSINESS OR ANY PARTICULAR PURPOSE. IN NO EVENT WILL ITI BE
LIABLE FOR DIRECT, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES RESULTING
FROM ANY DEFECT IN THE SOFTWARE, AND ITS SOLE RESPONSIBILITY WILL BE TO
CORRECT ANY DEFECT IN THE SOFTWARE WITHIN A REASONABLE TIME AFTER RECEIVING A
COMPLAINT.
UNDER NO CIRCUMSTANCES SHALL THE TOTAL LIABILITY OF ITI PURSUANT TO THIS
SECTION 7.1 EXCEED THE ROYALTIES PAID BY LICENSEE TO ITI.
7.2 ITI warrants that it has the right to enter into this Agreement, to
disclose the Proprietary Technology and to grant the specified licenses and
that there are no outstanding assignments, grants, licenses, encumbrances,
obligations, or agreements inconsistent with this Agreement.
7.3 ITI warrants that the Software included in the SRF and the SRF do not
infringe any third party patents, copyrights or trade secrets and that it is
not aware of any facts or
<PAGE>
circumstances that would constitute an infringement on any third party
patents, copyrights or trade secrets.
7.4 ITI agrees to defend, indemnify and hold harmless DataLode. its
subsidiaries, affiliates and their respective directors, officers and
employees from and against any and all alleged or actual claims by a third
party arising out of, or in connection with a breach by ITI of its
warranties in this Agreement, and pay all costs, damages, expenses, attorney
fees, liens and liabilities whatsoever incurred by DataLode in connection
therewith.
Article 8. COPYING RESTRICTIONS
8.1 Except as otherwise provided herein, DataLode shall only make copies of
the SRF for the purpose of incorporating it in its products. Unauthorized
copying of the Software, and Proprietary Technology directly or indirectly by
DataLode or by any of its employees or independent contractors will constitute
a fundamental and material breach of this Agreement.
8.2 DataLode shall have an unrestricted right to make copies of the SRF for
internal use, for the purposes of demonstration and evaluation as well as for
including it into its own product and business solution offering.
Article 9. PROPRIETARY RIGHTS
DataLode agrees that:
9.1 The Software, the SRF, ITI's logo, product names, software,
documentation and other support materials are either patented, copyrighted,
trademarked or owned by ITI as trade secrets and/or proprietary
information. DataLode agrees not to remove any Software copyright or patent
notices of such proprietary restriction from Software. ITI retains
exclusive ownership of the Software, of printed material and of the Software's
trademarks. All techniques, algorithms and processes contained in Software or
any modification or extraction thereof constitute trade secrets and/or
proprietary information of IRI ("Confidential Information") and will be
protected by this Agreement.
9.2 DataLode agrees that the Proprietary Technology shall be held in the
strictest confidence and shall not be reproduced or disclosed to others in
while or in part without the express written consent of ITIensor except in the
case of DataLode's personnel and Dealers having a need to know such
information for the purpose of this Agreement.
9.3 DataLode shall procure an undertaking from any such personnel and dealers
to keep the Proprietary Technology confidential. DataLode undertakes to take
legal action against any personnel and Dealer who will not act according to
the above. ITI shall be entitled to call from time to time for a
certificate signed by a responsible officer of the DataLode that DataLode has
complied with the provisions of this article.
<PAGE>
9.4 DataLode will immediately bring to the attention of ITI any improper
or wrongful use of Software which came to the notice of DataLode.
9.5 The provisions of this Article shall continue in full force and effect
notwithstanding termination of this Agreement howsoever arising.
Article 10. ASSIGNMENT
Either party agree not to assign, transfer, or otherwise dispose of this
Agreement in whole or in part to any third party without the prior consent of
the other party.
Article 11. TERMINATION
11.1 If the terms and conditions of this agreement are breached by either
party, and such breach is not rectified within thirty (30) days after
receiving a written notice from the other party, the injured party may, in
addition to any other remedy available to it, terminate this Agreement
immediately.
11.2 If a petition in a bankruptcy is filed involuntarily against either party
and is not discharged or withdrawn within 60 days, the other party shall have
the right to forthwith terminate this Agreement unconditionally with a written
notice to the counter party.
11.3 If DataLode shall do or allow to be done any act or thing which it
knows or can reasonably be expected to know as likely to jeopardize ITI's
rights in the Software or any part thereof and in particular if DataLode
shall make or allow to be made unauthorized copies of the Software. ITI
shall have the right to terminate this Agreement provided that ITI has
give written notice of such circumstance to DataLode and DataLode failed to
remedy such default within thirty (30) days of such notice.
11.4 Upon termination of this Agreement, DataLode will certify, in writing to
ITI, that through its best efforts, and to the best of its knowledge, the
original and copies in whole or in part of the programs have been destroyed
and deleted from any updated work into which they have been merged. except
that, upon prior written authorization from ITI, DataLode may retain a
copy for archive purposes only.
11.5 DataLode will compensate ITI for SRF and Software usage for programs in
distribution where SRF and/or Software cannot be removed. ITI shall be
obligated to perform its obligations as described in Article 4. Of this
agreement.
11.6 In the event of non-payment by DataLode, ITI shall have the right to
terminate DataLode's license, provided that ITI has given written notice of
non-payment to DataLode and DataLode failed to remedy such default within
thirty (30) days of such notice.
<PAGE>
11.7 ITI's and DataLode's obligations of confidentiality pursuant to this
Agreement, or any other agreement, shall survive termination of this Agreement
for any reason.
Article 12. CAPACITY OF PARTIES
This Agreement shall not be deemed to create any partnership, joint venture,
agency or employment relation between the parties.
Article 13. ENTIRE AGREEMENT
This Agreement and the exhibits constitute the entire agreement between the
parties hereto and supersedes all previous negotiations, agreements,
commitments in respect thereto, and shall not be released, discharged, changed
or modified in any manner, except by instrument signed by duly authorized
officers or representatives of each of the parties thereto.
Article 14. JURISDICTION, GOVERNING LAW AND ARBITRATION
14.1 This Agreement and the interpretation thereof shall be in accordance with
and governed by the laws of California, excluding that body of law known as
conflicts law.
14.2 Any controversy or claim arising out of or relating to this Agreement, or
the breach thereof, shall be settled pursuant to the Commercial Arbitration
Rules of the American Arbitration Association (the "AAA"), and judgment upon
the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. Notice of a demand for arbitration of any dispute
subject to arbitration by one party shall be filed in writing with the other
party and the AAA One of the arbitrators shall be appointed to decide
discovery disputes, and the decision of this arbitrator shall be final and
binding as to discovery. Discovery and disclosure shall be completed within
90 days after filing of such notice of arbitration unless extended by such
arbitrator upon a showing of good cause. Provided, however, that this
paragraph shall not apply to claims for equitable relief.
Article 15. WAIVER
The failure or delay of a party hereto to enforce any of its rights under this
Agreement shall not be deemed to be a continuing waiver or a modification by
such party of any of its rights or obligations of the other party under this
Agreement Any failure to enforce or delay in enforcement shall not constitute
a defense.
<PAGE>
Article 16. NOTICE
16.1 All notices required or permitted to be given hereunder (except for
routine communications to be addressed to the persons in charge of its subject
business) shall be in writing and shall be valid and sufficient is dispatched
by a reputable express delivery service by air or registered airmail, and
addressed as follows:
If to Data Lode: If to InfoImaging Technologies Inc.
DataLode Inc. ITI Inc.
27 Simms 7026 Koll Center Parkway #201
San Rafael, CA Pleasanton, CA 9456
Fax: Fax 925-485-4100
Attention: Marco Genoni
All notices to be given hereunder shall be in writing and sent by registered
mail or fax to the addresses stated above or to such addresses as are notified
in writing by the parties. If either party has changed its address, a written
notice thereof shall be given to the other party.
16.2 All notices shall be deemed to have been given on the day when such
notice is received by registered mail or fax.
In witness whereof the contracting parties have signed this Agreement.
DATALODE INC. INFOIMAGING TECHNOLOGIES INC.
"Gaylyn De Martini" "Marco Genoni"
- ---------------------- ----------------------
Gaylyn De Martini Marco Genoni
President Vice-President
07/21/99 07/20/99
INTERNATIONAL DISTRIBUTOR AGREEMENT
This Agreement entered into this 20th day of September, 1997 by and between
InfoImaging Technologies, Inc., (hereinafter called "COMPANY"), having its
principle place of business at 7026 Koll Center Parkway, Suite 201,
Pleasanton, CA 94566, and Orbit Company, Ltd. having its principle place of
business at Prince Mohammed Abju Aziz Street (Tahlia St.); Concord Plaza; 3rd
Floor, Jeddah, Kingdom of Saudi Arabia (hereinafter called "DISTRIBUTOR").
WITNESSETH
That THE PARTIES, in consideration of their respective promises set forth
below, agree as follows:
I. APPOINTMENT AND TERRITORY
DISTRIBUTOR accepts appointment as a exclusive DISTRIBUTOR for the purpose of
marketing by way of sale or lease, or otherwise, COMPANY'S products specified
in Attachment "A", DISTRIBUTOR price list.
II. DATES OF COMING INTO FORCE AND NORMAL EXPIRATION OF THE CONTRACT
This Agreement shall become effective as of the date written above for twelve
months, and shall remain in full force unless terminated for any reason or no
reason by either party in writing at least thirty (30) days prior to the
termination date. However, if at any time DISTRIBUTOR shall: (a) commit a
breach of any material obligation imposed upon it by agreement, (b) default in
making any payment required hereunder, (c) become insolvent, be subject to a
petition in bankruptcy filed by or against committee or creditor, (d) assign
or attempt to assign this Agreement, COMPANY may terminate this agreement by
notifying DISTRIBUTOR by certified mail or confirmed fax of the default.
DISTRIBUTOR shall have 30 days from this notice to cure said default(s). In
the event DISTRIBUTOR does not, termination shall take effect at the end of
the thirty (30) day period.
Such termination shall not prejudice any cause of action or claim of COMPANY
which COMPANY may have on account of any breach of this Agreement.
In the event of termination on grounds other than provisions (a) to (d) above,
DISTRIBUTOR will receive discounts, as appropriate, on a unfilled orders
placed prior to termination.
III. CONTRACTUAL PRICES
The prices at which COMPANY will sell its products to the DISTRIBUTOR are set
forth in Attachment "A". These prices are Ex COMPANY'S factory and it
exclusive of State and local taxes. COMPANY'S prices do not include sales,
use, excise, value-added or similar taxes. Consequently, in addition to the
price specified herein, DISTRIBUTOR shall pay, or reimburse COMPANY for the
gross amount of any present or future sales, use, excise, value-added or
similar tax applicable to the sale or furnishing of any services or Products
hereunder, or to their use by COMPANY with tax exemption evidence acceptable
to the tax authorities.
