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U.S. Securities and Exchange Commission
Washington, D.C. 20549
Amendment No. 1
to
Form 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
(UNDER SECTION 12(B) OR (G) OF THE
SECURITIES EXCHANGE ACT OF 1934)
PEDIANET.COM, INC.
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(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
GEORGIA 58-1727874
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION
NUMBER)
1804 Jerome Avenue, Brooklyn, New York 11235
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(Address of Principal Executive Offices) (Zip code)
Issuer's Telephone Number: (718) 332-3994
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Securities to be registered under Section 12 (b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
None N/A
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Securities to be Registered under Section 12 (g) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Shares N/A
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TABLE OF CONTENTS
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PART I - INFORMATION REQUIRED IN REGISTRATION STATEMENT
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Item 1. Description of Business..................................................................................4
Item 2. Management's Discussion and Analysis or Plan of Operation...............................................11
Item 3. Description of Property.................................................................................14
Item 4. Security Ownership of Certain Beneficial Owners and Management..........................................15
Item 5. Directors, Executive Officers, Promoters and Control Persons............................................16
Item 6. Executive Compensation..................................................................................18
Item 7. Certain Relationships and Related Transactions..........................................................20
Item 8. Description of Securities...............................................................................20
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters...............................................................................22
Item 2. Legal Proceedings.......................................................................................23
Item 3. Changes in and Disagreements With Accountants...........................................................23
Item 4. Recent Sales of Unregistered Securities.................................................................24
Item 5. Indemnification of Directors and Officers...............................................................25
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PART F/S Financial Statements.............................................................................FS1-FS17
PART III
Item 1. Index to Exhibits.......................................................................................46
Item 2. Description of Exhibits.................................................................................46
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Item 1. Description of Business
PediaNet, Inc. was incorporated in the State of New York on April 22,
1996. In December 31, 1999, PediaNet, Inc. affected a merger with
Ultraphonics-USA ("Ultraphonics"), a public, non-operating entity and
Ultraphonics changed its name to PediaNet.com, Inc. ("PediaNet" or the
"Company"). On January 14, 2000, PediaNet began trading on the OTCBB under the
new symbol "PEDN."
Ultraphonics was originally incorporated on April 3, 1975 under the
laws of the State of Utah under the name of David Thatcher & Sons Enterprises,
Inc. Thereafter, on June 4, 1979, its name was changed to Aware Products
Corporation.
In April, 1989 the Aware Products Corporation acquired 100% of the
assets subject to liabilities of Ultraphonics, a Georgia corporation, changed
its name to Ultraphonics and changed its State of Domicile from Utah to Georgia.
Ultraphonics was engaged in the design and manufacture of a proprietary
ultrasound diagnostic device for the military and industrial use. Ultraphonics
discontinued operations in April 1991 and had no operating activities since that
date. On November 17, 1999, the Board of Directors of Ultraphonics approved a 1
for 1000 reverse stock split and completed the merger with PediaNet.
The Company is in its development stage and has incurred operating
losses in excess of $1.3 million from its inception to December 31, 1999
including losses of $439,080, $389,017 and $511,407 for 1999, 1998 and 1997,
respectively. The Company's revenues have declined for each of the past three
years. Due to its lack of revenues, accumulated operating losses and the need
for additional working capital, there is no assurance that the Company's
business plan will be successful or that it will be able to continue as a going
concern.
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PediaNet, through its website at www.PediaNet.com is establishing
itself as a primary information and interactive communications resource for
pediatric health related matters for parents, guardians, children, sponsors, and
medical professionals as well as the general public on a worldwide basis, based
on internet solutions utilizing a proprietary pediatric software program known
as Devset ("Devset").
The Devset software was designed by a founder of the Company to serve
pediatricians by enhancing their practice. Devset augments the PediaNet Website
and enables visitors to the site to enjoy its benefits without any additional
cost to them. In addition, the Devset software enables pediatricians and other
health care professionals to track the growth and developmental milestones of
children and is being upgraded to report immunizations, perform billing and
gather statistical information. Devset also is designed to provide pediatric
practitioners with printouts of all patient related data, as well as printouts
of diagnoses and treatment in layman's language, making it easier for the
patient to understand.
PediaNet's primary focus is on expedient, internet-based delivery of up
to date information. Utilizing the vast communicative power of the Internet,
PediaNet provides a wide variety of interactive information and services
designed to enhance the lives of children and adolescents regardless of
geographic considerations. What differentiates PediaNet from other existing
medical internet sites is PediaNet's exclusive dedication of its site to
pediatrics. The Company believes that the variety of services provided on its
Website differentiates it from other pediatric websites.
The Company presently has six non-salaried employees, one of whom is
employed full time.
PediaNet is designed to accommodate two types of users:
Public Site:
This site is for the public-at-large, particularly parents, children
and medical students. PediaNet's concentration is on information necessary to
cover the issues of children's development and medical care. All materials
presented on the public site are authored by pediatric professionals. The
Company believes that such authorship helps ensure the delivery of the highest
caliber of pediatric information to the public. PediaNet not only links the
public to medical information but provides interactive avenues of communication
between parents and medical professionals. The Website is supported by portions
of Devset and can be accessed directly by visitors to the Website at no
additional cost.
Professional Site:
This site is intended for use by licensed pediatricians, medical
institutions and related industries servicing the world of pediatric medicine.
The foundation of the professional site is the development of a private
communications network for pediatric professionals, providing them with the
software tools necessary for creating a nationwide, and in the future, a
worldwide informational pediatric database within PediaNet.
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PediaNet's professional site is intended for use by physicians,
hospitals, medical professionals, and experts in the pediatric healthcare field,
nationally and worldwide and also either is, or will be, used to market Devset.
The Company intends to market Devset to physicians and other healthcare
professionals to enhance their daily practice of pediatrics. Utilizing the power
of the World Wide Web, PediaNet's professional website is designed to link
pediatricians worldwide for professional education and consultation and to offer
quick access to vast resources for current newsworthy releases and articles
regarding pediatrics and children, including health and legal issues, and
discussion groups between health professionals, medical scholars and
practitioners.
Marketing Policy:
PediaNet's marketing policy is to provide general services, free of
charge, to both the public and the pediatric professional community.
Historically, the Company has generated its revenues primarily from grants from
sponsors. It is expected that going forward the main revenue stream will be from
specialized services, such as advertising and sponsors, digital space, pediatric
internet digital TV, pediatric national database subscription, instructional
courses and online conferences. The Company's revenues have declined each year
over the past three years and the Company currently has no significant revenue
source. There can be no assurance that the Company will be successful in
generating revenues as planned.
Competition:
The online medical information and services market, like many other
online markets is characterized by strong competition. There are a large number
of web sites devoted to offering pediatric information or services. The Company
is not aware of any website offering the variety of information and services
offered on the PediaNet Website or augmented by a software system comparable to
Devset.
Because Web sites can be launched at relatively low cost, other
traditional providers of pediatric services and information may choose to create
an online model. Many of these companies have longer operating histories,
greater brand recognition, larger customer user bases and significantly greater
financial, technical and marketing resources than the Company. Failure to
compete effectively with such companies will have a material adverse effect on
the Company's business, financial conditions and results of operations.
Proprietary Rights:
The Company has been granted an exclusive, worldwide license to exploit
the Devset software by Dr. Melvin Koplow, the Chief Executive Officer of the
Company and a Director. The Company intends to seek patent and trademark
protection for Devset as soon as feasible. Currently, the Company relies
primarily upon its know-how, rather than patents, to develop and maintain its
competitive position.
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Plans for Growth:
In addition to internal growth, PediaNet intends to expand through
acquisitions and new product development. While PediaNet has no present
agreements to acquire additional companies, it intends to focus on companies
that exhibit stable, aggressive growth that would complement the services
offered on its website. No assurance can be given that PediaNet will be
successful in its endeavors to acquire compatible companies.
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Product Strategy:
PediaNet offers unlimited Internet access to the public, at no charge,
and provides the following:
Public Gateway:
Emergency Alerts: Local and national outbreaks of diseases or epidemics
highlight this important site. Data from the Center for Disease Control and
other professional sources regarding warnings about dangerous health related
situations keeps people informed with the latest breaking health emergency
information.
Pedia News: PediaNet gathers a wide array of important newsworthy releases and
articles regarding children, including health and other matters and puts it
quickly at interested persons' fingertips.
Disease Database: PediaNet has a comprehensive, easy to use, searchable list of
known illnesses and disorders that are relevant to children and adolescents.
These are referenced with pertinent information, such as common symptoms and
effects, aiding in the early detection of disease.
Simple Rx Guide: The world of prescription and over the counter drugs is
continually expanding with new drugs and treatments constantly being approved.
This site provides a brief description of drugs, their usage and possible side
effects.
Product Recalls and Alerts: Crucial information about toys, games and children's
products that may be dangerous or defective can be found here. Users of this
site are able to check regularly to see what products are currently being
recalled and what should be done if they own one. This information is not
available everywhere and is a key feature of PediaNet.
Development/Growth Chart: Through the underlying site support of a special
limited version of PediaNet's Devset software program, a parent or guardian can
see a child's projected development and probable growth up to age eighteen. This
feature can be an valuable tool for parents sensing that their child is not
properly growing physically or developmentally.
Immunization: An ever increasingly health issue for our children is receiving
timely and proper immunizations. PediaNet provides a list of immunizations
categorized by age, due date and the reasons for their necessity. At this site,
PediaNet will inform the users of any new standards and requirements as they are
established.
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Product Expo: PediaNet is an online source for finding and purchasing products
for children of all ages. Working in cooperation with major manufacturers and
catalog companies, PediaNet offers and displays a broad array of products and
services through links to participating companies. Many items to aid and assist
those who are physically and mentally challenged are featured here. The Company
is entitled to a portion of the revenues from products sold in this manner but
has generated only nominal revenue in this manner to date.
Kidz Club Only: This area is for children. Here information, games and
entertainment are available specifically for their use and exploration. While at
the PediaNet site, the user's child has an opportunity to open up and develop
interpersonal as well as learning skills.
Benefits to the End-user: As technology improves, and costs drop, the end-user
of PediaNet can expect to:
o Receive medical-related, Internet broadcasts;
o On-demand download voice/data;
o Receive speeches on medical topics;
o Receive Internet audio broadcasts of conferences;
o Interactive courses;
o Interactive seminars;
o Receive full-motion video; and
o Access interactive applications supplied by advertisers
These services and more are expected to be available on-demand.
Professional Gateway:
The Company's professional site is intended for use by pediatric
professionals who gain access to the site by means of a password provided to
them after they have completed a professional questionnaire compiled by the
Company. The Company does not independently verify the veracity or accuracy of
these questionnaires.
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PediaNews Pro: PediaNet gathers a wide array of important, newsworthy releases
and articles regarding pediatrics and children, including health and legal
issues and puts it quickly at the doctors' fingertips.
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CME Corner: Offered here are various products including publications, Board
Reviews, audios and videos which offer professionals required Continuing Medical
Education credits.
Item 2. Management's Discussion and Analysis or Plan of Operation
Overview
The following is a discussion of certain factors affecting PediaNet's
results of operations, liquidity and capital resources. You should read the
following discussion and analysis in conjunction with the Company's consolidated
financial statements and related notes that are included herein.
The following discussion regarding PediaNet and its business and
operations contains "forward- looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements consist of any
statement other than a recitation of historical fact and can be identified by
the use of forward-looking terminology such as "may," "expect," "anticipate,"
"estimate" or "continue" or the negative thereof or other variations thereon or
comparable terminology. The reader is cautioned that all forward-looking
statements are necessarily speculative and there are certain risks and
uncertainties that could cause actual events or results to differ materially
from those referred to in such forward- looking statements.
Results of Operations
Recapitalization
On December 31, 1999, PediaNet, Inc. effected a merger with
Ultraphonics-USA, Inc. In total, 3,730,386 shares of Ultraphonics-USA, Inc.
shares of common stock were exchanged for the outstanding shares of PediaNet,
Inc. This recapitalization resulted in the Company acquiring all of the assets,
net of liabilities, of Ultraphonics, with a net value of $154,538. Ultraphonics
changed its name to PediaNet.com, Inc. Prior to the merger Ultraphonics was
engaged in the design and manufacture of proprietary ultrasound diagnostic
devices for military and industrial use. Ultraphonics had no operating history
since April, 1991.
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PediaNet recognizes revenues under the categories of Sponsorships and Website
PediaNet generated revenues from sponsorship fees and Website income.
The Company's sponsorship category including unrestricted educational grants
received from pharmaceutical companies for the production of educational
information in support of pediatric information seminars. For the year ended
December 31, 1999 the Company realized revenues of $1,000 from sponsorship fees.
The prior year the Company did not generate any revenue in this category. The
Company's website income was derived from advertisers. For the year ended
December 31, 1999 the Company experienced a decline of 45% in website
advertising revenues to $3,500 as compared to $6,379 for the year ended December
31, 1998. This loss was attributable to non-renewal of the Exceptional Parent
Magazine advertising commitment for the year-ended December 31, 1999.
PediaNet plans to recognize additional revenue from design and implementation of
Websites and Licensing of Devset
PediaNet intends to derive future revenues from the design and
implementation of their Pediatrics Information Directory System and will offer a
number of website services to members of the Pediatrics profession. These
potential revenue streams will come from offering website design of Internet
home pages for Pediatricians, registration of domain addresses, setup of access
service and webmaster service. In addition, the Company's aim is to license and
distribute the Devset software and upgrades to Devset module. The Company
expects to commence implementation of these services sometime early in the third
quarter of 2000. The Company also plans to generate future revenues from digital
space, pediatric internet digital TV, pediatric national database subscriptions,
instructional courses and online conferences.
Year ended December 31, 1999 as compared with year ended December 31, 1998
During the year ended December 31, 1999, the Company's total assets
increased $258,946 or 108% to $497,875 as compared to $238,929 for the year
ended December 31, 1998. This increase is attributable to the proceeds from an
offering by Ultraphonics prior to its merger into PediaNet, Inc.
