<PAGE> 1
________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to _______.
Commission File Number: 0-11371
BIOSONICS, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2161932
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
260 New York Drive
Fort Washington, Pennsylvania 19034
(Address of principal executive offices) (Zip Code)
(215) 646-7100
(Registrant's telephone number including area code)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuers shares of
common stock, as of the latest practicable date: as of JUNE 30th 1997, there
were outstanding 306,264,536 shares of the Registrant's Common Stock, $.0001 par
value.
________________________________________________________________________________
Page 1 of 14 pages
Exhibit Index is on Page 14
<PAGE> 2
BIOSONICS, INC.
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets:
June 30, 1997 and December 31, 1996 3
Statements of Loss:
Three and Six Months Ended June 30, 1997 and 1996 and the Period
from November 13, 1980 (Inception) to June 30, 1997 4
Statements of Deficit Accumulated:
Six Months Ended June 30, 1997 and 1996 and the Period
from November 13, 1980 (Inception) to June 30, 1997 5
Statements of Cash Flows:
Six Months Ended June 30, 1997 and 1996 and the Period
from November 13, 1980 (Inception) to June 30, 1997 6 & 7
Statements of Shareholders' Equity - Paid-In-Capital:
November 30, 1980 (Inception) to June 30, 1997 8 - 11
Note to Financial Statements 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 14
</TABLE>
<PAGE> 3
BIOSONICS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ASSETS
Unaudited
JUNE 30 DECEMBER 31,
1997 1996
<S> <C> <C>
Current assets
Cash (including interest bearing deposits
of $10 in 1997 and 1996) $ 260 $ 260
Accounts receivable (net of allowance for doubtful
accounts of $2,000 in 1997 and 1996) 8,829 8,196
Inventory 63,725 64,271
Prepaid expenses and other current assets 6,377 25
------------ ------------
Total current assets 79,191 72,752
Equipment, furniture and leaseholds, net
of accumulated depreciation 12,005 15,007
Deposits 8,431 8,431
------------ ------------
Total assets $ 99,627 $ 96,190
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Notes payable $ 243,000 $ 288,000
Accounts payable and accrued expenses 1,616,853 1,707,779
Bonds unissued 187,000 187,000
Proceeds for common stock unissued 0 40,000
------------ ------------
Total current liabilities 2,046,853 2,222,779
------------ ------------
Shareholders' deficit
Common stock - authorized 750,000,000 shares at .0001 par value; issued
and outstanding 306,364,536 and 287,863,936 shares at
June 30, 1997 and December 31, 1996 respectively 30,636 28,787
Capital in excess of par value 12,468,180 11,763,002
Notes receivable from sale of stock (115,000)
Deficit accumulated during development stage (14,331,042) (13,918,378)
------------ ------------
Total shareholders' deficit (1,947,226) (2,126,589)
------------ ------------
Total liabilities and shareholders' deficit $ 99,627 $ 96,190
============ ============
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying note is an integral part of these financial statements.
3
<PAGE> 4
BIOSONICS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF LOSS
(UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED THREE MONTHS ENDED 11/13/80 (INCEPTION)
JUNE 30, JUNE 30, TO JUNE 30,
-------- -------- -----------
1997 1996 1997 1996 1997 1996
--------- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Development stage expenses
Research and development costs $ 0 $ 0 $ 0 $ 0 $ 4,166,053 $ 4,144,553
Professional fees 132,588 37,000 77,448 18,044 2,885,075 2,659,437
Other development stage expenses 287,545 220,238 142,377 122,835 8,453,103 7,661,558
----------- ---------- ---------- ---------- ------------- ------------
Total development stage expenses 420,133 257,238 219,825 140,879 15,504,231 14,465,548
Less: Revenues from cost recovery
program - - - - 118,082 118,082
----------- ---------- ---------- ---------- ------------- ------------
Net development stage expenses 420,133 257,238 219,825 140,879 15,386,149 14,347,466
----------- ---------- ---------- ---------- ------------- ------------
Sales 13,550 29,125 7,925 11,609 850,927 825,728
Cost of sales 8,297 16,166 4,893 13,111 553,282 530,943
----------- ---------- ---------- ---------- ------------- ------------
Gross profit 5,253 12,959 3,032 ( 1,502) 297,645 294,785
----------- ---------- ---------- ---------- ------------- ------------
Other income
Investment and other income 2,216 75 1,224 - 749,842 747,626
Gain on sale of fixed assets - - - - 7,620 7,620
----------- ---------- ---------- ---------- ------------- ------------
Total other income 2,216 75 1,224 - 757,463 755,246
----------- ---------- ---------- ---------- ------------- ------------
Net loss $( 412,664) $( 244,204) $( 215,569) $( 142,381) $( 14,331,042) $( 13,297,435)
=========== ========== ========== ========== ============= ============
Loss per common share $(.001) $(.001) $(.000) $(.000) $(.047) $(.054)
=========== ========== ========== ========== ============= ============
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying note is an integral part of these financial statements.
4
<PAGE> 5
BIOSONICS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE
(UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
SIX MONTHS ENDED 11/13/80 (INCEPTION)
JUNE 30, TO JUNE 30,
1997 1996 1997 1996
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
BEGINNING BALANCE ($13,918,378) ($13,053,231) $ - $ -
NET LOSS ( 412,664) ( 244,204) (14,331,042) (13,297,435)
------------ ------------ ----------- ------------
ENDING BALANCE ($14,331,042) ($13,297,435) ($14,331,042) ($13,297,435)
============ ============ ============ ============
- ---------------------------------------------------------------------------------------------
</TABLE>
The accompanying note is an integral part of these financial statements.