<PAGE>
a. Increases
Prices are Ex COMPANY'S factory, and may be changed by COMPANY by notification
in writing to the DISTRIBUTOR.
However, no price may be increased for Products purchased under a firm and
outstanding order in effect at the time of the price increase notification.
b. Reductions
If, during the term of this Agreement, COMPANY makes a general price reduction
in the prices of any of the Products, such newly established prices shall
apply
for the duration of this Agreement or until such prices are further reduced.
IV. METHOD OF SHIPMENT
Shipment will be made Ex COMPANY'S factory. COMPANY reserves the right to
utilize any commercia mode of shipment unless otherwise specified by
DISTRIBUTOR at time of order.
V. RIGHTS AND OBLIGATIONS OF COMPANY
a. Acceptance of Orders
COMPANY agrees to accept orders placed for Products which are submitted in
compliance with this Agreement. Orders shall be considered accepted on the
mailing of their formal order acknowledgment. Shipment of all or part of the
goods ordered shall also be considered accepted on the same terms, but
shipment of an order shall not obligate COMPANY to make further shipments.
COMPANY shall have no obligation to ship unless the terms of payment are
satisfactory to COMPANY at is sole and absolute discretion, at the time of
shipment.
b. Excusable Delays
COMPANY shall not be liable for delays in delivery or performance, or for
failure to manufacture, deliver or perform, due to (1) causes beyond its
reasonable control, (2) acts of God, distributor, civil or military authority,
governmental priorities, strike or other labor disturbances, floods,
epidemics,
war, riot, delays in transportation, (2) COMPANY'S inability to obtain
necessary materials, components, services, or facilities.
c. Marketing Support
COMPANY will supply reasonable quantities of marketing material and Product
support information to the DISTRIBUTOR at no charge for the term of this
Agreement.
d. Company's Industrial Property Rights
The DISTRIBUTOR will promptly inform COMPANY of any infringement that may come
to his notice in the course of his work in respect to patent rights,
copyright, trademark, and the like, being the property of or used by COMPANY,
and assist COMPANY'S request in taking necessary steps to defend these rights.
<PAGE>
The DISTRIBUTOR may use COMPANY'S trademark during the life of this Agreement
solely in conjunction with the sale of the product and, upon termination of
this Agreement, shall discontinue all such uses and any representations which
make it appear that DISTRIBUTOR is still handling COMPANY'S Products; provided
that the DISTRIBUTOR shall be permitted to dispose of inventory after the
termination of this Agreement for any reason other than its breach of
Contract.
e. No Power to Enter into Binding Agreements
DISTRIBUTOR shall not sign any contract in the name of COMPANY in any way to
any obligation and shall not hod itself out or purport to act as COMPANY'S
legal partner or legally empowered agent or representative for an purpose
whatsoever.
f. No Capacity to Act in the Name of InfoImaging
The relationship between COMPANY and DISTRIBUTOR created hereby is intended to
be that of vendor and vendee and, with respect to sales by COMPANY to third
parties, that of an independent distributor and not that of principal or
agent. DISTRIBUTOR shall not, and is not authorized to, enter into any
commitment on behalf of COMPANY.
g. Confidential Information
The DISTRIBUTOR and COMPANY shall maintain in confidence and not use any
business and technical information marked "Confidential", which becomes
available to either party under or in connection with this Agreement, unless
written permission is obtained from the other party. This obligation shall
continue for two (2) years after the termination of this Agreement.
h. Compliance with Laws
The COMPANY' parties' obligations hereunder shall be at all times subject to
the exports, imports, and other laws and regulations of countries.
VI. RIGHTS AND OBLIGATIONS OF THE DISTRIBUTOR
a. Maintaining an Adequate Sales Capacity
DISTRIBUTOR shall maintain a sales capability to supply and service COMPANY'S
Products.
DISTRIBUTOR shall stock Product in inventory sufficient to maintain and expand
sales.
b. Sales Aid and Advertising Matter
DISTRIBUTOR shall effectively advertise and promote COMPANY'S Products
utilizing advertising programs in keeping with good business practices.
c. Product Warranties
The DISTRIBUTOR accepts COMPANY'S Warranty given in Attachment "B", and agrees
that such Warranty shall commence at the date of shipment of Products.
<PAGE>
d. Limited Liability
Neither party will be liable for any direct, indirect, incidental,
consequential, or special damages suffered by the other party, its customers,
or others arising out of or related to this agreement or the products even if
advised of the possibility of such damages.
e. Non-Assignment of Agreement Clause
DISTRIBUTOR shall not assign all or any part of its interest in this Agreement
without the prior written consent of COMPANY and shall give COMPANY thirty
(30) days prior written notice of any transaction affecting the majority of
ownership of DISTRIBUTOR which shall be considered an assignment under this
agreement. Any attempted assignment without COMPANY'S prior written consent
will be void.
VII. GOVERNING LAWS
The rights and obligations of the parties hereunder shall be determined in
accordance with the laws of the State of California, excluding the body of
laws
known as conflicts of law.
VIII. NOTICES
All formal notices and communications hereunder shall be sent by certified
mail, or facsimile (fax), with a copy sent by ordinary mail. It shall be
deemed to have been given the date received in the case of certified mail, or
on the receipt facsimile (fax). Understanding that either party may from
time-to-time change the address to which notices to it are to be sent, written
notice of such change is to be given to the other party.
IX. GENERAL CLAUSE
This Agreement embodies the entire Agreement of THE PARTIES with respect to
the subject matter hereof. Any previous understanding, correspondence or
Agreement, verbal or otherwise, between THE PARTIES is of no effect, for the
amendments or modifications shall be made only in writing, specifically
referring to this Agreement and signed by THE PARTIES. In the event of
dispute between THE PARTIES, THE PARTY prevailing shall recover from THE OTHER
PARTY reasonable attorney fees and costs.
IN WITNESS WHEREOF THE PARTIES hereto have caused this Agreement to be
executed as of the date first written above, by their duly authorized officers
or representatives.
DISTRIBUTOR INFOIMAGING
"Adel Al-Sharif" "J. Douglas Wather"
- ------------------------- -------------------------
Adel Al-Sharif J. Douglas Wather
General Manager V.P. Sales & Marketing
20/9/97 29/9/97
<PAGE>
ATTACHMENT A
CONFIDENTIAL
INTERNATIONAL DISTRIBUTOR PRICING
InfoImaging international distributors shall be awarded specific, exclusive
territory of Saudi Arabia and the Arabian Gulf states in which they will
market the 3D FAX product line for twelve months. The qualified Distributor
typically sells to end-users, and concentrates heavily on software and/or data
communications and fax technology users as a large part of their business.
SOFTWARE
- --------
International Price Part Number
3D FaxFile Professional $(*) FF33776
3D FaxFile Freeware $(*) FF33373
FaxSpeed $(*) FS77372
HARDWARE
- --------
International Price Part Number
3D FaxPal Plus, .5M memory $(*) FP05758
(includes line sharing and bonus 3D FaxFile basic software)
3D FaxPal Plus, 2.5M memory $(*) FP20758
(includes line sharing and bonus 3D FaxFile basic software)
FaxPal II, .5M memory $(*) FP05372
(Non-line sharing-unit only)
FaxPal II, 2M memory $(*) FP20372
2M memory upgrade $(*) MC22273
4M memory upgrade $(*) MC42273
Distributor Guidelines
Exclusivity Terms: - wire transfer to InfoImaging account --- $(*) upon
execution of contract
- wire transfer to InfoImaging account --- $(*) 4
months after execution
- wire transfer to InfoImaging account --- $(*) 8
months after execution
Purchasing Terms: - orders placed during each 4 month period will be
deducted from the $(*) wire transfer. Funds not used during a particular
4-month period are non-refundable and non-transferable to the next 4-month
period. Any purchase requirements during a 4-month period over the $(*)
deposit will apply to the next 4-month purchase requirement and funds must be
sent via wire transfer before shipment.
With opening software order Distributor receives Freeware Packages to
distribute to his prospects.
With opening software order Distributor receives appropriate literature and
sales tools.
Distributor provides technical support to his customers.
All shipments are FOB manufacturer. Above prices do not include freight.
All prices are in U.S. Dollars, ex Company's factory, Pleasanton, California,
U.S.A.
*** Confidential portion omitted pursuant to a request for confidential
treatment and filed separately with the Commission.
<PAGE>
ATTACHMENT B
LIMITED WARRANTY
ITI warrants only (a) that the media on which the product is furnished and
protection device will be free from defects in materials and workmanship under
normal use for a period of 90 days from the date of delivery to the end user
and (b) that the product will operate substantially as described in the user
manual during that 90 day period.
THE END USER MUST ASSUME FULL RESPONSIBILITY FOR THE SELECTION OF THE PRODUCT
TO ACHIEVE THEIR INTENDED PURPOSES, FOR THE PROPER INSTALLATION AND USE OF THE
PRODUCT AND FOR VERIFYING THE RESULTS OBTAINED FROM USE OF THE PRODUCT. ITI
DOES NOT WARRANT THAT THE FUNCTIONS CONTAINED IN THE PRODUCT WILL MEET END
USER REQUIREMENTS, THAT THE PROGRAM IS FIT FOR ANY PARTICULAR PURPOSE OR THAT
THE OPERATION OF THE PROGRAM WILL BE INTERRUPTED, ERROR FREE OR VIRUS FREE.
Should the end user discover a defect in the recording medium or an error in
the product within the 90 day warranty period, they must return the defective
item to ITI. A copy of the receipt or other proof that the warranty period
has not expired must be included. ITI will, upon verification of the defect
or error, either repair or replace the defective item or refund the amount
paid.
THIS LIMITED WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, WHETHER ORAL OR
WRITTEN. ANY IMPLIED WARRANTIES, INCLUDING IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE EXPRESSLY EXCLUDED.
INTERNATIONAL DISTRIBUTOR AGREEMENT
This Agreement entered into this 28th day of June, 1996 by and between
InfoImaging Technologies, Inc., (hereinafter called "COMPANY"), having its
principle place of business at 3977 East Bayshore Road, Suite B, Palo Alto, CA
94303, and Rexton Corporation having its principle place of business at Wada
Bldg. 2F, I-Chome 2-6 Komagata, Taito-Ku, Japan (hereinafter called
"DISTRIBUTOR").
WITNESSETH
That THE PARTIES, in consideration of their respective promises set forth
below, agree as follows:
I. APPOINTMENT AND TERRITORY
DISTRIBUTOR accepts appointment as a exclusive DISTRIBUTOR in the country of
Japan for the purpose of marketing by way of sale or lease, or otherwise,
COMPANY'S products specified in Attachment "A", DISTRIBUTOR price list.
II. DATES OF COMING INTO FORCE AND NORMAL EXPIRATION OF THE CONTRACT
This Agreement shall become effective as of the date written above, and shall
remain in full force for a period of two (2) years unless terminated.