Revenue Total Revenue for the Company for the year ended December 31, 1999
declined 29% to $4,500 as compared to $6,379 for the year-ended December 31,
1998. The decline was attributable to a 45% drop in revenue from website income.
The Company was able to generate income from Sponsorship fees after a generating
no revenue for this category a year earlier. The Company's ability to continue
as a going concern is dependent upon our ability to obtain additional debt or
equity financing and realize revenues from our website sufficient to cover our
overhead. There can be no assurance that the Company will be successful in
generating such funds, and failure to do so would have a material adverse impact
on the Company's ability to continue as a going concern.
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Operating Expense During the year ended December 31, 1999 the Company
experienced an increase of approximately 13% in operating costs and expenses.
Operating costs increased to $443,580 from $395,396 from the year ended December
31, 1998. The primary reason for the increase was an increase in cost and
expenses associated with selling, general and administrative expenses. The
Company issued $89,325 of common stock in consideration for services rendered in
1999 compared to $2,535 in 1998 and professional fees increased $5,295 to
$15,808 in 1999 compared to $10,513 in 1998. This increase in expenses was
partially offset by a reduction in royalty expense from $47,178 in 1998 to zero
in 1999.
Gains or (Losses) There were no realized gains or losses for the years ended
December 31, 1999. The unrealized loss of $25,000 has been recorded as a
separate component of stockholder's deficiency for the year ended December 31,
1999.
Net (Loss) During the year ended December 31, 1999 the Company's net (loss)
increased 13% to $439,080 as compared to $389,017 for the year ended December
31, 1998. This loss was primarily attributable to lack of significant revenue
and an increase in selling, general, and administrative expenses of 13% over the
prior year. As a result of additional shares outstanding, the Net (loss) per
Common Share of the Company's stock,(basic and diluted) was ($0.13) in 1999,
compared to ($0.12) in 1998. Prior to the merger, Ultraphonics had experienced
recurring losses and negative cash flows through May 31, 1999 and, as of April
30, 1999, the Company had a stockholder deficiency of approximately $128,000 and
was in default on its debt to one of the Company's shareholders in the amount of
$117,795. We need to obtain additional financing to support our planned
activities and to achieve a level of sales adequate to support our costs
structure.
Liquidity and Capital Resources
As of December 31, 1999, PediaNet had a working capital deficit of
$605,783 as compared to a working capital deficit of $575,946 in 1998. At
December 31, 1999 PediaNet had cash and marketable securities of $176,687
compared to zero in 1998. PediaNet's primary source of working capital is
advertising revenue, sponsorship and investment capital. Operations used $28,303
of cash after non-cash consideration of $91,725, depreciation and amortization
of $81,383 and an increase in accounts payable of $237,669. The Company acquired
$100,000 through the acquisition of Ultraphonics, raised $66,000 from the sale
of securities and $15,597 from the exercise of stock options.
The main revenue stream is expected to be from specialized services
such as advertising and sponsors, digital space, pediatric internet digital TV,
pediatric national database subscriptions, instructional courses and online
conferences. The Company currently does not have commitments for capital
expenditures and does not expect to purchase property or equipment over the next
year that cannot be financed in the ordinary course of business. The Company
estimates that it will require approximately $850,000 to support its planned
activities over the next twelve months. The company will generate working
capital from the collection of $850,000 in notes receivable and from debt and
equity financings.
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The Company currently does not have adequate cash reserves to meet its
future cash requirements. The Company's ability to continue as a going concern
will depend upon successful completion of debt and equity financings and the
ability to generate revenue.
Year ended December 31, 1998 compared with year ended December 31, 1997
Revenue. Total revenue for the Company for the year ended December 31, 1998
declined 62% to $6,379 as compared to $16,720 for the year ended December 31,
1997. The decline was attributable to the Company receiving no revenue from
Sponsorship fees in 1998 as compared to $10,000 in Sponsorship fees for 1997.
Website revenue also decreased $341 in 1998 as compared to 1997.
Operating Expenses. Operating expenses decreased because of lower selling,
general, and administrative expenses. Selling general and administrative
expenses decreased $134,497 or 25% to $395,396 in 1998 as compared to $529,893
in 1997. In 1998 salaries decreased $34,517 to $8,400, professional fees
decreased $37,425 to $10,513, office expenses decreased $22,696 to $10,618, and
telephone expense decreased $6,681 to $3,428. In 1998 medical consulting fees
were eliminated as compared to $64,800 in 1997. In 1998 royalty fees increased
$42,178 to $47,178 as compared to $5,000 for 1997.
Net Loss. The net loss for 1998 decreased $112,390 or 22% to $389,017 as
compared to $511,407 in 1997. The reduction in net loss was the result of lower
selling, general and administrative expenses. The net loss per common share
(basic and fully diluted) decreased to $(.12) in 1998 as compared to $(.16) in
1997.
Liquidity and Capital Resources
As of December 31, 1998 the company had a working capital deficit of
$575,946. The Company had zero current assets and $575,946 in current
liabilities. In 1998, the Company used $15,882 in cash for operating activities
after depreciation and amortization of $81,231 and an increase in accounts
payable and accrued expenses of $286,904.
Item. 3 Description of Property
The Company presently leases space at 1804 Jerome Avenue, Brooklyn, New
York 11235. The Company's phone number is 718-332-3994. The present facility is
slightly less than 800 square feet and serves as the Company's headquarters and
technology center. The Company anticipates that it will be moving into a new
facility during the second quarter of this year. The proposed new address will
be 15 West End Avenue, Brooklyn, New York 11235. This facility is described as a
storefront property with street level access. This new facility is approximately
1500 square feet and will serve as the corporate headquarters and technology
center for the Company. The Company will be able to retain its current phone
number.
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Item 4. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of April 25, 2000, the number of
shares of the Company's common stock (the "Common Stock") beneficially owned by
all persons known to be holders of more than five percent (5%) of the Common
Stock and by all executive officers and directors of the Company individually
and as a group.
(a) Security Ownership of Certain Beneficial Owners
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Title of Name and address Amount and Nature Percentage of
Class of beneficial owners of beneficial ownership class
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Common Stock The Goalkeeper* 293,661 shares of 5.5%
Group, Limited Common Stock
c/o Meridian Management
Impress House, Douglas
Isle of Mann
1M99 1EE
British Isles
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*The listed beneficial owner has no right to acquire any shares within
60 days of the date of this Form 10-SB from options, warrants, rights,
conversion privileges or similar obligations.
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(a) Security Ownership of Management
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Title of Name and address Amount and Nature Percentage of
Class of beneficial owners of beneficial ownership shares outstanding
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Common Melvin Koplow, MD* ** 630,000 shares 11.93%
Stock 531 Huguenot Avenue
Staten Island, New York 10312
Common Steven Richter* ** 500,000 shares 9.47%
Stock 2226 Ralph Avenue
Brooklyn, New York 11234
Common Aleksandr Akerman* 500,000 shares 9.47%
Stock 641 88th Street 3C
Brooklyn, New York 11228
Common Shlomo Carlebach* 500,000 shares 9.47%
Stock 1314 Carroll Street
Brooklyn, New York 11231
Common John DeMauro* ** 375,000 shares 7.10%
Stock 577 Raphbun Avenue
Staten Island, New York 10312
Total All Officers & Directors 2,505,000 shares 47.44%
as a group beneficially own
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*The listed beneficial owners have no rights to acquire any shares
within 60 days of the date of this Form 10-SB from options, warrants, rights,
conversion privileges or similar obligations.
** Shares are beneficially held jointly with other family members.
(c) Change in Control
There are no arrangements, including any pledge by any person of
securities of PediaNet, the operation of which may at a subsequent date result
in a change in control of the registrant.
Item 5. Directors, Executive Officers, Promoters and Control Persons
The following Table sets forth certain information regarding the
executive officers and directors of PediaNet as of April 25, 2000.
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Name Age Title Five Year Business Experience
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Melvin D. Koplow 55 CEO Dr. Melvin Koplow has been CEO and a Director of PediaNet
Director* since April 1996. He has been a practicing pediatrician
for the past 22 years and developer of Devset software, a
pediatric growth and developmental tracking software
program that was developed in 1984. His current software
projects are focused on immunization tracking, electronic
billing and pediatric resource information.
Steven Richter 57 President Mr. Richter has served as President since November 1999 and
Director as Director of Marketing since 1996. Mr. Richter has been
an entrepreneur in wholesale consumer electronics for the
past twenty years.
John Lapore 43 Secretary Mr. Lapore has served as Corporate Secretary and Director
Director* of PediaNet since January 2000. In addition Mr. Lapore
since 1989 has managed and operated an Allstate Insurance
agency.
Ernest Cifaldi 39 Treasurer Mr. Cifaldi presently has served as Corporate Treasurer of
PediaNet since December 1999. In addition Mr. Cifaldi from
1997 to date is Senior Vice President in charge of
Consolidation, General Ledgers and Control at Solomon Smith
Barney and from 1995 to 1996 was Vice President and
Controller of Information Systems for Cowan & Co..
Aleksandr Akerman, 51 Director* Mr. Akerman has served as Treasurer from 1996 to December
1999. Mr. Akerman has a Master of Computer Science degree
from Moscow University; he served more than 20 years as
Deputy Director of Project Development for the Central Bank
of U.S.S.R. Mr. Ackerman created the Banking Information
System for Moscow Central Bank of the U.S.S.R. Since 1993
he has been President of Greycourt Inc.
Shlomo Carlebach 40 Director* Mr. Carlebach has served as a Director since 1996. Mr.
Carlebach was one of the founders of Maxum Computers, a
computer original equipment manufacturer and since 1995 has
been Purchasing Manager at Greycourt Inc..
John DeMauro 61 Director* Mr. DeMauro has served as as a Director of PediaNet since
1996. In 1996 Mr. DeMauro served as an Administrator of the
Amalgamated Lithographers Union, Local 1. From 1995 to 1996
DeMauro was a private consultant of employee benefits.. Mr.
DeMauro currently is employed by Greycourt Inc.
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* Each Director shall hold office until the next annual meeting of
stockholders and until his successor shall have been elected and qualified.
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The Directors of PediaNet hold no other directorship in any other
reporting company. There are no family relationships among the directors or
persons nominated or chosen by the Company to become a director.
Item 6. Executive Compensation
Summary Compensation Table
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Annual Compensation
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Principal Position Year Salary* Bonus Other
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Dr. Melvin D. Koplow, MD 1999 $62,500 --
Shlomo Carlebach 1999 $62,500 --
Aleksandr Akerman 1999 $62,500 --
John DeMauro 1999 $62,500 -- **
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*Amounts listed represent amounts accrued, but forgiven, under
employment contracts which terminated during 1999. There was no annual
compensation paid or owing to the officers and directors of the Company for
fiscal 1999 other than as described in "Employment Agreements" below.
** Mr. DeMauro exercised 59,700 options to purchase Common Stock at
$.01 per share and 100,000 options to purchase Common Stock at $.15 per share on
January 16, 1999. These options were granted pursuant to an employment contract
and exercised at a time when there was no market for the Company's stock and the
Company had a negative net worth. See "Employment Agreements" and "Recent Sales
of Unregistered Securities" below.
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As of January 1, 2000, no executive officer of the Company held any
stock appreciation rights with respect to the stock of the Company. Furthermore,
as of January 1, 2000, no named executive officer of the Company (as defined in
SEC Regulation S-B Item 402(a)(2)) has held any stock options with respect to
the stock of the Company. The authorization and/or granting of stock options to
directors of the Company and to other executive officers of the Company is
discussed below. See"Stock Option Agreements".
Employment Agreements
In 1999 the employment agreements for all of the officers and Directors
of the Company expired and were not renewed, provided, however, that John
DeMauro, a Director, retained an option to purchase 59,700 shares of common
stock at one cent ($.01) per share and an additional 100,000 shares at either
ten percent (10%) of an initial public offering by the Company, at takeover
price offer, any buyout price, private sale price or book value price, as
defined under the terms of his employment agreement. All of these options were
exercised by Mr. DeMauro prior to December 31, 1999. See "Recent Sales of
Unregistered Securities."
Stock Option Agreements
The Board of Directors of the Company on January 2, 2000 met and
adopted a board resolution by unanimous consent to grant 15,000 options to
purchase shares of the Company's common stock to the officers and Directors of
the Company annually. Options were granted to the Directors and officers to
purchase 15,000 shares of the Company's Common Stock at an exercise price of
$1.50 per share, exercisable on or after September 1, 2000. In addition, the
following individuals were granted options exercisable at $1.50 per share, all
of which expire on January 2 , 2005 to purchase shares of Common Stock in the
following amounts: Dr. Melvin D. Koplow, MD, Chief Executive Officer 150,000
shares Steven Richter, President 150,000 shares; John Lapore, Secretary 40,000
shares; John DeMauro, Director 150,000 shares; and Aleksandr Akerman, Director
100,000 shares.
19
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Name Shares acquired Value realized ($) Number of securities Value of unexercised in-
on exercise (#) underlying unexercised the-money options/SARs at
options/SARs at FY-end ($)
FY-end (#) Exercisable/
Exercisable/ Unexercisable
Unexercisable
<S> <C> <C> <C> <C>
John DeMauro, 159,700 0 -- --
Director
</TABLE>
* Mr. DeMauro exercised 59,700 options to purchase Common Stock at $.01 per
share and 100,000 options to purchase Common Stock at $.15 per share on January
16, 1999. These options were granted pursuant to an employment contract and
exercised at a time when there was no market for the Company's stock and the
Company had a negative net worth. See "Employment Agreements" and "Recent Sales
of Unregistered Securities" below.
Item 7. Certain Relationships and Related Transactions
The Company presently sub-leases its facilities on a month-to-month
basis from Aleksandr Akerman, a Director and shareholder who has forgiven all
rent payments although he is under no obligation to continue to do so. The
forgiveness of the rent obligation of $2,400 for the years ended December 31,
1999 and December 31, 1998 has been credited to additional paid in capital. See
"FINANCIAL STATEMENTS NOTE 8."