5
<PAGE> 6
BIOSONICS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED 11/13/80 (INCEPTION)
JUNE 30, TO JUNE 30,
-------- -----------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash flows used in operating activities
Net loss $(412,664) $(244,204) $(14,331.042) $(13,297,435)
--------- --------- ------------ ------------
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 3,002 2,670 381,689 371,353
Increase in allowance for doubtful accounts - - 2,000 2,000
Increase in reserve for inventory obsolescence - - 27,000 40,000
Loss on lease abandonment - - 19,550 19,550
Gain on sale of fixed assets - - (7,620) (7,620)
Common stock issued for services 29,500 - 573,459 458,209
Common stock options issued for services 14,398 - 177,678 -
Common stock issued for interest 10,000 - 10,000 -
Common stock issued for product rights - - 12,501 12,501
Change in
Accounts receivable (633) 4,802 (10,829) (18,211)
Inventory 546 4,195 (90,725) (105,889)
Prepaid expenses and other current assets (6,352) (3,347) (6,377) (12,198)
Accounts payable and accrued expenses (90,926) 95,884 1,882,378 1,855,531
--------- --------- ------------ ------------
Total adjustments (40,465) 104,204 2,970,704 2,615,226
--------- --------- ------------ ------------
Net cash used in operating activities $(453,129) $(140,000) $(11,360,338) $(10,682,209)
--------- --------- ------------ ------------
Cash flows from investing activities
Sale of fixed assets $ - $ - $ 10,825 $ 10,825
Capital expenditures - - (363,305) (363,305)
Issuance of note receivable - - (30,000) (30,000)
(Increase) decrease in deposits - - (8,431) (8,431)
Decrease in note receivable - - 30,000 30,000
Decrease in capitalized patents - - (45,690) (45,690)
--------- --------- ------------ ------------
Net cash provided (used) in investing activities $ - $ - $ (406,601) $ (406,601)
========= ========= ============= ============
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying note is an integral part of these financial statements.
6
<PAGE> 7
BIOSONICS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED 11/13/80 (INCEPTION)
JUNE 30, TO MARCH 31,
-------- -------------
1997 1996 1997 1996
--------- --------- ----------- ------------
<S> <C> <C> <C> <C>
Cash flows from financing activities
Proceeds for bonds unissued $ - $ - $ 190,000 $ 190,000
Repayments for bonds unissued - - (3,000) (3,000)
Proceeds for common stock unissued 239,530 - 550,530 271,000
Principal payments of note payable (45,000) (225,000) (352,000) (297,000)
Proceeds from issuance of note payable - - 834,444 789,444
Decrease in capitalized organization costs - - (7,453) (7,453)
Proceeds from issuance of preferred stock - 365,000 1,105,000 965,000
Proceeds from issuance of common stock 258,599 - 9,449,678 9,181,079
--------- --------- ------------ ------------
Net cash provided by financing activities $(453,129) $ 140,000 $ 11,767,199 $ 11,089,070
--------- --------- ------------ ------------
Net increase (decrease) in cash and cash equivalents - - 260 260
Cash and cash equivalents, beginning 260 260 - -
--------- --------- ------------ ------------
Cash and cash equivalents, ending $ 260 $ 260 $ 260 $ 260
========= ========= ============ ============
Schedule of noncash financing transactions:
Issuance of common stock from Loan Receivable: $ 115,000 $ - $ 115,000 $ -
========= ========= ============ ============
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying note is an integral part of these financial statements.
7
<PAGE> 8
BIOSONICS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF SHAREHOLDERS' EQUITY - PAID-IN CAPITAL
NOVEMBER 13, 1980 (INCEPTION) TO JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
DATE STOCK PRICE
ISSUED NUMBER OF SHARES PER SHARE AMOUNT RECEIVED NOTES
---------- ---------------- --------- --------------- -----
<S> <C> <C> <C> <C>
1/13/81 150,000,000 $.0001 $ 15,001 (A)
1/31/81 4,400,000 .025 110,000 (B)
1981 400,000 .025 10,000 (C)
1981 20,000,000 .05 1,000,000 (B)
1982 20,000 .40 8,000 (C)
1982 97,500 .20 19,500 (C)
1982 1,000,000 .06 60,100 (D)
1983 52,500 .20 10,500 (C)
1983 75,000 .305 22,875 (E)
1983 25,000 .235 5,875 (E)
1983 20,000 .50 10,000 (C)
12/29/83 7,300,000 .50 3,650,000 (F)
1984 390 1.00 390 (G)
1984 5,948 .50 2,975 (G)
1984 1,000 .375 375 (C)
1984 72,500 .25 18,125 (C)
1984 2,000 .375 750 (H)
1984 4,000 .25 1,000 (C)
1984 350,000 .20 70,000 (C)
1985 26,500 .281 7,453 (C)
1985 20,000 .25 5,000 (H)
1985 500 .50 250 (G)
1985 5,000 .344 1,719 (C)
1985 50 1.00 50 (G)
1985 2,000 .375 750 (H)
1985 7,500 .156 1,172 (C)
1986 6,882 .50 3,472 (G)
1986 85,000 .1875 15,938 (H)
1986 11,650 .281 3,276 (H)
1986 100,000 .219 21,875 (H)
1986 10,665,000 .181 1,929,737 (I)
1986 202,000 .156 31,562 (H)
1986 70,000 .313 21,875 (H)
1986 134,855 .20 26,939 (H)
1987 7,613,551 .20 1,522,710 (G)
1987 476,110 .295 140,478 (H)
1987 7,000 .159 1,113 (B)
1987 15,000 .312 4,687 (C)
1987 240,000 .20 48,000 (B)
1987 100,000 .218 21,875 (C)
- -----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying note is an integral part of these financial statements.
8
<PAGE> 9
BIOSONICS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF SHAREHOLDERS' EQUITY - PAID-IN CAPITAL (CONTINUED)
NOVEMBER 13, 1980 (INCEPTION) TO JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
DATE STOCK PRICE
ISSUED NUMBER OF SHARES PER SHARE AMOUNT RECEIVED NOTES
---------- ---------------- --------- --------------- -----
<S> <C> <C> <C> <C>
1988 125,000 .25 31,250 (C)
1988 2,500 .218 547 (H)
1988 10,000 .20 2,000 (G)
1988 100,000 .25 25,000 (B)
1988 4,227,000 .20 845,400 (B)
1988 25,000 .156 3,906 (C)
1988 11,000 .013 143 (H)
1989 400,000 .080 32,000 (B)
1989 3,000 .0938 282 (H)
1989 100,000 .080 8,000 (B)
1990 25,000 .010 250 (H)
1990 20,311,000 .010 203,110 (B)
1990 10,500,000 .010 105,000 (B)
1991 1,100,000 .010 11,000 (B)
1991 100,000 .010 1,000 (H)
1991 48,000 .0625 3,000 (J)
1991 32,000 .0625 2,000 (J)
1991 1,100,000 .010 11,000 (J)
1991 1,100,000 .010 11,000 (B)
1991 400,000 .010 4,000 (C)
1995 - 87,750 (Q)
1996 1,250,000 .08 100,000 (K)
1996 11,375,000 .0286 325,000 (K)
1996 16,100,000 .05 805,000 (K)
1996 1,300,000 .01 13,000 (L)
1996 12,900,000 .02 258,000 (L)
1996 300,000 .03 9,000 (M)
1996 280,000 .05 14,000 (M)
1996 400,000 .08 32,000 (M)
1996 100,000 .065 6,500 (M)
1996 250,000 .085 21,250 (M)
1996 (15,368,820) - 0 - (N)
1996 420,000 .0238 10,000 (L)
1996 11,150,000 .02 223,000 (L)
1996 428,600 .035 15,000 (L)
1996 250,000 .04 10,000 (L)
1996 1,075,220 .05 53,761 (L)
1996 350,000 .0258 9,032 (J)
1996 1,695,000 .0345 59,175 (J)
1996 75,000 .04 3,000 (O)
1996 200,000 .05 10,000 (B)
1996 - 75,530 (Q)
- ------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying note is an integral part of these financial statements.