However, if at any time DISTRIBUTOR shall; (a) commit a breach of any material
obligation imposed upon it by this agreement, (b) default in making any
payment required hereunder, (c) become insolvent, be subject to a petition in
bankruptcy filed by or against committee or creditor, (d) assign or attempt to
assign this Agreement, (e) fail to meet minimum sales commitments as outlined
in Attachment "C", COMPANY may terminate this agreement by notifying
DISTRIBUTOR by certified mail or confirmed fax of the default. DISTRIBUTOR
shall have 30 days from this notice to cure said default(s). In the event
DISTRIBUTOR does not, termination shall take effect at the end of the thirty
(30) day period.
Such termination shall not prejudice any cause of action or claim or COMPANY
which COMPANY may have on account of any breach of this Agreement.
In the event of termination on grounds other than provisions (a) to (d) above,
DISTRIBUTOR will receive discounts, as appropriate, on all unfilled orders
placed prior to termination.
III. CONTRACTUAL PRICES
The prices at which COMPANY will sell its products to the DISTRIBUTOR are set
forth in Attachment "A". These prices are Ex COMPANY'S factory and is
exclusive of State and local taxes. COMPANY'S prices do not include sales,
use, excise, value-added or similar taxes. Consequently, in addition to the
price specified herein, DISTRIBUTOR shall pay, or reimburse COMPANY for the
gross amount of any present or future sales, use, excise, value-added or
similar tax applicable to the sale or furnishing of any services of Products
hereunder, or to their use by COMPANY with tax exemption evidence acceptable
to the tax authorities.
<PAGE>
a. Increases
Prices are Ex COMPANY'S factory and may be changed by COMPANY by notification
in writing to the DISTRIBUTOR.
However, no price may be increased for Products purchased under a firm and
outstanding order in effect at the time of the price increase notification.
b. Reductions
If, during the term of this Agreement, COMPANY makes a general price reduction
in the prices of any of the Products, such newly established prices shall
apply
fur the duration of this Agreement or until such prices are further reduced.
IV. METHOD OF SHIPMENT
Shipment will be made Ex COMPANY'S factory. COMPANY reserves the right to
utilize any commercial mode of shipment unless otherwise specified by
DISTRIBUTOR at time of order.
V. RIGHTS AND OBLIGATIONS OF COMPANY
a. Acceptance of Orders
COMPANY agrees to accept orders placed for Products which are submitted in
compliance with this Agreement. Orders shall be considered accepted on the
mailing of their forma order acknowledgment. Shipment of all or part of the
goods ordered shall also be considered accepted on the same terms, but
shipment of an order shall not obligate COMPANY to make further shipments.
COMPANY shall have no obligation to ship unless the terms of payment are
satisfactory to COMPANY at its sole and absolute discretion, at the time of
shipment.
b. Excusable Delays
COMPANY shall not be liable for delays in delivery or performance, or for
failure to manufacture, deliver or perform, due to (1) causes beyond its
reasonable control, (2) acts of God, distributor, civil or military authority,
government priorities, strike or other labor disturbances, floods, epidemics,
war, riot, delays in transportation, (3) COMPANY'S inability to obtain
necessary materials, components, services, or facilities.
c. Marketing Support
COMPANY will supply reasonable quantities of marketing material and Product
support information to the DISTRIBUTOR at no charge for the term of this
Agreement. COMPANY will also support DISTRIBUTOR in a reasonable cooperative
advertising, exhibition and technical support programs mutually agreed upon by
both parties. COMPANY'S contribution for cooperative advertising, exhibition
and technical support will total a maximum of six (6) percent of
DISTRIBUTOR'S quarterly sales total. Allocated funds may be used at
DISTRIBUTOR'S discretion, but pre-approved by COMPANY executive.
<PAGE>
d. COMPANY'S Industrial Property Rights
The DISTRIBUTOR will promptly inform COMPANY of any infringement that may come
to his notice in the course of his work in respect to patent rights,
copyright, trademark, and the like, being the property of or used by COMPANY,
and assist COMPANY'S request in taking necessary steps to defend these rights.
The DISTRIBUTOR may use COMPANY'S trademark during the life of this Agreement
solely in conjunction with the sale of the product and, upon termination of
this Agreement shall discontinue all such uses and any representations which
make it appear that DISTRIBUTOR is still handing COMPANY'S Products; provided
that the DISTRIBUTOR shall be permitted to dispose of inventory after the
termination of this Agreement for any reason other than its breach of
Contract.
e. No Power to Enter into Binding Agreements
DISTRIBUTOR shall not sign any contract in the name of COMPANY in any way to
any obligation and shall not hold itself out or purport to act as COMPANY'S
legal partner or legally empowered agent or representative for any purpose
whatsoever.
f. No Capacity to Act in the Name of InfoImaging
The relationship between COMPANY and DISTRIBUTOR created hereby is intended to
be that of vendor and vendee and, with respect to sales by COMPANY to third
parties, that of an independent distributor and not that of principal or
agent. DISTRIBUTOR shall not, and is not authorized to, enter into any
commitment on behalf of COMPANY.
g. Confidential Information
The DISTRIBUTOR and COMPANY shall maintain in confidence and not use any
business and technical information marked "Confidential", which becomes
available to either party under or in connection with this Agreement, unless
written permission is obtained from the other party. This obligation shall
continue for two (2) years after the termination of this Agreement.
h. Compliance with Laws
The COMPANY'S parties' obligations hereunder shall be at all times subject to
the exports, imports, and other laws and regulations of countries.
VI. RIGHTS AND OBLIGATIONS OF THE DISTRIBUTOR
a. Maintaining an Adequate Sales Capability
DISTRIBUTOR and DISTRIBUTOR'S customers shall maintain a sales capability to
supply and service COMPANY'S Products.
DISTRIBUTOR and DISTRIBUTOR'S customers shall stock Product in inventory
sufficient to maintain and expand sales.
<PAGE>
b. Sales Aid and Advertising Matter
DISTRIBUTOR and DISTRIBUTOR'S customers shall effectively advertise and
promote COMPANY'S Products utilizing advertising programs in keeping with good
business practices.
c. Product Warranties
The DISTRIBUTOR accepts COMPANY'S Warranty given in Attachment "B", and agrees
that such Warranty shall commence at the date of shipment of Products.
d. Limited Warranty
Neither party will be liable for any direct, indirect, incidental,
consequential, or special damages suffered by the other party, its customers,
or others arising out of or related to this agreement or the products even if
advised of the possibility of such damages.
e. Non-Assignment of Agreement Clause
DISTRIBUTOR shall not assign all or any part of its interest in this Agreement
without the prior written consent of COMPANY and shall give COMPANY thirty
(30) days prior written notice of any transaction affecting the majority
ownership of the DISTRIBUTOR which shall be considered an assignment under
this agreement. Any attempted assignment without COMPANY'S prior written
consent will be void.
VII. GOVERNING LAWS
The rights and obligations of the parties hereunder shall be determined in
accordance with the laws of the State of California, U.S.A. excluding the body
of laws known as conflicts of law.
VIII. NOTICES
All formal notices and communications hereunder shall be sent by certified
mail, or facsimile (fax), with a copy sent by ordinary mail. It shall be
deemed to have been given the date received in the case of certified mail, on
on the receipt of facsimile (fax). Understanding that either party may from
time-to-time change the address to which notices to it are to be sent, written
notice of such change is to be given to the other party.
IX. GENERAL CLAUSE
This Agreement embodies the entire Agreement of THE PARTIES with respect to
the subject matter hereof. Any previous understanding, correspondence or
Agreement, verbal or otherwise, between THE PARTIES is of no effect, for the
amendments or modifications shall be made only in writing, specifically
referring to this Agreement and signed by THE PARTIES. In the event of
dispute between THE PARTIES, THE PARTY prevailing shall recover from THE OTHER
PARTY reasonable attorney fees and costs.
<PAGE>
IN WITNESS WHEREOF THE PARTIES hereto have caused this Agreement to be
executed as of the date first written above, by their duly authorized officers
or representatives.
DISTRIBUTOR INFOIMAGING
"Katsumi Sato" "Charles Leysek"
- ------------------------- -------------------------
Katsumi Sato Charles Leysek
President President
07/06/96 07/06/96
<PAGE>
ATTACHMENT A
CONFIDENTIAL
INTERNATIONAL DISTRIBUTOR PRICING
PRODUCT PRICE
3D Fax Professional $99.00 Without User's Manual $97.00
3D Fax Standard $67.00 Without User's Manual $67.00
3D Fax Personal $21.00 Without User's Manual $19.00
3D Fax Basic $ 4.00 Without Packaging $2.50
3D Fax Freeware $ 2.00 Without Packaging $1.50
3D FaxPal $145.00
Smart Code Quoted per application
All prices are in U.S. Dollars, Ex COMPANY'S factory, Palo Alto, California,
USA.
Payment terms are Irrevocable Letter of Credit or Cash Wire Transfer.
<PAGE>
ATTACHMENT B
LIMITED WARRANTY
ITI warrants only (a) that the media on which the product is furnished and
protection device will be free from defects in materials and workmanship under
normal use for a period of 90 days from the date of delivery to you and (b)
that the product will operate substantially as described in the user manual
during that 90 day period.
YOU MUST ASSUME FULL RESPONSIBILITY FOR THE SELECTION OF THE PRODUCT TO
ACHIEVE YOUR INTENDED PURPOSES, FOR THE PROPER INSTALLATION AND USE OF THE
PRODUCT AND FOR VERIFYING THE RESULTS OBTAINED FROM USE OF THE PRODUCT. ITI
DOES NOT WARRANT THAT THE FUNCTIONS CONTAINED IN THE PRODUCT WILL MEET YOUR
REQUIREMENTS, THAT THE PROGRAM IS FIT FOR ANY PARTICULAR PURPOSE OR THAT THE
OPERATION OF THE PROGRAM WILL BE UNINTERRUPTED, ERROR FREE OR VIRUS FREE.
Should you discover a defect in the recording medium or an error in the
product within the 90 day warranty period, then return the defective item to
ITI. Include a copy of your receipt or other proof that the warranty period
has not expired. ITI will, upon verification of the defect or error, either
repair or replace the defective item or refund the amount paid.
THIS LIMITED WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, WHETHER ORAL OR
WRITTEN, ANY IMPLIED WARRANTIES, INCLUDING IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE EXPRESSLY EXCLUDED.
<PAGE>
ATTACHMENT C
EXCLUSIVE DISTRIBUTORSHIP
TERMS, CONDITIONS AND PERFORMANCE COMMITMENTS
BETWEEN
INFOIMAGING TECHNOLOGIES, INC.
AND
REXTON CORPORATION
1. PAYMENTS AS ADVANCES ON SALES
A. No later than June 28th, 1996 Rexton will pay to the Company $230,000.00
(Two Hundred Thirty Thousand) U.S. dollars as an advance on sales under this
agreement.