On December 31, 1999 when PediaNet, Inc. merged into Ultraphonics the
Company assumed a liability of a shareholder loan, in the principal amount of
$43,611 which was in default at the time of the merger. In addition to the
principal amount, there was accrued interest of $55,358, accruing at the rate of
12% per annum, and accrued fees and court costs amounting to $18,876 associated
with this liability. See MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF
OPERATION- OTHER EXPENSES' AND "FINANCIAL STATEMENTS NOTE 3."
The Company believes that the terms of the above transactions are on
terms at least as favorable to the Company as could have been obtained from
arms-length negotiations with unrelated third parties.
Item 8. Description of Securities
The authorized capital stock of PediaNet consists of 50,000,000 shares
of Common Stock, par value $0.001 of which 5,248,557 are issued and outstanding
as of April 25, 2000. Each holder of record of Common Stock is entitled to one
vote for each share held on all matters properly submitted to the shareholders
for their vote. The holders of the shares are entitled to one vote for each
share held and are entitled to dividend when, and if, declared by the Board of
Directors. No dividends have ever been declared nor is there any intent to
declare or pay any dividends in the foreseeable future. There are currently no
preemptive rights connected with the common stock.
20
<PAGE>
The Company is also authorized to issue 10,000,000 shares of Preferred
Stock, par value $0.10 per share of which 10,003 shares are issued and
outstanding as of April 25, 2000. Each holder of record of Preferred Stock is
entitled to convert one share of Preferred Stock into one share of Common Stock
on a one to one basis. Each share of preferred stock is entitled to dividends
when, and if, declared by the Board of Directors. There are currently no voting,
conversion or liquidation rights, nor redemption or sinking fund provisions for
the preferred stock.
21
<PAGE>
PART II
Item 1. Market Price of and Dividends on the Company's Common Equity and Other
Shareholder Matters
PediaNet's Common Stock is currently traded on the Over-the-Counter
Bulletin Board ("OTCBB") under the symbol "PEDN." As of April 20, 2000, there
were approximately 342 holders of the Common Stock. The Company is presently not
required to file reports with the SEC pursuant to the Exchange Act. However,
under the OTC Eligibility Rule, effective January 4, 1999, companies whose
securities are quoted on the OTCBB are required to file periodic reports with
the SEC to continue quoting their securities (the "Eligibility Rule"). In order
to comply with the Eligibility Rule, most companies will register their
securities under the Exchange Act on Form 10 or (Form 10-SB if a small business
issuer, as is the case with PediaNet). The Eligibility Rule currently provides
that an issuer reach "no comment" status prior to its scheduled phase-in date in
order to avoid being delisted. PediaNet's scheduled phase-in date is May 3,
2000. No assurances can be given that PediaNet's Form 10-SB filing will be
effective in time to sustain an active public trading market.
The following table sets forth the range of the high and low closing
bid prices per share of PediaNet's Common Stock during each of the calendar
quarters identified below. These bid prices were obtained from the Standard &
Poor's Comstock, and do not necessarily reflect actual transactions, retail
markups, markdowns or commissions.
The high and low bid sales prices for the equity for each full
quarterly period within the two most recent fiscal years and any subsequent
interim period for which financial statements are included are as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Year Quarter High Bid Low Bid Year Quarter High Bid Low Bid
<S> <C> <C> <C> <C> <C> <C> <C>
1998 1st* N/A N/A 1999 1st* N/A N/A
1998 2nd* N/A N/A 1999 2nd* N/A N/A
1998 3rd* N/A N/A 1999 3rd* N/A N/A
1998 4th* N/A N/A 1999 4th 0.625 0.25
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Prior to the merger Ultraphonics securities were inactive until December 13,
1999, when trading resumed under the symbol ULPC. Following the merger and a
change in the stock symbol to PEDN to reflect the new merged Company, PediaNet
began trading on the Over-the-Counter Bulletin Board under the new symbol on
January 11 of 2000.
22
<PAGE>
Item 2. Legal Proceedings
The Company is not a party to or involved in any material litigation,
nor is it aware, to the best of its knowledge, of any pending or contemplated
proceedings against it by any third party or any government authorities.
Item 3. Changes in and Disagreements with Accountants
(a) Previous independent accountants
(i) As a result of the Merger, on December 30, 1999, the Registrant
dismissed Bernard Lipton, CPA (formerly accountant to PediaNet, Inc.) as its
independent accountant.
(ii) the reports of Bernard Lipton, CPA on the consolidated financial
statements for the past two fiscal years contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principle.
(iii) The Registrant's Board of Directors participated in and approved
the decision to change independent accountants.
(iv) In connection with its audits for the two most recent fiscal years
and through April 20, 2000, there have been no disagreements with Bernard
Lipton, CPA on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements if not
resolved to the satisfaction of Bernard Lipton, CPA would have caused them to
make reference thereto in their report on the consolidated financial statements
for such years.
(v) The Registrant has requested that Bernard Lipton, CPA furnish it
with a letter addressed to the SEC stating whether or not it agrees with the
above statements.
(b) New independent accountants
(i) The Registrant retained Weiner, Goodman & Company, P.C. (prior
accountants of Ultraphonics) as its new independent accountants as of January 1,
2000. During the two most recent fiscal years and through April 20, 2000, the
Registrant has not consulted with Weiner, Goodman & Company, P.C. on items which
(1) were or should have been subject to SAS 50 or (2) concerned the subject
matter of a disagreement or reportable event with the former auditor. The
Registrant authorized Bernard Lipton, CPA to respond to any and all inquiries of
the successor accountant.
23
<PAGE>
Item 4. Recent Sales of Unregistered Securities
On December 28, 1999, Ultraphonics closed on a private placement deal
pursuant to Rule 504 of Regulation D to a limited number of "accredited
investors"in which Ultraphonics raised $1,000,000 in a combination of cash,
promissory notes and shares of stock as a condition to completing a merger with
PediaNet, Inc. Pursuant to the offering, Ultraphonics sold a total of (i)
900,000 shares of common stock at $0.22 per share or $198,000; (ii) 410,000
one-year warrants to purchase shares of its common stock at $0.01 per warrant at
an exercise price of $0.01 or $8,200; and (iii) $793,800 principal amount of its
one year 10% convertible promissory notes (the "Convertible notes") for a total
of $1,000,000. At closing, Ultraphonics received $100,000 in cash, $50,000 in
marketable securities and $850,000 in unsecured six- month 10% promissory notes
(the "Investor Notes").
The Investor Notes are callable by the Company in 25% increments under
certain conditions.
The Convertible Note is convertible into 529,200 shares of the
Company's Common Stock. Interest is payable on December 28, 1999, the due date.
The proceeds to Ultraphonics, were used for working capital for the
Company after the merger with PediaNet, Inc.
In January 2, 1999, the Company issued 59,550 shares to outside
consultants in consideration for services rendered valued at $ 89,325.
On January 16, 1999, PediaNet, Inc. issued 59,700 shares of common
stock to John DeMauro, a Director, upon the exercise of an option at an exercise
price of $.01 per share or $597 and 100,000 shares of common stock upon the
exercise of an option at an exercise price of $.15 per share or $15,000.
24
<PAGE>
In September 1999, the Company issued 44,000 shares of common stock at
$1.50 per share for a total consideration of $66,000 to two unrelated
"accredited" investors.
On December 31, 1999,Ultraphonics issued 3,730,386 shares of its common
stock in exchange for all of the outstanding shares of PediaNet, Inc.
Item 5. Indemnification of Directors and Officers
The Company, may by virtue of section 722 of the Georgia Business
Corporation Law("GBCL"), indemnify any person made a party to an action by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that he, his testator or intestate, is or was a director of officer of the
corporation, against the reasonable expenses, including attorneys' fees,
actually and necessarily incurred by him in connection with the defense of such
action, or in connection with an appeal therein, except in relation to matters
as to which such director or officer is adjudged to have breached his duty to
the corporation under section 717 or section 715(h), respectively, of the GBCL.
Such indemnification shall in no case include amounts paid in settling or
otherwise disposing of threatened action, or a pending action with or without
court approval, or expenses incurred in defending a threatened action, or a
pending action with or without court approval, or expenses incurred in defending
a threatened action, or a pending action which is settled or otherwise disposed
of without court approval. The comprehensive statutory provisions for
indemnification of officers and directors sets forth the public policy of the
state as to this matter, and no provision to the contrary, whether found in the
certificate of incorporation, by-laws, shareholders' or directors' resolution,
agreement, or court order is valid "unless consistent" with the GBCL.
The Company is obligated under its bylaws to indemnify its directors,
officers and other persons who have acted as representatives of the Company at
its request to the fullest extent permitted by applicable law as in effect from
time to time, except for costs, expenses or payments in relation to any matter
as to which such officer, director or representative is finally adjudged
derelict in the performance of his or her duties, unless the Company has
received an opinion from independent counsel that such person was not so
derelict.
25
<PAGE>
The Company's indemnification obligations are broad enough to permit
indemnification with respect to liabilities arising under the Securities Act.
Insofar as the Company may otherwise be permitted to indemnify its directors,
officers and controlling persons against liabilities arising under the
Securities Act or otherwise, the Company has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
26
<PAGE>
PART FS
PEDIANET.com, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1999 and 1998
<PAGE>
PEDIANET.com, INC.
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Independent Auditors Report FS2 FS3
Financial Statements:
Balance Sheets,
December 31, 1999 and 1998 FS4
Statement of Operations, Years
Ended December 31, 1999, 1998
and 1997 FS5
Statement of Stockholders Deficiency
Years Ended December 31, 1999,
1998 and 1997 FS6
Statement of Cash Flows, Years Ended
December 31, 1999, 1998 and 1997 FS7
Notes to Financial Statements FS8 - FS17
FS1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders of PediaNet.com, Inc.
We have audited the accompanying balance sheets of PediaNet.com, Inc. (the
"Company") as of December 31, 1999 and the related statements of operations,
stockholders' deficiency and cash flows for the year then ended. These financial
statements are the responsibility of management. Our responsibility is to
express an opinion of these financial statements based on our audit. We did not
audit the 1998 and 1997 financial statements. These statements were audited by
other auditors whose report dated June 15, 1999 and February 24, 2000 has been
furnished to us.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, based on our audit and the report of other auditors, such
financial statements present fairly, in all material respects, the financial
position of PediaNet.com, Inc. as of December 31, 1999 and 1998 and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1999, in conformity with generally accepted accounting
principles
FS2
<PAGE>
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As more fully explained in Note 2 of
Notes to Financial Statements, the Company needs to obtain additional financing
to fulfill its activities and achieve a level of sales adequate to support its
cost structure. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Managements' plans are also described in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties should the Company be unable to
continue as a going concern.
WIENER, GOODMAN & COMPANY, P.C.
Certified Public Accountants
Eatontown, New Jersey
February 28, 2000, except for Note 9 and 11,
as to which the date is April 19, 2000
FS3
<PAGE>
Independent Auditor's Report
To The Board of Directors and shareholders of Pedianet, Inc.
We have audited the accompanying balance sheet of Pedianet, Inc. as of December
31, 1997 and December 31, 1998, and the related statements of operations,
stockholders equity, and cash flows for the years than 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pedianet, Inc as of December
31, 1997, and December 31, 1998, and the results of its operations and its case
law for the years then ended in conformity with generally accepted accounting
principals.