9
<PAGE> 10
BIOSONICS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF SHAREHOLDERS' EQUITY - PAID-IN CAPITAL (CONTINUED)
NOVEMBER 13, 1980 (INCEPTION) TO JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
DATE STOCK PRICE
ISSUED NUMBER OF SHARES PER SHARE AMOUNT RECEIVED NOTES
---------- ---------------- --------- --------------- -----
<S> <C> <C> <C> <C>
1997 550,000 .05 27,500 (M)
1997 200,000 .05 10,000 (O)
1997 5,000,000 .01 50,000 (P)
1997 1,000,000 .02 20,000 (P)
1997 - 14,398 (Q)
1997 11,130,600 .05 556,529 (R)
1997 500,000 .05 25,000 (P)
1997 40,000 .05 2,000 (M)
1997 80,000 .02 1,600 (L)
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL SHARES - COMMON STOCK 306,364,536
- --------------------------- ===========
TOTAL PAID-IN CAPITAL $ 12,972,311
- ---------------------
LESS: Notes Receivable for Stock Purchase 115,000
- ----
LESS: Offering Expenses 473,495
- ---- -------------
NET PAID-IN CAPITAL - COMMON STOCK $ 12,383,816
- ----------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying note is an integral part of these financial statements.
10
<PAGE> 11
BIOSONICS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF SHAREHOLDERS' EQUITY - PAID-IN CAPITAL (CONTINUED)
NOVEMBER 13, 1980 (INCEPTION) TO JUNE 30 , 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
NOTES
(A) $1 additional was paid on stock certificate #3.
(B) Cash purchases.
(C) Represents stock issued in consideration for services rendered. The value
assigned was based on the fair market value of the stock on the date the
transaction was authorized.
(D) 1,000,000 common stock warrants were issued to the underwriter, Monarch
Funding Corporation, at par value ($.0001). On November 15, 1982, these
warrants were exercised at $.06 per share.
(E) Represents stock issued in consideration for services rendered and $7,500
cash. The value assigned was based on the fair market value of the stock on
the date the transaction was authorized.
(F) Stock issued as part of unit offering. Each unit consisted of 2 shares
common stock, 2 Series "A" warrants and 1 Series "B" warrant. No separate
value was assigned to the warrants.
(G) Issued pursuant to the exercise of warrants described in (F).
(H) Issued pursuant to the employee incentive stock bonus plan.
(I) Issued as part of an offering completed March 26, 1986 for cash and
redemption of warrants described in (F).
(J) Liabilities converted to common stock.
(K) Preferred Stock transferred to Common Stock as per agreement.
(L) Issued stock for monies received during time when common stock was not able
to be issued.
(M) Issued stock as payment for services rendered.
(N) Shares contributed by IMRCH.
(O) Issued stock as payment for interest on loans received.
(P) Issued pursuant to exercising stock purchase option.
(Q) Stock Options granted.
(R) Issued pursuant to a Private Placement Agreement
- --------------------------------------------------------------------------------
The accompanying note is an integral part of these financial statements.
11
<PAGE> 12
BIOSONICS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTE TO FINANCIAL STATEMENTS
JUNE 30 , 1997
- --------------------------------------------------------------------------------
Note 1 - The unaudited financial statements presented herein have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by
generally accepted accounting principles. These statements should be
read in conjunction with the financial statements and notes thereto
included in the Company's Form 10-K annual report for the year ended
December 31, 1996. In the opinion of management, these financial
statements include all adjustments, consisting only of normal recurring
adjustments, necessary to summarize fairly the Company's financial
position and results of operations. The results of operations for the
nine-month period ended June 30, 1997 may not be indicative of the
results that may be expected for the year ending December 31, 1997.
- --------------------------------------------------------------------------------
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Liquidity and Capital Resources
Biosonics' primary sources of funds to date have been proceeds from the sale of
its securities and investment income on such proceeds, including loans and
advances for security purchases through offerings.
During this reported period, Biosonics has issued Common Stock shares as
follows: (a) 11,130,600 shares at $.05 per share for a private placement
agreement, (b) 40,000 shares at $.05 per share for payment of services to an
individual, and (c) 500,000 shares at $.05 per share was issued to one investor
in exercise of stock options, for which the company received a promissory note
in the principal amount of the purchase price and for which such shares are
being held as collateral. All shares issued are restricted subject to
registration requirements of the Securities Act of 1933 or an exemption from
such requirements such as Rule 144 of the SEC.
The Company does not have any material commitments for capital expenditures,
although the Company may make capital expenditures during 1997 in connection
with the manufacture of the Cystotron Systems, if funds are available. The
extent of the development or testing, if any, of the Company's other devices
will depend on the availability of funds, and there is no assurance that
development or testing of the devices will occur or be successful.