B. No later than July 22nd, 1996 Rexton will pay to the Company an additional
$45,000.00 (Forty-Five Thousand) U.S. dollars as an advance on sales.
C. During the term of this agreement each order, placed by Distributor and
shipped by Company, in excess of $100,000, will be discounted by 20% until the
aggregate discounts equal the total of $275,000.00 of advances on sales
Distributor paid to Company. After such time Company will process and ship
Distributors orders at full face value.
2. ORDERS
A. Distributor will place orders for 1500ea. Business and 1500ea. Personal
versions of Japanese 3DFAX Software for delivery in June 1996.
B. Distributor will place orders for 1500ea. Business and 1500ea. Personal
versions of Japanese 3DFAX Software for delivery in July 1996.
C. Distributor agrees to do their best effort to place orders for 1000
FAXPALS
for delivery in July 1996. In any event Distributor will place an
order for a minimum of 500 FAXPALS for delivery in July 1996. Product must
meet Japanese Regulatories.
<PAGE>
ATTACHMENT C
3. EXCLUSIVITY AND SALES PERFORMANCE
A. Distributor sales commitments for the term of this agreement are as
follows:
July 1, 1996 - December 31, 1996 = 1,000,000.00
January 1, 1997 - June 30, 1997 = 1,000,000.00
July 1, 1997 - December 31, 1997 = 1,250,000.00
January 1, 1998 - June 30, 1998 = 1,250,000.00
July 1, 1998 - December 31, 1998 = 1,500,000.00
January 1, 1999 - June 30, 1999 = 1,500,000.00
B. If the first twelve month goal is met by Distributor, Company will grant
an automatic extension for a third year.
C. If Distributor fails to meet sales commitment within any six month period,
it will have the following six month period to cumulatively meet that 12 month
period commitment. Failure to do so establishes the right by the Company to
terminate the exclusive portion of this agreement under the terms of Paragraph
II.
LICENSE AGREEMENT
This Agreement is made and entered into as of the 31st day of May, 1997, by
and between InfoImaging Technologies, Inc., having its principal place of
business at 7026 Koll Center Parkway, Suite 201, Pleasanton, CA 94566
(hereinafter referred to as ("ITI") and Brother Industries, Ltd., a Japanese
corporation, having its principal place of business at 15-1 Naeshiro-cho,
Mizuho-ku, Nagoya 467, Japan (hereinafter referred to as "Brother").
Article 1. Definitions
- -----------------------
1.1 "Software" shall mean the object code of 3D FAX software conforming to the
Specification set forth in Exhibit A ("Specification") and the end-user's
documentation and technical documentation therefor.
1.2 "Products" shall mean any multi-functional devices manufactured by or for
Brother that is connected to the personal computer and that is capable of,
including without limitation stand-alone facsimile, stand-alone copy, scanning
and printing functions.
Article 2. Delivery, Inspection and Acceptance
- ----------------------------------------------
2.1 ITI shall deliver Brother the following items relating to the Software
within fifteen (15) days after the execution of this Agreement.
[items]
(1) Straging Media contains 3D FAX and users documentations
(2) N/A
2.2 Brother shall have fifteen (15) days after receipt of such items to either
accept or reject the items. Brother's failure to notify ITI in writing within
such period will be deemed to be acceptance by Brother. If Brother elects to
reject the items delivered by ITI, Brother shall give ITI within such period a
written notice with the reasons for rejecting in sufficient detail to assist
ITI in correcting such rejected items. ITI shall make correction of the
rejected items and deliver a corrected one to Brother within fifteen (15) days
after ITI's receipt of rejection notice from Brother.
Article 3. License
- -------------------
3.1 ITI hereby grants to Brother a non-exclusive, non-transferable and
worldwide license to reproduce the Software or have such Software reproduced
by third parties, and distribute, sell and otherwise dispose of the Software
to end users, distributors and re-sellers solely in conjunction with the
Products.
3.2 Brother shall distribute the Software with the end user agreement in
accordance with the form separately agreed by both parties.
<PAGE>
Article 4. Considerations
- --------------------------
4.1 In consideration of the license granted herein, Brother shall pay ITI the
unit royalty of US$(*) for every unit of Software distributed by Brother in
connection with the Products.
4.2 Brother shall provide to ITI, within forty-five (45) days after the end of
each calendar quarter, a written statement showing the number of the Software
distributed by Brother and the amount of royalties due in each calendar
quarter, and shall pay ITI such amount of royalties.
4.3 All taxes imposed by the Japanese Government pursuant to the Income Tax
Convention between U.S.A. and Japan on the payment of royalties by Brother
shall be borne by ITI. Brother, in making payments, shall withhold the proper
amount of the tax levied on such payment by the Japanese Government, shall
promptly effect payment of such taxes so withheld to appropriate Japanese tax
authorities and shall transmit to ITI official tax receipts or other
certification issued by such authorities sufficient to enable ITI to support a
claim for appropriate foreign tax credit in respect of such taxes as withheld
and paid against taxes which may be levied in U.S.A.
Article 5. Title and Notice of Copyright and Trademark
- -------------------------------------------------------
5.1 All title and intellectual property right, including without limitation
copyright, in or relating to the Software shall remain the exclusive property
of ITI. Brother agrees to place ITI's copyright notice on each copy of the
Software and on the packaging materials for the Software in accordance with
the form provided by ITI.
5.2 ITI permits Brother to use the ITI's trade names or trademarks relating to
the Software (hereinafter referred to as "ITI's Marks") in connection with the
distribution or marketing of Products which bundles the Software in accordance
with the form provided by ITI. Brother agrees to include appropriate
trademark notices, in accordance with such form, on any advertising or
packaging materials for the Products which bundles the Software.
Article 6. Warranty
- --------------------
ITI warrants Brother that the Software stored in the item specified in Article
3.1 shall be free from defect in workmanship and material and shall conform to
the Specification for a period of ninety (90) days from the date it is
delivered to Brother. If any defect or nonconformity with the Specification
are found in the Software, ITI, at its own expense, shall immediately correct
such defect or nonconformity and shall replace such defective or
noncorformable items to the corrected items.
Article 7. Indemnification
- --------------------------
7.1 ITI warrants and represents that it has the right to grant license herein,
that it has the power and authority to enter into this Agreement and that the
Software and ITI's Marks shall not infringe any copyright, patent, trademark,
trade secret or other proprietary right of third party.
*** Confidential portion omitted pursuant to a request for confidential
treatment and filed separately with the Commission.
<PAGE>
7.2 ITI shall indemnify and hold Brother harmless from and against and defend
any claim, suit or proceeding, and pay any settlement amounts or damages
awarded by a court of final jurisdiction, arising out of claims by third
parties that the Software or ITI's Mark infringes any copyright, trademark,
patent, trade secret or other proprietary right, provided that ITI is given
prompt notice from Brother of such claim, suit or proceeding.
Article 8. Confidentiality
- -------------------------
8.1 Each party shall maintain any technical and/or business information
disclosed by other party with specific designation as confidential in strict
confidence and secret, and shall not disclose it to any third party.
8.2 The obligation set forth in Article 9.1 above shall not apply to
information which the receiving party can prove:
a) before or at the time of disclosure is known to the receiving party or
already in the public domain,
b) after the time of disclosure becomes publicly known without any fault of
the receiving party,
c) the receiving party has at any time lawfully obtained from a third party
without restriction against disclosure, or;
d) is disclosed by the disclosing party to any third party on an unrestricted
basis.
Article 9. Term and Termination
- --------------------------------
9.1 This Agreement shall become effective as of the execution of both parties
and continue in force for two (2) year unless previously terminated as
hereinafter provided, and shall thereafter be automatically renewed from year
to year unless either party gives written notice to the other party at least
two (2) months prior to the expiry of the term that it does not wish to renew
this Agreement for further one (1) year.
9.2 In the event that either party should breach any material provision of
this Agreement, the non-defaulting party may terminate this Agreement if other
party should fail to remedy such default within thirty (30) days after receipt
of written notice thereof.
9.3 Upon termination or expiration of this Agreement (except for termination
due to default by Brother), Brother shall have the right to continue to
distribute or otherwise dispose of the Software bundled in Product remaining
in its inventory on the date of such termination or expiration for a period of
three (3) months after termination or expiration.
Article 10. Survival
- ---------------------
The provisions of Article 4,5,6,7,8 and 9.3 in this Agreement shall survive
termination or expiration of this Agreement.
<PAGE>
Article 11. Assignment
- ----------------------
This Agreement or any right or obligation hereunder shall not be assigned by
either party except with the prior written consent of the other party.
Article 12. Notice
- ------------------
Any notice or other communications under this Agreement shall be sent to the
addresses first set forth above, or such other places as they may from time to
time specify by notice in writing to the other party. Any such notice or
communications shall be in writing and shall be deemed to have been duly given
if mailed by registered or certified mail, or by facsimile, the recipient of
which is confirmed by return facsimile or other written notice of receipt.
Article 13. Entire Agreement
- -----------------------------
This Agreement sets forth the entire agreement and understanding of the
parties on the subject matter hereof and supersedes all prior and
contemporaneous written and/oral agreement, arrangement, communications and
understandings relating to the subject matter hereof. This Agreement may not
be modified or amended except by a written instrument signed by the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives.
InfoImaging Technologies, Inc. Brother Industries, Ltd.
By: "Charles Lejsek" By: "S. Ishikawa"
---------------- -----------------
Charles Lejsek S. Ishikawa
President General Manager
05/31/97 05/25/97
<PAGE>
Exhibit A
Software Description
The FaxSpeed software program allows users to send files via their fax
application. Fax speed incorporates both a Send module and a Read module.
The Send module allows the user to select which files are to be sent.
FaxSpeed then compresses these files and converts them into infoimages. These
infoimages can then be printed or faxed by the appropriate software programs.
On the receiving side, FaxSpeed Read module will convert the received
infoimages back into the original data files.
All FaxSpeed Read modules are identical across all InfoImaging's 3D FaxFile
products. Each product model differs only in the Send module capabilities.
The following table shows these Send Module differences.
3D FaxSpeed Professional
Version 2.0 Version 2.0
---------- ------------
File Size Transmission No Limits No Limits
Low Resolution Max. Capacity 9K per Page 9K per Page
Medium Resolution Max. Capacity 36K per Page 36K per Page
High Resoution Max. Capacity 102 K per Page
Error Correction Yes Yes
Direct Read from Fax Application Yes Yes
Partial Resend Yes Yes
Send Macros Yes Yes
Password Protection Yes
Color Picture Manipulation Yes
Executable File Transmission Yes
Retail Pricing $49.00 $199.00
LICENSE AGREEMENT
This Agreement is made and entered into as of the 29th day of April, 1997, by
and between InfoImaging Technologies, Inc., having its principal place of
business at 7026 Koll Center Parkway, Suite 201, Pleasanton, CA 94566
(hereinafter referred to as "ITI") and Brother Industries, Ltd., a Japanese
corporation, having its principal place of business at 15-1 Naeshiro-cho,
Mizuho-ku, Nagoya 467, Japan (hereinafter referred to as "Brother").