/s/ Bernard Lipton
-------------------
Bernard Lipton
Certified Public Accountant
760 Jerricho Turnpike
Westbury, New York 11590
June l5, 1999 and February 24, 2000
FS3.1
<PAGE>
PEDIANET.com, INC
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
December 31,
1999 1998
----------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 151,687 $ (107)
Marketable securities 25,000 --
Accounts receivableshareholder 25,000 --
Notes receivable 56,200 --
Prepaid interest 82,335 --
----------- -----------
Total Current Assets 340,222 (107)
Property, furniture and equipment net 157,653 239,036
----------- -----------
TOTAL ASSETS $ 497,875 $ 238,929
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Accounts payable $ 129,864 $ 117,972
Accrued expenses 767,530 451,367
Loans payablerelated parties 48,611 6,500
----------- -----------
Total Liabilities 946,005 575,839
----------- -----------
Commitments and Contingencies
Stockholders' Equity (Deficiency):
Preferred stock, par value $.10
per share, 10,000,000 shares authorized;
outstanding 10,003 shares 1,000 --
Common stock, par value $.001 per share
50,000,000 shares authorized;
outstanding 5,248,557 and 3,467,136
shares 5,249 3,467
Additional paid in capital 1,161,883 811,805
Cumulative and other comprehensive (loss) (25,000) --
Deficit (1,591,262) (1,152,182)
----------- -----------
Total Stockholders' Deficiency (448,130) (336,910)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIENCY $ 497,875 $ 238,929
=========== ===========
</TABLE>
See notes to financial statements
FS4
<PAGE>
PEDIANET.com, INC
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended
December 31,
------------------------------------------------------
1999 1998 1997
---------- --------- ---------
<S> <C> <C> <C>
Revenue:
Sponsorship fees $ 1,000 $ -- $ 10,000
Website income 3,500 6,379 6,720
---------- --------- ---------
Total Revenue 4,500 6,379 16,720
Cost and Expenses:
Selling, general
and administrative 443,580 395,396 529,893
---------- --------- ---------
Loss from operations (439,080) (389,017) (513,173)
Other income
Interest income -- -- 1,766
---------- --------- ---------
Net (loss) $ (439,080) $(389,017) $(511,407)
========== ========= =========
Net (loss) per common
share basic and diluted $ (0.13) $ (0.12) $ (0.16)
========== ========= =========
Weighted average of common
shares outstanding
basic and diluted 3,538,986 3,345,220 3,229,597
========== ========= =========
</TABLE>
See notes to financial statements
FS5
<PAGE>
PEDIANET.com, INC
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
-------------------- ------------------- Additional
Comprehensive Shares Par Shares Par Paid-In
Total (loss) Deficit Outstanding Value Outstanding Value Capital
-------- ------------- ------- ----------- ----- ----------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1996 $ 471,293 $ (251,758) -- $ -- 3,198,050 $3,198 $ 719,853
Sale of common stock
(at $1.4476 per share) 69,001 47,666 48 68,953
Issuance of common stock
for services rendered
(at $.2736 per share) 15,820 57,820 58 15,762
Forgiveness of rent
obligation 2,400 2,400
Net (loss) (511,407) (511,407)
---------------------------------------------------------------------------------------------------
Balance, December 31, 1997 47,107 (763,165) 3,303,536 3,304 806,968
Exercise of stock options 65 65,300 65 --
Issuance of common stock
for services rendered
(at $.0159 per share) 2,535 98,300 98 2,437
Forgiveness of rent
obligation 2,400 2,400
Net (loss) (389,017) (389,017) --
---------------------------------------------------------------------------------------------------
Balance, December 31, 1998 (336,910) (1,152,182) -- -- 3,467,136 3,467 811,805
Sale of common stock
(at $1.50 per share) 66,000 44,000 44 65,956
Issuance of common stock
for services (at $1.50
per share) 89,325 59,550 60 89,265
Forgiveness of rent
obligation 2,400 2,400
Exercise of stock options 15,597 159,700 160 15,437
Issuance of stock in
connection with reverse
acquisition 154,538 10,003 1,000 1,518,171 1,518 152,020
Net unrealized loss on
marketable security (25,000) $ (25,000)
Shareholder contribution 25,000 25,000
Net (loss) (439,080) (439,080) (439,080)
---------------------------------------------------------------------------------------------------
Balance, December 31, 1999 $(448,130) $(464,080) $(1,591,262) 10,003 $1,000 5,248,557 $5,249 $1,161,883
========= ========= =========== ====== ====== ========= ====== ==========
</TABLE>
See notes to financial statements
FS6
<PAGE>
PEDIANET.com, INC
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
December 31,
-----------------------------------------------------
1999 1998 1997
--------- -------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) $(439,080) $(389,017) $(511,407)
Adjustments to reconcile net loss to cash used
in operating activities:
Non-cash compensation for services 91,725 5,000 18,220
Depreciation 3,562 3,410 5,684
Amortization 77,821 77,821 77,821
Changes in operating assets and liabilities:
Decrease in advances -- -- 20,000
Increase in accounts
payable and accrued expenses 237,669 286,904 272,452
Decrease in officers'
compensation payable -- -- (181,687)
--------- --------- ---------
Net Cash (Used in)
Operating Activities (28,303) (15,882) (298,917)
--------- --------- ---------
Cash flows from investing activities:
Computer software costs -- -- (103,196)
Cash acquired from acquisition 100,000 -- --
--------- --------- ---------
Net Cash Provided by (Used in)
Investing Activities 100,000 -- (103,196)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from sale of common stock 66,000 -- 69,001
Proceeds from loans payable -- 5,500 (16,764)
Payments on loans (1,500) -- --
Proceeds from exercise of stock options 15,597 -- --
--------- --------- ---------
Net Cash Provided by Financing
Activities 80,097 5,500 52,237
--------- --------- ---------
Net increase (decrease) in cash and
cash equivalents 151,794 (10,382) (349,876)
Cash and cash equivalents - beginning of year (107) 10,275 360,151
--------- --------- ---------
Cash and cash equivalents - end of year $ 151,687 $ (107) $ 10,275
========= ========= =========
Supplementary information:
Non-cash investing activities (acquisition):
Fair value of assets acquired-
net of cash acquired $ 982,335
Liabilities assumed 927,797
---------
Assets acquired net of cash $ 54,538
=========
</TABLE>
See notes to financial statements
FS7
<PAGE>
PEDIANET.com, INC.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTANT POLICIES
Organization
PediaNet.com, Inc (the "Company") formerly Ultraphonics-USA Inc
("Ultraphonics"), was engaged in the design and manufacture of
proprietary ultrasound diagnostic devices for military and industrial
use. Ultraphonics discontinued operations in 1991. On December 31,
1999, Ultraphonics merged with PediaNet, Inc. and changed its name to
PediaNet.com, Inc. The Company currently operates a website,
PediaNet.com, as a primary information and interactive communication
resource for pediatric health related matters for professionals as well
as the general public on a worldwide basis.
Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principals 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.
Marketable Securities
The Company classifies its investment in equity securities as
"available for sale", and accordingly, reflects unrealized losses, net
of deferred taxes, as a separate component of stockholders' deficiency.
The fair values of marketable securities are estimated based on quoted
market prices. Realized gains or losses from the sales of marketable
securities are based on the specific identification method.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash
investments. The Company places its temporary cash investments which
quality financial institutions and, by policy, limits the amount of
credit exposure with any on financial institution.
FS8
<PAGE>
Revenue Recognition
Sponsorship revenues received by the Company are unrestricted
educational grants received from pharmaceutical companies for the
production of educational information in support of pediatric
information services.
Website income is revenue received from pediatricians to construct
their websites including links and attachments to pediatric
directories.
Depreciation
Property, furniture and equipment are stated at cost less accumulated
depreciation. Depreciation is calculated using the straight-line method
over the estimated useful lives of the assets.
Computer Software Costs
In 1999 the Company adopted the provisions of the American Institute of
Certified Public Accountants' Statement of Position 98-1, "Accounting
for the Cost of Computer Software Development or Obtained for Internal
Use". This statement requires capitalization of certain costs incurred
in the development of internal use software. Adaptation of the
provisions of this statement did not have a material effect on the
financial statement of the Company.
Stock-Based Compensation
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation"
(SFAS No. 123). The standard encourages, but does not require,
companies to recognize compensation expense for grants of stock, stock
options and other equity instruments to employees based on fair value
accounting rules. The Company has adopted the disclosure-only
provisions of SFAS No. 123.
Earnings Per Common Share
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings
per Share", which requires companies to present basic earnings per
share ("EPS") and diluted earnings per share instead of the primary and
fully diluted EPS that was required. The new standard requires
additional information disclosures and also makes certain modifications
to the currently applicable EPS calculations defined in Accounting
Principles Board No. 15.
FS9
<PAGE>
Basic loss per common share is computed by dividing net loss by the
weighted average number of common shares outstanding during the year.
Diluted earnings per common share are computed by dividing net earnings
by the weighted average number of common and potential common shares
during the year. Potential common shares relate to 410,000 outstanding
stock warrants and 529,200 shares that are convertible in lieu of
payment on the Company's note payable at December 31, 1999. These
potential common shares were excluded from the computation of loss per
share as the effect is antidilutive.
Evaluation of Long-Lived Assets
Long-lived assets are assessed for recoverability on an ongoing basis.
In evaluating the fair value and future benefits on long-lived assets,
their carrying value would be reduced by the excess, if any, of the
long-lived asset over management's estimate of the anticipated
undiscounted future net cash flows of the related long-lived asset. As
of December 31, 1999 management concluded that no valuation allowance
was required.
Fair Value of Financial Instruments
For financial instruments including notes receivable, loans payable,
short term debt, accounts payable and accrued expenses it was assumed
that the carrying values approximated fair value because of their
short-term maturities.
2. BASIS OF PRESENTATION
The accompanying 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 of December 31, 1999 the Company has a deficit in stockholders'
equity of approximately $1,830,200 and is in default on its debt to one
of the Company's shareholders.
The Company's ability to continue as a going concern is dependant upon
its ability to obtain additional debt and/or equity financing and
realize revenues from its website sufficient to cover its overhead.
Management, through its website at www.PediaNet.com intends to
establish itself as a primary information system on the internet that
exclusively dedicates its site to pediatrics. However, there is no
assurance that additional capital will be obtained or the revenue
stream from its website will be commercially successful. The main
revenue stream will be from specialized services such as advertising
and sponsors digital space, pediatric internet digital TV, pediatric
national database subscriptions, instructional courses and online
conferences. These uncertainties raise substantial doubt about the
ability of the Company to continue as a going concern.
FS10
<PAGE>
The financial statements do not include any adjustments relative to the
recoverability and classification of recorded asset amounts or the
amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern.
3. RECAPITALIZATION
On December 31, 1999 the Company merged with Ultraphonics-USA, Inc and
issued 10,003 shares of its preferred stock and 1,518,171 shares of its
common stock in exchange for the outstanding shares of
Ultraphonics-USA, Inc. In connection with the share exchange the
Company acquired the assets net of liabilities of Ultraphonics-USA, Inc
with a net book value of $154,538. For accounting purposes, the merger
has been treated as a recapitalization of PediaNet Inc as the acquirer.
The historical financial statements prior to December 31, 1999 are
those of PediaNet Inc.
The financial statements include the Statements of Operations of the
Company, exclusive of Ultraphonics, for the three year ended December
31, 1999. The assets acquired by the Company included the following at
December 31, 1999:
Cash $ 100,000
Marketable securities 50,000
Notes receivable-
shareholders 850,000
Prepaid interest 82,335
----------
Assets acquired 1,082,335
Liabilities assumed 927,797
----------
$ 154,538
==========
4. MARKETABLE SECURITIES
Estimated Gross Gross
Fair Unrealized Unrealized
Cost Value Gains Losses
---- --------- ---------- ----------
December 31, 1999:
Marketable securities-
current:
20,000 shares of common
stock of Retail
Entertainment Group
Inc. @ 1.25 per share $ 50,000 $ 25,000 $ -0- $ 25,000
======= ======= ======= ========
FS11
<PAGE>
There were no realized gains or losses for the years ended December 31,
1999.
The unrealized loss of $25,000 has been personally guaranteed by a
shareholder of the Company and has been recorded as a contribution to
the Company and is included in accounts receivable - shareholder on the
Company's balance sheet at December 31, 1999. An unrealized loss of
$25,000 has been recorded for the year ended December 31, 1999.
5. NOTES RECEIVABLE
As part of the acquisition by the Company of the net assets of
Ultraphonics the Company acquired notes receivable of $850,000 bearing
interest at 10%, due June 28, 2000. In connection with the note
receivable of $850,000, the Company assumed, as part of the reverse
acquisition, a $793,800 principle, 10% convertible promissory note to a
third party due December 28, 2000. Interest is payable on the due date
and thereafter until the obligation is discharged. The note is
convertible into 529,200 shares of the Company's common stock, at the
option of the holder, at a conversion price of $1.50 per share. The
Company offset the note receivable as a deduction from the related
promissory note and recorded the net amount of $56,200 as notes
receivable at December 31, 1999.
6. PROPERTY, FURNITURE AND EQUIPMENT
1999 1998
---- ----
Furniture and
equipment $ 18,945 $ 18,945
Software (1) 389,107 389,107
-------- --------
408,052 408,052
Less accumulated
depreciation 250,399 169,016
-------- --------
$157,653 $239,036
======== ========
Depreciation expense for the years ended December 31, 1999, 1998 and
1997 was $81,383, $81,231 and $83,505, respectively.
(1) Software costs consist of software purchased from an
officer/director for 200,000 shares of the Company's common
stock valued at $200,000 during 1996. During 1997, the Company
incurred an additional $189,107 in software costs associated
with the development of their website.
FS12
<PAGE>
7. ACCRUED EXPENSES
Accrued expenses consist of the following:
December 31
--------------------------
1999 1998
---- ----
Accrued interest and
court costs $ 76,572 $ -
Accrued expense-misc. 958 1,367
Accrued compensation
expense (1) 675,000 450,000
Other accrued
expenses 15,000 -
-------- --------
$767,530 $451,367
======== ========
(1) This amount reflects the annual compensation expense for the
officers and directors of the Company. In 2000, these officers
and directors were granted options to purchase shares of the
Company's common stock in lieu of payment for these services.
8. RELATED PARTY TRANSACTIONS
(a) Loans payable to related parties consists of:
1999 1998
---- ----
Due to Directors $ 5,000 $ 6,500
Shareholder loans acquired
through merger (see Note 3
of Notes to Financial
Statements) 43,611 -
------- -------
$48,611 $ 6,500
======= =======
The shareholder loan bears interest at 12% per annum. There is no
accrued interest on the loans from the directors.
(b) The Company sub-leases its facilities on a month-to-month
basis from a shareholder who has forgiven all rent payments.
The forgiveness of the rent obligation of $2,400 for the years
ended December 31, 1999, 1998 and 1997 has been credited to
additional paid in capital.
FS13
<PAGE>
9. STOCK BASED COMPENSATION
In 1999, the Company issued 59,550 shares of common stock for
consulting services rendered. The Company valued these shares at $1.50
per share and recorded additional compensation expense of $89,325,
which is included in selling, general and administrative costs in the
Statement of Operations.
10. INCOME TAXES
The Company has a net operating loss ("NOL") carryforward of
approximately $1,591,000 for tax reporting purposes expiring in the
years 1999 through 2012. The Company has not reflected any benefit of
such net operating loss carryforward in the accompanying financial
statements in accordance with Financial Accounting Standards Board
Statement No. 109 "Accounting for Income Taxes" (SFAS 1109) as the
realization of deferred tax benefit is not more than likely.
The Tax Reform Act of 1986 provided for limitation of the use of NOL
carryforwards, following certain ownership changes. Under such
circumstances, the potential benefits from utilization of tax
carryforward may be substantially limited or reduced on an annual
basis.
There is no provision for income taxes during the years ended April 30,
1999 and 1998 as the Company had no taxable income due to net operating
losses.
A reconciliation of taxes on income at the federal statutory rate to
amounts provided is as follows:
Year Ended December 31,
--------------------------
1999 1998
---- ----
Tax benefit computed
at the Federal
statutory rate $(238,650) $(155,600)
Increase in taxes resulting from:
Effect of unused
tax losses 238,650 155,600
--------- ---------
$ - $ -
========= =========
FS14
<PAGE>
The temporary differences between the tax basis of assets and the
financial reporting amount that give rise to the deferred tax assets
and their reported tax effect are as follows:
December 31,
------------
1999 1998
---- ----
Temporary Tax Temporary Tax
Difference Effect Difference Effect
Net operating
loss carry-
forward $1,591,000 $ 636,400 $1,152,200 $ 460,880
Valuation
allowance (1,591,000) (636,400) (1,152,200) (460,880)
---------- --------- ---------- ---------
$ - $ - $ - $ -
========== ========= ========== =========
11. STOCK OPTIONS AND WARRANTS
The Company has adopted the disclosure only provision of Statement of
Financial Accounting Standards No. 123 "Accounting for Stock Based
Compensation" (SFAS No. 123).