Results of Operations
Net development stage expenses for the six and three months ended June 30, 1997
($420,133 and $219,826 respectively) were higher than those for the comparable
periods of the prior year ($257,238 and $140,879 respectively) due to funds
spent on consulting services, and expenses relating to Biosonics' participation
in the Medical Device Industry conference, also the preparation of Cystotron
devices and consulting fees regarding the engineer hired to prepare Biosonics
for manufacturing the Cystotron devices. Other development stage expenses
include primarily salaries, rent, supplies, transfer agent fees, manufacturing,
marketing, public relations and travel expenses. The Company's professional fees
for the six and three months ended June 30, 1997 ($132,588 and $77,448
respectively) were higher than professional fees for the comparable period of
the prior year ($37,000 and $18,044 respectively) due to legal and accounting
fees regarding numerous Securities and Exchange Commission filings as well as an
additional $60,000 of consulting expenses incurred. The Company's sales for the
six and three months ended June 30, 1997 were ($13,550 and $7,925 respectively)
as compared to ($29,125 and $11,609 respectively) for the same period of the
prior year. The decrease in sales resulted primarily from not having available
funds to continue the marketing program for its SALITRON System.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES.
During this reported period, Biosonics has issued Common Stock shares as
follows: (a) 11,130,600 shares at $.05 per share for a private placement
agreement, (b) 40,000 shares at $.05 per share for payment of services to an
individual, (c) 500,000 shares at $.05 per share was issued to one investor in
exercise of stock options, for which the company received a promissory note in
the principal amount of the purchase price and for which such
13
<PAGE> 14
shares are being held as collateral. All shares issued are restricted subject to
registration requirements of the Securities Act of 1933 or an exemption from
such requirements such as Rule 144 of the SEC.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
*3.1 Articles of Incorporation as amended (Registrant's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996).
3.5 By-laws of Registrant, as amended.
27 Financial Data Schedule
(b) Reports on Form 8-K:
None
- ------------------------------------
* Incorporated by reference
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
BIOSONICS, INC.
Date: August 13 , 1997 By: /s/Jack Paller
---- --------------------
Jack Paller, President, Chairman and Executive
Officer, Principal Financial Officer and Principal
Accounting Officer and Sole Director.
14
<PAGE> 1
EXHIBIT 3.5
BY-LAWS OF BIOSONICS, INC.
ARTICLE I - OFFICES
Section 1-1. Registered Office. The registered office of the corporation shall
be located within the Commonwealth of Pennsylvania, at such place as the Board
of Directors shall, from time to time, determine.
Section 1-2. Other Offices. The corporation may also have offices at such other
places, within or without the Commonwealth of Pennsylvania, as the Board of
Directors may, from time to time, determine.
ARTICLE II - SHAREHOLDERS' MEETINGS
Section 2-1. Place of Shareholders' Meetings. Meetings of shareholders shall be
held at such places, within or without the Commonwealth of Pennsylvania, as may
be fixed from time to time by the Board of Directors. If no such place is fixed
by the Board of Directors, meetings of the shareholders shall be held at the
registered office of the corporation.
Section 2-2. Annual Meeting. A meeting of the shareholders of the corporation
shall be held in each calendar year, commencing with the year 1981, on such date
and at such time as the Board of Directors may determine.
At such annual meeting, there shall be held an election of Directors.
Unless the Board of Directors shall deem it advisable, financial reports of the
corporation's business need not be sent to the shareholders and need not be
presented at the annual meeting. If any report is deemed advisable by the Board
of Directors, such report may contain such information as the Board of Directors
shall determine and need not be certified by a Certified Public Accountant
unless the Board of Directors shall so direct.
Section 2-3. Special Meetings. Special meetings of the shareholders may be
called at any time:
(a) By the Chairman of the Board of the corporation; or
(b) By a majority of the Board of Directors; or
(c) By shareholders entitled to cast at least one-fifth of the votes
which all shareholders are entitled to cast at the meeting.
Upon the written request of any person or persons entitled to call a special
meeting, which request shall set forth the purpose for which the meeting is
desired, it shall be the duty of the Secretary to fix the date of such meeting
to be held at such time, not less than five nor more than sixty days after the
receipt of such request, as the Secretary may determine, and to give due notice
thereof. If the Secretary shall neglect or refuse to fix the date of such
meeting and
1
<PAGE> 2
to give notice thereof within thirty days after receipt of such request, the
person or persons calling the meeting may do so.
Section 2-4. Notices of Shareholders' Meetings. Written notice stating the date,
place and hour and, if required by law or these By-laws, the purpose, of any
meeting of the shareholders, shall be given to each shareholder of record
entitled to vote at the meeting at least five days prior to the day named for
the meeting, unless otherwise required by law. Such notices may be given by or
at the direction of the person or persons authorized to call the meeting. When a
meeting is adjourned, it shall not be necessary to give any notice of the
adjourned meeting or of the business to be transacted at an adjourned meeting,
other than by announcement at the meeting at which such adjournment is taken.
Section 2-5. Quorum of and Action by Shareholders. Unless otherwise provided in
the Articles of Incorporation or in a By-law adopted by the shareholders the
presence, in person or by proxy, of shareholders entitled to cast at least a
majority of the votes which all shareholders are entitled to cast on the
articular matter shall constitute a quorum for the purpose of considering such
matter, and, unless otherwise specifically provided by law, the acts, at a duly
organized meeting, of the shareholders present, in person or by proxy, entitled
to cast at least a majority of the votes which all shareholders present are
entitled to cast, shall be the acts of the shareholders.
The shareholders present at a duly organized meeting can continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum.
If a meeting cannot be organized because a quorum has not attended, those
present may, except as otherwise provided by law, adjourn the meeting to such
time and place as they may determine, but in the case of any meeting called for
the election of Directors, those shareholders who attend the second of such
adjourned meetings, although less than a quorum as fixed in this section or in
the Articles of Incorporation, shall nevertheless constitute a quorum for the
purpose of electing Directors.
Section 2-6. Voting. At least five days before any meeting of shareholders, the
officer or agent having charge of the transfer books of the corporation shall
make a complete list of the shareholders entitled to vote at such meeting,
arranged in alphabetical order, with the address of and the number of shares
held by each, which list shall be kept on file at the registered office of the
corporation and shall be subject to inspection by any shareholder at any time
during usual business hours. Such list shall also 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.
At all shareholders' meetings, shareholders entitled to vote may attend and vote
either in person or by proxy. All proxies shall be in writing, executed by the
shareholder or by his
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duly authorized attorney-in-fact, and shall be filed with the Secretary of the
corporation. A proxy, unless coupled with an interest, shall be revocable at
will, notwithstanding any other agreement or any provision in the proxy to the
contrary, but the revocation of a proxy shall not be effective until notice
thereof has been given to the Secretary of the corporation. No unrevoked proxy
shall be valid after eleven months from the date of execution, unless a longer
time is expressly provided therein; but in no event shall a proxy, unless
coupled with an interest, be voted on after three years from the date of its
execution.