Article 1. Definitions
- -----------------------
1.1 "Software" shall mean the object code of 3D FAX software conforming to the
Specification set forth in Exhibit A ("Specification") and the end-user's
documentation and technical documentation therefor.
1.2 "Products" shall mean any multi-functional devices manufactured by or for
Brother that is connected to the personal computer and that is capable of,
including without limitation stand-alone facsimile, stand-alone copy, scanning
and printing functions.
Article 2. Delivery, Inspection and Acceptance
- -----------------------------------------------
2.1 ITI shall deliver Brother the following items relating to the Software
within fifteen (15)) days after the execution of this Agreement.
[items]
(1) Straging Media contains 3D FAX and users documentations
2.2 Brother shall have fifteen (15) days after receipt of such items to either
accept or reject the items. Brother's failure to notify ITI in writing within
such period will be deemed to be acceptance by Brother. If Brother elects to
reject the items delivered by ITI, Brother shall give ITI within such period a
written notice with the reasons for rejecting in sufficient detail to assist
ITI in correcting such rejected items. ITI shall make correction of the
rejected items and deliver a corrected one to Brother within fifteen (15) days
after ITI's receipt of rejection notice from Brother.
Article 3. License
- -------------------
3.1 ITI hereby grants to Brother a non-exclusive, non-transferable and
worldwide license to reproduce the Software or have such Software reproduced
by third parties, and distribute, sell and otherwise dispose of the Software
to end users, distributors and re-sellers solely in conjunction with the
Products.
3.2 Brother shall distribute the Software with the end user agreement in
accordance with the form separately agreed by both parties.
<PAGE>
Article 4. Considerations
- ---------------------------
4.1 In consideration of the license granted herein, Brother shall pay ITI the
unit royalty of US$(*) for every unit of Software distributed by Brother in
connection with the Products.
4.2 Brother shall provide to ITI, within forty-five (45) days after the end of
each calendar quarter, a written statement showing the number of the Software
distributed by Brother and the amount of royalties due in each calendar
quarter, and shall pay ITI such amount of royalties.
4.3 All taxes imposed by the Japanese Government pursuant to the Income Tax
Convention between U.S.A. and Japan on the payment of royalties by Brother
shall be borne by ITI. Brother, in making payments, shall withhold the proper
amount of the tax levied on such payment by the Japanese Government, shall
promptly effect payment of such taxes so withheld to appropriate Japanese tax
authorities and shall transmit to ITI official tax receipts or other
certification issued by such authorities sufficient to enable ITI to support a
claim for appropriate foreign tax credit in respect of such taxes as withheld
and paid against taxes which may be levied in U.S.A.
Article 5. Title and Notice of Copyright and Trademark
- -------------------------------------------------------
5.1 All title and intellectual property right, including without limitation
copyright, in or relating to the Software shall remain the exclusive property
of ITI. Brother agrees to place ITI's copyright notice on each copy of the
Software and on the packaging materials for the Software in accordance with
the form provided by ITI.
5.2 ITI permits Brother to use the ITI's trade names or trademarks relating to
the Software (hereinafter referred to as "ITI's Marks") in connection with the
distribution or marketing of Products which bundles the Software in accordance
with the form provided by ITI. Brother agrees to include appropriate
trademark notices, in accordance with such form, on any advertising or
packaging materials for the Products which bundles the Software.
Article 6. Warranty
- --------------------
ITI warrants Brother that the Software stored in the item specified in Article
3.1 shall be free from defect in workmanship and material and shall conform to
the Specification for a period of ninety (90) days from the date it is
delivered to Brother. If any defect or nonconformity with the Specification
are found in the Software, ITI, at its own expense, shall immediately correct
such defect or nonconformity and shall replace such defective or
noncorformable items to the corrected items.
Article 7. Indemnification
- --------------------------
7.1 ITI warrants and represents that it has the right to grant license herein,
that it has the power and authority to enter into this Agreement and that the
Software and ITI's Marks shall not infringe any copyright, patent, trademark,
trade secret or other proprietary right of third party.
*** Confidential portion omitted pursuant to a request for confidential
treatment and filed separately with the commission.
<PAGE>
7.2 ITI shall indemnify and hold Brother harmless from and against and defend
any claim, suit or proceeding, and pay any settlement amounts or damages
awarded by a court of final jurisdiction, arising out of claims by third
parties that the Software or ITI's Mark infringes any copyright, trademark,
patent, trade secret or other proprietary right, provided that ITI is given
prompt notice from Brother of such claim, suit or proceeding.
Article 8. Confidentiality
- ---------------------------
8.1 Each party shall maintain any technical and/or business information
disclosed by other party with specific designation as confidential, in strict
confidence and secret, and shall not disclose it to any third party.
8.2 The obligation set forth in Article 9.1 above shall not apply to
information which the receiving party can prove:
a) before or at the time of disclosure is known to the receiving party or
already in the public domain,
b) after the time of disclosure becomes publicly known without any fault of
the receiving party,
c) the receiving party has at any time lawfully obtained from a third party
without restriction against disclosure, or;
d) is disclosed by the disclosing party to any third party on an unrestricted
basis.
Article 9. Term and Termination
- --------------------------------
9.1 This Agreement shall become effective as of the execution of both parties
and continue in force for two (2) year unless previously terminated as
hereinafter provided, and shall therefore be automatically renewed from year
to year unless either party gives written notice to the other at least two (2)
months prior to the expiry of the term that it does not with to renew this
Agreement for further one (1) year.
9.2 In the event that either party should breach any material provision of
this Agreement, the non-defaulting party may terminate this Agreement if other
party should fail to remedy such default within thirty (30) days after receipt
of written notice thereof.
9.3 Upon termination or expiration of this Agreement (except for termination
due to default by Brother), Brother shall have the right to continue to
distribute or otherwise dispose of the Software bundled in Product remaining
in its inventory on the date of such termination or expiration for a period of
three (3) months after termination or expiration.
Article 10. Survival
- ---------------------
The provisions of Article 4,5,6,7,8 and 9.3 in this Agreement shall survive
termination or expiration of this Agreement.
<PAGE>
Article 11. Assignment
- -----------------------
This Agreement or any right or obligation hereunder shall not be assigned by
either party except with the prior written consent of the other party.
Article 12. Notice
- -------------------
Any notices or other communications under this Agreement shall be sent to the
addresses first set forth above, or such other places as they may from time to
time specify by notice in writing to the other party. Any such notice or
communications shall be in writing and shall be deemed to have been duly given
if mailed by registered or certified mail, or by facsimile, the recipient of
which is confirmed by return facsimile or other written notice of receipt.
Article 13. Entire Agreement
- ----------------------------
This Agreement sets forth the entire agreement and understanding of the
parties on the subject matter hereof and supersedes all prior and
contemporaneous written and/or oral agreement, arrangement, communications and
understandings relating to the subject matter hereof. This Agreement may not
be modified or amended except by a written instrument signed by the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives.
InfoImaging Technologies, Inc. Brother Industries, Ltd.
By: "Charles Lejsek" By: "S. Ishikawa"
-------------------- -----------------------
Charles Lejsek S. Ishikawa
President & CEO General Manager
April 29, 1997 April 17, 1997
<PAGE>
Exhibit A
Software Description
The FaxSpeed software program allows users to send files via their fax
application. Fax speed incorporates both a Send module and a Read module.
The Send module allows the user to select which files are to be sent.
FaxSpeed then compresses these files and converts them into infoimages. These
infoimages can then be printed or faxed by the appropriate software programs.
On the receiving side, FaxSpeed Read module will convert the received
infoimages back into the original data files.
All FaxSpeed Read modules are identical across all InfoImaging's 3D FaxFile
products. Each product model differs only in the Send module capabilities.
The following table shows these Send Module differences.
3D FaxSpeed Professional
Version 2.0 Version 2.0
---------- ------------
File Size Transmission No Limits No Limits
Low Resolution Max. Capacity 9K per Page 9K per Page
Medium Resoution Max. Capacity 36K per Page 36K per Page
High Resoution Max. Capacity 102 K per Page
Error Correction Yes Yes
Direct Read from Fax Application Yes Yes
Partial Resend Yes Yes
Send Macros Yes Yes
Password Protection Yes
Color Picture Manipulation Yes
Executable File Transmission Yes
Retail Pricing $49.00 $199.00
AUTHORIZED OEM AGREEMENT
This Agreement is entered as of this ____ day of July, 1996 ("Effective Date")
between InfoImaging Technologies, Inc., a Delaware corporation (Company) and
SmithMicro Software, Inc., a California corporation ("OEM").
IN CONSIDERATION of the promises contained herein and other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledge the
parties agree as follows:
1. DEFINITIONS
1.1 "Bundled Product(s)." The combination of OEM Product(s) or products of
OEM's permitted sublicensees and Licensed Software for purposes of marketing
under a single unit price for the combined products.
1.2 "Retail Products" A Licensed Software in commercial package to be re-sold
as a stand alone retail product.
1.3 "Confidential Product and Price List." A description of Company products
authorized for remarketing by OEM, together with related restrictions and
purchase prices, attached as Exhibit "A", and by reference made a part hereof
which is subject to change by Company from time to time without notice.
1.4 "Distributor." A person or entity that market Bundled and Retail
Product(s) to other dealers, retailers and/or End Users.
1.5 "Documentation." The written materials furnished by Company in
conjunction with the use of the Licensed Software by End Users described on
Exhibit "A".
1.6 "End-Users." Customers who acquire Bundled and Retail Product(s) pursuant
to an End-User License Agreement for their internal use and not for
redistribution, remarketing, time-sharing, or service bureau use.
1.7 "End-User License Agreement." A written license agreement in a form used
and required by Company for distribution of its software, including stand
alone and network versions attached hereto as Exhibit "B". - See Attached.
1.8 "Expiration Date." The Expiration Date shall be One year after the
Effective Date.
1.9 "Licensed Software." Company's computer program(s) (including corrections
to same) in executable machine code form only and related user's manual(s) as
described on Exhibit "A", as modified from time to time by Company.
1.10 "Marks." Any trademarks, service marks or trade names of Company
associated with the Licensed Software or Documentation as designated by
Company.
1.11 "Master Copy." A master copy of the Licensed Software on magnetic media
and a master copy of the Documentation either on magnetic media or in hard
copy as determined in the reasonable discretion of Company.
1.12 "OEM Product(s)." Computer products and/or computer hardware products
owned or licensed by OEM to be combined by OEM with Licensed Software to
create Bundled Product(s) as specified on Exhibit "A".
<PAGE>
1.13 "Proprietary Rights." All rights in and to copyrights, rights to
register copyrights, trade secrets, inventions, patents, patent rights,
trademarks, trademark rights, confidential and proprietary information
protected under contract or otherwise under law, and other similar rights or
interests in intellectual or industrial property.