The Company grants stock options and warrants as follows:
(a) The Company has established the 1997 Non-Statutory Stock
Option Plan, (The Plan), a non-qualified plan. The purpose of
the Plan is to provide a method whereby employees, officers,
directors, and consultants of the Company may acquire a
proprietary interest in the Company through the purchase of
shares of common stock. Options may be granted at prices not
equal to the fair market value of the common stock at the date
of the grant. The Company has reserved 1,000,000 shares of
common stock under the plan.
(b) John DeMauro, a director of the Company, received, as part of
his employment agreement dated October 8, 1996, an option to
purchase 125,000 shares of common stock at one cent ($.01) per
share and an additional 100,000 shares at either ten percent
(10%) of an initial public offering by the Company, a take
over price offer, any buy-out price, private sale price or
book value price, as defined under the terms of the agreement.
(c) 410,000 warrants were sold by Ultraphonics prior to the
acquisition for $8,200 in connection with financing received
by Ultraphonics and expire December 31, 2000. The warrants are
exercisable at $.01 which was below market value at the date
of the sale, which resulted in additional interest expense of
$86,100. The Company expensed $3,765 for the year ended
December 31, 1999 and prepaid interest of $82,335 is included
in the Company's balance sheet at December 31, 1999. Interest
expense in the estimated amount of $82,335 will be expensed
during the year ended December 31, 2000.
FS15
<PAGE>
Information regarding the Company's stock warrants for the year ending
December 31, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------ -------------------- ---------------------
Weighted Weighted Weighted
Average Average Average
Exercised Exercised Exercised
Shares Price Shares Price Shares Price
---------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Options and warrants
outstanding beginning
of year 159,700 $.10 225,000 $.07 225,000 $.07
Warrants acquired 410,000 .01 - - - -
Options exercised 159,700 $.10 65,300 .01
------- -------
Options and Warrants
outstanding end
of year 410,000 $.01 159,700 $.10 225,000 $.07
======= ======= =======
Warrant price range
at end of year $.01
Options and Warrants
available for grant
at end of year 775,000
</TABLE>
FS16
<PAGE>
The following table summarizes information about fixed price stock
warrants outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Weighted
Average Weighted Weighted
Range at Number Remaining Average Number Average
Exercise Outstanding Contracted Exercise Exercisable Exercise
Price December 31, 1999 Life Price December 31, 1999 Price
----------- ----------------- ---------- -------- ----------------- -------
<S> <C> <C> <C> <C> <C> <C>
$ .01 410,000 1 year $ .01 410,000 $ .01
</TABLE>
12. COMMITMENTS AND CONTINGENCIES
(a) During 1997 the Company entered into an exclusive one-year
renewable contract with Exceptional Parent Magazine of Psy-Ed
Corp to work on a marketing plan for sales presentations for
print and on-line sponsorship. The Company is to pay fees to
Exceptional Parent Magazine for their support personnel.
Additionally, the Company was required to pay an annual
royalty fee of $20,000 for the use of the Exceptional Parent
Magazine name. At December 31, 1999 and 1998 the Company owed
Exceptional Parent $47,000 which is included in accounts
payable. The Company did not renew the contract for 1999. On
January 6, 2000 Exceptional Parent Magazine agreed to accept
31,339 shares of PediaNet.com common stock for payment in full
of the debt owed.
(b) The Company signed a proposed agreement to acquire a newly
formed corporation on December 20, 1999. This agreement was
subsequently terminated on March 20, 2000.
FS17
<PAGE>
PART III
Item 1. Index to Exhibits
The Following list describes the exhibits filed as part of this Registration
Statement on Form 10-SB:
Exhibit Number Description of Document
- -------------- -----------------------
2.1 Articles of Incorporation of Ultraphonics- USA, Inc. as filed
on April 27, 1989
2.2 Amendment to Articles of Incorporation as filed on December
31, 1999 (as incorporated in Articles of Merger)
2.3 Bylaws
4.1 Form of Warrant dated December 28, 1999
4.2 Note agreement dated December 28, 1999
6.1 License Agreement among Melvin Koplow, Starr Koplow and
PediaNet, Inc. dated July 1, 1996
8.1 Plan of Merger of PediaNet, Inc. a New York Corporation Into
Ultraphonics- USA, Inc.
16.1 Letter from Bernard Lipton, CPA dated April 25, 2000.
27.1 Financial Data Schedule
Item 2 - Description of Exhibits
The required exhibits are attached hereto, as noted in Item 1 above.
27
<PAGE>
Signatures
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
PEDIANET.COM, INC.
(Registrant)
Date: 4/25/2000
By: /s/ Melvin D. Koplow
-------------------------
Dr. Melvin D. Koplow
Chief Executive Officer
<PAGE>
Exhibit 2.1
ARTICLES OF INCORPORATION
OF
ULTRAPHONICS - USA, INC.
1.
The name of the Corporation is ULTRAPHONICS - USA, INC., which is
incorporated under the Georgia Business Corporation Code.
2.
The Corporation shall have perpetual duration.
3.
The purpose for which the Corporation is formed and the business and
objects to be carried on and promoted by it are as follows: To act as
manufactures representatives for any and all types and kinds of products; to
manufacture any and all types and kinds of industrial equipment and products to
engage in sales of any and all types of products to own, lease, sell, buy, trade
in and lease any and all types of property, personal or real, and to be
authorized to perform any and all other types and kinds of businesses authorized
under the laws of the State of Georgia.
4.
The Corporation shall have the authority to issue not more than
50,000,000 Shares of voting common stock having a per value of $0.001 (one mil)
per share, and 10,000,000 Shares of non-voting preferred shares having a per
value of $0.10 (ten cents) per share.
<PAGE>
5.
The Corporation shall not commence business until it shall have
received not less than *** Dollars in payment for the issuance of shares of
stock.
6.
The initial registered office of the Corporation shall be at 1197
Peachtree Street NE, Colony Square, Plaza Level, Atlanta, Georgia, 30361. The
initial registered agent of the Corporation shall be E. Wayne Wallhausen, at
said address.
7.
The initial Board of Directors shall consist of three members whose
names and addresses are as follows:
Marianne Lumia Charles J. Brigis
Suite A, 147 15th St. Suite A, 147 15th St.
Atlanta, GA 30361 Atlanta, GA 30361
E. Wayne Wallhausen
1017 Riverbend Club Dr.
Atlanta, GA 30339
8.
The name and address of the Incorporator is as follows:
Marianne Lumia
Suite A, 147 15th St.
Atlanta, GA 30361
IN WITNESS WHEREOF, the Incorporator has executed these Articles of
Incorporation by and through his duly authorized Attorney.
/s/ E. Wayne Wallhausen
-------------------------
E. Wayne Wallhausen
P.O. Box 723411 Attorney for Incorporator
Atlanta, GA 30339
(404) 953-6362
<PAGE>
Exhibit 2.2
000030814
ARTICLES OF MERGER
OF
PEDIANET, INC.
AND
ULTRAPHONICS - USA, INC.
J908534
To the Secretary of State
State of Georgia
Pursuant to the provisions of the Georgia Business Corporation Code,
the domestic corporation and the foreign corporation herein named do hereby
adopt the following articles of merger.
FIRST: Annexed hereto and made a part hereof is the Plan of Merger for
merging PediaNet Inc., a corporation of the State of New York, with and into
Ultraphonics - USA, Inc., a corporation of the State of Georgia, as adopted at a
meeting by the Board of Directors of PediaNet Inc. on November 22, 1999, and
adopted at a meeting by the Board of Directors of Ultraphonics - USA, Inc. on
November 23, 1999.
SECOND: Pursuant to subsection (h) of Section 14-2-1103 of the Georgia
Business Corporation Code, the approval by the shareholders of Ultraphonics -
USA,Inc. to the merger is not required.
THIRD: The merger of PediaNet,Inc. with and into Ultraphonics - USA,
Inc. is permitted by the laws of the jurisdiction of organization of PediaNet
Inc. and has been authorized in compliance with said laws.
<PAGE>
FOURTH: Ultraphonics - USA, Inc. will continue its existence as the
surviving corporation under the corporate name PediaNet.com, Inc. pursuant to
the provisions of the Georgia Business Corporation Code.
FIFTH: These Articles constitute an undertaking by Ultraphonics - USA,
Inc. that the request for publication of a notice of filing these Articles of
Merger and payment therefor will be made as required by subsection (b) of
Section 14-2-1105.1 of the Georgia Business Corporation Code.
SIXTH: These Articles of Merger shall be effective on December 3l,
1999.
Executed on this fourteenth day of December, 1999.
PEDIANET, INC.
By: /s/ Steven Richter
---------------------
Name: Steven Richter
Title: President
ULTRAPHONICS - USA, INC.
By: /s/ C.M. Benedict
---------------------
Name: C.M. Benedict
Title: President
<PAGE>
Exhibit 2.3
BYLAWS
OF
PEDIANET. INC.
------------------------------
ARTICLE I
OFFICES
The principal office of the Corporation in the State of New
York shall be located in New York City, County of Brooklyn. The Corporation may
have such other offices, either within or without the State of New York, as the
Board of Directors may designate or as the business of the Corporation may
require from time to time.
ARTICLE 11
SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of the
shareholders shall be held in the month of July in each year, beginning with the
year 1997, at the hour of 10:00 a.m., for the purpose of electing Directors and
for the transaction of such other business as may come before the meeting. If
the day fixed for the annual meeting shall be a legal holiday in the State of
New York, such meeting shall be held on the next succeeding business day. If the
election of Directors shall not be held on the day designated herein for any
annual meeting of the shareholders, or at any adjournment thereof, The Board of
Directors shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as conveniently may be.
SECTION 2. Special Meetings. Special meetings of the
shareholders, for any purpose or purposes, unless otherwise prescribed by
statute, may be called by the Board of Directors, and shall be called by the
Board at the request of the holders of not less than fifty percent (50%) of all
the outstanding shares of the Corporation entitled to vote at the meeting.
SECTION 3. Place of Meeting. The Board of Directors may
designate any place, either within or without the State of New York, unless
otherwise prescribed by statute, as the place of meeting for any annual meeting
or for any special meeting. A waiver of notice signed by all shareholders
entitled to vote at a meeting may designate any place, either within or without
the State of New York, unless otherwise prescribe by statute, as
<PAGE>
the place for the holding of such meeting. If no designation is made, the place
of meeting shall be the principal office of the Corporation.
SECTION 4. Notice of Meeting. Written notice stating the
place, day and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called shall unless otherwise
prescribed by statate, be delivered not less than 10 days (ten days) nor more
than 50 days (fifty days) before the date of the meeting, to each shareholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the United States Mail, addressed to the
shareholder at his address as it appears on the stock transfer books of the
Corporation, with postage thereon prepaid Notwithstanding anything contained
herein, a quorum shall be met when at least four directors are present.
SECTION 5. Closing of Transfer Books or Fixing of Record. For
the purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors of the
Corporation may provide that the stock transfer books shall be closed for a
stated period, but not to exceed in any case fifty (50) days. If the stock
transfer books shall be closed for the purpose of determining shareholders
entitled to notice of or to vote at a meeting of shareholders, such books shall
be closed for at least 5 days, (five days) immediately preceding such meeting.
In lieu of closing the stock transfer books, the Board of Directors may fix in
advance a date as the record date for any such determination of shareholders,
such date in any case to be not more than 50 (fifty) days and, in case of a
meeting of shareholders, not less than 10 (ten) days, prior to the date on which
the particular action requiring such determination of shareholders is to be
taken. If the stock transfer books are not closed and no record date is fixed
for the determination of shareholders entitled to notice of or to vote at a
meeting of shareholders, or shareholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on which
the resolution of the Board of directors declaring such dividend is adopted, as
the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjoumment thereof.
SECTION 6. Voting Lists. The officer or agent having charge of
the stock transfer books for shares of the corporation shall make a complete
list of the shareholders entitled to vote at each meeting of shareholders or any
adjournment thereof, arranged in alphabetical order, with the address of and the
number of shares held by each. Such list shall be produced and kept open at the
time and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting for the purposes thereof.
2
<PAGE>
SECTION 7. Quorum. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transaction which might have been transacted at the meeting as
originally noticed. The shareholder present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum. Notwithstanding anything
contained herein a quorum, shall be met when at least four directors are
present.
SECTION 8. Proxies. At all meetings of shareholders, a
shareholder may vote in person or by proxy executed in writing by the
shareholder or by his or her duly authorized attorney-in-fact. Such proxy shall
be filed with the secretary of the Corporation before or at the time of the
meeting. A meeting of the Board of Directors maybe held by means of a telephone
conference or similar communications equipment by which all persons
participating in the meeting can hear each other, and participation in a meeting
under such circumstances shall constitute presence at the meeting.
SECTION 9. Voting of Shares. Each outstanding share entitled
to vote shall be entitled to one vote upon each matter submitted to a vote at a
meeting of shareholders.
SECTION 10. Voting of Shares by Certain Holders. Shares
standing in the name of another corporation may be voted by such officer, agent
or proxy as the By laws of such corporation may prescribe or, in the absence of
such provision, as the Board of Directors of such corporation may determine.
Shares held by an administrator, executor, guardian or
conservator may be voted by him either in person or by proxy, without a transfer
of such shares into his name. Shares standing in the name of a trustee may be
voted by him, either in person or by proxy, but no trustee shall be entitled to
vote shares held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be noted by
such receiver without the transfer thereof into his name, if authority to do so
be contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to
vote such shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee shall be entitled to vote the shares so
transferred.
3
<PAGE>
Shares of its own stock belonging to the Corporation shall not
he voted directly or indirectly, at any meeting, and shall not be counted in
determining the total number of outstanding shares at any given time.