Except as otherwise specifically provided by law, all matters coming before the
meeting shall be determined by a vote of shares. Such vote be taken by voice
unless a shareholder demands before the election begins that it be taken by
ballot in which event the vote shall be taken by written ballot, and the Judge
or Judges of lection or, if none, the Secretary of the meeting (unless a
candidate for office, in which case such other person who is not a candidate for
office as may be appointed by the Chairman of the Board), shall tabulate and
certify the results of such vote.
Section 2-7. Participation in Meetings by Conference Telephone. Any shareholder
who is otherwise entitled to participate in any meeting of the shareholders may
attend, be counted for the purposes of determining a quorum and exercise all
rights and privileges to which he might be entitled were he personally in
attendance, including the right to vote, by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other.
Section 2-8. Action by Unanimous Consent of Shareholders. Any action which may
be taken at a meeting of the shareholders or a class of shareholders may be
taken without a meeting if a consent or consents in writing, setting forth the
action so taken, shall be signed by all of the shareholders who would be
entitled to vote at a meeting for such purpose and shall be filed with the
Secretary of the corporation. Insertion in the minute book of the corporation
shall be deemed filing with the Secretary regardless of whether the Secretary or
some other authorized person has actual possession of the minute book. Written
consents by all of the shareholders executed pursuant to this section may be
executed in any number of counterparts and shall be deemed effective as of the
date set forth therein.
Section 2-9. Action by Less than Unanimous Consent of Shareholders. Only if the
Articles of incorporation so provide, any action which may be taken at a meeting
of the shareholders or of a class of shareholders may be taken without a
meeting, if a consent or consents in writing to such action, setting forth the
action so taken, shall be (a) signed by shareholders entitled to cast not less
than the larger of (i) two-thirds of the total number of votes which all
shareholders of the corporation or of a class of shareholders would be entitled
by the Articles of Incorporation to cast upon such action or (ii) the minimum
percentage of the vote required by law, if any, for the proposed action, and (b)
shall be filed with the Secretary of the corporation. Insertion in the minute
book of the corporation shall be deemed filing with the Secretary regardless of
whether the Secretary or some other authorized person has actual
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<PAGE> 4
possession of the minute book. Written consents executed pursuant to this
section may be executed in any number of counterparts. Such action shall not
become effective until after at least ten days' written notice of such action
shall have been given to each shareholder of record entitled to vote thereon.
This paragraph shall not be applicable to any action with respect to any plan or
amendment f the Articles of Incorporation to which Section 515 of the
Pennsylvania Business Corporation Law, concerning dissenters rights, is
applicable.
ARTICLE III - BOARD OF DIRECTORS
Section 3-1. Number. The Board of Directors shall consist of not less than three
nor more than fifteen members, the exact number to be determined by resolution
of the Board, from time to time. Once elected, Directors shall serve until the
next annual meeting of shareholders and until their successors are duly elected
and qualified or until their earlier resignation or removal.
Section 3-2. Place of Meeting. Meetings of the Board of Directors may be held at
such place within the Commonwealth of Pennsylvania or elsewhere as a majority of
the Directors may from time to time appoint or as may be designated in the
notice calling the meeting.
Section 3-3. Regular Meetings. A regular meeting of the Board of Directors shall
be held annually, immediately following the annual meeting of shareholders, at
the place where such meeting of the shareholders is held or at such other place,
date and hour as a majority of the newly elected Directors may designate. At
such meeting, the Board of Directors shall elect officers of the corporation. In
addition to such regular meeting, the Board of Directors shall have the power to
fix by resolution the place, date and hour of other regular meetings of the
Board.
Section 3-4. Special Meetings. Special meetings of the Board of Directors shall
be held whenever ordered by the Chairman of the Board, by a majority of the
executive committee, if any, or by a majority of the Directors in office.
Section 3-5. Participation in Meetings by Conference Telephone. Any Director may
participate in any meeting of the Board of Directors or of any committee
(provided he is otherwise entitled' to participate), be counted for the purpose
of determining a quorum thereof and exercise all rights and privileges to which
he might be entitled were he personally in attendance, including the right to
vote, by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other.
Section 3-6. Notices of Meeting of Board of Directors.
(a) Regular Meetings. No notice shall be required to be given of any
regular meeting, unless the same is held at other than the time or place for
holding such meetings
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as fixed in accordance with Section 3- 3 of these By-laws, in which event one
day's notice shall be given of the time and place of such meeting.
(b) Special Meetings. Written notice stating the date, place and hour
of any special meeting of the Board of Directors shall be given at least one day
prior to the date named for the meeting.
Section 3-7. Quorum. A majority of the Directors in office shall be necessary to
constitute a quorum for the transaction of business, and the acts of a majority
of the Directors present at a meeting at which a quorum is present shall be
considered as the acts of the Board of Directors there is no quorum present at a
duly convened meeting of the Board of Directors, the majority of those present
may adjourn the meeting from time to time and place to place.
Section 3-8. Informal Action by the Board of Directors. Any action which may be
taken at a meeting of the Directors, or of the members of any committee of the
Board of Directors, may be taken without a meeting if a consent or consents in
writing, setting forth the action so taken, shall be signed by all of the
Directors, or members of the committee, as the case may be, and shall be filed
with the Secretary of the corporation. Insertion in the minute book of the
corporation shall be deemed filing with the Secretary regardless of whether the
Secretary or some other authorized person has actual possession of the minute
book. Written consents by all of the Directors or the members of any committee
of the Board of Directors executed pursuant to this section may be executed in
any number of counterparts and shall be deemed effective as of the date set
forth therein.
Section 3-9. Powers.
(a) General Powers. The Board of Directors shall have all the power and
authority granted by law to the Board, including all powers necessary or
appropriate to the management of the business and affairs of the corporation.
(b) Specific Powers. Without limiting the general powers conferred by
the last preceding clause and the powers conferred by the Articles and these
By-laws of the corporation, it is hereby expressly declared that the Board of
Directors shall have the following powers:
(i) To confer upon any officer or officers of the corporation
the power to choose, remove or suspend assistant officers, agents or servants.