2. APPOINTMENT OF OEM
2.1 Grant of License. Subject to the limitations and restrictions provided in
this Section 2 and to the other terms and conditions hereof, Company hereby
grants, and OEM hereby accepts, the following non-transferable, non-exclusive
right and licenses:
2.1.1 To sublicense, distribute, and demonstrate the Licensed Software only as
a component of Bundled Product(s) through Distributors and OEMs, to End-Users
for use on computers, for such End-User's internal use only pursuant to the
terms of the End-User Agreement.
2.1.2 To package and resell License Software as a retail package(s) and to
provide support services for Distributors, worldwide and End-users of Licensed
Software.
2.1.3 To use Company's Marks in accordance with the requirements of Section 6
below in association with the Licensed Software and Bundled Product(s).
2.2 Territory Clause. OEM's distribution rights are non-exclusive and shall
extend to End-Users, Dealers, OEM's and Distributors, Worldwide. OEM shall
comply with all export and import laws and regulations.
2.3 Field of Use Restrictions. OEM shall distribute the Licensed Software
with OEM Product(s) as provided herein. OEM may distribute Bundled Product(s)
to Distributors which may be authorized to bundle Bundled Product(s) with
other products.
2.4 Retained Rights. Company reserves and retains all rights not expressly
granted herein, including but not limited to the rights to market the Licensed
Software either directly or through distributors and/or third parties. In
addition, except as authorized by an Addendum to this Agreement, OEM shall
have no rights to reproduce the Licensed Software.
2.5 Sublicensing.
2.5.1 OEM shall have the right to sublicense the rights granted to the OEM
under this Agreement, provided that:
(i) each Sublicensee who, pursuant to a sublicense granted by OEM,
incorporates any portion of the Licensed Software into such Sublicensee's
product or products shall execute a written sublicense agreement with OEM (the
"Sublicense Agreement") which shall prohibit such Sublicensee from
sublicensing any of the rights granted to in the Sublicense Agreement, except
to end users, and a provision stating that such Sublicense Agreement and all
rights granted therein shall terminate automatically without notice and
without further action on OEM's part upon the expiration or termination of
this Agreement for any reason.
OEM'S FAILURE TO ENSURE THAT ALL MATERIAL FOREGOING CONDITIONS HAVE BEEN MET
WITH RESPECT TO ALL SUBLICENSEES SHALL BE DEEMED A MATERIAL BREACH OF THIS
AGREEMENT.
<PAGE>
2.5.2 OEM will use its best efforts to ensure that all Sublicensees under such
Sublicensee Agreement abide by the terms of such Sublicense Agreements and,
upon request by Company, will keep Company apprised of its activities to
enforce such provisions with particular Sublicensees. In addition, OEM agrees
that (I) Company may join OEM as a named plaintiff in any suit brought by OEM
against any Sublicensee with respect to the Licensed Software and (ii) OEM
will take such other actions, give such information, and render such aid, as
may be reasonably necessary to allow Company to bring and prosecute such
suite.
2.5.3 OEM will remain responsible for al its obligations under this Agreement
notwithstanding any Sublicense Agreement, including without limitation, the
payment to Company of al amounts due to Company from the reproduction and
distribution of the Licensed Software, regardless of whether such reproduction
and distribution is performed by OEM or its Sublicensees.
2.5.4 Company shall have the right to approve sublicensees of OEM for
unbundled products sod through another reseller, which approval will not be
unreasonably withheld.
3. COMPANY'S MARKETING AND SUPPORT RESPONSIBILITIES
3.1 Duties of Company. From Company's principal place of business, Company
shall:
3.1.1 Provide to OEM (and not to End-Users) technical assistance by telephone
during Company's normal operating hours regarding the Licensed Software.
Company shall not be obligated to accept any calls or other communications
from End-Users sublicensed by OEM. OEM shall notify all such End-Users to
only contact OEM's support services. OEM shall never communicate to any
End-User sublicensed by OEM any directions, including but not limited to
publishing Company's telephone numbers in documentation, or information that
recommend or facilitate contacting Company for support.
3.1.2 Provide to OEM two (2) days of training at the principal office of OEM.
Company agrees to provide additional one (1) day training services to OEM upon
a mutually agreeable schedule when major releases or revisions are announced
and both companies deem such training necessary.
3.2 Product Warranty: Company warrants that for a period of 90 days following
delivery to OEM, the Software will perform substantially in accordance with
Company current specifications. COMPANY HEREBY DISCLAIMS ALL OTHER
WARRANTIES, EXPRESS AND IMPLIED, INCLUDING WITH LIMITATION, THE IMPLIED
WARRANTEES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. OEM
EXPRESSLY ACKNOWLEDGES THAT NO REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS AGREEMENT HAVE BEEN MADE RESPECTING THE GOODS OR SERVICES TO BE PROVIDED
HEREUNDER, AND THAT OEM HAS NOT RELIED ON ANY REPRESENTATION NOT EXPRESSLY SET
OUT IN THIS AGREEMENT.
3.3 Proprietary Rights Indemnification. Company shall indemnify and hold OEM
harmless from any final award of costs and damages against OEM for any action
based on infringement or misappropriation of any U.S. copyright, trademark, or
trade secret as a result of the use or distribution of a current, unaltered
version of the Licensed Software; provided, however, that Company is promptly
notified in writing of any such suit or claim, and further provided that OEM
permits Company to defend, compromise, or settle same, and provides all
available information and reasonable assistance to enable Company to do so.
The foregoing states the entire liability of Company and sole remedy of OEM
with respect to infringement or misappropriation of any Proprietary Rights by
the Licensed Software.
<PAGE>
3.4 Limitation of Liability. IN NO EVENT SHALL COMPANY OR ITS DEVELOPERS,
DIRECTORS, OFFICERS, EMPLOYEES OR AFFILIATES BE LIABLE TO OEM FOR ANY
INDIRECT, INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES (INCLUDING, BUT NOT
LIMITED TO, DAMAGES FOR LOSS OF DATA, LOSS OF USE OF COMPUTER HARDWARE
DOWNTIME, LOSS OF GOODWILL, LOSS OF BUSINESS OR COMPUTER HARDWARE
MALFUNCTION), WHETHER FORESEEABLE OR UNFORESEEABLE, ARISING OUT OF THE USE OF
OR INABILITY TO USE THE LICENSED SOFTWARE OR ACCOMPANYING WRITTEN MATERIALS,
REGARDLESS OF THE BASIS OF THE CLAIM AND EVEN COMPANY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
3.5 Notification. Company agrees to advise OEM of updates and or revisions to
the Licensed Software, if any, when Company makes sure information generally
available; provided, however, that Company shall have no obligation to make
any such updates or revisions to OEM under this agreement. Company agrees to
offer updates and or revisions to the Licensed Software to the OEM at the best
customer price.
3.6 Standard of Performance. Company shall use its best efforts to perform
each of the duties described in Section 4.1 hereof in a commercially
reasonable manner that preserves and protects OEM's business reputation and
its Proprietary Rights.
3.7 Indemnification. Company shall indemnify and hold OEM harmless from and
against any and all claims, liabilities, costs and expenses (including legal
fees) arising out of (i) any duty, obligation, or warranty regarding the
Licensed Software created by Company, (ii) the improper installation, support
or maintenance of the Product(s) by Company or its employees, (iii) any
violation by Company of any material provision of this Agreement, or (iv) any
claims of intellectual property infringement which relate to the products and
would not cover the Licensed Software standing alone.
3.8 Compliance with Applicable Laws. Company shall:
(i) At its own expense, make obtain, and maintain in force at all times during
the term of this Agreement, all filings, registrations, reports, licenses,
permits and authorizations (collectively "Authorizations") in order for
Company to perform its obligations under this Agreement. OEM shall provide
Company with such assistance as Company may reasonably request in making or
obtaining any such Authorizations. In the event that the issuance of any
Authorization is conditioned upon an amendment or modification to this
Agreement which is unacceptable to OEM, OEM shall have the right to terminate
this Agreement without further obligation whatsoever to Company.
4. OEM'S MARKETING AND SUPPORT RESPONSIBILITIES
4.1 Duties of OEM. OEM shall:
4.1.1 Promote and market the Product(s) listed in Exhibit A, at OEM's
discretion.
4.1.2 Maintain sufficient inventory levels of Product(s) to satisfy reasonably
anticipated demand.
4.1.3 Comply with the limitations on distribution provided in Section 2
hereof.
4.1.4 Provide all technical assistance to End-Users and Distributors the
nature and extent of which shall be determined by OEM in OEM's sole
discretion.
OEM shall prominently display OEM's technical support telephone number in the
Documentation and other materials delivered with the Products.
4.1.5 Notify Company promptly of any defects in the Licensed Software and
distribute Licensed Software connections as required by Company.
<PAGE>
4.1.6 Perform the obligations concerning reproduction and packaging set forth
on the Packaging Addendum, if any, attached hereto.
4.1.7 Produce and deliver to Company all reports and other reports required
herein.
4.1.8 Print the Company logo or marks specified by Company on the front and
other sides of the retail boxes containing the Products.
4.2 Standard of Performance. OEM shall use its best efforts to perform each
of the duties described in Section 4.1 hereof in a commercially reasonable
manner that preserves and protects Company's business reputation and its
proprietary rights.
4.3 Warranty Limitation. OEM shall not make or create any duty, obligation,
or warranty on behalf of Company regarding the Licensed Software.
4.4 Indemnification. OEM shall indemnify and hold Company harmless from and
against any and all claims, liabilities, costs and expenses (including legal
fees) arising out of (i) any duty, obligation, or warranty regarding the
Licensed Software created by OEM, (ii) the improper installation, support or
maintenance of the Product(s) by OEM or its employees, (iii) any violation by
OEM of any material provision of this Agreement, or (iv) any claims of
intellectual property infringement which relate to the products and would not
cover the Licensed Software standing alone.
4.5 Compliance with Applicable Laws. OEM shall:
(i) At its own expense, make, obtain, and maintain in force at all times
during the term of this Agreement, all filings, registrations, reports,
licenses, permits and authorizations (collectively "Authorizations") in order
for OEM to perform its obligations under this Agreement. Company shall
provide OEM with such assistance as OEM may reasonably request in making or
obtaining any such Authorizations. In the event that the issuance of any
Authorization is conditioned upon an amendment or modification to this
Agreement which is unacceptable to Company, Company shall have the right to
terminate this Agreement without further obligation whatsoever to OEM.
5. PRODUCT SUPPLY, PAYMENT, AND SHIPMENT
5.1 Price and Payment.
5.1.1 Price, Resale Prices. Subject to the Initial Inventory Requirement,
Minimum Purchase Commitment, and the other terms and conditions set forth in
the Confidential Product and Price List, OEM shall pay to Company the price
indicated per unit of the Licensed Software in the Confidential Product and
Price List. Any suggested retail prices indicated by Company from
time-to-time are not binding on OEM and OEM is free to determine its own
resale prices.