SECTION 11 . Informal Action by Shareholders. Unless otherwise
provided by law, any action required to be taken at a meeting of the
shareholders, or any other action which may be taken at a meeting of the
shareholders, may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the shareholders entitled
to vote with respect to the subject matter thereof.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the
Corporation shall be managed by its Board of Directors.
SECTION 2. Number, Tenure and Qualifications. The number of
directors of the Corporation shall be fixed by the Board of Directors, but in no
event shall be less than four (4). Each director shall hold office until the
next annual meeting of shareholders and until his successor shall have been
elected and qualified.
SECTION 3. Qualifications and Powers. Each director shall be
at least eighteen years of age. A director need not be a shareholder, a citizen
of the United States or a resident of the State of New York. The business of the
corporation shall be managed by the Board of Directors, subject to the
provisions of the Certificate of Incorporation. In addition, to the powers and
authorities by these by laws expressly conferred upon it, the board may exercise
all such powers of the corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these by laws
directed or required to be exercised or done exclusively by the shareholders.
SECTION 4. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this by law immediately after,
and at the same place as, the annual meeting of shareholders. The Board of
Directors may provide, by resolution, the time and place for the holding of
additional regular meetings without notice other than such resolution.
SECTION 5. Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the President or any two
directors. The person or persons authorized to call special meetings of the
Board of Directors may fix the place for holding any special meeting of the
Board of Directors called by them.
4
<PAGE>
SECTION 6. Notice. Notice of any special meeting shall be
given at least one (1) day previous thereto by written notice delivered
personally or mailed to each director at his business address, or by telegram.
If mailed, such notice shall be deemed to be delivered when deposited in the
United States Mail so addressed, with postage thereon prepaid. If notice be
given by telegram, such notice shall be deemed to be delivered when the telegram
is delivered to the telegraph company. Any directors may waive notice of any
meeting. The attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
The Board of Directors will meet exclusive of special meetings
at least four times per year. They shall have discretionary spending power. The
secretary shall be responsible for the taking of the minutes of each meeting and
they shall be done by a suitable recording device.
SECTION 7. Quorum. A majority of the number of directors fixed
by Section 2 of this Article III shall constitute a quorum for the transaction
of business at any meeting of the Board of Directors, but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
SECTION 8. Manner of Acting. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
SECTION 9. Action Without a Meeting. Any action that may be
taken by the Board of Directors at a meeting may be taken without a meeting if a
consent in writing, setting forth the action so to be taken, shall be signed
before such action by all the directors.
SECTION 10. Vacancies. Any vacancy occurring in the Board of
Directors may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors, unless otherwise
provided by law. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office. Any directorship to be filled by
reason of an increase in the number of directors may be filled by election by
the Board of Directors for a term of office continuing only until the next
election of directors by the shareholders.
In the event a Board of Director seeks to step down, retire,
dies or is terminated with cause, the remaining board members shall have the
option to purchase his or her stock at fair market value at the time that the
Board or Director ceases to be a member of said board. Additionally, each board
of director shall obtain a life insurance policy in the amount of $25,000
designating a specific beneficiary so that the remaining board will be in a
position to purchase the stock free and clear.
5
<PAGE>
SECTION 11. Compensation. By resolution of the Board of
Directors, each director may be paid his expenses, if any, of attendance at each
meeting of the Board of Directors, and may be paid a stated salary as a director
or a fixed sum for attendance at each meeting of the Board of Directors or both.
No such payment shall preclude any director from serving the Corporation in any
other capacity and receiving compensation therefore.
SECTION 12. Presumption of Assent. A director of the
Corporation who is present at a meeting of the Board of Directors at which
action on any corporate matter is taken shall be presumed to have assented to
the action taken unless his dissent shall be entered in the minutes of the
meeting or unless he shall file his written dissent to such action with the
person acting as the Secretary of the meeting before the adjournment thereof, or
shall forward such dissent by registered ma:d to the Secretary of the
Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
ARTICLE IV
OFFICERS
SECTION 1. Number. The officers of the Corporation shall be a
President, one or more Vice Presidents, a Secretary and a Treasurer, each of
whom shall be elected by the board of Directors. Such other officers and
assistant officers as may be deemed necessary may be elected or appointed by the
Board of Directors, including a Chairman of the Board. In its discretion, the
Board of Directors may leave unfilled for any such period as it may determine
any office except those of President and Secretary. Any two or more offices may
be held by the same person, except for the offices of President and Secretary
which may not be held by the same person. Officers may be directors or
shareholders of the Corporation.
SECTION 2. Election and Term of Office. The officers of the
Corporation to be elected by the Board of Directors shall be elected annually by
the Board of Directors at the first meeting of the Board of Directors held after
each annual meeting of the shareholders. If the election of officers shall not
be held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall ho ld office until his successor shall
have been duly elected and shall have qualified, or until his death, or until he
shall resign or shall have been removed in the manner hereinafter provided.
SECTION 3. Removal. Any officer or agent may be removed by the
Board of Directors whenever, in its judgment, the best interests of the
Corporation will be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the
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person so removed. Election of appointment of an officer or agent shall not of
itself create contract rights, and such appointment shall be terminable at will.
SECTION 4. Vacancies. A vacancy in any office because of
death, resignation, removal, disqualification or otherwise, may be filled by the
Board of Directors for the unexpired portion of the term.
SECTION 5. President. The President shall be the, principal
executive officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the Corporation. He shall, when present, preside at all meetings of
the shareholders and of the Board of Directors, unless there is a Chairman of
the Board, in which case the Chairman shall preside. He may sign, with the
Secretary or any other proper officer of the Corporation thereunto authorized by
the Board of Directors, certificates for shares of the Corporation, any deeds,
mortgages, bonds, contracts, or other instruments which the Board of Directors
has authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these By
laws so some other officer or agent of the Corporation, or shall be required by
law to be otherwise signed or executed; and in general shall perform all duties
incident to the office of President and such other duties as may be prescribed
by the Board of Directors from time to time.
SECTION 6. Vice President. In the absence of the president or
in event of his death, inability or refusal to act, the Vice President shall
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. The Vice
President shall perform such other duties as from time to time may be assigned
to him by the President or by the Board of Directors. If there is more than one
Vice President, each Vice President shall succeed to the duties of the President
in order of rank as determined by the Board of Directors. If no such rank has
been determined, then each Vice President shall succeed to the duties of the
President in order of date of election, the earliest date having the first rank.
SECTION 7. Secretary. The Secretary shall: (a) keep the
minutes of the proceedings of the sbarebolders and of the Board of Directors in
one or more minute books provided for that purpose; (b) see that all notices are
duly given in accordance the provisions of these By laws or as required by law;
(c) be custodian of the corporate records and of the seal of the Corporation and
see that the seal of the Corporation is affixed to all documents, the execution
of which on behalf of the Corporation under its seal is duly authorized; (d)
keep a register of the post office address of each shareholder which shall be
furnished to the Secretary by such shareholder; (e) signed with the President
certificates for shares of the Corporation, the issuance of which shall have
been authorized by resolution of the Board of Directors; (f) have general charge
of the stock transfer books of the Corporation; and (g) in general perform all
duties incident to the
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office of the Secretary and such other duties as from time to time may be
assigned to him by the President or by the Board of Directors.
SECTION 8. Treasurer. The Treasurer shall: (a) have charge and
custody of an be responsible for all funds and securities of the Corporation;
(b) receive and give receipts for moneys due and payable to the Corporation
from, any source whatsoever, and deposit all such moneys in the name of the
Corporation in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of Article VI of these By laws; and
(c) in general perform all of the duties incident to the office of Treasurer and
such other duties as from time to time may be assigned to him by the President
or by the Board of Directors. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such sureties as the Board of Directors shall determine.
SECTION 9. Salaries. The salaries of the officers shall be
fixed from time to time by the Board of Directors, and no office sbal I be
prevented from receiving such salary by reason of the fact that he is also a
director of the Corporation.
SECTION 10. Delegation. In case of the absence of any officer
of the Corporation, or for any other reason that the Board of Directors may deem
sufficient, the Board may temporarily delegate the powers or duties, or any of
them, of such officer to any other officer or to any director.
ARTICLE V
INDEMNITY
The Corporation shall indemnify its directors, officers and
employees as follows:
(a) Every director, officer, or employee of the Corporation
shall be, indemnified by the Corporation against all expenses and liabilities,
including counsel fees, reasonably incurred by or imposed upon him in connection
with any proceeding to which he may become involved, by reason of his being or
having been a director, officer, employee or agent of the Corporation or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of the corporation, partnership, joint venture, trust or enterprise, or
any settlement thereof, whether or not he is a director, officer employee or
agent at the time such expenses are incurred, except in such cases wherein the
director, officer or employee is adjudged guilty of willful misfeasance or
malfeasance in the performance of his duties; provided that in the event of a
settlement the indemnification herein shall apply only when the Board of
Directous approves such settlement and reimbursement as being for the best
interests of the Corporation.
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(b) The Corporation shall provide to any person who is or was
a director, officer, employee, or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
the Corporation, partnership, joint venture, trust or enterprise, the indemnity
against expenses of suit, litigation or other proceedings which is specifically
permissable under applicable law.
(c) The Board of Directors may, in its discretion, direct the
purchase of liability insurance by way of implementing the provisions of this
Article V.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of
the Corporation and no evidences of indebtedness shall be issued in its name
unless authorized by a resolution of the Board of Directors. Such authority may
be general or confined to specific instances.
SECTION 3. Checks, Drafts, etc. All checks, drafts or other
orders for the payment of money, notes or other evidences of indebtedness issued
in the name of the Corporation, shall be signed by such officer or officers,
agent or agents of the Corporation and in such manner as shall from time to time
be determined by resolution of the Board of Directors.
SECTION 4. Deposits. All funds of the Corporation not
otherwise employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositories as the Board of
Directors may select.
ARTICLE VIII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. Certificates for Shares. Certificates representing
shares of the Corporation shall be in such form as shall be determined by the
Board of Directors. Such certificates shall be signed by the President and by
the Secretary or by such other officers authorized by law and by the Board of
Directors so to do, and sealed with the corporate
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seal. All certificates for shares, shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the stock transfer books of the Corporation. All certificates
surrendered to the Corporation for transfer shall be cancelled and no new
certificate shall be issued until the former certificate for a like number of
shares shall have been surrendered and cancelled, except that in case of a lost,
destroyed or mutilated certificate a new one may be issued therefore upon such
terms and indemnity to the Corporation as the Board of Directors may prescribe.
SECTION 2. Transfer of Shares. Transfer of shares of the
Corporation shall be made only on the stock transfer books of the Corporation by
the holder of record thereof or by his legal representative, who shall furnish
proper evidence of authority to transfer, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary of
the Corporation, and on surrender for cancellation of the certificate for such
shares. The person in whose name shares stand on the books of the Corporation
shall be deemed by the Corporation to be the owner thereof for all purposes.
Provided, however, that upon any action undertaken by the shareholders to elect
S Corporation status pursuant to Section 1362 of the Internal Revenue Code and
upon any shareholders agreement thereto restricting the transfer of said shares
so as to disqualify said S Corporation status, said restriction on transfer
shall be made a part of the By laws son long as said agreement is in force and
effect.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the Corporation shall begin on the Ist day
of January and end on the 3 1 st day of December of each year.
ARTICLE IX
DIVIDENDS
The Board of Directors may from time to time declare, and the
Corporation may pay, dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law and its Articles of Incorporation.
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ARTICLE X
CORPORATE SEAL
The Board of Directors shall provide a corporate seal which
shall be circular in form and shall have inscribed thereon the name of the
Corporation and the state of incorporation and the words, "Corporate Seal."
ARTICLE X
WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is
required to be given to any shareholder or director of the Corporation under the
provisions of these By laws or under the provisions of the Articles of
Incorporation or under the provisions of the applicable Business Corporation
Act, a waiver thereof in writing, signed by the person or persons entitled to
such notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
ARTICLE X11
AMENDNENTS
These By laws may be altered, amended or repealed and new By laws may
be adopted by the Board of Directors at any regular or special meeting of the
Board of Directors.
The above By laws are certified to have been adopted by the
Board Directors of the Corporation on the 25th day of April 1996.
/s/ Shlomo Carlebach
--------------------
Secretary
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Exhibit 4.1
ULTRAPHONICS-USA, INC.
Warrant to purchase _________
shares of common stock, subject
to the provisions set forth
below.
Warrant to Purchase shares of Common Stock of
ULTRAPHONICS-USA, INC. (a Georgia Corporation)
1. Issuance of Warrant.
This certifies that, for good and valuable consideration,
_______________ and assigns (collectively, the "Warrantholder"), is entitled to
purchase from ULTRAPHONICS-USA, INC., a Georgia corporation (the "Company"),
subject to the terms and conditions hereof, at any time commencing on the date
hereof and before 5:00 p.m., New York time on December 31, 2000,(the "Expiration
Date"), ________________ (____) shares of common stock (the "Common Stock"
and/or "Warrant Shares") for $.01 per share (the "Exercise Price") This Warrant
may be exercised in whole only. The exercise price per share and the number of
shares of Common Stock issuable upon exercise of the Warrants are subject to
adjustment as hereinafter provided.
2. Manner of Exercise.
(a) The Warrant may be exercised by giving written notice of
such exercise to the Company, accompanied by payment in full
of the Exercise Price, in cash or certified check payable to
the Company, for the shares to be purchased. As soon as
practicable, but not later than 15 days after Warrantholder
has given said written notice and made said payment, the
Company shall, without charging stock issue or transfer taxes
to Warrantholder, issue the number of shares of duly
authorized Common Stock issuable upon such exercise, which
shall be duly issued, fully paid and non- assessable, and
shall deliver to Warrantholder a certificate or certificates
therefor, registered in Warrantholder's name. The
Warrantholder shall be deemed a stockholder of the Company
upon exercise of this Warrant as provided in this Section 2,
except that if payment is made by personal check he shall not
be deemed a stockholder until such time as his check has
cleared.