(ii) To appoint any person, firm or corporation to accept and
hold in trust for the corporation any property belonging to the corporation or
in which it is interested, and to authorize any such person, firm or corporation
to execute any documents and perform any duties that may be requisite in
relation to any such trust.
(iii) To appoint a person or persons to vote shares of another
corporation held and owned by the corporation.
(iv) By resolution adopted by a majority of the whole Board of
Directors, to designate one or more committees, each committee to consist of two
or more of the Directors of the corporation. To the extent provided in any such
resolution, and to the extent permitted by law, a committee so designated shall
have and may exercise the authority of the
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<PAGE> 6
Board of Directors in the management of the business and affairs of the
corporation. The Board of Directors may designate one or more Directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. If specifically granted this power by
the Board in its resolution establishing the committee, in the absence or
disqualification of any member and all designated alternates of such committee
or committees or if the whole Board of Directors has failed to designate
alternate members, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he 'or they constitute a quorum, may
unanimously appoint another Director to act at the meeting in the place of any
such absent or disqualified member.
(v) To fix the place, time and purpose of meetings of shareholders.
(vi) To fix the compensation of Directors and officers for their
services.
Section 3-10. Removal of Directors by Shareholders. The entire Board of
Directors or a class of the Board of Directors, where the Board of Directors is
classified with respect to the power to elect Directors, or any individual
Director may be removed from office without assigning any cause by the vote of
shareholders entitled to cast at least a majority of the votes which all
shareholders would be entitled to cast at any annual election of Directors or
such class of Directors. In case the Board of Directors or such class of the
Board of Directors or any one or more Directors is so removed, new Directors may
be elected at the same time.
Section 3-11. Vacancies. Vacancies in the Board of Directors, including
vacancies resulting from an increase in the number of Directors, may be filled
by a majority of the remaining members of the Board of Directors though less
than a quorum, and each person so elected shall be a Director until his
successor is duly elected by the shareholders, who may make such election at the
next annual meeting of the shareholders or at any special meeting duly called
for that purpose and held prior thereto, or until his earlier resignation or
removal.
ARTICLE IV - OFFICERS
Section 4-1. Election and Office. The corporation shall have a Chairman of the
Board, a President, a Secretary and a Treasurer who shall be elected by the
Board of Directors. The Board of Directors may elect as additional officers one
or more Vice Presidents, and one or more other officers or assistant officers.
Any number of offices may be held by the same person.
Section 4-2. Term. The officers and assistant officers shall each serve at the
pleasure of the Board of Directors and until the annual meeting of the Board of
Directors following the next annual meeting of shareholders unless removed from
office by the Board of Directors during their respective tenures.
Section 4-3. Powers and Duties of the Chairman of the Board. The Chairman of the
Board shall be the chief executive officer of the corporation with general
supervision over and
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direction of the affairs of the corporation. In the exercise of these duties and
subject to the limitations of the laws of the Commonwealth of Pennsylvania,
these By-laws, and the actions of the Board of Directors, he may appoint,
suspend, and discharge employees, agents and assistant officers, fix the
compensation of all officers and assistant officers, and shall preside at all
meetings of the shareholders and at all meetings of the Board of Directors. He
shall also do and perform such other duties as from time to time may be assigned
to him by the Board of Directors.
Unless otherwise determined by the Board of Directors, the Chairman of the Board
shall have full power and authority on behalf of the corporation to attend and
to act and to vote at any meeting of the shareholders of any corporation in
which the corporation may hold stock, and, at any such meeting, shall possess
and may exercise any and all the rights and powers incident to the ownership of
such stock and which, as the owner thereof, the corporation might have possessed
and exercised.
Section 4-4. Powers and Duties of the President. The President shall be the
chief operating officer of the corporation and, subject to the overall
supervision of the Chairman of the Board, shall carry out the policies set by
the Board of Directors and direct the operations of the corporation's business.
In the absence of the Chairman of the Board, he shall preside at meetings of the
shareholders and at meetings of the Board of Directors. He shall also do and
perform such other duties as from time to time may be assigned to him by the
Board of Directors or the Chairman of the Board.
Section 4-5. Powers and Duties of the Secretary. Unless otherwise determined by
the Board of Directors, the Secretary shall be responsible for the keeping of
the minutes of all meetings of the Board of Directors, shareholders and all
committees, in books provided for that purpose, and for the giving and serving
of all notices for the corporation. He shall have charge of the corporate seal,
the certificate books, transfer books and stock ledgers, and such other books
and papers as the Board of Directors may direct. He shall perform all other
duties ordinarily incident to the office of Secretary and shall have such other
powers and perform such other duties as may be assigned to him by the Board of
Directors or the Chairman of the Board.
Section 4-6. Powers and Duties of the Treasurer. Unless otherwise determined by
the Board of Directors, the Treasurer shall have charge of all the funds and
securities of the corporation which may come into his hands. When necessary or
proper, unless otherwise determined by the Board of Directors, he shall endorse
for collection on behalf of the corporation checks, notes, and other
obligations, and shall deposit the same to the credit of the corporation in such
banks or depositories as the Board of Directors may designate and shall sign all
receipts and vouchers for payments made to the corporation. He shall sign all
checks made by the corporation, except when the Board of Directors shall
otherwise direct. He shall be responsible for the regular entry in books of the
corporation to be kept for such purpose, full and accurate account of all funds
and securities received and paid by him on account of the
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corporation. Whenever required by the Board of Directors, he shall render a
statement of the financial condition of the corporation. He shall have such
other powers and shall perform such other duties as may be assigned to him from
time to time by the Board of Directors or the Chairman of the Board. He shall
give such bond, if any, for the faithful performance of his duties as shall be
required by the Board of Directors and any such bond shall remain in the custody
of the Chairman of the Board.
Section 4-7. Powers and Duties of Vice Presidents and Assistant Officers. Unless
otherwise determined by the Board of Directors, each Vice President and each
assistant officer shall have the powers and perform the duties of his respective
superior officer, as may be required by the absence or disability of such
superior officer or as may be delegated to him, from time to time, by such
superior officer. The President shall be the superior officer of the Vice
Presidents. The Treasurer and Secretary shall be the superior officers of the
Assistant Treasurers and Assistant Secretaries, respectively. Vice Presidents
and assistant officers shall have such rank as may be designated by the Board of
Directors. A Vice President may be designated as having responsibility for a
specific area of the corporation's affairs, in which event such Vice President
shall be superior to the other Vice Presidents in relation to matters within his
area.