5.1.2 Payment Terms. Payment terms are payment in full to Company within
thirty (30) days after the end of the quarter in which reproduction of the
Licensed Software by OEM. Company reserves the right in its reasonable
commercial judgment to place OEM on credit hold if payment is not made withing
60 days after the end of the month above, in which event Company will promptly
inform OEM, and Company may suspend OEM rights to reproduce Licensed Software.
5.1.3 Taxes and Duties. The prices stated are exclusive of income taxes,
sales or use taxes ad valorem taxes, duties, licenses, or levies imposed on
the production, storage, sale transportation or use of the Licensed Software.
OEM shall pay all such charges either as levied by taxing authorities, or in
lieu thereof, OEM shall provide an exemption certificate acceptable to the
relevant taxing authorities.
<PAGE>
5.2 Late Payment Charge. OEM shall pay interest to Company on delinquent
accounts and any other fees not paid within thirty (30) days after becoming
due to Company as provided hereunder at the rate of ONE AND ONE-HALF PERCENT
(1-1/2 %) per month or the maximum amount allowed by law, whichever is less,
commencing thirty (30) days after the date payment was due.
6. PROPRIETARY RIGHTS
6.1 Use Restrictions. OEM acknowledges that this transaction is a license
only, and that Company or its suppliers, retain sole ownership of all
Proprietary Rights embodied in the Licensed Software. Except as permitted
herein, OEM shall not: (i) copy reproduce, market, sell, distribute, modify,
decompile, disassemble, or otherwise reverse engineer the Licensed Software or
create derivative works based on the Licensed Software or any portions thereof
or obtain possession of any source code or other technical material relating
to the Licensed Software; (ii) distribute, transfer, loan, rent or provide a
ccess to the Licensed Software, except as provided herein; (iii) remove or add
any Proprietary Rights notice associated with the Licensed Software without
the
express written permission of Company; (iv) process OEM's own internal data
with the Licensed Software or use the Licensed Software for other internal use
except as provided herein.
6.2 Trademark Rights. The trademarks and trade names under which Company
markets its Licensed Software are the exclusive property of Company. This
Agreement gives OEM no rights therein, except the restricted license to
reproduce such trademarks and trade names as required for OEM's marketing
efforts. OEM shall not: (i) register Company's trademarks or trade names in
its name or in any other name; (ii) use Company's trademarks and trade names
as part of OEM's corporate name or trade name; (iii) market the Licensed
Software under any other or different trademarks or trade names than those
specified in writing by Company. In written communications and in
advertising, OEM's use of the Marks shall at all times be in accordance with
such styles and together with such trademark notices as Company may require.
Upon the request of Company, OEM agrees to discontinue the use of (i) any
Marks used by OEM in a manner inconsistent with the guidelines set forth
above, or (ii) any trademark, service mark, or trade name deemed to create a
likelihood of confusion with a Mark.
6.3 Notice of Infringement. OEM will promptly notify Company of any and all
infringements or violations by third parties or attempted infringements or
violations of any of the Marks copyrights or other legal rights of Company
that may come to OEM's attention. OEM will provide reasonable assistance to
Company, at Company's expense, in taking such action to enforce Company's
rights against the parties infringing or violating such rights as Company may
elect in its sole discretion.
6.4 Injunctive Relief. The parties hereby agree that any breach of Section 6
would constitute irreparable harm to Company, and that Company shall be
entitled to specific performance and/or injunctive relief in addition to other
remedies at law or in equity.
6.5 Disclosure. Each party hereunder may disclose to the other party certain
Trade Secrets and Confidential Information, including, without limitation,
Company's pricing policies set out in the Confidential Product and Price List.
For purposes of this Agreement, "Trade Secrets" means information which: (a)
derives economic value, actual or potential, from not being generally known
to, and not being readily ascertainable by proper means by, other persons who
can obtain economic value from its disclosure use; and (b) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy;
"Confidential Information" means information, other than Trade Secrets, that
is of value to its owner and is treated as confidential; "Proprietary
Information" means Trade Secrets and Confidential Information; "Owner" refers
to the party disclosing Proprietary Information hereunder, whether such party
is Company or OEM; and "recipient" refers to the party receiving any
Proprietary Information hereunder, whether such party is Company or OEM.
<PAGE>
6.6 Requirement of Confidentiality. Recipient agrees to hold the Proprietary
Information of Owner in strictest confidence and not to, directly or
indirectly, use, copy, reproduce, distribute, manufacture, duplicate, reveal,
report, publish, disclose, cause to be disclosed, or otherwise transfer the
Proprietary Information of Owner to any third party, or utilize the
Proprietary Information of Owner for any purpose whatsoever other than as
expressly contemplated by this Agreement. With regard to the Trade Secrets,
this obligation shall continue for so long as such information constitutes a
trade secret under applicable law. With regard to the Confidential
Information, this obligation shall continue for the term of this Agreement and
for a period of one (1) year thereafter. The foregoing obligations shall not
apply if and to the extent that: (a) Recipient establishes that the
information communicated was already known to Recipient, without obligations
to keep such information confidential, at the time of Recipient's receipt from
Owner, as evidenced by documents in the possession of Recipient prepared or
received prior to disclosure of such information; (b) Recipient establishes
that the information communicated was received by Recipient in good faith
from a third party lawfully in possession thereof and having no obligation to
keep such information confidential; (c) Recipient establishes that the
information communicated was publicly known at the time of Recipient's receipt
from Owner or has become publicly known other than by a breach of this
Agreement; or (d) Recipient establishes that the Proprietary Information was
not marked as Confidential when received from the Owner.
6.7 Security Measures. Without limiting the general obligations specified
above, Recipient agrees to implement those security procedures it uses to
protect its own Proprietary and confidential Information of like nature, but
in no circumstances less than reasonable care.
6.8 Ownership. OEM acknowledges and agrees that Company expressly retains
title and ownership to all worldwide intellectual property rights, including
without limitation, design, trade secrets, know-how, patent rights, trademarks
and copyrights in and to the Licensed Software.
6.9 No Reverse Engineering. OEM agrees not to reverse assemble, reverse
engineer, decomplie or otherwise attempt to derive source code from the
Licensed Software; provided, however, that if OEM's address set forth above is
located within a Member State of the European Community, then such activities
shall be permitted solely to the extent, if any, permitted by Article 6 of the
Council Directive of 14 May 1991 on the legal protection of computer programs,
and implementing legislation thereunder.
7. TERM AND TERMINATION
7.1 Term of Agreement. The initial term of this Agreement shall commence as
of the Effective Date and shall terminate at 11:59 pm., U.S. Eastern Time, on
the Expiration Date.
7.2 Renewal. This agreement may be renewed for any number of successive one
(1) year terms. Both the initial term and any renewal term are subject to
earlier termination as otherwise provided herein. Company or OEM may choose
not to renew this Agreement without cause for any reason, so long as notice
not to renew is given at least 30 days in advance of the end of the current
term.
7.3 Automatic Termination. Unless both parties promptly after discovery of
the relevant facts notifies each party to the contrary in writing, this
Agreement will terminate immediately without notice upon the institution of
insolvency, bankruptcy, or similar proceedings by or against either party, any
assignment or attempted assignment by either party for the benefit of
creditors, or any appointment or application for such appointment, of a
receiver for either party.
7.5 Mutual Termination. Either Party shall be entitled to terminate this
Agreement at any time if either party breaches any material provision of this
Agreement if such breach is not cured within thirty (30) days after
notification by either party.
<PAGE>
7.6 Acknowledgment and Waiver. The parties acknowledge that the provisions
of this Section 7 are essential, fair, and reasonable, and that the occurrence
of any of the events described herein shall constitute good, just and
sufficient cause for the termination or nonrenewable of this Agreement.
7.7 Distribution Grace Period. Upon the expiration or termination hereof, OEM
may continue to distribute its fully-paid, current inventory of Licensed
Software (not including any Licensed Software reproduced by OEM after such
termination), but in no event longer than four (4) months after expiration or
termination. During this period, the provisions of this Agreement shall
continue in force for purposes of permitting OEM to distribute its fully-paid,
current inventory. Notwithstanding the above, OEM shall not be entitled to
distribute any Licensed Software reproduced by OEM after termination of this
Agreement. Notwithstanding anything herein or elsewhere to the contrary, OEM
shall pay all invoices for license fees and other sums due to Company
regardless of whether this Agreement has terminated or expired. Company shall
have no obligation of any kind to repurchase or grant a credit for any
Licensed Software whether or not it has been licensed to End Users.
7.8 Continuing Obligations. Sections 3.2, 3.3, 3.4, 3.5, 4.4, 5, 6, and 8
shall survive the expiration or termination hereof (including all rights for
the grace period in Section 7)).
7.9 Obligations upon Termination. Upon cancellation or termination of this
Agreement for any reason, OEM shall pay to Company immediately all License
fees, support fees, and other sums due to Company hereunder and immediately
return to Company all Company property, including, but not limited to, the
Master Copy, all Demonstration Copies and the Proprietary Information of
Company.
OEM may keep in its possession however, the materials necessary to support its
customers for a period of 90 days. Upon return of such materials, OEM shall
provide Company with a signed written statement certifying that it has
returned all Company property to Company. Upon termination of this Agreement
for any reason, all rights and licenses granted by Company hereunder to OEM
shall immediately cease, provided such termination shall not result in
termination of End User Agreements extended to End Users. Upon termination or
cancellation of this Agreement for any reason, all invoices and any other
monies due to Company bo OEM shall remain due and payable in accordance with
the terms hereof. Upon termination or cancellation of this Agreement for any
reason, OEM shall promptly notify all Sublicensees of such termination.
7.10 Limitation of Liability upon Termination. In the event of termination by
either party in accordance with any of the provisions of this Agreement,
neither party shall be liable to the other, because of such termination, for
compensation, reimbursement or damages on account of the loss of prospective
profits or anticipated sales or on account of expenditures, inventory,
investments, leases or commitments in connection with the business or goodwill
of Company or OEM. Termination shall not, however, relieve either party of
obligations incurred prior to the termination.
8. GENERAL PROVISIONS
8.1 Notices. All notices shall be given in writing and shall be effective
when either served by personal delivery, or by airmail or communicated
electronically by cable, telegram or facsimile transmission and addressed to
the parties at their respective addresses set forth beneath their signature
below, or to such other address as either party may later specify by written
notice.
8.2 Merger; Amendment. OEM has not relied on any representation by Company
that is not provided herein. This Agreement constitutes the entire
understanding of the parties with respect to the subject matter of this
Agreement and merges all prior communications, understandings, and agreements.
This Agreement may be modified only by a written agreement signed by the
parties. All Exhibits and Addendum attached hereto and referred to herein are
by this reference made a part hereof by this reference.