(b) If this Warrant is exercised in part, it must be exercised
for a number of whole shares of Common Stock, and the
Warrantholder will be entitled to receive a new Warrant
covering the Warrant Shares which have not been exercised and
setting forth the proportionate part of the Aggregate Warrant
Price applicable to such Warrant Shares. Upon such surrender
of this Warrant, the Company
<PAGE>
will: (i) issue a certificate or certificates, in such
denominations as are requested for delivery by the
Warrantholder, in the name of the Warrantholder for the
largest number of whole shares of Common Stock to which the
Warrantholder shall be entitled and, if this Warrant is
exercised in whole, in lieu of any fractional share of Common
Stock to which the Warrantholder may be entitled, pay to the
Warrantholder cash in an amount equal to the fair value of
such factional share (determined in such reasonable manner as
the Board of Directors of the Company shall determine); and
(ii) deliver the other securities and properties receivable
upon the exercise of this Warrant, or the proportionate part
thereof if this Warrant is exercised in part, pursuant to the
provisions of this Warrant. Upon exercise in accordance with
Subsection 2(a) or (b), the Warrantholder shall be deemed to
be the holder of record of the shares of Common Stock issuable
upon such exercise, notwithstanding that the stock transfer
books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be
actually delivered to the Warrantholder.
3. Representation of Warrantholder.
(a) By exercising this Warrant, Warrantholder understands and
agrees that the shares of Common Stock to be acquired upon
exercise of this Warrant will not be registered under the Act,
and will be issued in reliance upon an exemption from
registration afforded by Rule 504 of Regulation D of the Act;
and that the shares will not be registered with any state
securities commission or authority. Warrantholder further
understands that the shares to be acquired upon exercise of
the Warrant may not be offered or sold, unless registered or
exempt from registration under the Act and any applicable
securities or blue sky laws, and that prior to any such offer
or sale, the Company may require, as a condition to effecting
a transfer of the shares of Common Stock issuable upon the
exercise of the Warrant, an opinion of counsel acceptable to
the Company as to the registration or exemption therefrom
under the Act and any state blue sky laws. The Warrantholder
also understands that the Company is under no obligation to
register the shares on his behalf or to assist him in
complying with any exemption from registration.
(b) By exercising this Warrant, Warrantholder acknowledges
that he has, either alone and/or through his agents, been
afforded access to all material information concerning the
Company and has received responses to all questions
specifically posed to the Company relevant to
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the issuance of the Warrants to the Warrantholder. Without
limiting the foregoing, Warrantholder, upon exercise of this
Warrant, hereby represents that he has alone and/or through
his agents, had adequate opportunity to ask questions of and
receive answers from, responsible officers and/or directors of
the Company and to conduct any other investigation he deems
necessary and appropriate concerning the issuance of the
Warrant. Except as set forth herein, the Company has made no
representations or warranties to Warrantholder which have
induced, persuaded or stimulated Warrantholder to exercise the
Warrant.
(c) By exercising this Warrant, Warrantholder acknowledges
that the Company will be relying upon the representations made
herein in issuing the shares of Common Stock, upon exercise of
the Warrant, without registration.
4. Exchange, Transfer, Assignment or Loss of Warrants
The Warrants are exchangeable, without expense, at the option
of the Warrantholder, upon presentation and surrender hereof to the Company or
at the office of its stock transfer agent, Holladay Stock Transfer ("HST") for
other Warrants of different denominations entitling the holder thereof to
purchase in the aggregate the same number of shares of Common Stock purchasable
hereunder. Upon surrender of these Warrants to the Company or at the office of
HST, with the Assignment Form annexed hereto duly executed and funds sufficient
to pay any transfer tax, the Company shall, without charge, execute and deliver
new Warrants in the name of the assignee named in such instrument of assignment
and this Warrant shall promptly be cancelled. This Warrant may be divided or
combined with other Warrants which carry the same rights upon presentation
hereof, at the office of the Company or at the office of HST, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued and signed by the Warrantholder hereof. The term "Warrant" and /or
"Warrants" as used herein includes any Warrants into which this Warrant may be
divided or exchanged. Upon receipt by the Company of evidence satisfactory to it
of the loss, theft, destruction or mutilation of the Warrants, and (in the case
of loss, theft, or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of these Warrants, if mutilated, the Company
will execute and deliver a new Warrant of like tenor.
5. Restrictions.
The Warrantholder shall not be entitled to any dividend
declared by the Company, and shall not be entitled to any voting rights by
virtue of the Warrants, except with respect to any shares of Common Stock issued
upon the exercise hereof.
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<PAGE>
6. Adjustments to Exercise Price.
The price per share at which shares Common Stock may be
purchased hereunder, and the number of such shares to be purchased upon exercise
hereof, are subject to change or adjustment as follows:
(a) In case the Company shall, while this Warrant remains
unexercised, in whole or in part, and in force, effect a
recapitalization of such character that the shares of Common
Stock purchasable hereunder shall be changed into or become
exchangeable for a larger or smaller number of shares, then,
after the date of record for effecting such recapitalization,
the number of shares of Common Stock which the holder hereof
shall be entitled to purchase hereunder shall be increased or
decreased, as the case may be, in direct proportion to the
increase or decrease in the number of shares of Common Stock
by reason of such recapitalization, and the purchase price
hereunder per share of such recapitalized Common Stock shall,
in the case of an increase in the number of such shares, be
proportionately reduced, and in the case of a decrease in the
number of such shares, shall be proportionately increased. For
the purpose of this subsection (a), a stock dividend, stock
split-up or reverse split shall be considered as a
recapitalization and as an exchange for a larger or smaller
number of shares, as the case may be.
(b) In the case of any consolidation of the Company with, or
merger of the Company into, any other corporation, or in case
of any sale or conveyance of all or substantially all of the
assets of the Company in connection with a plan of complete
liquidation of the Company, then, as a condition of such
consolidation, merger or sale or conveyance, adequate
provisions shall be made whereby the holder hereof shall
thereafter have the right to purchase and receive, upon the
basis and upon the terms and conditions specified in this
Warrant and in lieu of shares of Common Stock immediately
theretofore purchasable and receivable upon the exercise of
the rights represented hereby, such shares of stock or
securities as may be issued in connection with such
consolidation, merger or sale or conveyance with respect to or
in exchange for the number of outstanding shares of Common
Stock immediately therefore purchasable and receivable upon
the exercise of the rights represented hereby had such
consolidation, merger or sale or conveyance not taken place,
and in any such case appropriate provision shall be made with
respect to the rights and interests of the holder of this
Warrant to the
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<PAGE>
end that the provisions hereof shall be applicable as nearly
as may be in relation to any shares of stock or securities
thereafter deliverable upon the exercise hereof.
(c) In case the Company shall, while this Warrant remains
unexercised in whole or in part, and in force, offer to the
holders of Common Stock any rights to subscribe for additional
shares of stock of the Company, then the Company shall given
written notice thereof to the registered holder hereof not
less than thirty (30) days prior to the date on which the
books of the Company are closed or a record date fixed for the
determination of shareholders entitled to such subscription
rights. Such notice shall specify the date as to which the
books shall be closed or the record date fixed with respect to
such offer or subscription, and the right of the holder hereof
to participate in such offer or subscription shall terminate
if this Warrant shall not be exercised on or before the date
of such closing of the books or such record date.
(d) Any adjustment pursuant to the foregoing provisions shall
be made on the basis of the number of shares of Common stock
which the holder hereof would have been entitled to acquire by
exercise of this Warrant immediately prior to the event giving
rise to such adjustment and, as to the purchase price
hereunder per share, whether or not in effect immediately
prior to the time of such adjustment, on the basis of such
purchase price immediately prior to the event giving rise to
such adjustment. Whenever any such adjustment is required to
be made, the Company shall forthwith determine the new number
of shares of Common Stock which the holder shall be entitled
to purchase hereunder and/or such new purchase price per
share, and shall prepare, retain on file and transmit to the
holder hereof within ten (10) days after such preparation a
statement describing in reasonable detail the method used in
calculating such adjustment(s).
(e) For the purposes of this Section 6, the term "Common
Stock" shall include all shares of capital stock authorized by
the Company's Certificate of Incorporation, as from time to
time amended, which are not limited to a fixed sum or
percentage of par value in respect of the right of the holders
thereof to participate in dividends or in the distribution of
assets upon the voluntary or involuntary liquidation,
dissolution or winding-up of the Company.
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<PAGE>
7. Fractional Shares
No fractional shares or script representing fractional shares
shall be issued upon the exercise of this Warrants. With respect to any fraction
of a share called for upon any exercise of this Warrant, the Company shall pay
to the Warrantholder an amount in cash equal to such fraction multiplied by the
current market value of such fractional share, determined as follows:
(a) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such
exchange or listed for trading on the NASDAQ National Market
System, the current value shall be the reported last sale
price of one share of common Stock on such exchange or system
on the last business day prior to the date of exercise of this
Warrant, or if the Common Stock is included in the NASDAQ or
other automated quotation system other than the National
Market System or if no such sale is made on such day, the
current value shall be the average of the closing bid and
asked prices for such day on such exchange or system; or
(b) If the Common Stock is not so listed or admitted to
unlisted trading privileges, the current value shall be the
mean of the reported last bid and asked prices of one share of
common Stock as reported by the National Quotation Bureau,
Inc. on the last business day prior to the date of the
exercise of this Warrant.
(c) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not
so reported, the current value of one share of Common Stock
shall be an amount, not less than book value, determined in
such reasonable manner as may be prescribed by the Board of
Directors of the Company.
8. Reservation of Warrant Shares.
The Company agrees that, prior to the expiration of this
Warrant, the Company will at all times (a) have authorized and in reserve, and
will keep available, solely for issuance or delivery upon the exercise of this
Warrant, the shares of Common stock and other securities and properties as from
time to time shall be receivable upon the exercise of this Warrant, free and
clear of all restrictions on sale or transfer and free and clear of all
preemptive rights and rights of first refusal.
9. Amendment.
This Warrant may be amended upon the written consent of the
Company and the Warrantholder.
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<PAGE>
10. Jurisdiction
This Warrant shall be governed by and construed in
accordance with the laws of the State of New York
(Applicable to New Jersey Residents Only):
THE ATTORNEY GENERAL OF THE STATE OF NEW JERSEY DOES NOT PASS
UPON OR ENDORSE THE MERITS OF ANY PRIVATE OFFERING. NO
OFFERING DOCUMENT HAS BEEN FILED WITH OR OTHERWISE APPROVED BY
THE DEPARTMENT OF LAW AND PUBLIC SAFETY OF THE STATE OF NEW
JERSEY. ANY REPRESENTATIONS TO THE CONTRARY IS UNLAWFUL.
THIS WARRANT AND THE SHARES UNDERLYING THIS WARRANT (THE
"UNDERLYING SHARES") ARE BEING PURCHASED FOR INVESTMENT AND
NOT WITH THE VIEW TO OR FOR SALE IN CONNECTION WITH A
DISTRIBUTION OF THIS WARRANT AND/OR THE UNDERLYING SHARES. ANY
RESALE OF THIS WARRANT AND/OR THE UNDERLYING SHARES SOLD IN
RELIANCE ON THE EXEMPTION PROVIDED BY N.J.S.A 49:3-50 WITHIN
12 MONTHS OF THE SALE SHALL BE PRESUMED TO BE WITH A VIEW TO
DISTRIBUTION AND NOT FOR INVESTMENT, EXCEPT A RESALE PURSUANT
TO A REGISTRATION STATEMENT EFFECTIVE UNDER N.J.S.A 49:3:61,
61.1 OR TO AN ACCREDITED INVESTOR PURSUANT TO AN EXEMPTION
AVAILABLE UNDER N.J.S.A 49:3:50. THIS WARRANT AND/OR THE
UNDERLYING SHARES ISSUED UNDER THE EXEMPTION SET FORTH HEREIN
MAY ONLY BE RESOLD PURSUANT TO REGISTRATION OR AN EXEMPTION
UNDER THE UNIFORM SECURITIES LAW (1997), N.J.S.A 49:3-47.
Dated: December __, 1999
ULTRAPHONICS-USA, INC.
By:_________________________
C.M. Benedict, President
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PURCHASE FORM
Dated:____________
The undersigned hereby irrevocably elects to exercise the within
Warrants to the extent of purchasing ____ shares of Common Stock and hereby
makes payment of $__________ in payment of the exercise price thereof.
____________________
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name __________________________________________________
(Please typewrite or print in block letters)
Signature _____________________________________________
ASSIGNMENT FORM
FOR VALUE RECEIVED __________________________________________ hereby
sells, assigns and transfers unto
Name ___________________________________________________
(Please typewrite or print in block letters)
Address _____________________________________________________________________
Social Security or Employer Identification No. ______________________________
The right to purchase Common Stock represented by this Warrant to the extent of
____ shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint _____________ attorney to transfer the same on the books
of the company with full power of substitution.
Dated:_______________, 199_
Signature ______________________________________________
Signature Guaranteed:
______________________
Social Security Number
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Exhibit 4.2
PROMISSORY NOTE
DUE 180 DAYS AFTER THE CLOSING OF
THE MERGER OF PEDIANET, INC. INTO ULTRAPHONICS-USA, INC.
OR EARLIER, IF CALLED IN ACCORDANCE WITH THE
CALL PROVISIONS OF THIS NOTE
LTM PRODUCTIONS ("Maker"), residing at 631 Foxworth Drive, Holmes Beach,
FL 34217, for value received, hereby promises to pay to the order of
ULTRAPHONICS-USA, INC. (the "Company" ),180 days after the closing of the merger
of PediaNet, Inc. into Ultraphonics-USA, Inc.(the "Merger") or earlier, if this
Note is called in accordance with the call provisions set forth herein, the
principal sum of EIGHT HUNDRED SIX THOUSAND FIVE HUNDRED TWENTY-EIGHT ($806,528)
DOLLARS (the "Principal Amount"), together with interest on the outstanding
Principal Amount at the rate of Ten (10%) percent per annum. All payments
hereunder shall be made at the offices of the Company c/o PediaNet, Inc., 1804
Jerome Avenue, Brooklyn, New York 11234 in such currency which shall constitute
legal tender of the United States. In the event that for any reason whatsoever
any interest or other consideration payable with respect to this Note shall be
deemed to be usurious by a court of competent Jurisdiction under the laws of the
State of New York or the laws of any other state governing the repayment hereof,
then so much of such interest or other consideration as shall be deemed to be
usurious shall be held by the Company as security for the repayment of the
principal amount hereof and shall otherwise be waived.