Section 4-8. Delegation of Office. The Board of Directors may delegate the
powers or duties of any officer of the corporation to any other person from time
to time.
Section 4-9. Vacancies. The Board of Directors shall have the power to fill any
vacancies in any office occurring from whatever reason.
ARTICLE V-CAPITAL STOCK
Section 5-1. Share Certificates. Every share certificate shall be signed by the
Chairman of the Board or the President or Vice President and by the Treasurer,
Assistant Treasurer, Secretary or Assistant Secretary and sealed with the
corporate seal, which may be a facsimile, engraved or printed, but where such
certificate is signed by a transfer agent or a registrar, the signature of any
corporate officer upon such certificate may be a facsimile, engraved or printed.
Section 5-2. Transfer of Shares. Transfer of shares shall be made on the books
of the corporation only upon surrender of the share certificate, duly endorsed
or with duly executed stock powers attached and otherwise in proper form for
transfer, which certificate shall be canceled at the time of the transfer.
Section 5-3. Determination of Shareholders of Record and Closing Transfer Books.
The Board of Directors may fix a time, not more than fifty days prior to the
date of any meeting of shareholders, or the date fixed for the payment of any
dividend or distribution, or the date for the allotment of rights, or the date
when any change or conversion or exchange of shares
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will be made or go into effect, as a record date for the determination of the
shareholders entitled to notice of or to vote at any such meeting, or entitled
to receive payment of any such dividend or distribution, or to receive any such
allotment of rights, or to exercise the rights in respect to any such change,
conversion or exchange of shares or otherwise. In such case, only such
shareholders as shall be shareholders of record on the date so fixed shall be
entitled to notice of or to vote at such meeting, or to receive payment of such
dividend, or to receive such allotment of rights, or to exercise such rights, as
the case may be, notwithstanding any transfer of any shares on the books of the
corporation after any record date fixed as aforesaid. The Board of Directors may
close the books of the corporation against transfers of shares during the whole
or any part of such period, and, in such case, written or printed notice thereof
shall be mailed at least ten days before the closing thereof to each shareholder
of record at the address appearing on the records of the corporation or supplied
by him to the corporation for the purpose of notice. While the stock transfer
books of the corporation are closed, no transfer of shares shall be made
thereon. Unless a record date is fixed by the Board of Directors for the
determination of shareholders entitled to receive notice of, or vote at, a
shareholders' meeting, transferees of shares which are transferred on the books
of the corporation within ten days next preceding the date of such meeting shall
not be entitled to notice of or to vote at such meeting. The corporation may
treat the registered owner of each share of stock as the person exclusively
entitled to vote, to receive notifications and otherwise to exercise all the
rights and powers of the owner thereof.
Section 5-4. Lost Share Certificates. Unless waived in whole or in part by the
Board of Directors, any person requesting the issuance of a new certificate in
lieu of an alleged lost, destroyed, mislaid or wrongfully taken certificate
shall (a) give to the corporation his bond of indemnity with an acceptable
surety; and (b) satisfy such other reasonable requirements as may be imposed by
the corporation. Thereupon, a new share certificate shall be issued to the
registered owner or his assigns in lieu of the alleged lost, destroyed, mislaid
or wrongfully taken certificate, provided that the request therefor and issuance
thereof have been made before the corporation has notice that such shares have
been acquired by a bona fide purchaser.
ARTICLE VI - NOTICES; COMPUTING TIME PERIODS
Section 6-1. Contents of Notice. Whenever any notice of a meeting is required to
be given pursuant to these By-laws or the Articles of Incorporation or
otherwise, the notice shall specify the place, day and hour of the meeting and,
in the case of a special meeting of shareholders or where otherwise required by
law, the general nature of the business to be transacted at such meeting.
Section 6-2. Method of Notice. All notices shall be given to each person
entitled thereto, either personally or by sending a copy thereof through the
mail, or by telegraph, charges prepaid, to his address appearing on the books of
the corporation, or supplied by him to the corporation for the purpose of
notice. If notice is sent by mail or by telegraph, it shall be
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<PAGE> 10
deemed to have been given to the person entitled thereto when deposited in the
United States mail or with a telegraph office for transmission to such person.
Section 6-3. Computing Time Periods. In computing the number of days for
purposes of these By-laws, all days shall be counted, including Saturdays,
Sundays or holidays; provided, however, that if the final day of any time period
falls on a Saturday, Sunday or holiday. then the final day shall be deemed to be
the next day which is not a Saturday, Sunday or holiday. In computing the number
of days for the purpose of giving notice of any meeting, the date upon which the
notice is given shall be counted but the day set for the meeting shall not be
counted. Notice given twenty-four hours before the time set for a meeting shall
be deemed one day's notice.
ARTICLE VII - LIMITATION OF DIRECTORS' LIABILITY AND
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS
Section 7-1. Limitation of Directors' Liability. No Director of the corporation
shall be personally liable for monetary damages as such for any action taken or
any failure to take any action unless: (a) the Director has breached or failed
to perform the duties of his or her office under Section 8363 of the
Pennsylvania Directors' Liability Act (relating to standard of care and
justifiable reliance), and (b) the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness; provided, however, that the
provisions of this Section shall not apply to the responsibility or liability of
a Director pursuant to any criminal statute, or to the liability of a Director
for the payment of taxes pursuant to local, state or federal law. This section
shall be applicable to any action taken and any failure to take any action on or
after January 27, 1987.
Section 7-2. Indemnification and Insurance.
(a) Indemnification of Directors and Executive Officers.
(i) Each Indemnitee (as defined below) shall be indemnified
and held harmless by the corporation for all actions taken by him or her and for
all failures to take action (regardless of the date of any such action or
failure to take action) to the fullest extent permitted by Pennsylvania law
against all expense, liability and loss (including without limitation attorneys'
fees, judgments, fines, taxes, penalties, and amounts paid or to be paid in
settlement) reasonably incurred or suffered by the Indemnitee in connection with
any Proceeding (as defined below). No indemnification pursuant to this Section
shall be made, however, in any case where the act or failure to act giving rise
to the claim for indemnification is determined by a court to have constituted
willful misconduct or recklessness.