<PAGE>
8.3 Independent Contractor. OEM is an independent contractor, and nothing
herein shall be construed to create a partnership, joint venture, or agency
relationship between the parties. OEM shall have no authority to enter into
agreements of any kind on behalf of Company and shall not have the power or
authority to bind or obligate Company in any manner to any third party.
8.4 Assignment. OEM shall not be entitled to assign this Agreement, by
operation of aw or otherwise, without the prior written consent of Company.
Company shall not be entitled to assign this Agreement by operation of law or
otherwise without written consent of OEM. In neither case shall written
consent be unreasonably withheld.
8.5 Severability. If any provision of this Agreement shall be held by a court
of competent jurisdiction to be contrary to law or public policy, the
remaining provisions shall remain in full force and effect.
8.6 No Implied Waivers. The failure of either party to enforce at any time
any of the provisions hereof shall not be a waiver of such provision, or any
other provision, or of the right of such party thereafter to enforce any
provision hereof.
8.7 Governing Law and Arbitration. The rights and obligations of the parties
under this Agreement shall not be governed by the 1980 U.N. Convention on
Contracts for International Sale of Goods; rather such rights and obligations
shall be governed by and construed under the laws of the State of California,
including its Uniform Commercial Code, without reference to conflict of laws
principles.
8.8 Force Majeure. Neither Company or OEM shall be liable for damages for any
delay or failure of delivery arising out of causes beyond their reasonable
control and without their fault or negligence, including, but not limited to,
acts of God, acts of civil or military authority, fires, riots, wars, or
embargoes.
8.9 Multiple Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each one of which shall be deemed an original, but
all of which shall constitute one and the same instrument.
8.10 No Fee Paid; Trademarks. Except for payment of advance fees as otherwise
provided herein, OEM has not paid and will not pay any fee to Company in
connection with entering into this Agreement or any prior agreement with
Company or its predecessors. OEM acknowledges that its rights under this
Agreement and the operations of its business are not substantially related to
the use of any trademark, trade name, logo, service mark, or other commercial
symbol of Company or its products.
8.11 Language. This Agreement is in the English language only, which language
shall be controlling in all respects, and all versions hereof in any other
language shall not be binding on the parties hereto. All communications and
notices to be made or given pursuant to this Agreement shall be in the
English language.
8.12 Applicability of Provisions Limiting Company's Liability. The provisions
of this Agreement under which the liability of Company is excluded or limited
shall not apply to the extent that such exclusions or limitations are declared
illegal or void under the applicable laws, unless the illegality or
invalidity is cured under the laws of the Territory by the fact that the Law
of California governs this Agreement.
<PAGE>
8.13 U.S. Export Control. OEM understands and acknowledges that Company is
subject to regulation by agencies of the U.S. Government, including, but not
limited to, the U.S. Department of Commerce, which prohibit export or
diversion of certain products and technology to certain countries. Any and
all obligations of Company to provide the Licensed Software, documentation, or
any media in which any of the foregoing is contained, as well as any other
technical assistance shall be subject in all respects to such United States
laws and regulations as shall from time to time govern the license and
delivery of technology and products abroad by persons subject to the
jurisdiction of the United States, including the Export Administration Act of
1979, as amended, any successor legislation, and the Export Administration
Regulations issued by the Department of Commerce, Bureau of Export
Administration. OEM agrees to cooperate with Company, including, without
Limitation, providing require documentation, in order to obtain export
licenses or exemptions therefrom. OEM warrants that it will comply with the
Export Administration Regulations and other United States laws and regulations
governing exports in effect from time to time.
8.14 Foreign Corrupt Practices Act. In conformity with the United States
Foreign Corrupt Practices Act and with Company's established corporate
policies regarding foreign business practices, OEM and its employees and
agents shall not directly or indirectly make an offer, payment, promise to
pay, or authorize payment, or offer a give, promise to give, or authorize the
giving of anything of value for the purpose of influencing an act or decision
of an official of any government within the United States Government
(including a decision not to act) or inducing a decision not to act) or
inducing such a person to use his influence to affect any such governmental
act or decision in order to assist Company in obtaining, retaining or
directing any such business.
8.15 Government Approvals and Enforceability. OEM hereby represents and
warrants that no consent, approval or authorization of or designation,
declaration or filing with any governmental authority in the Territory is
required in connection with the valid execution, delivery and performance of
this Agreement. OEM represents and warrants that the provisions of this
Agreement and the rights and obligations of the parties hereunder, are
enforceable under the laws of the countries within the Territory.
8.16 Exhibits and Addendum. The Exhibits and Addendum attached hereto are by
this reference made a part hereof, including the Packaging Addendum.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
date first above written.
BY: "Charles M. Lejsek" BY: "William W. Smith"
------------------- --------------------
Charles M. Lejsek William W. Smith, Jr.
President President/CEO
08/06/1996 08/06/1996
3977 E. Bayshore Road #B
Palo Alto CA 94303
(415) 960-0100
(415) 960-0205
<PAGE>
EXHIBIT "A"
INFOIMAGING TECHNOLOGIES, INC.
PRODUCT DESCRIPTION
Bundled Product(s). The following Licensed Software Product(s) are authorized
to be Bundled by OEM with the corresponding OEM Product(s) or sold as Retail
Product(s) pursuant to the terms of the Agreement.
Authorized Licensed Software Product for Retail Only
3D FaxFile Standard
CONFIDENTIAL PRICE LIST
1. Royalty price of $(*) per unit for 3D FaxFile Standard
Authorized Licensed Software Produce for OEM Bundled Products Only
3D FaxFile Basic
CONFIDENTIAL PRICE LIST
1. Royalty price of $(*) per unit for 3D FaxFile Basic, 4K send capability
2. Royalty price of $(*) per unit for 3D FaxFile Basic, 8K send capability
3. Royalty price of $(*) per unit for 3D FaxFile Basic, 16K send capability
4. Royalty price of $(*) per unit for 3D FaxFile Basic, 32K send capability
5. A special royalty price of $(*) per unit for 3D FaxFile Basic, 32K sent
capability to be sold only to OEM's customer Brother International.
COMPANY PACKAGING ADDENDUM ROYALTY
Master Disks. Notwithstanding anything to the contrary in the Authorized OEM
Agreement ("Agreement") to which this Addendum is attached, Company is not
obligated to deliver any copies of the Licensed Software or Packaging except
for one copy of the Master Copy(s) and the End User Agreement for 3D FaxFile
Basic. 3D FaxFile Standard Product will be supplied on individual disks.
Additional License Rights. In addition to the licenses rights granted in
Section 2 of the Agreement, during the term of the Agreement Company grants to
OEM the non-transferable, non-exclusive right and license:
To reproduce copies of the Licensed Software from the Master Copy for the
purpose of creating Bundled and Retail Product(s) and for distribution to (i)
End-Users, OEM customers and (ii) Distributors solely for sublicense and
distribution to End Users in accordance with the Agreement.
To reproduce copies of the End User Agreement that is specified and required
by Company to accompany each copy of the Licensed Software distributed by OEM.
*** Confidential portion omitted pursuant to a request for confidential
treatment and filed separately with the Commission.
<PAGE>
Packaging. OEM hereby agrees that all Licensed Software distributed hereunder
pursuant to Orders described herein including the Licensed Software reproduced
by OEM pursuant to the provisions of this Addendum shall be distributed in the
packaging approved by Company ("Packaging") and shall be accompanied by an
End-User Agreement. OEM shall not alter, obliterate, modify, change or
replace the Packaging or the End-User Agreement without Company's consent.
OEM agrees to use the Marks in association with the Packaging and the Licensed
Software in compliance with the requirements of this Agreement.
Reports. On or before thirty (30) days after the end of each sales quarter
(May-July; August-October; November-January; and February-April) during the
term of this Agreement and at such other times as Company may request, OEM
shall deliver to Company written fee reports certified as accurate by an
authorized representative of OEM disclosing the number of copies of the
Licensed Software distributed, including any reproduced copies OEM is
authorized to distribute, and the names and addresses of the End Users and
Distributors who licensed the Licensed Software during the previous month.
OEM shall keep complete and accurate records to allow Company to examine and
audit OEM's accounts with respect to the licensing of the Licensed Software
and payment of fees.
Audit. Upon reasonable notice from Company, OEM agrees to permit Company, no
more than once for each annual period, access, during OEM's normal business
hours, to OEM's records which are relevant to this Agreement, in order for
Company to verify and audit OEM's compliance with this Agreement. Such
verification and audit shall be at Company's expense and may be performed, at
Company's option, by an independent third party selected by Company which
party shall be bound by reasonable obligations of confidentiality. OEM agrees
to permit Company or, at its option, a certified public accountant paid by
Company, to inspect such records at reasonable times during normal business
hours. In the event such audit discloses that the fees or other sums
previously paid or reported as due to Company have been underpaid or
under-reported as of the date of the audit, then OEM shall immediately pay to
Company
the difference. If the audit discloses that the fees due and payable to
Company pursuant to this Agreement have been underpaid or under-reported by an
amount that exceeds five (5%) percent of the fees paid by OEM during the
period covered by the audit, then OEM shall pay all expenses incurred by
Company in performing the audit.
BY: "Charles M. Lejsek" BY: "William W. Smith"
------------------- --------------------
Charles M. Lejsek William W. Smith, Jr.
President President/CEO
08/06/1996 08/06/1996
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Intacta Technologies Inc.
We hereby consent to the use in the prospectus constituting a part of this
Registration Statement of our report dated April 14, 2000 relating to the
consolidated financial statements of Intacta Technologies Inc., which is
contained in that Prospectus. Our report contained an explanatory paragraph
regarding the Company's ability to continue as a going concern.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO Seidman, LLP
Atlanta, Georgia
May 10, 2000
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Intacta Technologies Inc.
We hereby consent to the use in the prospectus constituting a part of this
registration statement of our report dated February 20, 1998, relating to the
combined financial statements of Intacta Delaware Inc (formerly ITI
InfoImaging, Inc.) and Intacta Labs, Ltd. (formerly Fontech Ltd.) for the year
ended December 31, 1997, which is contained in that Prospectus. Our report
contained an explanatory paragraph regarding the Company's ability to continue
as a going concern.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ Meredith, Cardozo, Lanz & Chiu, LLP
San Jose, California
May 11, 2000
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Intacta Technologies Inc.
We hereby consent to the use in the prospectus constituting a part of this
Registration Statement of our reports dated 12/02/1998, 16/03/1999
and 12/04/2000 relating to the financial statements of Intacta Labs, Ltd.
(formerly Fontech Ltd.), which is contained in that Prospectus. Our reports
contained an explanatory paragraph regarding the Company's ability to continue
as a going concern.
We also consent to the reference to us under the caption "Experts" in the
Prospectus
/s/ Penini & Penini, C.P.A. (ISR)
Ramat-Gan, Israel
May 11, 2000
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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