After the closing of the Merger (the "Closing"), the Company shall have
the right to call this Note, in 25% increments, as follows:
(a) 45 days after the Closing, if the bid price of the
Company's common stock is $5.00 or more for any five (5)
trading days in the 45 day period;
(b) 60 days after the Closing, if the bid price of the
Company's common stock is $5.00 or more for any ten (10)
trading days in the 60 day period.
(c) 90 days after the Closing, if the bid price of the
Company's common stock is $5.00 or more for any fifteen (15)
trading days in the 90 day period;
(d) 120 days after the Closing, if the bid price of the
Company's common stock is $5.00 or more for any twenty (20)
trading days in the 120 day period;
The obligations to make the payments provided for in this Note are
absolute and unconditional and not subject to any defense, set-off,
counterclaim, recission, recoupment or adjustment whatsoever. The Maker hereby
expressly waives demand and presentment for payment, notice of nonpayment,
notice of dishonor, protest, notice of protest, bringing of suit and diligence
in taking any action to collect any amount called for hereunder, and shall be
directly and primarily liable for the payment of all sums owing and to be owing
hereon, regardless of and without any notice, diligence, act or omission with
respect to the collection of any amount called for hereunder.
<PAGE>
This Note may be prepaid in whole or in part at any time. Any such
prepayment(s) shall reduce the amount due in any subsequent 25% increment
subject to the call provisions set forth above.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, or by Federal Express, Express Mail or similar overnight
delivery or courier service or delivered ( in person or by telecopy, telex or
similar telecommunications equipment) against receipt to the party to whom it is
to be given (i) if to the Company, at its address at c/o PediaNet, Inc., 1804
Jerome Avenue, Brooklyn, New York 11234 (ii) if to the Company at its address
set forth on the first page hereof; or (iii) in either case, to such other
address as the party shall have furnished in writing in accordance with the
provisions of this paragraph. Notice to the estate of any party shall be
sufficient if addressed to the party as provided in this paragraph. Any notice
or other communication given by certified mail shall be deemed given at the time
of certification thereof, except for a notice changing a party's address which
shall be deemed given at the time of receipt thereof. Any notice given by other
means permitted by this paragraph shall be deemed given at the time of receipt
thereof.
No course of dealing and no delay or omission on the part of
the Company in exercising any right or remedy shall operate as a waiver thereof
or otherwise prejudice the Company's rights, powers or remedies
This Note has been negotiated and consummated in the State of
New York and shall be governed by and construed in accordance with the laws of
the State of New York, without giving effect to principles governing conflicts
of law.
The Maker irrevocably consents to the jurisdiction of the
courts of the State of New York and of any federal court located in such State
in connection with any action or proceeding arising out of or relating to this
Note, any document or instrument delivered pursuant to, in connection with or
simultaneously with this Note, or a breach of this Note or any such document or
instrument. In any such action or proceeding, the Maker waives personal service
of any summons, complaint or other process and agrees that service thereof may
be made in accordance with the aforesaid notice provisions of this Note.
The Maker shall pay all costs incurred by the Company to
collect any amounts due hereunder.
2
<PAGE>
IN WITNESS WHEREOF, the Maker has caused this Note to be signed this
28th day of December, 1999.
LTM PRODUCTIONS, INC.
By: /s/ Charles F. Trapp
----------------------------
Charles F. Trapp, President
3
<PAGE>
Exhibit 6.1
Devset License Agreement
7-01-1996
I hereby agree by and between Melvin David Koplow and Starr Koplow hereafter
referred to as "The Koplows", as owners of Devset software. The Koplows hereby
grant full unlimited, and exclusive usage of the Devset software program to
PediaNet Inc. with the following provisions.
1) The usage and name and software become null and void if PediaNet ceases to
exist as a corporate entity.
2) The exclusive usage is extended to only PediaNet and or any entity PediaNet
owns or operates as a doing business as partner etc. This usage cannot be
assigned to any other entity without full disclosure and permission by the
Koplow, subject to their approval.
3) The compensation for the value and exclusive usage of Devset, in a working
format, will be 200,000 share of PediaNet Inc. currently being sold for $1.00
Per share of equivalent to be agreed upon.
Devset
/s/ Starr Koplow
- -----------------------
Starr Koplow
/s/ Melvin David Koplow
- -----------------------
Melvin David Koplow
PediaNet
- -----------------------
/s/ Jeffrey Steir
President
/s/ Steven Richter
- -----------------------
Vice President
/s/ Aleksandr Ackerman
- -----------------------
Treasurer
/s/ Shlomo Carlebach
- -----------------------
Secretary
<PAGE>
Exhibit 8.1
PLAN OF MERGER
OF
PEDIANET INC.,
A NEW YORK CORPORATION,
INTO
ULTRAPHONICS - USA, INC.,
A GEORGIA CORPORATION
PLAN OF MERGER adopted by PediaNet Inc., a corporation for profit
organized under the laws of the State of New York, by resolution of its Board of
Directors on November 22, 1999 and adopted by Ultraphonics - USA, Inc., a
corporation for profit organized under the laws of the State of Georgia, by
resolution of its Board of Directors on November 22, 1999. The names of tile
corporations planning to merge are PediaNet Inc., a corporation for profit
organized under the laws of the State of New York, and Ultraphonics - USA, Inc.,
a corporation for profit organized under the laws of the State of Georgia. The
name of tile surviving corporation into which PediaNet Inc. plans to merge
shall- by this merger, be changed from Ultraphonics - USA, Inc. to
Pedia.Net.com,Inc.
1. The name of each constituent corporation is PedlaNet Inc., a New
York corporation, sometimes hereinafter referred to as the "terminating
corporation", and Ultraphonics- USA, Inc., a Georgia Corporation, sometimes
hereinafter referred to as the "surviving corporation." The name of the
surviving corporation is PediaNet.com, inc . a Georgia corporation incorporated
under the name Ultraplionics - USA, Inc., but whose Articles of Incorporation
will be amended by this merger such that its corporate name will be changed to
PediaNet.com, Inc.
<PAGE>
2. PediaNet Inc. and Ultraphonics - USA, Inc. shall, pursuant to the
provisions of the laws of the State of New York and the provisions of the
Georgia Business Corporation Code, be merged with and into a single corporation,
to wit, Ultraphonics - USA,Inc., which, by this merger, shall have its name
changed to PediaNet.com, Inc., shall be the surviving corporation upon the
effective date of the merger and which shall continue to exist as the surviving
corporation under the corporate name PediaNet.com, Inc. pursuant to the
provisions of the Georgia Business Corporation Code. The separate existence of
PediaNet Inc., the New York corporation, shall cease upon the effective date of
the merger in accordance with the laws of the jurisdiction of its organization
3. The designation, number and voting fights of the outstanding shares
of each class and series of the constituent corporations is as follow:
CLASS NUMBER OUTSTANDING
----- ------------------
ULTRAPHONICS - USA, INC.
voting common stock having a par value 49,846 shares
of $0.001 (one mil) per share
non-voting preferred shares having a par 10,000 shares
value of $0.10 (ten cents) per share
stock options none
2
<PAGE>
5. The present bylaws of the terminating corporation will be the bylaws
of said surviving corporation and will continue in full force and effect until
changed, altered, or amended as therein provided and in the manner prescribed by
the provisions of the Georgia Business Corporation Code.
6. The directors and officers in office of the terminating corporation
upon the effective date of the merger shall be the members of the first Board of
Directors and the first officers of the surviving corporation, all of whom shall
hold their respective successors or until their tenure is otherwise terminated
in accordance with the bylaws of the surviving corporation.
7. Each issued share of the terminating corporation when the merger
takes effect shall be converted into one (1) common share of the surviving
corporation, provided, however, if the application of such conversion, formula
would result in the issuance to any shareholder of the terminating corporation
of a fractional share of the surviving corporation, no fractional share shall be
issued, rather, that fractional share which would otherwise be issued shall be
rounded up to a whole share of the surviving corporation. After the effective
date of this Plan, each holder of outstanding certificates representing shares
of stock of the terminating corporation shall surrender the same to the
surviving corporation and each such holder shall be entitled, upon such
surrender, to receive the numbers of shares of stock of the surviving
corporation as is provided for in the preceding sentence. The surviving
corporation will bear the costs of such share surrender and issuance is to each
holder of the outstanding certificates representing shares of stock of the
terminating corporation who surrenders all of his said certificates within
thirty (30) days of the
3
<PAGE>
date of the notice from the surviving corporation to such holders containing
instructions as to the method of such surrender; the such holders shall bear
such costs as to such certificates surrendered after such thirty (30) day
period. Until so surrendered, the outstanding shares of the stock of the
terminating corporation may be treated by the surviving corporation for all
corporate proposes as evidencing the ownership of shares of the surviving
corporation as through said surrender and exchange had taken place. The issued
shares of the surviving corporation shall not be converted or exchanged in any
manner, but each said share which is issued as of when the merger takes effect
shall continue to represent one issued share of the surviving corporation
8. The merger of the terminating corporation with and into the
surviving corporation shall be authorized in the manner prescribed by the laws
of the jurisdiction of organization of the terminating corporation. As permitted
by subsection (h) of Section 14-2-1103 of the Georgia Business Corporation Code,
the approval of the Plan of Merger herein made is not being submitted to the
shareholders of the surviving corporation for their approval.
9. In the event that the merger of the terminating corporation with and
into the surviving corporation shall have been duly authorized in compliance
with the laws of the jurisdiction of organization of the terminating
corporation, and in the event that the Plan of Merger shall have been approved
by the Board of Directors of the surviving corporation in the manner prescribed
by the provisions of the Georgia Business Corporation Code, the terminating
corporation and the surviving corporation hereby stipulate that they will cause
to be executed and filed and/or recorded any document or documents prescribed by
the laws of the State of New
4
<PAGE>
York and of the State of Georgia, and that they will cause to be performed all
necessary acts therein and elsewhere to effectuate the merger.
10. Upon the effective date of this Plan, the surviving corporation
shall possess all the rights, privileges, powers and franchises of a public and
private nature and shall be subject to all the duties of each of the constituent
corporations parties to this merger, and all and singular the rights,
privileges, powers, and franchises of each of the corporations parties to this
merger on whatever account shall be vested in the surviving corporation, and all
property, rights, privileges, powers, contracts and franchises and every officer
interest shall be thereafter as effectually the property of the surviving
corporation as they were (if the respective constituent corporations parties to
this merger, but all rights of creditors and all liens upon any property of
either of any of the constituent corporations parties to this merger shall be
preserved unimpaired and all debts, liabilities, duties of the respective
constituent corporations parties to this merger shall thenceforth attach to the
surviving corporation and be enforceable against it to the same extent as if
said debts, liabilities, and duties had been incurred or contracted by it.
11. If, at any time, the surviving corporation shall consider or be
advised that any further assignments or assurance in law or any other things are
necessary or desirable to vest in the surviving corporation, according to the
terms hereof, the title to any property or rights of the terminating
corporation, the proper officers and directors of the terminating corporation
shall and will execute and make all such proper assignments and assurances and
do all things necessary or proper to vest title in such property or rights in
surviving corporation and otherwise to carry out the purposes of this merger.
5
<PAGE>
12. The effective date of this merger in Georgia and New York shall be
December 31, 1999.
13. The President or other officers or directors of each of the
constituent corporations to this Plan are hereby authorized and directed to
prepare and execute such agreements, certificates or other documents as may be
necessary in order to carry out this Plan.
14. Anything herein or elsewhere to the contrary notwithstanding this
merger may be terminated and abandoned by either of the Boards of Directors of
the constituent corporations at any time prior to the effective date of this
merger, if, in the opinion of either of the Boards of Directors, the merger is
impractical by reason of the possible exercise of statutory rights or appraisal
and payment of stock to any objecting shareholders.
15. The Board or Directors and the proper officer of the terminating
corporation and of the surviving corporation, respectively, are hereby
authorized, empowered, and directed to do any and all acts and things and to
make, execute, deliver, file and or record any and all instruments, papers, and
documents which shall be necessary, proper or convenient to carry out or put
into effect any of the provisions of this Plan of Merger.
6
<PAGE>
Exhibit 16.1
Bernard Lipton, CPA
April 25, 2000
Securities and Exchange Commission
Mail Stop 9-5
450 5th Street, N.W.
Washington, D.C. 20549
Gentlemen,
We have read and agree with the comments in Part II, Item 3 of Form 10
SB/A of PediaNet.com, Inc. dated April 25, 2000.
Yours truly,
/s/ Bernard Lipton
---------------------
Bernard Lipton, CPA
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of operations and
related footnotes of PediaNet.com, Inc. as of and for the years ended December
31, 1999 and 1998 and is qualified in its entirety by reference to such
financial statements and footnotes.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 151,687 (107)
<SECURITIES> 25,000 0
<RECEIVABLES> 81,200 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 340,222 (107)
<PP&E> 408,052 408,052
<DEPRECIATION> (250,399) (169,016)
<TOTAL-ASSETS> 497,875 238,929
<CURRENT-LIABILITIES> 946,005 575,839
<BONDS> 0 0
0 0
1,000 0
<COMMON> 5,249 3,467
<OTHER-SE> (454,379) (340,377)
<TOTAL-LIABILITY-AND-EQUITY> 497,875 238,929
<SALES> 4,500 6,379
<TOTAL-REVENUES> 4,500 6,379
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 443,580 395,396
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (439,080) (389,017)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (439,080) (389,017)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (439,080) (389,017)
<EPS-BASIC> (.13) (.12)
<EPS-DILUTED> (.13) (.12)
</TABLE>