(ii) The right to indemnification provided in this Section
shall include the right to have the expenses incurred by the Indemnitee in
defending any Proceeding paid by the corporation in advance of the final
disposition of the Proceeding to the fullest extent permitted by Pennsylvania
law; provided that, if Pennsylvania law continues so to require, the payment of
such expenses incurred by the Indemnitee in advance of the final disposition
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of a Proceeding shall be made only upon delivery to the corporation of an
undertaking, by or on behalf of the Indemnitee, to repay all amounts so advanced
without interest if it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified under this Section or otherwise.
(iii) Indemnification pursuant to this Section shall continue
as to an Indemnitee who has ceased to be a Director or executive officer and
shall inure to the benefit of his or her heirs, executors and administrators.
(iv) For purposes of this Article, (A) "Indemnitee" shall mean
each Director or executive officer of the corporation who was or is a party to,
or is threatened to be made a party to, or is otherwise involved in, any
Proceeding, by reason of the fact that he or she is or was a Director or officer
of the corporation or is or was serving in any capacity at the request or for
the benefit of the corporation as a Director, officer, employee, agent, partner,
or fiduciary of, or in any other capacity for, another corporation or any
partnership, joint venture, trust, employee benefit plan, or other enterprise;
and (B) "Proceeding" shall mean any threatened, pending or completed action,
suit or proceeding (including without limitation an action, suit or proceeding
by or in the right of the corporation), whether civil, criminal, administrative
or investigative.
(b) Indemnification of Employees and other Persons. The corporation, by
action of its Board of Directors and to the extent provided in such action, may
indemnify employees and other persons as though they were Indemnities.
(c) Non-Exclusivity of Rights. The rights to indemnification and to the
advancement of expenses provided in this Article shall not be exclusive of any
other rights that any person may have or hereafter acquire under any statute,
provision of the corporation's Articles of Incorporation or By-laws, agreement,
vote of shareholders or Directors, or otherwise.
(d) Insurance. The corporation may purchase and maintain insurance, at
its expense, for the benefit of itself and any person against any expense,
liability or loss, whether or not the corporation would have the power to
indemnify such person under Pennsylvania or other law. The corporation also may
purchase and maintain insurance to insure its indemnification obligations
whether arising hereunder or otherwise.
(e) Fund For Payment of Expenses. The corporation may create a fund of
any nature, which may, but need not be, under the control of a trustee, or
otherwise may secure in any manner its indemnification obligations, whether
arising hereunder, under the Articles of Incorporation, by agreement, vote of
shareholders or Directors, or otherwise.
Section 7-3. Amendment. The provisions of this Article relating to the
limitation of Directors' liability, to indemnification and to the advancement of
expenses shall constitute a contract between the corporation and each of its
Directors and executive officers which may be modified as to any Director or
executive officer only with that person's consent or as specifically provided in
this Section. Notwithstanding any other provision of these Bylaws relating to
their amendment generally, any repeal or amendment of this Article which is
adverse to any Director or executive officer shall apply to such Director or
executive officer only on a prospective basis, and shall not reduce any
limitation on the personal liability of a Director of the corporation, or limit
the rights of an Indemnitee to
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indemnification or to the advancement of expenses with respect to any action or
failure to act occurring prior to the time of such repeal or amendment.
Section 7-4. Changes in Pennsylvania Law. References in this Article to
Pennsylvania law or to any provision thereof shall be to such law (including
without limitation the Directors' Liability Act) as it existed on the date this
Article was adopted or as such law thereafter may be changed; provided that (a)
in the case of any change which expands the liability of Directors or limits the
indemnification rights or the rights to advancement of expenses which the
corporation may provide, the rights to limited liability, to indemnification and
to the advancement of expenses provided in this Article shall continue as
theretofore to the extent permitted by law; and (b) if such change permits the
corporation without the requirement of any further action by shareholders or
Directors to limit further the liability of Directors (or limit the liability of
executive officers) or to provide broader indemnification rights or rights to
the advancement of expenses than the corporation was permitted to provide prior
to such change, then liability thereupon shall be so limited and the rights to
indemnification and the advancement of expenses shall be so broadened to the
extent permitted by law.
ARTICLE VIII - FISCAL YEAR
Section 8-1. The Board of Directors shall have the power by resolution to fix
the fiscal year of the corporation. If the Board of Directors shall fail to do
so, the Chairman of the Board shall fix the fiscal year.
ARTICLE IX - EXEMPTION FROM ANTI-TAKEOVER LAW
Section 9-1. Pursuant to Section 910 A. of the Pennsylvania Business Corporation
law, as amended by Act 92 of 1983 adopted December 23, 1983, Section 910 of the
Business Corporation Law shall not be applicable to this Corporation.
ARTICLE X - AMENDMENTS
Section 10-1. The shareholders entitled to vote thereon shall have the power to
alter, amend, or repeal these By-laws, by the vote of shareholders entitled to
cast at least a majority of the votes which all shareholders are entitled to
cast thereon, at any regular or special meeting, duly convened after notice to
the shareholders of such purpose. The Board of Directors, by a majority vote of
those voting, hall have the power to alter, amend, and repeal these By-laws, at
any regular or special meeting duly convened after notice of such purpose
subject always to the power of the shareholders to further alter, amend or
repeal these Bylaws.
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ARTICLE XI - INTERPRETATION OF BY-LAWS
Section 11-1. All words, terms and provisions of these By-laws shall be
interpreted and defined by and in accordance with the Pennsylvania Business
Corporation Law, as amended, and as amended from time to time hereafter.
Section 11-2. Inapplicability of Subchapters G, I and J of Pennsylvania Business
Corporation Law of 1988. Pursuant to Section 2561 (b) (2) (i) of the
Pennsylvania Business Corporation Law of 1988, as amended effective April 27,
1990 (the "BCL"), the provisions of Subchapters G, I and J of the BCL shall not
be applicable to the Corporation as of and after April 27, 1990.
Section 11-3. Inapplicability of Subchapter H of Pennsylvania Business
Corporation Law of 1988. Pursuant to Section 2571 (b) (2) (i) of the BCL, the
provisions of Subchapter H of the BCL shall not be applicable to the corporation
as of and after April 27, 1990.
13
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<NAME> BIOSONICS, INC.
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
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0
0
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</TABLE>
